BTG loses out on sterling benefit due to hedging and dollar costs

The FTSE 250 company, in a statement issued ahead of its annual shareholder meeting and after one quarter of trading, said it would hit its full year targets, with Specialty Pharmaceuticals "steady" and Interventional Medicine continuing to "perform well".

In April, BTG guided to £485-515m revenue, overheads of £160-170m and research and development spending of £85-95m, based on a pound changing hands for $1.45.

Should the average rate for the remaining nine months of the year find the pound valued at $1.35, management expect revenue guidance to jump to £510-540m, costs to £165-175m and R&D to £90-100m.

But at the net income level the company said this forex benefit "would be mostly offset in the short term by foreign exchange losses on existing forward contracts to hedge future US dollar cash flows".

Broker Numis explained that with each 5c move, BTG’s revenues shift by £13m, while at the EPS level the adverse movement on hedging contracts will be around £10m at $1.35.

Using 1.37 as a basis for the current year, analysts updated their model for FX and product mix and now forecast sales and EBITDA both up 8% to £533m and £110m but EPS dampened 17% by higher adjusted taxes and the adverse hedging impact to 18.7p.

"At the EBITDA and EPS level these forecasts are below consensus for FY17 [which is £120m and 23.7p] and we would expect some downgrades today."

Shares in BTG were down 5% to 688.5p.