Sports Direct to lose £15m in sterling flash crash

Jake Cordell
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Mike Ashley
Mike Ashley can't escape the headlines (Source: Getty)

As if Mike Ashley didn't have enough troubles to deal with at the moment.

Fresh from his Sports Direct warehouses being likened to a "Victorian warehouse" and a gaffe-ridden open-doors day at the retailer's Shirebrooke factory, the firm has been caught up in the fallout from sterling's flash crash.

A trading update from the firm issued this afternoon said the company will take a £15m hit to its bottom line as a result of last night's freak trading.

What's more, if the pound falls to $1.20 against the US dollar, its earnings before interest, tax, depreciation and amortisation (Ebitda) will come in another £20m short of its £300m guidance for the 2016/17 financial year.

Read more: Where next for sterling after the flash crash

Investors weren't best pleased, sending shares in the retailer down 12 per cent. Shares were trading at 264.44p at pixel time.

7 October 2016 @ 3:15pmSports Direct Intl (SPD)

Sports Direct said: "The company stated that it expected underlying Ebitda to be in the region of £300m. This guidance was based on a GBP/USD rate of approximately $1.30.

"In light of recent downward currency movements, the company entered into a hedging arrangement with respect to the GBPUSD 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 underlying Ebitda expectation.

"In addition, after taking into account the hedging referred to above, if the GBPUSD rate is $1.20 on average for the remainder of the fiscal year, then the negative impact on the company's underlying Ebitda expectation would be in the order of a further £20m."

Read more: Who's who at Sports Direct after the latest changes

Wild trading activity early in the morning saw sterling fall to around $1.18 as a number of options and future contracts - including, it appears, for Sports Direct - were triggered following a dramatic plunge in the value of the pound. Reuters estimates for a few minutes the going rate for the pound could have fallen as low as $1.14.

What is going on with sterling?

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