A dramatic rise in profit warnings reported by smaller UK quoted companies will boost demand for corporate restructuring advice, according to leading insolvency lawyers.
An analysis of profit warnings for the last quarter of 1998 – conducted by Ernst & Young and published this week – reveals the number of quoted firms in the £1m-£50m and £51m-£100m turnover bands reporting warnings rocketed by over 50%.
Lovell White Durrant insolvency partner Robin Spencer said it was these companies and those at the lower end of the FTSE 250 market that have most call for corporate restructuring advice. "It is those companies that are more financially fragile, and which may be particularly dependent on profits for the year, that are most in need of advice." Spencer added: "A profits warning by a much larger company means they are more likely to be a takeover target."
Egan Brooks, former senior partner at Slater Heelis and now head of insolvency at Addleshaw Booth & Co, warned that companies making the profit warnings should be looking at their credit control generally, retention of title rights and remedies to enforce debt payment.
But he said the big clearing banks in the north west were being more sympathetic. "Bankers are not looking for bad publicity," he said. The major lenders in the north east are being similarly prudent, according to Dibb Lupton Alsop's national head of corporate, Mark Cranston.
Cranston said, "The banks have taken to heart many of the lessons learned last time."