Ernst & Young's latest quarterly Analysis of Profit Warnings reveals that 67 profit warnings were made during the three months to June 2002, a fall of 26 per cent on quarter one when there were 91. In quarter four, 2001 there were a record 149 warnings. The figure for warnings in this quarter is the lowest number since quarter one, 2000. The report, which surveyed 1,583 UK quoted companies, found that the only sector where warnings increased was the software and computer services industry (up by one to 12). Other sectors like transport, retail and support services all recorded big falls in warning numbers. Sales falling short of forecasts were the most commonly cited reason for warnings, accounting for over 30 per cent of the total. This was followed by difficult trading/market conditions and delays to contracts and negotiations.
Alan Bloom, head of corporate restructuring at Ernst & Young has no doubts why this fall is so dramatic. "There were two principal reasons for the decline: firstly companies are getting better at forecasting market conditions in the current economic climate. There is much more realism in the UK market place," he says. "Secondly there were no major external shocks like 11 September 2001. If companies issued a warning this quarter it was due to internal difficulties within an organisation not external circumstances."