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Profit warnings in UK increase as they hit three year peak: EY

By Steffen Müller

UK quoted companies issued 137 profit warnings in the first six months of 2014, up 9% on the same period of last year and the highest first half total since 2011, according to an EY UK report.

Adverse currency movements triggered over a fifth of profit warnings in 2014, compared with just 3% last year, the report found. "The pounds rapid rise is one of the biggest pressures on earnings," EY capital transformation leader for Europe, Middle East, India and Africa Keith McGregor said.

Along with the currency headwinds, the report referred to intense competition and margin pressure as the other main reasons for the growing number of warnings.

"Price and competition pressures have also intensified. While the recovery has boosted demand, it hasn't eradicated the austerity mind-set of businesses or consumers," McGregor said. According to the report, 19% of profit warnings cited competitive or pricing pressures, compared with 7% in 2013.

The EY UK report found that UK consumer goods manufacturers suffered the most from pricing, currency and competitive pressures with the percentage of companies in the FTSE consumer goods sector warning almost doubled, from 9% in the first half of 2013 to 16% over the same period this year.

On the other end, FTSE retailers have issued record low warnings. Although the sector has grown by 25% in the last year, a smaller number of companies issued profit warnings for first half of 2014. The total percentage of retailers warning in the first half of 2014 was only at 8%, against 16% in the same period of 2013, the report said.

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