FTSE hospitality sector issued over two years’ worth of profit warnings in 2020

FTSE travel and leisure companies have issued 54 profit warnings in 2020, equating to over two years’ worth of warnings, according to EY’s latest Profit Warnings Report.

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 and 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 and leisure at EY, UK and Ireland, said: “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.”

He added: “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.”

Mole concluded: “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.”

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