Profit warnings in region buck national picture
UK quoted companies issued the highest level of profit warnings since the height of the financial crisis last year, according to new research, but the number in Yorkshire and the North East dropped by a third.
Ernst & Young’s latest Profit Warnings report found that only 26 profit warnings were issued by quoted companies in Yorkshire and the North East in 2012 – a third less than 2011 and 28% down on 2008 at the peak of the financial crisis.
That contrasts to the national picture where 287 warnings were recorded by UK Main Market and AIM listed companies in 2012, the highest since 2008.
In total, more than 15% of UK quoted companies issued profit warnings in 2012, the highest annual proportion of companies warning since 2008, when almost 18% warned.
Concern over the economic outlook for 2013 peaked in the final quarter of last year, when 26 companies nationally cited delayed or cancelled contracts as the reason for their profit warning – higher than the previous peak in 2008.
Industrial companies saw the largest increase in profit warnings in 2012, with customers reacting to a volatile economic landscape by delaying orders and destocking.
Four profit warnings were made in Yorkshire and the North East in the final quarter of 2012, one less than the previous quarter.
Hunter Kelly, Yorkshire restructuring partner at Ernst & Young, said: “Profit expectations dropped sharply in 2012 which partly accounts for these reductions in warnings. The UK economy lacked the strength to gather momentum and finished 2012 with nothing more than a low growth landscape on the horizon. My concern is that lower profits and uncertainty is leading to delayed investment and purchasing decisions and contributing to the lack of growth.
“The insolvencies highlight the polarisation of consumer sectors exposed to the greatest technological changes and transformation in consumer behaviour. Those who have adapted best and newer entrants with no baggage have emerged as strong winners. In a flat market, this inevitably creates significant losers and this will continue.”
Experts are predicting the number of UK profit warnings is likely to fall in 2013.
Mr Kelly added: “But even if the year ahead proves uneventful, it will still be a testing time for UK Plc, with tough competition for modest growth. Technology and patterns of demand are changing faster than some companies can adapt – especially those with pension, debt and real estate legacies to deal with. Companies will need to invest to not only be fit to compete but also stimulate growth.”
