85 UK companies issue profit warnings

Eighty-five profit warnings were issued by UK-quoted companies in the third quarter of this financial year, with support service firms and media companies the worst hit, a report revealed today.

The research by accountancy firm Ernst & Young found that "difficult trading conditions" were blamed for profit warnings by more than 40% of the companies involved.

Some 21% reported "contract delays and cancellations" and 16% cited "increased costs and overheads" as primary reasons for warning.

Support service firms had 17 warnings and media companies 13 - the highest for the sector in the last four years. Software companies were also suffering, with 10 warnings.

Meanwhile, six general retailers issued a profit warning in the quarter - compared with five in the previous quarter - and there seems to be little change in the tough trading conditions on the high street.

Keith McGregor, corporate restructuring partner at Ernst & Young, said: "Next quarter includes the vital Christmas period and given the pressure on UK consumer spending, the rise in internet shopping and polarisation of the high street, we expect the pain to be felt by mid-market retailers."

However, he said there were some bright spots in the industry.

"There are a few significant retailers who are doing very well, particularly those who are looking overseas to increase their growth, thus leapfrogging a near-saturated UK market," he said.

"Russia, India and the Middle East all offer significant opportunities."

Some 61% of profit warnings came from the Alternative Investment Market, during the quarter.

Andrew Wollaston, also of Ernst & Young, said: "Light regulation is a big attraction to some AIM companies, who make no bones about the fact that is the primary reason why they are choosing to float on the alternative market.

"However, the argument from some quarters is that if AIM is to continue to attract investment, then AIM-listed companies must be able to better balance good investor relations and effective forecasting despite their relatively limited resources."