Image credit: Phil Wolff/Flickr
BT has suspended several members of its BT Italy division senior management team, including former chief executive Gianluca Cimini and chief operating officer Stefania Tuzzoli. The company announced a new CEO will take over on 1 February, charged with the task of reviewing the local management team and working to BT Group ethics and compliance in order to “improve the governance, compliance and financial safeguards in our Italian business”.
Allegations of “inappropriate behaviour” at BT’s Italian operation first emerged last summer
BT first acknowledged in October there were dodgy goings on in Italy and it wrote down the business by £145 million. However, BT issued a profit warning on Tuesday after revealing the accounting scandal at its Italian business is bigger than first thought, and wrote down BT Italy by £530 million (€613.8 million).
This comes following investigations carried out internally, along with an independent review by KPMG. Both found evidence of improper accounting practices, improper sales, purchase, factoring and leasing transactions were found, resulting in the overstatement of BT Italy’s earnings over a number of years.
The extent and complexity of the inappropriate behaviour at BT Italy is far greater than previously thought and in a statement from BT CEO Gavin Patterson, he 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 share prizes suffered a sharp decrease in value as the news of the scandal broke
The news of the Italian scandal saw BT’s shares plunge as soon as trading began, and by midday they were down 18% at 313.55p. This meant BT chief executive Gavin Patterson was at least £2m poorer, with his 2.8 million shares down 72p each. It also means the almost one million other small shareholders are out of pocket.
BT warned this revelation would affect its results for the next two years. It now expects operating profit for the current financial year to be £7.6bn, compared to the predicted £7.9bn, and forecasts that both sales and profit will be flat for the year to March 2018.
In addition to its problems in Italy, BT also said the outlook for the UK public sector and international corporate markets had “deteriorated”.
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