BT shares tum­ble after tam­per­ing

The Star Early Edition - - INTERNATIONAL - Kate Holton

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.

Whis­tle-blower

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.

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