The value of BT shares has plunged 19%, after it was forced to write down the value of its Italian business by £530m, a sum far higher than the £145m initially anticipated. BT warned that its results could be affected for the next two years.
An investigation into accounting practices at BT’s Italy operation started in October, and according to a statement by KPMG, the problems turned out to be ‘far greater than previously identified’, occurred over ‘a number of years’ and included ‘a complex set of improper sales, purchase, factoring and leasing transactions’ which ‘resulted in the overstatement of earnings in our Italian business over a number of years.’
BT group chief executive Gavin Patterson 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.’
BT said it had suspended a number of BT Italy's senior management team who have now left the business. These include former chief executive Gianluca Cimini and chief operating officer Stefania Truzzoli.
Subsequently it was announce that the head of BT's Continental European operation, Corrado Sciolla, is also to resign.
A new chief executive of BT Italy will take charge on 1 February, and the company said the new chief executive will review the local management team and ‘ work with BT Group ethics and compliance to improve the governance, compliance and financial safeguards in our Italian business’.
BT now expects operating profit for the current financial year to be £7.6bn, compared to previously guidance of £7.9bn, with revenue flat. Sales and profit forecasts for the year ending March 2018 are also flat.
BT’s market value fell by £5.5bn on the news, and shares were down 19% at 309.8p.