Smith & Nephew reported a 12 per cent drop in half year profits to pounds 81.1m but it would have made another pounds 11m but for the adverse effects of a strong pound on overseas earnings and on UK exports. If sterling stays strong it will cost another pounds 11m in the second half of the year.
Glynwed pushed up profits by pounds 3.7m to pounds 43.9m in the six months to the end of June, but the strength of sterling cost it another pounds 4m in lost profit on overseas earnings and UK exports.
BOC said the strong pound had cost it more than pounds 33m in the nine months to June. Sales and profits were up 5 per cent at constant exchange rates. However, due to the surge in sterling, turnover was down 3 per cent to pounds 2.71bn and profits down 1 per cent to pounds 325.4m.
The pound reduced profits from abroad by pounds 26m when translated into sterling, including a pounds 22m effect on the industrial gas division which sells 95 per cent of its output in local currencies around the world. In addition to this translation effect, the transaction costs of profits lost because of exchange rate changes was pounds 13m.
The adverse impact of the strong pound is partly offset by the benefits of borrowing 90 per cent of the debt finance overseas, which reduces the adverse impact of translation costs by pounds 6m. But in a full year the finance director Tony Isaacs said the translation costs of sterling will reduce profits by pounds 36m before interest costs and pounds 28m after interest costs, while the transaction costs will grow to pounds 19m.
It was the same story at the insurance brokers Sedgwick Group. The company claimed a 16 per cent increase in profits to pounds 66.5m at the half-way stage in constant exchange rates, but the strength of sterling cost it pounds 7m, half of it on translation the rest on transactions, and the actual increase in sterling terms was less than 4 per cent. That cost will rise to pounds 8.5m in a full year if the pound stays strong.
Sedgwick confirmed it would consider mergers or takeovers following a wave of consolidation amongst insurance brokers.
Analysts believe its rival Willis Corroon would be the most suitable candidate but the company has consistently said it wants to retain its independence.
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