Profits warning in North West fall by 15%

Profit warnings in the North West fell by 15% in the last year, according to the latest statistics.

Listed companies in the region issued 29 profit warnings in 2018 in contrast to 34 the previous year, according to EY’s latest Profit Warnings report.

The North West’s performance bucks the national picture, which saw a four per cent increase year on year.

Nationally, one in six quoted companies issued profit warnings in 2018, the second highest level since 2008.

In the final quarter of 2018, EY recorded 88 warnings nationally, representing the highest fourth-quarter total since 2015.

On the day of warning, companies saw their share prices fall by a record average of 22.6%.

EY’s report found that 74% of companies issuing profit warnings in the last quarter of 2018 hadn’t warned in the last year.

Sam Woodward, EY’s head of restructuring in the North West, said: “It is particularly significant that we have seen more ‘new’ companies warning in 2018.

“It demonstrates that there are more wide-reaching pressures at work, namely the impact of rising uncertainty on confidence and demand, contributing to a wider spread of profit warnings.

“Investors, like many businesses, are positioning for the worst – which could provide some upside to 2019.

“Recent events have created further political and economic uncertainty and there is no let-up in the pace of structural change.

“Rising uncertainty wasn’t the only reason why profit warnings spread in 2018. The weather continued to confound normal seasonal patterns.

“Regulatory issues came increasingly to the fore, such as the changes to diesel regulation in the automotive sector and increasing gaming regulation.

“China’s slowdown also particularly hit automotive and technology sales. But, rising uncertainty has certainly exacerbated these and existing pressures.”

FTSE General retailers (36) issued the highest number of profit warnings in 2018, followed by travel and leisure (29), support services (27) and software and computer services (23).

Sam Woodward said: “A combination of a relentless margin squeeze, the continuous need for reinvention and falling consumer confidence made 2018 an exceptionally tough year for the retail sector.

“Disposable incomes may rise in 2019, but to survive, retailers will still need a strong understanding of their customer, the unique selling point of their offering and how this fits into consumers’ changing lives.”

Sam Woodward added: “What happens next depends on how much more unpredictable 2019 becomes.

“Markets adjust quickly to new realities and recent falls in consensus expectations suggest that much of UK plc has a difficult year ahead factored into their forecasts.

“However, in this fast-moving world companies need to keep moving forward or risk finding themselves on the wrong side of sector trends, potentially triggering a new cycle of profit warnings in years to come.”