30/07/2001

Analysts concerns grow over continued profits warnings

Business consultants Ernst & Young have warned that many UK managers may not be coping properly with the current downturn in the UK economy.

The top business consultancy has expressed concern that UK managers are likely to be faced with further profit warnings in the third quarter of the year. Most of the warnings are being made by the high-tech firms who have been responsible for half of the profit forecast downgrades made in the last three months.

Even though the quantity of profit warnings being made has dropped by around a quarter in the last three months, analysts at Ernst and Young remain concerned that there are little grounds for optimism. Such a change in the pattern does not necessarily imply that the companies concerned were being realistic about the profit forecasts they were generating.

Alan Bloom, Head of Corporate Restructuring at Ernst & Young described the number of warning as “still high” and, sounding an ominous note, cautioned that it was still too early in the financial year for companies to “correct over-ambitious forecasts”.

He added that some managers were finding difficulty in making accurate forecasts on the brink of a recession, and cautioned that they should go back to basics in a bear economy as “more things tend to go wrong than right, and what can go wrong - will.”

(SP)

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