Profit warnings ‘steady’ from North West quoted companies

Levels of profit warnings from North West quoted companies have remained steady between July and September (Q3 2019) this year, according to EY’s latest Profit Warnings report.

Eight companies issued warnings in each of the first two quarters of the year (Q1 2019: 8 & Q2 2019: 8). In total, EY recorded 25 profit warnings in the region so far in 2019, compared to 26 in the same period last year.

Nationally, statistics are replicating those seen in 2008: in the nine months to the end of September, UK quoted companies issued 235 profit warnings, the highest year total to date since 2008 (323).

Almost 18% of UK listed companies have now issued a profit warning in the last 12 months – the highest figure since Q4 2008.

In quarter three (Q3) of 2019 (July, August and September), EY recorded 77 profit warnings from UK listed businesses, up from 69 in the previous quarter (Q2 2019) and 13% higher than Q3 2018 (68).

Just over a third of UK profit warnings issued in Q3, explicitly cited the impact of macro-economic volatility, with a further 30% blaming contract delays or cancellations.

Sam Woodward, EY Restructuring Partner for the North West, said:

“This year, profit warnings issued by listed businesses in the North West remained stable, however it’s clear that UK businesses have felt the growing impact of escalating political and trade tensions in the global economy. The negative effect of protracted and widespread uncertainty is evident, with warnings across all FTSE sectors.

“Profit warnings aren’t an absolute measure of performance, but they do track a company’s ability to meet their forecasts, which is clearly more difficult in an uncertain environment.”

Retail profit warnings hit an 8-year high in run up to Christmas

Profit warnings from the UK FTSE Retail sector have hit an 8-year high in 2019, ahead of the all-important festive period, with 28 warnings recorded between January and September this year

Woodward continued:

“Retail’s biggest problem isn’t consumers’ ability to spend, but their willingness. Despite a strong labour market, rising wages, low inflation and disposable incomes improving, the public’s concern for the broader economy is hitting discretionary spending especially hard.”

‘Brexit-related’ warnings

As outlined in EY’s report, 22% of the profit warnings issued in Q3 2019 cited Brexit, compared to 10% in Q1 2019 – the quarter before the March exit deadline. Around half of the ‘Brexit-related’ warnings issued in the last year have come from FTSE sectors heavily exposed to market volatility and discretionary spending.

Woodward concludes:

“An uncertain economic outlook will continue to affect the decision-making and demands of UK businesses and households, driving profit warnings in the remaining weeks of 2019.

“As we move further into the final quarter of the year, a particularly crucial period for consumer-facing sectors, companies will need to react quickly to changing conditions to avoid becoming another profit warning statistic.”

Image:
License: Creative Commons 3 – CC BY-SA 3.0
Attribution: Alpha Stock Images – http://alphastockimages.com/
Original Author: Nick Youngson – http://www.nyphotographic.com/ Original Image: http://www.thebluediamondgallery.com/wooden-tile/p/profit.html