BT Takes £245 Million Charge Linked to Italian Business, Earnings Fall - TheStreet

BT Group Plc (BT)  said Friday that its third quarter earnings plunged nearly 60% after taking a total £268 million charged linked to an accounting scandal at its accounting business. 

BT earnings for the three months ending in December, its fiscal third quarter, fell 59% to 3.8 pence per share. On and adjusted basis, that figure comes in 24% lower at 6.6 pence per share. Revenues were 32% higher at £6.128 billion ($7.6 billion), the company said, and £17.94 billion on a nine-month basis.

"Total adjustments relating to the investigation of our Italian business amount to £268 million for prior year errors, for which we've revised prior periods, and a specific item charge of £245 million for changes in accounting estimates," the company said.

BT shares shares fell 0.42% to 300 pence each by 09:00 GMT, extending a 20% over the past three days, however, including the biggest single day decline on record, after it said writedowns in its Italian business linked to accounting irregularities will be much larger than expected and trimmed its earnings guidance for the current fiscal year.

BT also said its head of Continental Europe, Corrado Sciolla, will leave the company, with Reuters news reporting he'll be replaced by Andrea Bono, who currently heads the group's Swiss operations. 

"The good progress we're making across most of the business has unfortunately been overshadowed by the results of our investigation into our Italian operations and our outlook," said CEO Gavin Patterson. "We've undertaken extensive investigations into our Italian business, including an independent review by KPMG, and I am deeply disappointed with the unacceptable practices by some that we've found. This has no place at BT, and it undermines the good work we're doing elsewhere in the Group. We are committed to ensuring the highest standards across the whole of BT."

The internal audit into BT's Italian unit was first announced in late October. The company estimated costs associated with the investigation at around £145 million but said Wednesday that the probe "revealed that 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" and could exceed £530 million ($661 million).

BT also said earlier this week that, owing to "pressures in the U.K. public sector and international corporate markets", it now expects flat revenue underlying revenue growth in the 2016/2017 fiscal year and adjusted EBIDTA of around £7.6 billion from a previous guidance of £7.9 billion.