Strong sterling alarms Reed and Reuters

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Further concerns over the strength of sterling were voiced by two of Britain's biggest companies yesterday when Reuters and Reed Elsevier warned that the currency could have a significant impact on profits this year.

Peter Job, Reuters' chief executive, told shareholders attending the electronic information group's annual meeting that both profits and earnings would be virtually static in the first half of 1997 if the pound continued at current levels. The news pushed the shares down 8p at one stage, before recovering to end the day 3p lower at 589p.

First-quarter revenues have been cut by 2 per cent to pounds 699m by currency factors, but underlying sales growth in the first three months was 8 per cent and Reuters said there had been no impact on the fundamental business.

"Sterling's strength continues to have a negative impact on our reported figures", Mr Job said. "Meantime, the business is performing much as we expected. We mainly invoice in local currency all over the world so sterling exchange rate movements are not having any impact on unit sales."

Fears over the impact of translating overseas profits into a higher sterling were echoed at Reed's annual meeting yesterday. Ian Irvine, chairman of Reed International, the British-quoted end of the business, told shareholders that if sterling maintained its current strength against most other currencies it would have a "marked effect on the reported results, particularly in the first six months to June 30 from 1996".

But, like Reuters, he tempered his remarks by adding that the negative effect of currency translation did not affect the underlying operating performance of the group. "Overall, the businesses continued to perform well," he said.

Reuters also warned yesterday that computer problems related to the switch to the year 2000 was hampering its efforts to develop new products. Mr Job said this effect of the change of date on existing software was a serious issue with wide ramifications. "There is a lot of work to be done and we will eat up some effort that would usually go in to new product development."

Reuters was unable to report any progress on plans to reinstate last year's share buy-back, which was derailed by a last-minute tax change from the Chancellor Kenneth Clarke.