BT previously estimated their Accounting irregularities would cost £145 million.Very wrong it appears. In fact so wide of the mark its incredible.
Today they admitted that the “extent and complexity of inappropriate behaviour” was far greater than had been thought, following an independent review of the business by KPMG.
The errors meant BT’s Italian business had overstateed its earnings over a number of years – the Italian arm accounts for around one per cent of the group’s total earnings.
Experts called the update a scandal, as the group’s shares fell into freefall.
Its ‘inappropriate accounting practices’ in its Italian business will cost it more than half a billion pounds.
BT it appears will not be forecasting any revenue growth for the next two years and a sharp cut to its previous earnings estimates will drop hugely.To state the obvious this was not received well by investors, the stock plunging 15 per cent when markets closed.
An investigation into the telecoms firm revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions”, leading to the upwards revision in the value of the write down, according to BT.Chief executive Gavin Patterson said: “We are deeply disappointed with the improper practices which we have found in our Italian business. He went to say , “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.”The group first revealed the accounting errors in October last year and on Tuesday said the investigation was nearly 100 % completed .They expects the whole fiasco to result in a reduction in its third quarter adjusted revenue and adjusted earnings of around £120 million.
For the financial year as a whole, BT expects adjusted revenue to decrease by around £200 million and adjusted earnings by £175 million – and expects a similar hit next year.
In reaction to the scandal BT said in a statement: “The improper behaviour in our Italian business is an extremely serious matter, and we have taken immediate steps to strengthen the financial processes and controls in that business.
“We suspended a number of BT Italy’s senior management team who have now left the businWe have also appointed a new chief executive of BT Italy who will take charge on 1 February 2017. He will review the Italian management team and will work with BT Group Ethics and Compliance to improve the governance, compliance and financial safeguards in our Italian business.”
BT will look to conduct a more strategic review of its financial processes, systems and controls across the group and its remuneration committee will “consider the wider implications” of the BT Italy investigation.