Podcast 02 Aug 2022
24: Kirsten Tompkins - Ernst & Young
'On the Spot' this episode is Kirsten Tompkins, Market Analyst and Content Creator in Turnaround and Restructuring at EY-Parthenon, the strategy consulting arm of EY.
Kirsten is the author of EY thought leadership articles and blog content, providing market and company analysis. She is the coordinating editor and data analyst for EY-Parthenon’s Quarterly Analysis of UK Profit Warnings and joins the show to discuss the latest report, 'The Oncoming Storm' (Q2 2022).
Companies are facing an economic vortex that will challenge even experienced management teams. We're only halfway through 2022 and there have already been a recorded 136 profit warnings, 66% more than at the same point last year.
At the start of 2022, profit warnings were primarily triggered by cost and supply issues, which hit exposed companies extremely hard, but left many others unharmed. As the year progresses, however, demand headwinds amid falling consumer confidence are set to have a much blunter impact, exposing more underlying stresses.
Kirsten also explains the link between profit warnings and insolvency. A twenty-year analysis of EY data, issued in 2019, showed that one in five companies warning three times in a 12-month period delists within a year, mostly due to insolvency. After a brief hiatus during the pandemic, the three-warning rule is well and truly back.
But it’s not just the strength of the headwinds that are making 2022 so challenging. It is their combination and interplay with prevailing disruptive forces that have left governments, central banks, and companies facing difficult, almost impossible, choices. How companies navigate these choices will make a substantial difference between success and failure. Hard choices inevitably lead to hard impacts...