On the go: Profit warnings issued by UK-listed companies with defined benefit pension schemes leapt by 69 per cent between the third and fourth quarters of 2021.
Listed DB sponsors, however, warned on profits on fewer occasions than in the prior year, according to new EY-Parthenon research.
In 2021, 14 per cent of these businesses issued profit warnings, compared with almost two-thirds of listed companies with DB schemes in the prior year. The outbreak of the coronavirus pandemic in 2020 triggered a seismic wave of profit warnings from UK-listed businesses.
The number of profit warnings issued by UK-listed businesses lifted to 70 in last year’s final quarter, up from 51 in Q3.
Of the 1,225 UK-listed companies, 265 support a DB scheme. Most profit warnings came from the industrial or consumer-facing sectors, with supply chain problems being particularly felt by sectors that support these pension funds. Almost two-thirds of these companies cited supply chain difficulties.
Companies in the FTSE aerospace and defence sector endured the most pain last year, with 10 warnings issued by companies with a sponsoring DB scheme.
These included Avon Protection, the manufacturer of respiratory protection systems and body armour, and defence engineer QinetiQ. Their latest warnings both took place in the final quarter of 2021.
DB sponsors in the personal care, drug and grocery sector issued six warnings, followed by retailers and food producers, who warned four times on profits.
“Companies with DB schemes are clustered in many of the most traditional sectors, and it is these that have been most exposed to supply chain disruption and rising energy costs over the last six months,” said Karina Brookes, UK pensions covenant advisory leader and partner at EY-Parthenon.
“Many companies will need to adjust their corporate strategies to secure long-term viability, with some looking to sell non-core assets to shore up the business.
“Decision-makers of companies sponsoring DB schemes will need to ensure they are moving in accordance with the requirements of the Pension Schemes Act 2021 and consider how any strategy changes could impact the pension scheme’s position,” Brookes added.
