BT rocked by profit warning
ABOUT £7.5billion was wiped from the value of BT Group yesterday as it admitted the financial blow from an accounting scandal at its Italian division would be far worse.
Shares in the telecoms giant plunged by 20 per cent, 79½p to 303p, as the size of the black hole in its Italian accounts snowballed from an earlier £145million estimate in October to £530million.
BT flagged a further squeeze on profits from a slowdown in UK public-sector spending as Government departments delay expenditure amid Brexit and general economic uncertainty.
Contracts are either not being replaced or are being awarded on a smaller scale.
Yesterday, chief executive Gavin Patterson, pictured, said: “We are deeply disappointed with the improper practices which we have found in our Italian business.
He said: “We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders.”
Prosecutors in Milan are reported to have opened an investigation into BT’s Italian operations, formed in 1995 as a joint venture before BT took full control in 2005, over alleged false accounting and embezzlement.
BT said its own probe had shown “the extent and complexity of inappropriate behaviour in the Italian business were far greater than previously identified and have revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions”.
Earnings were overstated “over a number of years”.
As a result, third-quarter adjusted revenue and pre-tax earnings are likely to be about £120million lower, with cashflow reduced by £100million.
The annual impact on earnings for this year and next is expected to be about £175million, with cashflow down by up to £500million.
BT said a number of its Italian senior management team had now left the business having been suspended. A new chief will take charge next month.
Despite deteriorating prospects for UK public-sector and international corporate markets, BT said its consumer businesses are set for revenue growth and it expects to increase its dividend by at least 10 per cent this year and next.