Press release

19 May 2020 , 10:00 London, GB

Over two years’ worth of profit warnings issued in 2020 by FTSE Travel & Leisure sector

54 FTSE Travel & Leisure profit warnings issued so far in 2020, compared to 2019 and 2018 combined (51)

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Adam Holden

EY UK&I Media Relations Senior Manager

Passionate media relations and public relations professional helping to provide insight and clarity to complex business issues. Husband and father to twin boys, and a golden retriever.

  • 54 FTSE Travel & Leisure profit warnings issued so far in 2020, compared to 2019 and 2018 combined (51)
  • 95% of FTSE Travel & Leisure warnings have cited COVID-19 in 2020
  • ‘Most dramatically affected sector’ 70% of the FTSE Travel & Leisure issued a warning in Q1 2020
  • Companies will need to take a ‘slow and steady’ approach to restarting operations amidst continued uncertainty

London, 19 May 2020: FTSE Travel & Leisure companies have issued 54 profit warnings to date in 2020 (13 May 2020), equating to over two years’ worth of warnings (2019:23 2018:28), according to EY’s latest Profit Warnings Report. Exposed to the impact of national lockdowns, 95% (51) of warnings issued by quoted travel and leisure businesses this year have cited COVID-19. This figure is six times the number compared to the same period last year (1 January 2019 to 13 May 2019) - when EY recorded nine.

Exposed to the impact of national lockdowns, 95% (51) of warnings issued by quoted travel and leisure businesses this year have cited COVID-19.

By percentage of companies warning in the UK, FTSE Travel & Leisure was the most dramatically affected in Q1 2020, with 70% of the sector issuing a profit warning in Q1 2020 - followed by Industrial Materials (63%) and Retailers (61%).

Christian Mole, Head of Hospitality & Leisure at EY, UK & Ireland, comments: “The hospitality and leisure sector was hit hard and fast by the necessary actions employed to limit the spread of the coronavirus, with the sector almost entirely shutting down overnight.  Whilst government support, particularly the job retention scheme, has assisted in conserving cash and minimizing business failures, surviving the initial lockdown is just the first hurdle. The challenge now is how to navigate a new form of normality in the face of continuing social distancing measures.”

Record breaking UK warnings

In Q1 2020, a total of 301 profit warnings were recorded by EY, almost equal to the entire number issued in the whole of 2019 (313) and 5% higher than the total for 2018 (287). Compared to the same period last year (Q1 2019), warnings rose from 89, representing a 238% year-on-year increase.

Although 77% of UK profit warnings blamed COVID-19 in the first quarter of 2020, it is worth noting that significant parts of UK plc were struggling before the pandemic. In January 2020, EY recorded UK warnings had increased by 43% year-on-year, when compared to the same month last year.

Lisa Ashe, UK Restructuring Partner at EY, comments: “COVID-19 has created new problems, but it has also accelerated existing structural change and exacerbated existing weaknesses. When lockdown lifts, it will undoubtedly ease some pressures, but these underlying issues will remain. Businesses will need to plan carefully to consider what the new ‘normal’ looks like for both customers and suppliers and reshape their businesses accordingly.” 

A difficult reboot

Looking ahead, EY expects the number of UK profit warnings to fall, but distress levels to rise – with echoes of 2008 to 2009 and the aftermath of the financial crisis. Notably, there were more insolvencies in 2009 than 2008.

Christian Mole commented: “Anticipating a staged end to the lockdown, we expect travel and leisure sub-sectors to recover at different paces. Broadly speaking, travel will emerge more slowly behind leisure and hospitality.

“However, whilst we expect to see a gradual re-opening of hotels and lodgings such as holiday parks, where domestic demand could be bolstered by the forthcoming enforced quarantine period on travel into the UK, the position in respect of pubs, restaurants and many other leisure attractions is more problematic. Even if these are permitted to open again in July, as the latest Government announcements suggest, it is difficult to see how these businesses can operate profitably as long as current social distancing requirements are in place. Continuing Government support in respect of both salaries and potentially rent costs will therefore almost certainly be necessary for a significant level of re-openings to take place.”

Mark Hemming, Travel Leader at EY, UK & Ireland, comments: “There is likely to be a difference between domestic and internationally oriented markets, especially when travel restrictions are expected to relax at different times. Demand will also vary significantly between consumer and business markets, linked to confidence and the appetite to spend, which will leave businesses running at reduced capacity for the foreseeable future."