The financial stability of quoted travel and leisure firms will come under renewed pressure at the end of a Covid-19 disrupted summer.
The caution came as the number of profit warnings made by companies in the sectors rose to 59 in the first half of the year, according to new data.
Financial advisory group EY said the half year total is more than four times the number of profit warnings (13) issued in the equivalent period the previous year.
It was also more than double the highest post-financial crisis annual total for this FTSE sector of 28 profit warnings in 2018.
Nearly all (95%) warnings issued in the first six months of 2020 cited the impact of Covid 19.
A total of 46 FTSE travel and leisure companies issued profit warnings in period, representing more than three-quarters (79%) of the sector.
As well as having exceptionally high levels of profit warnings, FTSE travel and leisure was among the sectors with the highest number of companies warning three or more times in a 12-month period.
This level of profit warnings indicates a 1 in 5 chance of a “distress event” within the next 12 months – including administration, liquidation, debt restructuring, Company Voluntary Arrangement or distressed sale.
EY UK and Ireland head of hospitality and leisure Christian Mole said: “After the peak summer season, when staycation-driven bookings will be high, the financial stability of many businesses will come under renewed pressure.
“Q3 will see the phasing out of the furlough scheme, which represents a significant period for the sector.
“It may also be an extended period of lower demand, particularly related to business travel and commuter spending.
“We expect many businesses will need to reshape their operating models to meet these new challenges, with more distress arising as they struggle to adapt.”
He added: “While profit warnings have decreased in Q2 compared with Q1, COVID-19 continues to take its toll on the leisure sector, having exposed underlying structural weaknesses and exacerbating existing challenges.
“Despite the sector reopening after lockdown and a welcome government stimulus package, social distancing will continue to limit operating capacity and consumer demand.
“The continuing prevalence of working from home will mean that business travel and work-related hospitality will remain at low levels, severely impacting city centre demand and wider hotel occupancies.”
Lisa Ashe, UK testructuring partner at EY, said: “The size of a business appears to offer no protection, with more FTSE 350 companies than ever issuing profit warnings.
“Boards need to guard against complacency and be ready to take swift and decisive action to reshape their business to face a different future than they imagined just a few months ago.
“Companies could find that previously healthy parts of their business are no longer profitable. This is a pivotal moment for UK plc.”