BusinessBusiness RecoveryProfit warnings highest since dot-com crash

Profit warnings highest since dot-com crash

Ernst & Young reveals fears of financial turbulence as parts of UK plc struggle to meet market expectations

Profit warnings among the UK’s listed companies have hit the highest levels
since the dot-com crash in 2001, adding to growing fears of a weakening economy.

A report from
Ernst
& Young
reveals there were 191 profits warnings issued by UK listed
companies in the first six months of 2007, 13 per cent up on the first half of
2006, which saw 169 profit warnings.

A ‘shortfall in sales’ was blamed for the warnings by 43 per cent of the
companies, while 22 per cent cited ‘difficult trading conditions’ and 17 per
cent gave ‘delayed or discontinued contracts’ as their main reason for failing
to meet market expectations.
Keith McGregor, corporate restructuring partner at E&Y, said: ‘We are a long
way from the economic climate at the start of 2001 that saw more than 230 profit
warnings. Nevertheless, the 191 profit warnings are a reminder that segments of
UK plc are struggling.’

He added: ‘Many experienced market watchers are concerned that a turn in the
credit cycle, brought about by these factors, together with potential shocks
from the US sub-prime situation, rising interest rates and credit tightening,
will result in financial turbulence.’

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