Profit warning figures improve

Profit warnings hit a six-year low in the UK for Q3 2009. there were 52
profit warnings form quoted UK companies during the period, a drop of 53% on the
previous year and 15% lower than the last quarter, according to
Ernst &
Young’s survey.

E&Y partner Keith McGregor said the improvement was due to the already
depressed market and withdrawn company guidance, and an improving economic
outlook, but warned against complacency.

“The one-off effects of monetary and fiscal stimulus and inventory rebuilding
have put a gloss on current demand that could soon tarnish once this support is
withdrawn.”

“The ability of the economy to transition smoothly from this temporary boost
to self-sustaining growth is still in serious doubt given the strong headwinds
from still tight credit and the ongoing effects of balance sheet restructurings
in both the private and public sector. Relapses are still possible, a slow
recovery probable. The worst of the downturn may be behind us, but that does not
mean all the risks to UK plc are too.”

Another wave of restructurings could occur over the next couple of quarters
as companies produce year-long depressed figures, which could push banking
covenants to breaking point, McGregor added.