BT shares tumble after tampering
BRITAIN’S BT cut its revenue, earnings and cash-flow forecasts for the next two years yesterday after finding that improper accounting at its Italian business went far deeper than previously thought, sending its shares 20 percent lower.
The telecoms company, which had revealed an initial investigation into historical accounting practices in Italy in October, said a review had found a complex set of improper sales, purchase and leasing transactions.
A write-down to the business of £145 million (R2.4 billion), announced in October, has been increased by more than three times to £530m.
According to a source familiar with the situation, staff had colluded with suppliers to inflate their accounts over a number of years, before a whistle-blower contacted senior executives at BT headquarters last year to make them aware of the practices.
“We are deeply disappointed with the improper practices which we have found in our Italian business,” chief executive Gavin Patterson said.
BT also said it had seen a deterioration in its UK public sector business and international corporate markets. The news sent its shares tumbling, hitting a three-and-a-half-year low and falling the most on record in a single day.
Group revenue will now not grow for the next two years while the guidance for core earnings, or earnings before interest, tax, depreciation and amortisation, has been cut to £7.6bn from a previous guidance of £7.9bn.
Normalised free cash flow for 2016/17 is expected to come in at £2.5bn, compared with a previous forecast of between £3.1bn and £3.2bn. Free cash flow is also forecast to be lower than the guidance given for 2017/18.
The group said it had taken immediate steps to strengthen its processes and controls in Italy. It suspended a number of BT Italy’s senior-management team, who have now left the business, and appointed a new BT Italy chief executive as of next Wednesday.
“Further, we are conducting a broader review of financial processes, systems and controls across the group,” it said. “BT Group’s remuneration committee will consider the wider implications of the BT Italy investigation.” – Reuters
We are deeply disappointed with the improper practices which we have found in our Italian business.