Profit alerts issued by listed companies in Yorkshire and the North East fell to a near-12 year low in the third quarter of 2014 – as the region’s listed companies bucked a nationwide increase in warnings.
The latest Profit Warnings Report from accountancy firm EY, showed there were just three warnings in Yorkshire and the North East during the quarter against 11 in the previous quarter and four in the corresponding period last year.
The total for the third quarter this year in Yorkshire and the North East matched the record for the fewest profit warnings recorded in a single quarter in the region – set in the first three months of 2002 and equalled in the first quarter of 2003.
In contrast, quoted companies in the wider UK issued 69 profit warnings in between July and September, 2014, the highest third quarter total since 2008 and 13 more than the corresponding quarter in 2013.
Hunter Kelly, restructuring partner at EY in Yorkshire and the North East, said: “It is difficult to read too much into this quarterly performance, but it may suggest that Yorkshire and North East-based PLCs are beginning to read the shape of this recovery and forecast profits better than the rest of the country. Many businesses are becoming more operationally agile and focusing on working capital to respond to opportunities and challenges in the more competitive environment.
“However, before we get too complacent, the total profit warnings in the region for the first three quarters of 2014 still exceeded those for the corresponding periods in 2013 and 2012. Businesses in Yorkshire and the North East must maintain focus on adapting to the rapid changes created in the economy.
“Slower global growth – particularly in Europe, low inflation, low wage growth and low interest rates are likely to be around for some time and some sectors will also see rapid structural change. One only has to look to the supermarket sector for an obvious example.
“In short, some companies are finding it tough to grow sales and margins and predict the direction the economy will take.”
EY said the rise in profit warnings nationwide exposed the struggles that many companies faced in adapting to the challenges of predicting the new economy. Behind the headline rise in demand, companies faced crowded and competitive markets, savvier customers and rapid structural change as well as the strong pound which is an ongoing issue for business.
In the first nine months of 2014, 21% of profit warnings cited competitive or pricing pressures compared with 7% in 2013. Companies citing currency in their profit warnings rose from 14% in the second quarter to 22% in the third.
Those sectors reporting the most profit warnings were support services, software and computer services, construction and Materials and media.
Mr Kelly said: “The shape of this recovery, in particular the low level of corporate failures during the recession and the relatively benign cycle, means businesses in many sectors face overcapacity. This is leading to intense competition and wafer thin margins – leaving little room for error. “
