As news that pasta is not the only thing being cooked the boss of BT’s Continental European operation, Corrado Sciolla, is to resign after the firm was forced to write down the value of its Italian unit by £530m after years of “inappropriate behaviour”.
The BBC reported that BT’s shares plunged 18% after revealing the Italian scandal would cost far more than the £145m initially anticipated. BT also warned that this would affect its results for the next two years.
BT began investigating its Italian unit’s accounting practices in October. It emerged that the problems were “far greater than previously identified” and occurred over “a number of years”.
The investigation, which included an independent review by accountancy firm KPMG, found improper accounting practices and “a complex set of improper sales, purchase, factoring and leasing transactions”.
BT said: “These activities have resulted in the overstatement of earnings in our Italian business over a number of years.”
From 2006, Mr Corrado was chief executive of BT Italy before his remit expanded in 2011 to include France.
In January 2013, he was appointed as president of BT’s Continental Europe operation, where he reported to Luiz Alvarez, the chief executive of the company’s global services business.
In addition, BT provided an update on its outlook and said that there had been a deterioration in both the public sector and international corporate market.
Along with the Italian scandal, BT now expects operating profit for the current financial year to be £7.6bn, compared to previously guidance of £7.9bn and revenue to be flat. It also forecasts that both sales and profit will be flat for the year ending March 2018.
The market valuation of BT tanked by £5.5bn in a matter of minutes in Tuesday trading and its shares continued to fall, down 18% at 313.55p.
Observers are saying that the problem is that investors will fear that this is not the end – what else will be uncovered? The costs could yet rise and that fear is driving the selling this morning.
Following the acquisition of EE BT Group’s net debts are around £9.6 Billion with an additional similar amount being owed to the BT pension fund. This further £530 Million loss could caused jitters.
BT CEO Gavin Patterson personally lost £2.0 Million today as his as his 2.8 million shares are down 72p each, or nearly 20%.
The exodus from BT Italy is not restricted to Corrado Sciolla either as BT said it had suspended a number of Italy senior senior management team who have now left the business. These include former chief executive Gianluca Cimini and chief operating officer Stefania Truzzoli.
The steep fall in BT’s share price will hit smaller investors. It has an estimated one million small shareholders after becoming the first state-owned business to be privatised under Margaret Thatcher’s government in 1984.
At the time, some two million members of the public bought shares priced at 130p including our Editor Ian Hunter who told us he had sold the lot some time ago!