Steep profit warning rise in leisure sector

The leisure, entertainment and hotel sector saw the steepest rise in profit warnings in the last quarter of 2002 according to Ernst & Young.

Fifteen warnings were issued compared to eight in the third quarter - the most dramatic rise since Ernst began its research in 1998.

The professional services group said the results were a further indication of "waning consumer confidence".

Iain Wilkie, head of hospitality, leisure and gaming at Ernst & Young said: "The sector is looking at a very mixed year with the strong performances by individual companies being overshadowed by a volatile market.

"We expect to see some public to private deals as life in public ownership becomes increasing uncomfortable."

In total 106 warnings were issued across all sectors compared to 89 in the previous three months.

The general sluggish economic climate was to blame in many cases, with 43 per cent of companies citing difficult trading conditions as the single biggest cause of profit warnings.

"We are seeing further evidence of a waning in consumer confidence," said Kevin Hewitt, corporate restructuring expert at Ernst & Young.

"Companies exposed to consumers tightening their belts on discretionary spending have contributed strongly to a rise in profit warnings for the second quarter in a row. This momentum looks irresistible and we anticipate a further increase in profit warnings in the first quarter of this year."

In the pub sector, Luminar and Yates have issued warnings already this year and cidermaker Bulmer again gave a dismal update to the market regarding current trading.

The stock market's sensitivity to warnings was heightened - the fall in share price once a warning was issued reached a record average first day decline of 24 per cent.

Other sectors hit badly included construction and building materials, and media and photography.