Listed IT services firms weather the storm

Number of profit warnings in UK software and services sector drop in Q3, despite rise in profit warnings in overall market

Listed UK software and services firms appear to be holding up well in the face of the financial downturn, with profit warnings in the sector falling in Q3.

According to market watcher Ernst & Young, seven warnings were issued by five firms in the Software & Computer Services sector in the three months to September. This compares to nine warnings in the same quarter last year.

The Software and Computer Services sector comprises 145 firms, meaning only 3 per cent of the firms issued warnings during the period.

This is despite the number of profit warnings across all sectors rising to their highest level in a third quarter since 2001.

Warnings in the Electronic and Electrical Equipment sector also dropped from nine to four year over year. The Technology Hardware and Equipment sector saw an increase in warnings from two to three.

James Bennet, technology director at Ernst & Young, said: “Q3 has been less challenging for software and IT services companies, mostly because they went into the downturn slightly earlier than other sectors.

“Over the past 24 months the IT and software services sector has been one of the most hit in terms of profit warnings. We would however express caution about the climate and the likely health of the technology sector in the coming two quarters, particularly with the dramatic downturn in the overall economy.”