BT shares plummet on deepening Italian accounting scandal
- 7 years ago
UK telecoms firm BT has cut its revenue, earnings and cash flow forecasts for the next two years.
The reason for that was it had discovered that improper accounting at its Italian business went far deeper than previously thought.
Its shares slumped and on Tuesday were on track for their worst ever one-day fall, cutting its value on the stock market by almost a fifth.
The problems in Italy got the headlines, but even more serious for the long term was BT’s revelation of a deterioration in its international corporate and UK public sector businesses which mean group revenue will now not grow for the next two years.
BT is also facing a regulatory battle over its core network, a growing pensions deficit and the cost of expanding its TV business.
LATEST: BT shares fall 16% after an accounting probe in Italy https://t.co/Jufez6qOL8 pic.twitter.com/vKU7lx5ogq— Bloomberg (@business) January 24, 2017
“Deeply dissapointed”
BT said a review had found a complex set of improper sales, purchase and leasing transactions in Italy stretching back years.
As a result it was writing down the value of the business by around 530 million pounds (615 million euros) – more than three times the original estimate.
“I am deeply disappointed with the inappropriate behaviour we found,” BT Chief Executive Gavin Patterson said.
BT said it had taken immediate steps to strengthen its processes and controls in Italy. It suspended a number of the Italian senior management team, who have now left the business, and appointed a new Italian CEO.
“Further, we are conducting a broader review of financial processes, systems and controls across the group,” it said.
Corrado Sciolla, who headed BT’s Continental European operation, was reportedly set to resign.
Investor concern
Richard Marwood, senior fund manager at Royal London Asset Management which owns 0.9 percent of BT’s shares said he was concerned by the magnitude of the Italian writedown, given the modest size of the business.
“Prior to this morning’s news, BT investors had been concerned about BT’s large pension liabilities and the company’s relationship with its regulator, Ofcom. Today’s news is an unwelcome addition to those worries. Certainty on any of those issues would be welcomed by investors.”
BT : Top BT investor Royal London says surprised by scale of Italy scandal https://t.co/b6Gml5XWoc— 4-traders.com (@ForTraders) January 24, 2017
The reason for that was it had discovered that improper accounting at its Italian business went far deeper than previously thought.
Its shares slumped and on Tuesday were on track for their worst ever one-day fall, cutting its value on the stock market by almost a fifth.
The problems in Italy got the headlines, but even more serious for the long term was BT’s revelation of a deterioration in its international corporate and UK public sector businesses which mean group revenue will now not grow for the next two years.
BT is also facing a regulatory battle over its core network, a growing pensions deficit and the cost of expanding its TV business.
LATEST: BT shares fall 16% after an accounting probe in Italy https://t.co/Jufez6qOL8 pic.twitter.com/vKU7lx5ogq— Bloomberg (@business) January 24, 2017
“Deeply dissapointed”
BT said a review had found a complex set of improper sales, purchase and leasing transactions in Italy stretching back years.
As a result it was writing down the value of the business by around 530 million pounds (615 million euros) – more than three times the original estimate.
“I am deeply disappointed with the inappropriate behaviour we found,” BT Chief Executive Gavin Patterson said.
BT said it had taken immediate steps to strengthen its processes and controls in Italy. It suspended a number of the Italian senior management team, who have now left the business, and appointed a new Italian CEO.
“Further, we are conducting a broader review of financial processes, systems and controls across the group,” it said.
Corrado Sciolla, who headed BT’s Continental European operation, was reportedly set to resign.
Investor concern
Richard Marwood, senior fund manager at Royal London Asset Management which owns 0.9 percent of BT’s shares said he was concerned by the magnitude of the Italian writedown, given the modest size of the business.
“Prior to this morning’s news, BT investors had been concerned about BT’s large pension liabilities and the company’s relationship with its regulator, Ofcom. Today’s news is an unwelcome addition to those worries. Certainty on any of those issues would be welcomed by investors.”
BT : Top BT investor Royal London says surprised by scale of Italy scandal https://t.co/b6Gml5XWoc— 4-traders.com (@ForTraders) January 24, 2017