‘Profit warnings reached three-year high in 2014’

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The number of profit warnings issued by PLCs in Yorkshire and the North East reached a three year high in 2014, according to professional services firm EY’s latest profit warnings report.

There were 31 warnings in Yorkshire and the North East in 2014, compared with 25 in the region in 2013 and 26 in 2012. The final quarter of 2014 saw seven profit warnings in Yorkshire and the North East. This was up from just three warnings in the third quarter.

Nationally, profit warnings hit a six year high of 299 in 2014, with more FTSE 100 companies issuing warnings last year than at the height of the credit crunch.

Hunter Kelly, restructuring partner at EY in Yorkshire and the North East, said: “Sales falling short of forecasts, contract delays and cancellations, and pricing and competition issues continue to pose significant challenges for Yorkshire and North East PLCs, and were the most common reasons for issuing warnings in 2014. Last year proved that an improving macro outlook is no guarantee of a smooth ride for UK PLC, while the political, policy and pricing uncertainties that hit confidence at the end of 2014 perhaps give us a taste of what’s to come in the first half of 2015. Companies in Yorkshire and the North East must continue to focus on building operational and capital resilience, adapting their forecasting and planning capabilities to have robust business models, and be able to react promptly to varying market conditions.”

Total profit warnings from FTSE 350 companies were just three shy of the record 90 issued in 2008. Adverse exchange rates, in particular a strong Sterling and weakening emerging market currencies, were cited by 17 per cent of those companies warning in 2014, including 27 per cent of warnings from the more internationally exposed FTSE 350 firms. Throughout 2014, 20 per cent of warnings cited contract delays or cancellations, peaking at 27 per cent in Q4 2014 as global uncertainties increased. The rise in profit warnings nationally in 2014 to 299, compared with 255 in 2013, is more consistent with a period of low growth or a global shock than an improving economic outlook, EY said.

Many companies have faced increasing challenges in recent months from geopolitical concerns including the Russian trade sanctions and the knock on effects of falling oil prices, the report added.

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