North West profits warnings double as Brexit uncertainty ‘takes its toll’

Accountancy firm EY’s latest Profit Warnings report reveals there were eight profits warnings in January, February and March, double the number in the previous quarter. Tony McDonough reports

Brexit
Brexit is likely to be impacting negatively on North West quoted companies, says EY

 

There was a a sharp increase in the number of profits warning from North West stock market-quoted companies in the first quarter of 2019, new figures show.

Accountancy firm EY’s latest Profit Warnings report reveals there were eight profits warnings in January, February and March, double the number in the previous quarter and spread across six sectors – including support services, travel and leisure, and personal goods.

However, it is the lowest first quarter total for profit warnings recorded in the region since 2016 when there were five, compared to 12 in 2018 and 11 in 2017. The eight warnings issued by North West plc in Q1 2019 were spread across six sectors, including support services, travel and leisure, and personal goods.

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Across the UK, quoted companies issued the highest number of first quarter profit warnings since the height of the financial crisis a decade ago. In the three months to the end of March 2019, EY recorded 89 profit warnings – 22% higher than the same quarter in 2018 (73) and up by one compared to Q4 2018 (88).

The year-on-year rise (22%) in warnings came across a broad range of FTSE sectors, with profit alerts spreading beyond previously dominant consumer sectors.

Sam Woodward, EY Restructuring partner in the North West, said“Protracted uncertainty is taking its toll on the North West and the UK as a whole. The ‘no deal Brexit’ countdown was especially disruptive for businesses exposed to blows to consumer, corporate and investor confidence – as well as those reliant on cross-border EU supply chains and regulation.

“However, it is hard to split out Brexit stresses from mounting global trade and growth concerns, including the recent weakening of the global economic outlook, and rising concerns over US-China trade relations.”

Retail volatility

The FTSE sectors issuing the most profit warnings in Q1 2019 were general retailers (12), financial services (10) and travel and leisure (8). According to the report, FTSE General Retailers issued 12 profit warnings in Q1 2019, one fewer than Q1 2018.

Retail sales remain volatile, but rose at the start of the year, with consumers bolstered by wage rises that continue to outstrip inflation and low unemployment. Mr Woodward added: “Improving disposable incomes and sector restructuring may provide some breathing space, but retailers could find their core markets turning sour incredibly quickly.

“Online growth and development is relentless, requiring continuous investment when margins are tight, and many consumers are still reluctant to pay full-price.”

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