Positive picture on profits for Northern firms

QUOTED companies in the North are showing resilience despite EU referendum uncertainty, contrasting the nationwide picture which saw the highest level of second quarter profit warnings since 2008.

Quoted companies in the North of England issued 11 profit warnings in the second quarter of 2016 up slightly from the same quarter last year when 10 profit warnings were issued, but a clear improvement on 2014 figures when 15 profit warnings were issued in this quarter, according to EY’s latest Profit Warnings report.

This is in contrast with the UK picture where the number of profit warnings jumped to 66, from 57 in Q2 2015.

Slower than expected sales continues to trigger most UK profit warnings.

However, 11% of the profit warnings nationally in Q2 relate to the EU referendum, with companies primarily citing the impact of uncertainty on demand and the weaker pound.

The North West and Yorkshire regions both issued four profit warnings in this period. The North East issued three.

Hunter Kelly, restructuring partner at EY in Yorkshire and the North East, said: “The profit warnings in the region have come from a variety of sectors ranging from retail to industrial engineering.  This would suggest that the main focus for businesses in the region is simply to concentrate on the day job and spend time preparing for when Brexit ultimately occurs.”

The sectors with the largest number of warnings across the UK were Support Services (14), Travel and Leisure (8) and General Retailers (7).  

Mr Kelly continued: “The travel and retail sectors have obvious risks from the exposure to currency changes which is the one factor from Brexit to have an immediate effect. However, the majority of the profit warnings in these sectors were pre Brexit and related to factors such as higher wages and investment in digital infrastructure.

“We have to approach Brexit as an opportunity. Brexit will disrupt operations and business models; but this is only a continuation of the existing pressures on business to adapt and innovate in constantly changing markets where technology disruption is becoming the norm.”

“Those that demonstrate clear thinking about their priorities, build in resilience to provide a buffer for unexpected changes and take advantage of opportunities will be successful. It’s all change again, where disruption, upheaval and transformation are the norm,“ he added.