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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/jan/24/bt-shares-profits-italy-accountig-scandal-sterling-public-finances-live
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| Version 1 | Version 2 |
|---|---|
| BT shares plunge 19% as Italian accounting scandal deepens – business live | BT shares plunge 19% as Italian accounting scandal deepens – business live |
| (35 minutes later) | |
| 10.23am GMT | |
| 10:23 | |
| Boost for Philip Hammond in public finance figures | |
| Katie Allen | |
| On the surface, the latest figures on the UK’s public finances were worse than expected, with a marginally bigger deficit than predicted in December. But the release should still provide some cheer to chancellor Philip Hammond with revisions to November’s figures meaning he now looks more likely to hit his borrowing target for the full year.Public sector net borrowing decreased by £0.4bn to £6.9bn in December 2016, compared with December 2015, the Office for National Statistics said. The consensus forecast was for a bigger drop to 6.7bn in a Reuters poll of economists. | |
| Public sector net borrowing (excl public sector banks) decreased by £0.4 bn to £6.9 bn Dec 16, compared with Dec 15 https://t.co/X7MMWsdcgw | |
| In the current financial year-to-date (April to December 2016), the public sector borrowed £63.8bn. That was £10.6bn lower than in the previous financial year-to-date, helped by a smaller deficit than previously thought for November. The Office for Budget Responsibility (OBR) is forecasting full-year (April 2016-March 2017) public sector net borrowing of £68.2bn. | |
| UK public sector #borrowing £63.8bn for financial year-to-date; £10.6bn down on last year; lowest y-t-d since 2007/8 https://t.co/NhzTvzUhKj pic.twitter.com/h5jbPhKaQX | |
| Scott Bowman, UK economist at the consultancy Capital Economics said the fall in borrowing in December continued the recent trend of a gradual improvement in the public finances. Explaining the pattern, he said: | |
| The improvement was mainly driven by a 5.6% annual rise in central government receipts, while spending actually fell slightly on a year earlier. And looking through some of the monthly volatility, receipts growth has been on a slight upward trend since May – adding to the evidence that the economy has held up well following the vote to leave the EU... We think borrowing should come in slightly below the OBR’s current £68bn forecast for the 2016/17 fiscal year.” | |
| Suren Thiru, head of economics at the British Chambers of Commerce (BCC), sounds a cautious note about the future state of the public finances as the Brexit process unfolds. | |
| The UK’s fiscal position, which was weakened significantly by the financial crisis, is likely to come under increasing pressure in the near-term if UK economic growth weakens as expected. A slowing economy would further restrict the UK’s capacity to collect enough tax revenue to consistently achieve deficit reduction in the coming years. | |
| More needs to be done to boost business confidence, to help firms to deliver the sort of growth, investment and job creation needed to achieve a sustainable strengthening of the UK’s tax base.” | |
| 10.15am GMT | |
| 10:15 | |
| Pound volatile as supreme court gives Brexit verdict | |
| As predicted in our agenda, the pound has flailed around as Britain’s top judges delivered their verdict on Britain’s exit from the EU. | |
| The supreme court ruled by 8 votes to 3 that the government cannot trigger Article 50 without parliamentary approval. That sent the pound up to $1.2535, suggesting traders reckon this could slow the Brexit process. | |
| But the pound then fell back as the judges announced that the devolved assemblies in Scotland and Northern Ireland do not need to give their own assent. That removes one possible hurdle to Britain’s exit from the EU. | |
| Andy Sparrow’s politics liveblog has full details and rolling reaction. | |
| Updated | |
| at 10.22am GMT | |
| 10.00am GMT | |
| 10:00 | |
| In other news, Europe’s factories and service sector firms have made a solid start to 2017. | |
| Data firm Markit’s monthly eurozone PMI has come in at 54.3, down slightly from 54.4. Any reading over 50 shows growth. | |
| Firms added new jobs at the fastest rate in 9 years too, while factory growth hit a five-year high. Encouraging stuff. | |
| Manufacturers in the eurozone have reported their best month since 2011 https://t.co/88VBa4QsOM pic.twitter.com/SNZU6cVLSq | |
| 9.48am GMT | 9.48am GMT |
| 09:48 | 09:48 |
| BT’s shares are popular with small shareholders, some of whom will have held them since the company was privatised in 1984. | BT’s shares are popular with small shareholders, some of whom will have held them since the company was privatised in 1984. |
| So today’s share plunge will have hit them in the pocket (although BT says it hopes to keep raising its dividend over the next couple of years) | So today’s share plunge will have hit them in the pocket (although BT says it hopes to keep raising its dividend over the next couple of years) |
| The Share Centre, a retail stockbroker, have put their ‘buy’ recommendation on review. | The Share Centre, a retail stockbroker, have put their ‘buy’ recommendation on review. |
| Helal Miah, investment research analyst, says: | Helal Miah, investment research analyst, says: |
| “On top of BT’s big pension deficit and grumbles amongst rivals and users of its infrastructure network, today’s news has further dented investors’ confidence in the group. | “On top of BT’s big pension deficit and grumbles amongst rivals and users of its infrastructure network, today’s news has further dented investors’ confidence in the group. |
| We too, have become more cautious and have placed our current ‘buy’ recommendation under review. However, this may be an attractive idea for investors taking a contrarian position and, provided the group maintains its dividend, then it could become a good income option.” | We too, have become more cautious and have placed our current ‘buy’ recommendation under review. However, this may be an attractive idea for investors taking a contrarian position and, provided the group maintains its dividend, then it could become a good income option.” |
| 9.33am GMT | 9.33am GMT |
| 09:33 | 09:33 |
| Here’s Mike van Dulken of Accendo Markets on BT shock warning: | Here’s Mike van Dulken of Accendo Markets on BT shock warning: |
| This morning sees BT Group (BT/A) shares -16% to trade levels last seen in mid-2013. Just as brokers and investors were prepping for FY results on Friday, the company delivers a profits warning linked to an existing accounting scandal at its Italian business. Continued investigation since October (internal + external) has shown the extent of impropriety (sales, purchase, leasing) and overstatement of profits to be far greater than initially thought. Management has been forced to more than triple its expected write-down to £530m and admit that FY revenues, profits and cash flow will be lower than consensus. 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. Today’s admission adds this to these nasty headwinds, especially as it could weigh on profits for the next two years. | This morning sees BT Group (BT/A) shares -16% to trade levels last seen in mid-2013. Just as brokers and investors were prepping for FY results on Friday, the company delivers a profits warning linked to an existing accounting scandal at its Italian business. Continued investigation since October (internal + external) has shown the extent of impropriety (sales, purchase, leasing) and overstatement of profits to be far greater than initially thought. Management has been forced to more than triple its expected write-down to £530m and admit that FY revenues, profits and cash flow will be lower than consensus. 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. Today’s admission adds this to these nasty headwinds, especially as it could weigh on profits for the next two years. |
| Even management isn’t sure what the final figure will be. The group still expects 10% dividend increases for the next two years but is this enough to appease disgruntled shareholders who had already been wearing a 20% downtrend since early 2016. The increases may, however, attract newbies via a 4% yield. Assuming this can be honoured…. | Even management isn’t sure what the final figure will be. The group still expects 10% dividend increases for the next two years but is this enough to appease disgruntled shareholders who had already been wearing a 20% downtrend since early 2016. The increases may, however, attract newbies via a 4% yield. Assuming this can be honoured…. |
| Updated | Updated |
| at 9.34am GMT | at 9.34am GMT |
| 9.00am GMT | 9.00am GMT |
| 09:00 | 09:00 |
| We’ll get more colour on BT’s business on Friday, when it publishes its third-quarter financial results. | We’ll get more colour on BT’s business on Friday, when it publishes its third-quarter financial results. |
| Today’s announcement was rushed out once the company had calculated the full cost of its Italian accounting problems. | Today’s announcement was rushed out once the company had calculated the full cost of its Italian accounting problems. |
| Under City rules, a company can’t keep a problem of this magnitude to itself. | Under City rules, a company can’t keep a problem of this magnitude to itself. |
| Updated | Updated |
| at 9.10am GMT | at 9.10am GMT |
| 9.00am GMT | 9.00am GMT |
| 09:00 | 09:00 |
| Q: Why were the accounting irregularities BT Italy not discovered a lot sooner? | Q: Why were the accounting irregularities BT Italy not discovered a lot sooner? |
| BT says that it “needs to reflect” on why they were not spotted by BT Italy’s management, the wider Group, or by its auditors. | BT says that it “needs to reflect” on why they were not spotted by BT Italy’s management, the wider Group, or by its auditors. |
| But it is “far too premature” to say anything about the auditors this morning | But it is “far too premature” to say anything about the auditors this morning |
| 8.43am GMT | 8.43am GMT |
| 08:43 | 08:43 |
| This is turning into a full-blow rout: | This is turning into a full-blow rout: |
| Make that down 19% for BT shares and on track for the biggest fall ever after "improper" accounting practices at its Italian unit. pic.twitter.com/rCRw2J1F7s | Make that down 19% for BT shares and on track for the biggest fall ever after "improper" accounting practices at its Italian unit. pic.twitter.com/rCRw2J1F7s |
| 8.42am GMT | 8.42am GMT |
| 08:42 | 08:42 |
| This is a “dark day” for BT, says city analyst Neil Wilson of ETX Capital. | This is a “dark day” for BT, says city analyst Neil Wilson of ETX Capital. |
| He says investors are selling up, on fears that there are deeper problems at the telecoms firm. | He says investors are selling up, on fears that there are deeper problems at the telecoms firm. |
| The group’s own investigation of accounting malpractice in its Italian business shows the situation is far worse than it first thought – the bill is now thought to be around £530m, well above the £145m initially forecast. | The group’s own investigation of accounting malpractice in its Italian business shows the situation is far worse than it first thought – the bill is now thought to be around £530m, well above the £145m initially forecast. |
| According to BT, this will mean a reduction in Q3 adjusted revenue and adjusted EBITDA of around £120m. Free cash flow will be £100m worse off. | According to BT, this will mean a reduction in Q3 adjusted revenue and adjusted EBITDA of around £120m. Free cash flow will be £100m worse off. |
| For 2016/17 as a whole the problems will have a negative revenue impact of around £200m, while denting normalised free cash flow by up to £500m. The impact on 2017/18 is expected to be just as bad and that is likely to have a material impact on its ability to return cash to shareholders, although BT says it still expects to grow dividend per share by 10% in each of those years. The problem is that investors will fear that this is not the end – what else will be uncovered? The costs could yet rise and that fear is driving the selling this morning.” | For 2016/17 as a whole the problems will have a negative revenue impact of around £200m, while denting normalised free cash flow by up to £500m. The impact on 2017/18 is expected to be just as bad and that is likely to have a material impact on its ability to return cash to shareholders, although BT says it still expects to grow dividend per share by 10% in each of those years. The problem is that investors will fear that this is not the end – what else will be uncovered? The costs could yet rise and that fear is driving the selling this morning.” |
| 8.40am GMT | 8.40am GMT |
| 08:40 | 08:40 |
| BT’s shares are now down 19%, which wipes £6bn off its market capitalisation. | BT’s shares are now down 19%, which wipes £6bn off its market capitalisation. |