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'Remarkably high' number of UK profit warnings, research says

Published 24/04/2016

Tesco was among high-profile companies to issue a profit warning
Tesco was among high-profile companies to issue a profit warning

The number UK companies making profit warnings is "remarkably high" despite a significant downgrade in expectations for earnings, according to a report.

Quoted businesses issuing profit warnings hit 76 in the first three months of the year, down from 77 in the same quarter of 2015, the EY profit warnings report found.

Meanwhile, the research said the number of firms warning over profits reached 17.2% in the 12 months to the end of the first quarter, up from 16.5% over the same period in 2015.

High-profile profit warnings this year include supermarket Tesco, betting giant William Hill, Burberry and Sports Direct.

The research said weaker oil prices and slower global growth have "dented" expectations for UK businesses.

It added: "The volatile start to 2016 created uncertain and difficult conditions for companies reliant on the contract cycle. Central bank action has soothed market concerns, but the global economy is still struggling to build momentum.

"Meanwhile, companies are clearly still coming to terms with the intense competition that comes as a result of overcapacity and disruption across many sectors."

The report found the FTSE sectors leading the profit warnings in the first quarter of this year were support services with nine, general retail with eight and media with seven.

Christian Mole, EY retail specialist, said: "We've seen in recent years how rising operational costs and the hard bargain driven by the UK consumer have chipped away at the benefits of rising disposable income and demand.

"This year looks no different, with additional challenges and opportunities that will further differentiate between retail's winners and losers."

He added: "Retailers that emerge as the winners will be those who can significantly improve their productivity and remain relevant to customers.

"Much of what we have seen in recent years has taken the form of short-term responses to problems of space, price and technology that need long term solutions. Retailers will win market share by being bold with new propositions."

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