Listed businesses in Yorkshire and the North East issued five profit warnings in Q1 2022, up 67% from Q1 2021, according to EY-Parthenon’s latest Profit Warnings report. The number of warnings issued (five) between January and March remains in line with the previous quarter. In the region, warnings were issued across a range of industries, including consumer-facing sectors, where UK warnings reached their highest level since the second quarter of 2020, with 36% of warnings citing supply chain disruption and 69% blaming rising costs. Tim Vance, EY Parthenon UK&I Turnaround and Restructuring Leader in Yorkshire and the North East, said: “We expected that 2022 would be a difficult year for companies to navigate as inflationary pressures, which had been building throughout 2021, were already putting pressure on company margins and consumers’ real incomes. We are now looking at a year with ongoing COVID-19 disruption alongside higher inflation, greater uncertainty, and faster monetary tightening than we expected just a few months ago.” Total UK Profit Warnings The number of profit warnings issued by UK-listed companies in the first quarter of 2022 increased 44% year-on-year with a record number of warnings citing rising costs as increased commodity and energy prices fuel inflation, according to the latest EY-Parthenon Profit Warnings report. The report reveals that UK-listed companies issued 72 warnings in Q1 2022, the highest quarterly figure since the start of the pandemic in the second quarter of 2020. A record-breaking 43% of warnings were due to rising costs, up from 27% in Q4 2021 and well above the 2011-2021 average of 10%. Eleven per-cent (11%) of warnings cited the impact of the war in Ukraine, with most referencing the impact of sanctions and withdrawal from Russian markets. Meanwhile, supply chain challenges eased slightly in Q1 2022 with 22% of listed companies issuing a warning referencing this as the main reason for doing so. Vance continues: “The post-pandemic recovery should continue in 2022 but will be slower than expected with greater downside risks. Volatility and uncertainty have become the standard backdrop to operations, and companies need to ask themselves when ‘crisis as usual’ becomes the norm for which they plan. Businesses will need to start thinking about how their operations and wider ecosystem will fare in sustained headwinds, and how they can reshape in response to long-term change.” Supply chain issues hamper post-pandemic recovery The FTSE sectors with the highest number of warnings in Q1 2022 were those most affected by cost and supply chain pressures, alongside those that are most sensitive to changes in business confidence. FTSE Retailers issued the most warnings in the first quarter of the year (nine in total), followed by FTSE Industrial Support Services (seven) and Personal Care, Drug and Grocery Stores (six). EY’s analysis forecasts that supply chain challenges could be even tougher in 2022 than in 2021, with the periodic breakdowns in supply witnessed last year potentially giving way to significant challenges for material and product availability in the most exposed sectors in 2022. The war in Ukraine has helped tighten supplies in areas like metals and semiconductors, which has led to businesses again adjusting production and forecasts, as well as having to factor in increases in energy and transport costs. In addition, the biggest emerging issue in profit warnings, according to EY’s data, is contract delays and cancellations, reflecting the increasing uncertainty around company investment decisions. Headwinds for UK retail Despite strong levels of consumer spending, UK-listed Retailers issued nine profit warnings in Q1 2022 – the highest quarterly total since the start of the pandemic, accounting for 17% of all listed Retailers. Over one-third of FTSE Retailers (34%) have issued a warning in the last 12 months. The sector has been affected by supply issues with 67% of retail warnings citing supply chain disruption, 75% blaming increased costs and over half (56%) revealing staffing issues in the last six months. Consumer sector profit warnings look set to remain high as the ability to pass costs on depends on the capacity of increasingly pressured consumers to absorb them. Silvia Rindone, EY UK&I Retail Lead, said: “Our data underlines the challenges ahead for UK retail. The sector’s problems so far have been largely on the supply – rather than demand – side. Companies will now be facing a combination of supply chain, cost, and demand headwinds, as the rise in the cost-of-living affects real incomes and creates a challenge for the sales growth that has helped drive the recovery so far. “It is vital that companies respond to consumers’ concerns. Our latest Future Consumer Index revealed that more than two-thirds of UK consumers are worried about their finances. So, we expect significant ‘trading down’, as we saw in the last financial crisis, but we also expect an increasing focus on ‘value for money’ options as sustainability-conscious consumers look for purchases that will last. “Retailers will also need to focus on operational resilience by creating clear inventory visibility and a strong cash culture to minimise costly write-offs and optimise working capital to ensure they have the capital necessary to focus on growth and transformation. Digital opportunities and consumer expectations will continue to grow, regardless of the economic backdrop.”

Bradford-based Airedale Group, a specialist in the installation and servicing of catering equipment, has acquired Network Catering Engineers. A team led by Martin Sweeney and Jessica Fielden of Scofield Sweeney advised Airedale Group on the deal. Founded in 2000 by Tim Church, Halesown-based Network employs more than 90 engineers and carries out maintenance services for more than 60 chain customers. Airedale Group CEO, Rob Bywell commented: “Over the last 10 years, Airedale has consistently received outstanding support from Tom Sikora and Liam Bradford at HSBC Leeds Corporate and Martin Sweeney and Jessica Fielden and their teams at Schofield Sweeney. Having partners that truly understand our commercial and corporate ambitions and who we can count on time after time makes a huge difference to where we can take our business to.”  Tim Church, MD of Network said: “Airedale are a second generation family run business employing over 350 people, including 200 plus service engineers and have consistently been acknowledged as the market leading end-to-end platform business in the UK today. They have a proven track record of successful acquisitions in the kitchen maintenance space, notably SCC in 2014 and Flowrite in 2019. Just as importantly, Airedale really understands our industry and during our numerous conversations, it has become clear that we have a shared vision for the future. We believe Airedale Group is the ideal home for Network and all of the Network team are fully committed to the business for the long term.” 
The acquisition comes after investment partnership, Rubicon Partners, bought a significant stake in Airedale Group. Rubicon is focused on the acquisition and long-term strategic development of complex industrial businesses in Europe and North America. Airedale Group CEO, Rob Bywell said: “Rubicon’s investment in May last year, which included providing significant funding for further acquisitions, has given us the support to continue building a group of highly complementary brands that are specialists and leaders in their respective sectors. Network tick all of these boxes; they are specialists in servicing high-end catering equipment, including accelerated cooking platforms and microwaves, and have further developed their capabilities into electrical and coffee machine maintenance. Network are also the foremost service provider to the Quick Service Restaurant industry, which is one of the fastest growing segments in the food service sector. Alongside our previous acquisitions SCC (catering) and Flowrite (refrigeration), Network enhances what was already an unrivalled national commercial kitchen maintenance platform. Post-acquisition the group will employ a combined total of over 300 national service technicians.”  All of the existing Network management team will remain in place and will be fully responsible for operating the business as normal.