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Profit warnings up

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25th Oct 2005
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Profit warnings issued by UK quoted companies in the last quarter were up 39% compared with the same period last year, according to research by Ernst & Young.

During the three months to 30 September 2005, 103 profit warnings were issued by UK plcs. This brings the total number of profits warnings issued this year to 370, compared to 261 in the first nine months of 2004 - an increase of more than 40%.

Difficult market and trading conditions were blamed by 50% of companies who issued warnings, while 22% cited "delays or discontinued contract negotiations", and 18% blamed "increasing costs and overheads". The sectors most affected include software and computer services, support services, electronic and electrical equipment, media and entertainment. Companies issuing a warning saw their share price drop by an average of about 13% during the next day's trading.

"With profit warnings averaging 92 per quarter in the 12 months to Q3 2005, businesses are clearly finding it difficult to forecast in the current environment," said Ernst & Young partner Andrew Wollaston. "Though the economy is weaker than a year ago, this continued high level of warnings, 42% up on the previous year, is a real concern."

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