Investors are just not interested in small engineering companies with heavy overseas exposure unless they have some exceptional story. The fact that their shares are cheap will not attract buyers.’

This is sector analyst Steve Medlicott, of Midlands stockbroker Harris Allday, summing up the market view of such businesses as the pound grows ever stronger.

The company is aware of the exchange headache. Mark Swaby, chairman of Brasway (market capitalisation £17.5m) rates currency as his most `pertinent problem,’ which the budget `did nothing to help’.

Brasway’s principal business, Europower, which makes connection equipment for hydraulic, fluid, and gas systems, does 30% of its sales overseas, and Swaby is ambitious to expand its tiny 2% share of the global market for these products.

But he is frustrated by the strong pound; the figures he presented for 1996-97 show that Europower’s sales are slightly down at £30.2m, and its profits virtually static at £2.53m. Weak trading in several overseas markets did not help: sales in Germany fell by £1m.

With the contribution from the much smaller Electrolube lubricants arm in the sums, Brasway’s profit pre-tax before exceptionals rose 13% to £2.88m on total turnover down 3.5% at £38.55m.

Medlicott expects Brasway’s profits to be little changed at £2.9m this year, but he expects an encouraging £3.1m for 1998-99.

Rory Shearer, finance director for Hadleigh the tanks specialist with 67% of its sales overseas, hedged the rate last year at an average $1.59; but it will be much higher this year, so the company could have costly exchanges once the pound weakens.

`We can’t do much about currencies, but we can offset the damage by cutting labour and manufacturing costs, and we’ll be investing a further £2.8m for greater efficiency this year,’ Shearer said. Last year, Hadleigh spent £1.8m to this end.

The currency shadow took a heavy toll on Hadleigh’s shares when it reported for 1996-97 despite the excellent figures – profits up 30% at £2.4m on sales 14% ahead at £30.2m. A 22% increase in dividend to 7p was three times covered by a 30% increase in earnings.

Roger Brocklebank, at house broker Albert E Sharp, says investors focus too much on the damaging impact of the strong pound, and `ignore both the company’s organic growth and the benefits of a capital spending that will offset currency depreciations’.

He forecasts modest profit rises to £2.43m this year, rising to £2.9m next.