Sports Direct slides as it warns of currency hit to earnings

7th Oct 2016 15:07

(ShareCast News) - Sports Direct International slid on Friday afternoon as the company warned that its full-year 2017 earnings would take a hit from recent currency movements after sterling tanked overnight.The group said guidance provided in its trading update in September of underlying earnings before interest, taxes, depreciation and amortisation of around £300m was based on a GBP/USD rate of approximately 1.30.In light of recent downward currency movements, it had entered into a hedging arrangement with respect to the GBP/USD rate."Extreme movements overnight resulted in a crystallisation of that rate at 1.19, resulting in a negative impact of approximately £15m on the company's FY17 underlying EBITDA expectation," it said.Sports Direct added that after taking into account the hedging above, if the GBP/USD rate is 1.20 on average for the remainder of full-year 2017, the hit to its FY17 underlying EBITDA expectation would be an additional £20m or so.Sterling slid as much as 6% to hit its lowest level against the dollar since 1985 in Asian trade, with market participants speculating that it could have been the result of a faulty algorithm or 'fat finger' trade, with low liquidity also thrown into the mix. The plunge coincided with comments by French president Francois Hollande, who said the EU should take a tough stance with the UK during exit talks.At 1515 BST, the shares were down 8.7% to 274.26p.