Big drop in quarter-on-quarter profit warnings

Eighty-five profit warnings were issued by UK quoted companies in the third
quarter of 2006, one more than the previous quarter but an 18% decrease of on
quarter three of 2005, according to research released by
Ernst & Young.

The firm said difficult ‘trading conditions’ were once again the most used
term with 40% of the companies giving this as the reason for the warning, while
21% reported ‘contract delays and cancellations’.

Sixteen percent cited “increased costs and overheads”, up from 11% last
quarter, as primary reasons for the warning.

The third quarter also saw a continuing increase in the number of warnings
from AIM -listed companies
with 61% of profit warnings coming from AIM this quarter.

Andrew Wollaston, corporate restructuring partner at Ernst & Young said
‘Light regulation is a big attraction to some AIM companies, who make no bones
about the fact that is the primary reason why they are choosing to float on the
alternative market. However, the argument from some quarters is that if AIM is
to continue to attract investment, then AIM listed companies must be able to
better balance good investor relations and effective forecasting despite their
relatively limited resources.’

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