Profit warnings fall to lowest level since 2010 in North East and Yorkshire

EY Restructuring Partner Hunter Kelly says PLCs still face a tough environment, despite a stable start to the year

© Giles Rocholl Photography Ltd 2010 Hunter Kelly, restructuring partner at EY in Yorkshire
Hunter Kelly, restructuring partner at EY in Yorkshire

The number of profit warnings issued by PLCs in the North East and Yorkshire fell in the first three months of 2015 to the lowest first quarter total since 2010, according to EY’s latest Profit Warnings report.

Quoted companies in the region issued six profit warnings in the first quarter of the year, compared with nine in Q1 of 2013 and 10 in Q1 of 2014. In 2014 as a whole, profit warnings hit a three-year high in the region.

In total, UK quoted companies issued 77 profit warnings in the first quarter of 2015, three more than the same period of 2014, but 16 fewer than the previous quarter.

This was a higher number than expected, particularly given the much-improved economic outlook and the significant adjustment to forecasts at the end of 2014.

Hunter Kelly, Restructuring Partner at EY in Yorkshire and the North East, said: “These results for Yorkshire and the North East suggest that PLCs had a more stable start to this year than previous years.

“However, it’s still a tough environment in which to plan and forecast.

“The recovery hasn’t increased predictability for many factors, including currency movements or competitor pricing activity.

“Companies need to work hard to create a distinctive business that can translate an improving outlook into earnings growth.

“There are clear advantages for firms that can demonstrate market understanding and the business resilience necessary to match an unpredictable world.”

He added that he expected to see the number of UK profit warnings fall, but not so significantly as it had done in previous economic cycles.

“Even in the absence of a major shock, there is still geopolitical uncertainty,” he said.

“Speculation over the timing of US tightening and diverging policies elsewhere will keep markets volatile.

“Companies must continue to build capital, market, operational and stakeholder resilience and to ensure they can cope with markets turning out to be different than expected.”

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