In October last year, the mobile, TV and broadband provider BT said it had discovered "historical accounting errors" and "inappropriate management behaviour" at its Italian division amounting to a "best estimate" of £145 million. Now, after an independent review by KPMG, that estimate has been revised to a whopping £530 million.
In addition to some dishonest accounting work, investigators found "a complex set of improper sales, purchase, factoring and leasing transactions," conducted over multiple years. As a result, BT has said that it expects its revenue to fall by £200 million in the current financial year, and to take a hit of £175 million to its adjusted EBITDA (earnings before interest, tax, deprecation and amortisation).
The company also says it will face "a similar annual impact" in the 2017/18 financial year. "We are deeply disappointed with the improper practices which we have found in our Italian business," Gavin Patterson, chief executive of the BT Group said. "We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the while of BT."
BT has now removed several members of it's Italian leadership team, and has appointed a new chief exec who will take charge from February 1st with the remit of reviewing the current management team. While all of this is happening, BT will have to brace itself for the financial ramifications. The company's share price dropped by 15 per cent today (on last check it was down 19 per cent), which knocked £5.5 billion off the company's totay value. This is the lowest point that the firms shares have been at for two and a half years, and could mark the company's worst day since 2008.