RE:RE:RE:U.S. DollarThey report in USD so a stronger USD on their USD sales is irrelevant. 60% of the business is in GBP so lower GBP vs higher USD will serve to decrease their USD profit and Sales.
Their British business operating costs are in GBP so even though Their translated sales will be down, their GBP costs will be down so all that really matters is the profit and cashflow that they convert to USD will be lower... The shorts will focus on top line sales being down due to forex but they will neglect to mention all the GBP denominated costs will be down as well. Keep that in mind.
25% of their debt is in GBP - So the balance sheet debt number denominated in USD goes down, so the lower GBP almost makes it look like they owe less debt in USD... They also use their GBP cashflow to pay down the GBP debt so the currency value there is irrelevant.
Given they have 40% of their business in USD they use that cash flow to pay down the USD debt just as they use their GBP cash flow to pay down the GBP debt... Shorts will focus on having 75% of their debt in USD but 60% of their business in GBP but let's remember this debt isn't being paid off over a year. With free cash flow around $300mil a year and increasing over time, this is a 5 year process to get the debt ratios in a better balance. You always want some debt which is why I say 5 years...
Over the next few years, the USD cashflow will pay down USD debt and GBP cash flow will payoff GBP debt. The USD denominated sales and profits will be lower due to lower GBP but where will GBP be in 2-5 years when it might matter? Operationally the low GBP isn't a huge deal. It's just a reporting issue in the short run that shorts will use to their advantage.
if they lower guidance simply due to forex, people will trade on the headline. They won't focus on the points above. The 11% drop in the pound effectively lowered CXR's debt this morning.
Q2 should be fine as pound was in good shape. Q3 and Q4 might need to be revised due to forex now. I don't know.