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Warning Signs - An Analysis of Profit Warnings

The pace of profit warnings and share-price reaction have increased significantly since last summer, reflecting a more difficult domestic outlook. In this report EY considers the impact of rising costs, falling growth and increasing competition on companies struggling to get a handle on the changing economy
Key points include:
  • The median share price reaction in Q4 2017 was the highest since the Brexit quarter of Q2 2016 and moved even higher in the first three weeks of 2018.
  • Many companies are still struggling to adapt to the cumulative effects of economic and structural change.
  • The UK may have hit the peak of inflation, but prices still look set to stay ahead of wages for most of 2018.
  • EY expects 2018 to bring little respite in top-line, margin or cost pressures and no let-up in the pace or demand for structural change.
  • Companies will need strong leadership to generate enough internal momentum and external support to overcome barriers.

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