BT shares suffer worst one-day fall on accounts scandal
BT lost a fifth of its market value yesterday when an Italian accounting scandal, compounded by a sudden slowdown in its British government work, forced the telecoms group to cut forecasts for the next two years.
In an abrupt halt to the recovery in BT since the 2008 downturn, the company's shares plunged to a three-and-a-half year low in their worst-ever one-day fall.
While an admission of a £530m (€614m) black hole in BT's Italian accounts shocked many, a slowdown in public sector contracts could have the longer lasting impact. The hit to cash generation could restrict the firm's firepower when bidding for the next round of expensive sports rights, at a time when it needs to agree a new payment plan to tackle its huge pension deficit and stick to its pledge to grow the dividend.
"I am deeply disappointed with the inappropriate behaviour we found," ceo Gavin Patterson told analysts, after the Italian write-down ballooned from the £145m it revealed in October.
"Public sector in the UK is also particularly challenging. Big contracts are completing and we're not seeing them being replaced at this stage."
Patterson could also lose out himself after the firm said its remuneration committee would consider the wider implications for the group.
Patterson received a total remuneration of £5.4m (€6.2m) for the 2016 financial year.
According to a person familiar with the situation, BT staff in Italy had colluded with suppliers and third-party groups to inflate cash flow over a number of years, before a whistle-blower contacted senior executives at BT headquarters in London last summer to make them aware of the conduct. (Reuters)