Profit warnings diminish for West Midlands listed firms

PROFIT warnings issued by West Midlands listed businesses in 2010 is the lowest number it has been for four years, with only 16 warnings announced, new research has shown.

The latest figure compares with 20 warnings in 2009, 31 warnings in 2008 and 17 warnings in 2007.

However, business adviser Ernst & Young has said any thoughts of full recovery may be premature as 2011 was likely to be “testing”.

UK quoted companies issued just 196 profit warnings in 2010, the lowest number recorded and an exceptionally low number when compared to 282 warnings in 2009, and 449 in warnings in 2008.

The sectors with the highest number of warnings for the year were: Support Services (38), Software & Computer Services (22), Media (16) and General Retailers (16).

In 2010 across the West Midlands, warnings came from businesses operating in aerospace & defence (1), electrical & electronic equipment (1), general retailers (1), health care equipment & services (1), industrial engineering (4), software & computer services (1), support services (3), travel & leisure (2), financial services (2).

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Ian Best, partner and head of restructuring at Ernst & Young in the Midlands said: “A stronger than expected start to the recovery has provided many UK companies with the opportunity to leverage efficiency savings and exceed earnings expectations in the last 12 months.

“However, there are already signs that 2011 could be more testing for some parts of the UK economy. Market conditions in several service sectors are already tightening, even though the full impact of the Chancellor’s austerity measures have yet to arrive in earnest.
Substantial changes to levels and patterns of public sector spending, both here and abroad, make some long-term losers and short-term pain inevitable.”

Mr Best cautions that it will take some time for companies serving the public sector to work through what the changing landscape means for them, with contract cancellations and a spending hiatus likely to produce more profit warnings this year.

“Forecasting will be more difficult and many companies have been rightly cautious in their recent statements. However, volatility in demand and prices in 2011 could still catch companies out and we expect profit warnings to rise back towards their average levels in the year ahead,” he added.