‘Mixed’ signals from profit warnings

Profit warnings issued in the UK for the first quarter of 2006 have fallen
11% compared with the last quarter of 2005, according to research by Ernst
& Young.

This would indicate that confidence is growing, but over the last 12 months,
profit warnings have increased by a massive 24% – increasing from 307 to 381 –
when compared with the previous 12 months, making it harder to paint a clear
picture of the health UK plcs.

Keith McGregor, corporate restructuring partner at Ernst & Young, said
the outlook remained uncertain for both corporate and consumers.

‘The picture for the last quarter is very mixed. Confidence is clearly
growing and warnings are falling. However, the warning level for the last 12
months is still high, and the proportion of companies warning continues to give
cause for concern,’ he added.

Eighty-five profit warnings were issued by UK quoted companies in the first
three months of the year, with nearly half citing ‘sales short of forecasts’
followed by ‘difficult market/trading conditions’ and ‘increasing costs and
overheads’ as reasons for the market announcements.

The sector which recorded the most warnings was software and computer
services with 12 warnings, followed by general retailers with ten, support
services with six, and food producers, healthcare equipment & services and
travel & leisure with five warnings each.

Related reading