Profit warnings fall to two-year low

They fell from 91 in the first quarter of 2002 to 67 in the second quarter, their lowest level since the beginning of 2000. Company share prices fell an average 17.5% on the first day’s trading following a warning, compared with 21.9% in the first quarter.

Alan Bloom, head of corporate restructuring at Ernst & Young, identified two reasons for the decline.

‘Companies are getting better at forecasting market conditions in the current economic climate. There is much more realism in the UK marketplace and a better grasp of what profit figures can actually be achieved.

‘Secondly there were no major external shocks. If companies issued a warning this quarter it was due to internal difficulties, not external circumstances.’

Related reading