Telecom operator BT said it’s expected to post lower revenue due to an alleged accounting scam in its business in Italy.
BT said an initial internal investigation of accounting practices in its Italian business identified certain historical accounting errors. Later, audit firm KPMG conducted a review of the accounting practices, while BT conducted its own balance sheet review.
Improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions were part of the scandal. BT said that these activities resulted in the overstatement of earnings in Italian business over a number of years.
BT said the adjustments identified have increased from the £145 million announced in its half-year update to around £530 million.
“There will be a reduction in Q3 adjusted revenue and adjusted EBITDA of around £120 million, and in a reduction in Q3 normalised free cash flow of around £100 million,” said BT in a statement issued on Tuesday.
There will be decrease in adjusted revenue of around £200 million, adjusted EBITDA of around £175 million, and up to £500 million of normalised free cash flow due to the EBITDA impact due to inappropriate working capital transactions in 2016-17. BT will face the financial issue in 2017-18.
BT suspended a number of BT Italy’s senior management team who have now left the business. BT has also appointed a new chief executive officer for its business in Italy.
BT CEO Gavin Patterson said: “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 outlook for Q3
BT’s consumer businesses will report good revenue growth, with consumer delivering volume and ARPU growth and EE achieving revenue growth for the first time.
Within Business and Public Sector, Corporate and SME continue to benefit from the integration of EE and mobile demand.
BT Openreach is expected to report its highest ever fibre broadband connections.
