Profit warnings fall in the North West but expert warns of ‘trickier conditions’ ahead

According to EY’s latest Profit Warnings report, 10 companies in the North West issued profit warnings in the second quarter, one less than the previous quarter

Profit warnings were lower among North West firms in Q2 2017

 

Profit warnings among North West companies dropped slightly in the second quarter of this year – but experts are warning against complacency.

According to EY’s latest Profit Warnings report, 10 companies in the North West issued profit warnings in the second quarter, one less than the previous quarter.

Six of the profit warnings were issued from the software and computer services sector, followed by three in the retail sector.

The relatively steady regional picture was not reflective of the wider UK.

UK quoted companies issued 45 warnings in Q2 2017, 40% lower than the previous quarter, almost a third lower than Q2 2016 and well below the post-crisis second-quarter average of 58.

This is the biggest single quarterly percentage drop in profit warnings since the second quarter of 2009.

A stronger than expected global economic backdrop and falling forecasts have combined to significantly lower warnings, according to the report.

A fifth of warnings cite internal operational problems, with external factors, such as exchange rates and price pressures, slipping down the list as earnings expectations adjust.

Sam Woodward. EY’s head of restructuring in the North West, said: “A low level of profit warnings across the UK should not lead to complacency.

“The reality in the market is that earnings forecasts have dipped and the economy’s relative outperformance has enabled more companies to meet already low expectations.

“Profit warnings may not rise dramatically without a shock, given the companies seem to have come to terms with passing a lower bar – but trickier conditions will catch out more companies and expose any weaknesses.”

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