EY figures come as host of contractors prepare to unveil latest results

As the reporting season of listed contractors begins in earnest this week, the number of quoted firms issuing profit warnings has reached a seven-year high.

Ground engineer Keller, which last September saw the departure of its chief executive Alain Michaelis as the firm warned of problems in its key North America market, kicked off a busy period for quoted firms this morning seeing pre-tax profit bounce back to 拢52m after collapsing last year to just 拢8.4m, with Kier, Costain, Balfour Beatty and Galliford Try all due to report full year and interim figures in the next couple of weeks.

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The number of profit warning issued last year by quoted firms jumped to 18 from 2018鈥檚 figure of eight

Costain issued two profit warnings in as many days last December with the firm admitting that operating profit would be down to no more than 拢19m from last year鈥檚 拢52m when it publishes its annual results next Wednesday.

And all eyes will be on Kier this Thursday when the firm unveils its interim numbers having racked up a 拢245m pre-tax loss in the year to June 2019.

Now the latest quarterly profit warnings report from Ernst & Young (EY) said that more than a quarter of firms in the FTSE construction and materials sector warned on profits last year.

In all, 18 warnings were issued in 2019 just one below the 19 recorded in 2012.

Ian Marson, EY鈥檚 head of construction, said: 鈥淚n the short term, companies need to ensure they return to health through careful contract selection, turning down lower profit contracts and focusing on specialist areas where they can reliably achieve higher margins.鈥�

He said firms needed to act quickly to reverse the trend and added: 鈥淭here is a fundamental need for construction firms to innovate and use technology, automation and data to disrupt the status quo and drive real and sustainable changes in profitability.鈥�

And EY鈥檚 financial restructuring director Richard Harrison added: 鈥�2019 was an exceptionally testing year for the construction sector. Although the UK economy overall didn鈥檛 fall into recession, arguably the construction sector did.鈥�

Marson also warned firms faced a range of issues which threatened to hit their bottom lines including access to finance, skills shortages and the possibility of costly new trade tariffs if negotiations ahead of the UK鈥檚 formal split from the EU at the end of this year turned sour.

Last year鈥檚 profit warnings number was more than double the eight recorded in 2018 with EY saying that UK quoted companies issued a total of 313 profit warnings in 2019, led by the 32 of those in the retail sector, followed by the 25 each in the industrial support and computer and software services sectors and then construction.

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