The number of profit warnings issued by FTSE-listed media companies hit an all-time high in the first half of the year as the coronavirus crisis sparked a collapse in advertising revenue.
Between January and June 59 per cent of the media sector issued one or more profit warnings, with 81 per cent citing Covid-19.
A total of 31 profit warnings were issued by 26 companies — more than the total number recorded in the sector across 2018 and 2019 combined.
ITV and Pearson were among the major media firms to issue profit warnings in the first six months of the year as the pandemic took its toll.
The crisis was largely driven by a sharp downturn in the UK advertising market, while the cancellation of major events also played a key role.
“Profit warnings issued by the FTSE media sector hit an all-time high in 2020, but with downgrades heavily concentrated in the advertising, events and the publishing sub-sectors, it is a more differentiated picture than the headlines suggest,” said Tal Hewitt, UK media & sports strategy practice lead at EY-Parthenon, which compiled the data.
“In the first half of 2020, around a third of all sector profit warnings came from companies that operate business or entertainment events. Not only were events completely closed during lockdown, they will also be some of the last activities to reopen due the number of attendees.”
The surge in profit warnings among media firms came as the impact of the coronavirus crisis was felt by UK companies across all sectors.
A total of 165 profit warnings were recorded across all FTSE sectors in the second quarter this year — almost 100 more than in the same period last year.
This followed a record-breaking first quarter, when 301 warnings were recorded — almost equivalent to the full-year total for 2019.
Despite a slight improvement due to the easing of lockdown, retailers and travel firms remained the hardest hit in the second quarter.
Alan Hudson, turnaround and restructuring leader at EY, UK & Ireland, said: “Unsurprisingly, the most immediate and dramatic impact of Covid-19 has been acutely felt by companies whose existing structural challenges have been exacerbated by the pandemic.
“However, many businesses that were essentially sound before the virus struck, have also been forced to fundamentally reassess their expectations and business plans too. It’s vital that UK boards don’t underestimate the depth and extent of both the immediate and long-term challenges ahead.”