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Last Updated: Sunday, 14 January 2007, 13:33 GMT
Small firms head UK profit alerts
Sale shoppers on London's Oxford Street
High Street retailers have experienced a turbulent time
The number of firms in the UK warning that their performance would fall short of forecasts fell during 2006, research by auditors Ernst & Young (E&Y) says.

According to the firm, 342 firms listed on the London Stock Exchange issued profit warnings, against 381 in 2005.

In 2006, 75% of firms issuing profit warnings had a turnover of under 200m, from 70% in 2005 and 67% in 2004.

E&Y said small firms seemed to have more difficulty forecasting accurately, with contractual problems a big factor.

The researchers said the number of profit warnings issued last year was comparable to 2002, "when economic conditions were far more testing".

'Better forecasting'

But one of the key differences between 2002 and 2006 was the relative importance of London's junior stock market AIM, E&Y said.

In 2002, AIM companies accounted for 30% of UK listed companies and for 22% of profit warnings.

However, by 2006, warnings from AIM companies comprised 54% of all profit warnings - up from 43% in 2004.

It's a measure of how tough the High Street is that some felt compelled to warn of a profit shortfall before the end of the festive season
Keith McGregor, E&Y

Andrew Wollaston, E&Y corporate restructuring partner said: "The high incidence of profit warnings from AIM companies, especially in their first year of flotation, has placed increased scrutiny on the junior market.

"Its light regulatory burden is one of AIM's main attractions.

"But, with AIM becoming increasingly popular, there will be more competition for investment and therefore a greater need for companies to adopt better forecasting and investor relations."

The annual total of profit warnings from retailers was 30, indicating a tough year in 2006.

Keith McGregor, also of E&Y's corporate restructuring team said: "Profit warnings from general retailers usually reach their peak in the first quarter after the all-important Christmas period.

"So it's a measure of how tough the High Street is that some felt compelled to warn of a profit shortfall before the end of the festive season."


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