The Italian job: Analysts react to BT's £530m accounting slip-up

 
Caitlin Morrison
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A man drives a car with Italian flag in
Accounting irregularities in BT's Italian business will cost it £530m (Source: Getty)

BT warned on its outlook for the year this morning, after revealing that the impact of impropriety in its Italian business would be much bigger than previously expected.

Shares in the company had fallen 18 per cent by mid-morning following the announcement that the financial impact of problems in its Italian business has inflated to £530m, from initial estimates of £145m.

Here's how the analysts have reacted:

Nasty headwinds

"Last October’s suggestion of a £145m charge didn’t cause too many ripples as regulatory issues and a rising pension deficit hogged the headlines," noted Mike van Dulken at Accendo Markets.

"Today’s admission adds this to these nasty headwinds, especially as it could weigh on profits for the next two years."

Bitter pill

"The revelation that accounting deficiencies in Italy are worse than previously thought is a bitter, and needless to say unwelcome, pill to swallow for BT investors," said George Salmon, equity analyst at Hargreaves Lansdown.

"With news that its business and public sector division is coming under pressure too, worries about the group’s ability to fund its generous dividend policy will surely grow.

"With the group’s net debts pushing £9.6bn following the acquisition of EE, and a review of how to fund the £9.5bn pension deficit coming up in June, there were already a few jitters around the stock so this was the last thing the group needed."

Over-reaction

While today's announcement was a "bitter disappointment" for investors, the massive drop in BT's shares this morning was an over-reaction, said John Karidis at Haitong Research.

"We think regulation and the pension deficit remain much more important determinants of BT’s net present value," he added.

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