More profit warnings issued in tech than any other sector - EY report

'Clear parallels' between economy now and that of last financial crisis, according to EY

The tech sector issued the most profit warnings in the UK in the third quarter of 2019, according to research by EY.

The sector submitted 10 of the overall 77 warnings issued for the three months to September.

Profit warnings are given when companies have to inform their investors that profits will not hit previous expectations.

EY breaks the tech sector into two categories: software and computer services and technology hardware and equipment. The former issued the most cautions - along with retail - of any sector. Technology hardware issued two in the quarter.

The research also revealed that publicly-listed companies in the UK issued more profit warnings in the first nine months of 2019 since the 2008 financial crisis.

British companies made 235 such cautions between January and September of this year.

"Although the economy is in better shape now than it was in 2008, there are clear parallels in terms of sheer unpredictability," stated Alan Hudson, EY's head of restructuring for the UK&I.

"Profit warnings aren't an absolute measure of performance, but they do track a company's ability to meet their forecasts, which is clearly more difficult in an uncertain environment."

There was a 13 per cent year-on-year increase in profit warnings in the third quarter of 2019, the research revealed.

The top two reasons given for these warnings included sales falling short of forecasts and delayed or cancelled contracts.

Brexit was cited as a reason in 22 per cent of cautions in Q3 - a jump up from 10 per cent in the first quarter of the year.

Publicly-listed Capita reported a decline in sales in its IT divisions for its year ending 31 December 2018.

In August, Micro Focus saw its share price nosedive 30 per cent after revealing it would miss its revenue guidance.

EY also listed global economic uncertainty for the surge in cautions in Q3, as customers reduce their discretionary spending.

"The economy certainly has a more autumnal feel, with the potential for a late Indian summer — if some of the fog of uncertainty lifts — but also the risk of an early winter if the wind changes," stated Hudson.

"Companies will need to react fast to changing conditions to avoid becoming another profit warning statistic.

"There are increasing concerns not just for the UK, but also for global growth, as geopolitical and trade tensions continue to dent confidence and investment."