UK profit warnings have hit their highest second quarter level since the financial crisis. Our analysis shows more companies warning – and more companies warning more than once. Why is this happening? More to the point, how can companies avoid profit warnings when the future is so becoming more unpredictable?
We’re taking stock four weeks on from the result of the EU Referendum. A great deal of water has passed under some political bridges; but in terms of BREXIT practicalities we’re not much the wiser and won’t be for some time. The eye of the storm is focused on those most exposed to the greatest uncertainties and sterling transactions. As you move out to the edges, it’s looking more like “business as usual”, with the falling pound even creating sunnier skies for exporters. But are the latest surveys signalling more trouble to come?
It’s hard to take your eyes off what’s going on in the markets. We’re not ignoring these stresses and strains and this week’s blog covers the primary themes in four charts. But, I also want to think more practically. Given that uncertainty looks set to be an overused word for many, many months yet, there’s a danger that we worry about everything and do nothing. So, what can companies sensibly do now?
After quite a week for the United Kingdom we take stock of where we are. It seems that we won’t know for some time what shape the UK’s reformed relationships will take. So, for now, we can only assess the impact of uncertainty – including a weaker pound – and look at the pinch points and opportunities by sector. This is a complex and nuanced picture – with some potential bright spots, as markets are starting to acknowledge.
Yesterday’s historic UK referendum has delivered a vote to leave the European Union. It will take time to work through the implications. So much is still unknown in terms of how the UK will negotiate its exit and build new trading relationships in the years ahead. But, invariably, uncertainty affects economic and capital market activity – and this feeds market volatility; although governments and central banks also stand ready to react.
This all adds up to a complex picture that we can’t hope to unravel in one sitting. The starting point for us today is how the various forces in play might reshape the capital agenda. It was always the case that companies needed to think in terms of multiple futures– but BREXIT adds another dimension.
On Monday we got together with leading Corporate Development Officers (CDOs) to discuss their changing role in disrupted markets. In many ways, the challenges they face are familiar ones. CDOs have always contended with disrupted business models and decisions about where to position their company in the supply chain. What’s changed is the pace of change. This has put companies under pressure to get in early before they know who the “winners” will be – whilst technology, regulation and changing behaviours constantly shift where the value lies in the supply chain. As a result, CDOs are looking at vastly different target populations, employing very different deal tactics and challenging some of the fundamental assumptions that shaped deal making for decades. It’s a fascinating time to be doing deals and we were very lucky to hear such great insights from some of our leading CDOs – which we’ve captured in this week’s blog.
I don’t think we need to hype this up; June could herald fundamental changes to our capital landscape. There is already a great deal to digest from last week’s ECB and OPEC meetings and even more to anticipate from pivotal votes on US interest rates (14-15th) and the UK’s EU membership (23rd) – in case you needed reminding. Then again, we’d caution against zooming in too closely on specific events. Outwith both of these votes, the world keeps turning and presenting challenges and opportunities….there’s plenty more to see here.