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magazineWorrying number of profit warnings in 2017
London-listed companies issued 75 profit warnings in the three months to 30 September and there have been plenty
more in recent weeks.
Among the latest offenders is Ultra Electronics (ULE) whose profit warning on 13 November was blamed on Ministry of Defence expenditure. That in turn led to share price weakness among its peer group including BAE Systems (BA.), QinetiQ (QQ.) and Babcock (BAB) as investors worry they might be next in line for bad news.
The aerospace and defence sector is now down more than 8% in the last month, although it is still up 4.7% year-to-date.
The FTSE 100 is up by a similar amount this year but is beginning to lose momentum and there are some cracks appearing beneath the performance of the headline index.
According to SharePad just nine of the 37 sectors in the FTSE 350 are in positive territory in the last month and just three of the top 10 performing sectors year-to-date traded higher over the same time frame.
Lots of different sectors have been affected
The 75 profit warnings recorded in the third quarter is significantly above the average levels of warnings (62) for that time of year, says accountant EY.
Although retail has been a big offender, companies from a diverse set of industries have disappointed the market of late.
On 19 October serviced office business IWG (IWG) lost a third of its market value as it warned annual profit would be ‘materially below’ forecasts. On the same day consumer goods giant Unilever’s (ULVR) third quarter results were below the consensus estimate.
And even supposedly defensive sectors like healthcare have served up disappointments with generic drugs specialist Hikma Pharmaceuticals (HIK) slashing guidance for the third time in just six months on 9 November.
These are just a selection of the setbacks UK shareholders have had to face over the last few months, not to mention the damage endured
by the likes of Carillion (CLLN), Provident Financial (PFG) and Dixons Carphone (DC.) earlier in the year.
It highlights the importance of running a diversified portfolio. If too much of your investment pot is in just one individual company the impact of a profit warning on the scale of some of those detailed in this article could have a devastating impact on your ISA or pension. (TS)
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