Strong sterling assaults Reed Elsevier and Zeneca

Reed Elsevier, the Anglo-Dutch publishing combine, and Zeneca, the giant drugs group, yesterday became the latest companies to reveal the scars left by the soaring pound, ironically on the day that the currency slipped back through the DM3 barrier, writes Magnus Grimond.

Reed said virtually all its first half profits had been wiped out by the effects of currency and forecast a hit in the rest of the year close to the pounds 36m sustained so far. Zeneca, part of a sector whose shares have soared this year on hopes that it will provide a safe haven from economic storms, saw its first half profits growth more than halved as the rampant pound reduced the value of earnings arising from overseas.

Shares in both groups suffered early on, with Reed closing down 40p at 590p, wiping pounds 455m from its market value, and Zeneca losing 49p at one stage, before recovering to end up 6p at pounds 20.52. Both underperformed a market buoyed by a further fall in the pound, which sank decisively through DM3 to end around 3.3 pfennigs lower at DM2.967. That boosted exporters and foreign earners in the manufacturing sector, notably LucasVarity, up 11.5p at 208.5p, BTR, which rose 10.5p to 197p, Rolls-Royce, which put on 13p at 256p, and ICI, where the shares added 42.5p to pounds 11.05.

Separately, Zeneca revealed that its 10 per cent rise in pre-tax profits to pounds 669m in the six months to June would have been 22 per cent had it not been for the effects of the pound. John Mayo, the finance director who is shortly leaving to join GEC, said sales were some pounds 300m lower and operating profits pounds 90m less due to the effects of the pound. He gave warning that its continuing strength in the second half could hit margins.

Investment column, page 23

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