The number of profit warnings issued by companies in the leisure sector fell in the first three months of 2003 compared to the last three months of 2002 – but it was still the third worst quarter in five years, the accountancy firm Ernst & Young said yesterday.
It added that companies with the greatest exposure to London and the South East were those being hardest hit.
A total of 11 companies in the leisure sector issued profit warnings in the first 3 months of 2003, down from the 15 in Q4 2002, an all-time high.
The worst-hit companies were those with the greatest exposure to the High Street and the tourist trade. Ian Wilkie, leisure and hospitality partner at Ernst & Young, said: "Those companies with a significant proportion of their business based in and around the big cities and geared towards servicing international and business travellers are suffering badly".
In contrast, he said, more regionally spread and domestically oriented businesses, such as the value-for-money hotel chains, are continuing to do well.
Among pubs and bars, Wilkie said, "those with strong exposure to the international tourist trade and financial services market in London and the South East are suffering in comparison to businesses with a wider regional portfolio and a higher proportion of local trade."
This effect is magnified by the disproportionate impact that the plunge in share prices, City redundancies and the stalling of the housing market is having on consumer spending and confidence in and around the capital, he said.
Wilkie said that as discretionary spend is depressed and delayed, and staff costs in the form of higher National Insurance contributions and minimum wage increases continue to rise, quoted companies are now trading at a discount to the value of their underlying assets. This means t clear potential for more asset write-downs and possible buying opportunities for private equity houses looking to take publicly-quoted leisure firms private, he said.
In total there were 81 warnings in the quarter, down from 106 in the fourth quarter of 2002.
It added that companies with the greatest exposure to London and the South East were those being hardest hit.
A total of 11 companies in the leisure sector issued profit warnings in the first 3 months of 2003, down from the 15 in Q4 2002, an all-time high.
The worst-hit companies were those with the greatest exposure to the High Street and the tourist trade. Ian Wilkie, leisure and hospitality partner at Ernst & Young, said: "Those companies with a significant proportion of their business based in and around the big cities and geared towards servicing international and business travellers are suffering badly".
In contrast, he said, more regionally spread and domestically oriented businesses, such as the value-for-money hotel chains, are continuing to do well.
Among pubs and bars, Wilkie said, "those with strong exposure to the international tourist trade and financial services market in London and the South East are suffering in comparison to businesses with a wider regional portfolio and a higher proportion of local trade."
This effect is magnified by the disproportionate impact that the plunge in share prices, City redundancies and the stalling of the housing market is having on consumer spending and confidence in and around the capital, he said.
Wilkie said that as discretionary spend is depressed and delayed, and staff costs in the form of higher National Insurance contributions and minimum wage increases continue to rise, quoted companies are now trading at a discount to the value of their underlying assets. This means t clear potential for more asset write-downs and possible buying opportunities for private equity houses looking to take publicly-quoted leisure firms private, he said.
In total there were 81 warnings in the quarter, down from 106 in the fourth quarter of 2002.
