Yorkshire’s profit warnings down by a third, bucking UK trend

Twenty-six warnings were recorded in the region by EY last year, a 33 per cent year-on-year decrease, compared to 2018 (39 warnings), according to its latest quarterly Profit Warnings report.

Seventy three per cent (19) of the profit warnings were issued in the first six months of year, compared to seven warnings between July and December.

In sharp contrast, profit warnings issued by quoted companies across the UK rose by nine per cent (313) year-on-year (287 in 2018) to reach the highest annual total of warnings since 2015,

Particularly striking is the proportion of UK-listed companies warning in 2019 (17.8 per cent), which marginally surpassed 2008 (17.7 per cent), to reach an 18-year high – in 2001, the figure was 22.7 per cent.

In Q4 2019, 22 per cent of UK profit warnings blamed ‘political uncertainty’ and over a third pointed to delayed or cancelled contracts.

Hunter Kelly, restructuring partner at EY, said: “2019 was a challenging year, full of twists and turns that undoubtedly contributed to a remarkably high level of profit warnings in the UK. Volatile domestic and geopolitical uncertainty delayed corporate decision making and hit demand.

“We also saw evidence of investors pricing in concerns that there was more to come when a company issues a profit warning as the median share price fall on the day of warning dropped to a two-year low.

“Yorkshire businesses are perhaps ahead of the curve in adjusting their earnings, which will certainly stand them in good stead for 2020. In comparison to the national picture, it is striking that warnings in the region declined from 17 in the first half of 2019 to just seven in the second half.”

Sectors relying on consumer discretionary spend were hardest hit in 2019.

However, contractors also issued a high level of warnings, faced with a combination of systemic low margins and the cyclical impact of uncertainty on corporate decision making.

Looking ahead, Mr Kelly said: “Easing political tensions and promises of UK fiscal expansion could help companies beat potentially depressed expectations in 2020 but underlying stresses and tensions mean that there is still vulnerability and profit warning numbers could remain at high levels in the UK.”