30% spike in profit warnings
2015 was a challenging year for the region’s listed companies as there was a 30% hike in the number of profit warnings.
With retail and support services the most affected, quoted companies issued 22 profit warnings in 2015, up from 17 in 2014, and the highest annual total for three years, according to EY’s latest Profit Warnings report.
The final quarter of 2015 saw five profit warnings issued in the North West, up from three in the previous quarter and down from seven in the same period of 2014.
The sectors which issued the highest number of profit warnings in the North West in 2015 were support services (eight) and general retailers (five) – with support services recording the highest number of profit warnings in the region since 2009.
Sam Woodward, restructuring partner at EY in the North West, says: “Although North West companies are benefiting from a period of economic growth, they are also contending with intense competition and rapid economic and structural change in the local marketplace.
“In this environment, companies need to undertake a realistic assessment of their business and their market. They should look at both their operational and capital resilience and consider where and how they can create value. This should help businesses across the North West build more robust forecasts and adapt quickly to change in these fast moving markets.”
The increase in profit warnings in this region followed a national trend. There were 313 warnings in 2015, up from 299 in the previous year and the highest annual total since 2008.
Woodward added: “The North West followed the UK trend, which saw a collective rise in warnings led by retail in consumer facing sectors. It seems that some companies are underestimating the competitive and disruptive challenge and the level of investment required to keep up. Volatile demand and margins squeezed by the rise of online and consumer austerity certainly look set to stay.”
