More UK Firms Warned Investors About Last Year’s Profit Than In 2008

More UK Firms Warned Investors About Last Year’s Profit Than In 2008
Paul Allison, CFA

23 days ago2 mins

What’s going on here?

Almost one-fifth of listed British firms warned investors that last year’s profit would come in smaller than forecast – more than the financial crisis year of 2008.

What does this mean?

Business leaders have years of experience under their belts, along with a subscription to every financial terminal in the world and, most likely, a high-caliber MBA degree. So you’d think that when last year kicked off with raging inflation, cash-strapped shoppers, and languishing economies, they’d have set investors’ expectations low. Like, on-the-floor low. But clearly not: roughly 300 businesses fell short of their projections during the year. They pinned the blame on the high price of borrowing cash, scared-to-spend shoppers, and companies dragging their feet when making deals – in other words, predictable effects of an economic slowdown.

UK profit warnings
Source: EY-Parthenon

Why should I care?

For markets: Investing is a long-haul flight.

That said, a company falling behind target is already old news, since investors will have baked their expectations into stock prices ahead of time. So besides taking note of any factors that could stick around for years, investors will likely shrug off the results. Just look at Ryanair. The no-frills airline reported worse-than-expected profit for the last quarter and pushed its outlook for this year’s profit down by 5%. The reasons were hardly shocking: fuel was more expensive and the airline was booted from online booking sites. Investors only sent the stock down a little, though, with most staying firm on Ryanair’s future prospects.

Zooming out: Oh, Blighty.

British companies’ problems do seem to be running deep, mind you: the number of job openings in the UK fell nearly 7% in December from November according to online employment agency Adzuna. That means that fewer firms are hiring or that more folk are job-hunting – both signs of a deteriorating job market. Either way, that’s not a reassuring sign for an economy that’s been whacked with inflation-fighting interest rates.

UK job vacancies
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