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Uk Profit Warnings Hit Three-Year High, Says Ey - The Recovery

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http://www.bbc.co.uk/news/business-28509984

Profit warnings from UK companies have hit a three-year high despite the continuing recovery in the wider economy, a report has found.

Listed firms issued 137 warnings in the first half of 2014, 9% up on a year ago and the highest number since the first half of 2011, consultancy EY said.

Increased competition, squeezed margins and a strong pound were the reasons.

Official figures released on Friday showed that the UK economy had returned to its pre-crisis level.

It just wouldn't be a recovery without a 3 year high of profit warnings.... Just think how bad these warnings would be if there wasn't a recovery.

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Sterling's strength is now working against a recovery. The unintended consequences of an enormous, govt sponsored echo bubble in house prices.

Canada is suffering similarly. Carney's economic miracle getting bitch slapped by reality both sides of the Atlantic. :D

Profits warnings from UK companies have hit a three-year high despite the improving economy, with the strong pound a growing problem for businesses with overseas operations.

As a number of major companies including Rolls-Royce, BAE Systems, GKN and Diageo prepare to reveal the impact of sterling's recent rise on their profits, a report released on Sunday shows adverse currency movements triggered more than a fifth of profit warnings in the first half of 2014, compared with just 3% last year. The pound has appreciated by around 12% against a basket of currencies since the start of the year, lifted by the prospect of the Bank of England becoming the first major central bank to raise interest rates after a sustained period of cheap borrowing.

In May Rolls, which reports first half profits on Thursday, said adverse foreign exchange effects could knock £40m off full-year profits and £300m off revenues.

With intense competition and pricing pressures adding to the currency woes, UK quoted companies issued 137 profit warnings in the first six months of the year, up 9% on the same period in 2013 and the highest first half total since 2011, according to consultancy group EY.

Manufacturing was one sector hit hard by the rise in sterling, but support services was the sector with the highest number of currency-related warnings, with a third of them relating to exchange rates.

Keith McGregor at EY said: "The pound's rapid rise is one of the biggest pressures on earnings, although the problem highlighted in profit warnings isn't one of sales but of currency translation. Recent history shows that UK exports are relatively insensitive to currency effects. However, the pound's leap to multi-year highs has caught out a number of companies who translate foreign earnings back into pounds."

He said the second half was likely to pose more challenges that the first:

"Central bank actions have helped to quash volatility, pushing asset prices to pre-crisis highs. However, the countdown to a new monetary era will bring new tests and greater volatility as markets begin to re-price risk."

http://www.theguardian.com/business/2014/jul/27/profit-warnings-rise-strong-pound

Edited by zugzwang

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Profit warnings from UK companies have hit a three-year high despite the continuing recovery in the wider economy, a report has found.

"The wider economy" must be the new precis for massive debt, QE, inputed rent, cheated savers, extra taxation and a heavily manipulated GDP figure etc.

Edited by billybong

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"However, the countdown to a new monetary era....."

A Freudian slip? Do they know something we're not supposed to?! :ph34r:

Edited by anonguest

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"However, the countdown to a new monetary era....."

A Freudian slip? Do they know something we're not supposed to?! :ph34r:

Article is clearly referring to the end of ZIRP.

Foreign buyers pumping up sterling with their London property boom obviously ain't doing much good for company profits.

How Carney intends to get sterling down when he's about to start raising interest rates is anybodies guess. He's screwed this up big time.

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Isn't this good news?

Big profits go to share holders and CEO's. Would you prefer the company you work for make big profits or pay you higher wages?

And surely private debt is the other side of the balance sheet to company profits. Do you think people should be taking on more debt so companies can increase their profits.

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"However, the countdown to a new monetary era....."

A Freudian slip? Do they know something we're not supposed to?! :ph34r:

It's the monetary era of near zero interest rates. This is the new "normal". 0.75% is the new 6%.

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