Jan 24, 2017
BT warns on profits after Italian writedown balloons
BT has issued a two-pronged warning after more than trebling the financial impact of its accounting scandal in Italy and guiding towards a sharp slowdown in public sector spending in the UK. The double hit means that the telecoms group has reversed its guidance for growth over the next two financial years. The warning, particularly on public sector spend, was described by Bernstein analyst Dhananjay Mirchandani as "Surprisingly gloomy" and he predicted a "Difficult day" for BT shareholders. BT first warned of "Inappropriate behaviour" at its Italian unit, part of its Global Services division, last year and said it would probably lead to a £145m write down. Gavin Patterson, chief executive of BT, said: "We are deeply disappointed with the improper practices which we have found in our Italian business. 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 combined effect of the two issues means that BT now expects to report flat revenue in its financial year, excluding the impact of its £12.5bn takeover of EE, with adjusted earnings of £7.2bn. It also expects no revenue growth in the financial year ending in 2018, which was a sting in the tail for analysts who said that its public sector order book must have deteriorated substantially.
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