SW profit warnings reach six-year high - EY
Fri, 24th October 2014

SW profit warnings reach six-year high - EY

Profit warnings at listed companies in the South West reached their highest level in six years during the third quarter of 2014, a new report from EY has revealed.

A total of six groups posted warnings during the third quarter, one more than the same period last year and the highest number since 2008.

In 2014 so far, 21 South West businesses have issued profit warnings, just two shy of the annual total in 2013.

Chris Marsden, EY’s restructuring partner in the South West, said: "Profit warnings in 2014 have increased when compared with the levels reported at this time last year – 21 warnings so far this year compared with 14 at the same point in 2013.

"This implies that many South West companies and markets are struggling to align their businesses and their forecasts with the pace and nature of the current economic recovery. Slower global growth, lower inflation, lower wage growth and lower interest rates are likely to be around for some time. Companies cannot simply hope for a rising economic tide to float their profits."

The warnings came from companies in the software and computer services, aerospace and defence, food production, general financial and support services sector.

Across the UK, almost 70 companies have issued warnings this year, with 23 per cent posting them multiple times, just above the calendar year average of 22 per cent.

Marsden added: "The recovery isn’t returning us to the pre-crisis economy. South West companies are finding this a tough economy to grow sales and margins, and a tough economy to read, as this latest rise in profit warnings indicates.

"The shape of this recovery, in particular the low level of corporate failures during the recession, and the relatively benign cycle, means many South West businesses face overcapacity issues.

"This is leading to intense competition and pressure on margins - leaving many with little room for error. The stronger pound and a tougher, but uncertain geopolitical backdrop, provide additional complicating, but not necessarily short-term, obstacles."

category South West  |  source Insider Media