BT share price subdued as group posts drop in profit amid Italian scandal

on Jan 27, 2017
Updated: Oct 21, 2019
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Shares in BT Group (LON:BT.A) have been subdued this morning, as the company posted a 59-percent drop in earnings per share for the three months to December 31. The statement followed the group’s profit warning earlier this week, when the former telecoms monopoly disclosed that it had been forced to write down the value of its Italian unit by as much as £503 million following the discovery of inappropriate accounting practices.

As of 09:53 GMT, BT’s share price had inched 0.25 percent lower to 301.35p, slightly underperforming the broader London market, with the benchmark FTSE 100 index currently 0.09 percent worse off at 7,155.39 points. The telco’s shares tumbled earlier this week, losing a fifth of their value in a single session, following news of the Italian scandal.
BT announced in a statement this morning that its reported earnings per share had fallen 59 percent in the third quarter of its financial year, while adjusted earnings came in 24 percent lower. The group’s reported revenue rose 32 percent during the reported period, but dipped 1.5 percent on an adjusted basis.

Earlier this week, the former telecoms monopoly revealed that it expected a double-digit decline in revenue from its large UK public sector and international corporate business in the fourth quarter. That, coupled with the Italian unit writedown, along with the pressures in the UK public sector and international corporate markets means that BT now expects to report broadly flat revenue in its financial year, excluding the impact of its takeover of EE, with adjusted earnings of £7.6 billion. It also expects no revenue growth in the 2017/18 financial year.

“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,” the group’s chief executive Gavin Patterson commented in today’s statement, adding that BT had “undertaken extensive investigations into our Italian business, including an independent review by KPMG”.
The Financial Times meanwhile reported that BT was to bring forward a review of its auditors in the wake of the scandal which will end a relationship with PwC dating back more than 30 years. Sources with knowledge of the matter told the newspaper that the telco was due to tender for a new audit partner in 2019 with a view to switching from PwC. The company, however, is now expected to accelerate the process following the accounting scandal.
As of 10:19 GMT, Friday, 27 January, BT Group plc share price is 300.70p.

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