Millennium bug hitting profits beyond IT sector
Poor sales and trading conditions are the most common cause of profit warnings, but the millennium is increasingly threatening the results of many companies, according to research by Ernst & Young.
The firm found the number of warnings fell during the third quarter of this year due to positive economic conditions.During the third quarter of the year 62 warnings were reported, representing a 22% fall on the second quarter and a 28% fall on the same quarter last year. Most of the decline in warnings came from medium-sized companies.The millennium has had a direct impact on profit warnings over the quarter – with ‘several’ companies warning it would hit their results – with the effects felt beyond IT related sectors. The millennium bug will continue to be a threat throughout next year, E&Y also warned.The report did however find a high number of repeated warning over the longer term – 16 firms issued their second or third warning this year.Alan Bloom, partner in Ernst & Young’s corporate restructuring practice, said: ‘The decrease in profit warnings is a reflection of increase economic prosperity. But companies must not rest on their laurels, and they should be prepared to anticipate any future events, such as a possible rise in interest rates.’