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South West profit warnings fall

The number of profit warnings issued by quoted companies in the South West fell to a near two year low in the second quarter of 2015, according to EY’s latest Profit Warnings report.


PLCs in the region issued three warnings in Q2 2015, down from seven in the previous quarter and six during the corresponding period in 2014. The South West total for the second quarter of 2015 was the lowest since Q2 2013, when there were two profit warnings.

 

UK quoted companies issued just 57 warnings – a drop of 26% compared to the previous quarter and six fewer than the same period of 2014.

 

Chris Marsden, EY’s Transactions Markets Leader in the South West, said: 

“An improving global economic outlook and a decisive General Election result in May appeared to set the ball rolling on contracts and investment decisions. This helped companies in the South West and the wider UK to meet their lower forecasts.
 
“Despite these positive results, planning and forecasting remains challenging for companies, with the summer bringing renewed uncertainties. Even with improving economic conditions, there are enduring issues dragging on profits.
 
“Rising competition, and disruptive new entrants and trends – combined with overcapacity and ‘noflation’ – create a tough environment in which to raise prices and forecast. Companies in the South West need to continue focusing on operational and capital resilience to thrive, and meet rising investor expectations in this volatile environment.”

Looking ahead, Chris Marsden commented: 

“This year has seen stronger growth and rising deal activity, but heightened monetary policy speculation and the Eurozone’s growing existential crisis have increased market volatility and clouded the outlook for the second half of 2015.
 
“A rebound in growth should remain the dominant theme for 2015, but the recovery will have less speed and stability if uncertainties continue, and create a more testing period for UK companies and their earnings forecasts.
 
“For UK earnings the macro environment is only part of the story. Many companies are contending with dizzying change within their own sectors, as disruptive entrants and technologies continue to challenge pricing and old models. Change brings opportunity, but only for those resilient enough to take advantage.” 

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