PracticeConsultingBig increase in City profit warnings

Big increase in City profit warnings

Year-on-year profit warnings for September and the first week of October are up by more than a 200%, according to information from the London Stock Exchange.

A tally of profit warnings issued by the London Stock Exchange’s show 108 profit warnings were issued in this period, compared with just 32 a year ago.

In the first week of October, the difference is staggering with 35 companies expecting results to fall below expected levels, compared with just five last year.

Companies that issued warnings this week included recruitment specialists Michael Page, UK airports authority BAA and industrial materials group Cookson.

The overwhelming reason for the poor trading forecasts appear to be the global economic slowdown, exacerbated by the terror attacks on New York and Washington a month ago.

Cookson blamed its poor forecast on ‘difficult and deteriorating trading conditions’ while Michael Page said it was affected by ‘changes in business confidence and rates of economic growth’.

Another possible reason for the increased number of profit warnings is a warning by the Financial Services Authority in July to keep investors better informed.

In July FSA chairman Howard Davies said: ‘Any information which might be price-sensitive must be announced to the market as a whole without delay, and must not be given to anyone else before it has been so notified.’

He added: ‘A company can disclose price-sensitive information in advance of a public announcement to certain people to facilitate a negotiation. These provisions can also allow companies to consult employee representatives about a merger, or a closure, if they wish.’

But the City watchdog said yesterday it was ‘cautious’ in attributing the increased numbers of profit warnings to its July reminder.

The watchdog told the FT: ‘A lot of companies were calculating the global impact of the slowdown [and] September 11 was an added issue to think about.’

But the FSA did say that it would continue to strengthen its monitoring and scrutinising team to make sure companies are not providing information selectively.

Links

IT companies dominate profit warnings

FSA online

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