BusinessCompany NewsProfit warnings jump 40%

Profit warnings jump 40%

Nearly 300 profit warnings were issued by UK listed companies in 2004, a jump of 40% on the previous year, according to figures from Ernst & Young.

Link: Bonus for Compass directors despite profit warning

Nearly 300 profit warnings were issued by UK listed companies in 2004, a jump of 40% on the previous year, according to figures from Ernst & Young.

Revealing a fourth quarter figure of 85 profit warnings, E&Y found that 294 were announced in 2004, up from 210 in 2003. The firm’s findings discovered that the Q4 figure was 11 higher than the previous three months’ figure of 74 – an increase of 15% and the highest quarterly figure since the first three months of 2003.

E&Y said the increase in warnings was ‘higher than anticipated’. The overall trend showed a steady rise since the first quarter of 2003, with most companies blaming ‘sales short of forecasts’ or ‘difficult trading conditions’. Five successive interest rate rises and a slowing housing market were also found to have affected consumer confidence.

Andrew Wollaston, corporate restructuring partner at E&Y, said: ‘While there is no cause for concern in the short term, should the trend continue and the warnings level rise towards the one hundred mark, this could indicate a significant deterioration in the state of corporate UK.’

The highest warning sector in 2004 was support services, which issued 32 warnings, followed by software and computer services with 31 warnings. General retailers made 25 profit warnings in 2004 while companies in the media and entertainment sector issued 24.

Figures for Q4 2004 revealed that companies with a turnover of less than £200m bore the brunt of difficulties, accounting for nearly three quarters of the warnings, up from 65% in Q3.

In contrast, the proportion of warning companies with a turnover of more than £1bn was only 6% for Q4, down from 12% in Q3.

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