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Yorkshire and North East profit warnings increase in Q3

The number of profit warnings issued by quoted companies in Yorkshire and the North East increased to six in the third quarter of 2015, compared with four in the previous quarter and three for the same period in 2014, according to EY’s latest Profit Warnings report.

However, the six profit warnings was at the same level as recorded in Q1 2015 and remains below the quarterly average of seven warnings for Yorkshire and the North East area over the past three years.

Nationally the picture was slightly different with quoted companies issuing 79 profit warnings in Q3 2015 – over a third more than the previous quarter, 10 more than same period in 2014 and eight above the three year quarterly average of 71.

Hunter Kelly, restructuring partner at EY in Yorkshire and the North East, said: “Despite an increase in profit warnings in Q3, these results show that the performance of Yorkshire and North East PLCs was more in line with market expectations compared with the wider UK, which saw a more significant rise in profit warnings.

“In general, macroeconomic concerns created by Chinese stock market volatility, the possibility of US interest rate moves, and the extent of the supply and demand imbalances for commodity products has created uncertainty for UK listed businesses.

“Even where sales are growing, some companies are struggling to maintain profitability as technological advances and competition are eroding margins.

“There is an increasing need for businesses to invest to keep pace with new business models and approaches. Record M&A activity reflects companies’ efforts to adapt to new patterns of growth and to create synergistic profit improvements.

“Active capital allocation and a strong focus on operational resilience are vital.”

Hunter Kelly said: “With markets changing fast and companies’ profits being eroded, we expect to see a greater divide in corporate experiences.

“Even in the same sector, companies could have very different outlooks depending on their operational efficiency and ability to be fleet of foot.

“Many of the issues highlighted in recent profit warnings relate to long-term adjustments in global and sector growth patterns that will require companies to look beyond the current cycle and make longer term investments.

“The UK economy seems to be set fair for a period of growth, however, many businesses are now vulnerable to global supply demand imbalances or regulatory issues emanating from another country.

“M&A has reached record levels in 2015 that will help consolidate, reduce costs and capture the expertise necessary to meet the demands of the new economy. The big unknown is whether that will rectify excess supply.

“We expect to see more of the same in the next twelve months”

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