East Midlands sees fall in 2017 profit warnings
The number of profit warnings among quoted companies in the East Midlands dropped from 19 in 2016 to 13 in 2017, according to EY’s latest Profit Warnings report.
2016 saw the highest number of warnings in the East Midlands since 2008, which, says EY reflected the mixed fortunes of companies responding to the unpredictable economic climate.
This compares with the West Midlands which saw the highest number of warnings for three years, up to 17 in 2017 compared to 12 in 2016. The UK saw 81 warnings in Q4 2017 – 11% higher than the same quarter of 2016. However, the total number of warnings in 2017 (276) was comparable with 2016 when 283 warnings were issued.
Overall 2017 was a year of two-halves, with both the number of profit warnings and investor reaction increasing significantly in the final two quarters. Notably, the median share price drop on the day of warning rose from 12% in the first half of 2017 to 14.9% in the second half and 15.2% in Q4 2017 – the highest since the Brexit vote quarter of Q2 2016.
Dan Hurd, head of EY’s Midlands restructuring team, said: “An increase in restructurings and profit warnings reflects the pressure building across a significant portion of the Midlands economy. Companies that issue profit warnings are now under greater scrutiny and investors are reacting with less patience, especially in sectors where shareholders view warnings as a sign of deeper issues rather than a one off event.
“Whilst the decrease in profit warnings we’re seeing in the East Midlands highlights that there are still opportunities to capture growth; the cumulative impact of rising costs, slowing UK growth and increasing competition will continue to expose weaknesses in any company struggling to get a handle on this changing economy.”
According to the report, 30% of all UK profit warnings in 2017 cited cost and competitive pressures, compared to 16% in 2016. Contract uncertainties also continued in 2017, with 25% of companies citing delays or cancellations, including 40% of warnings from the FTSE support sector and 60% from FTSE software & computer services.
