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Software of Excellence is the latest company to warn the high-flying New Zealand dollar may affect profits, but the news is unlikely to have implications for US firm Henry Schein's takeover offer.
SOE's directors yesterday said the New Zealand dollar's strength against both the British and Australian currencies - if maintained at current levels - had the potential to lower its first-half earnings.
Around 85 per cent of the company's earnings are drawn from its British operations and 15 per cent in Australia and New Zealand.
SOE said its internal targets were based on a cross-rate of £0.35.
"Current market forecasts show an average cross-rate of £0.38 for the remainder of the fiscal year. In the absence of offsetting operating outperformance, every 1p change in the cross-rate, if sustained for the full year has an approximate 5 per cent of impact on profitability."
ABN Amro Craigs analyst Brett Orsler said that was consistent with his firm's estimates. It is forecasting SOE to turn in a March year 2008 net profit of $3.7 million.
Chairman Jim Syme didn't believe SOE's exchange rate earnings risk would affect Henry Schein's current takeover offer.
"I would think they have fully factored in the foreign exchange situation into their calculations."
Henry Schein, a New York-based Fortune 500 medical services company, has offered $2.73 a share for SOE including a 3c special dividend.
The offer, which will posted to shareholders next week with an independent adviser's report, is conditional on gaining 90 per cent of the company.
Schein now holds just under 23 per cent of the company.
Orsler said the exchange rate had potential to impact the firm's half-year result, but that "doesn't materially change our long term view or value on the company".
Orsler believes Schein's offer does not offer sufficient premium for control of SOE, and a price above $3 a share will be necessary to gain 90 per cent acceptances.
SOE shares were unchanged at $2.66 yesterday.
