Jan 24, 2017
BT: rats in the kitchen
For BT Group, the problem is more that the kitchen might also be home to more troublesome pests. Its shares fell as much as 18 per cent, far more than the Italian issue alone should warrant. A subsequent investigation has revealed that executives in Italy inflated profits over a number of years by artificially depressing the cost base. Unwinding all the unauthorised transactions will reduce free cash flow by about £500m. True, Italy represents just 1 per cent of BT's ebitda and the reduction in cash flow is not big enough to imperil the dividend, set to grow 10 per cent this year and next. Alongside the Italian revelations, BT reported a slowdown in the group's public sector and global services businesses, which are more material contributors to profit.
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