BT's share price fell by almost 20% last Tuesday, after an update on an accounting scandal in its Italian business led to a profit warning, and the resignation of the head of its European operations. BT admitted last October that it had uncovered "historical accounting errors". It wrote down £145m, and most of the Italian unit's management were ushered out of the business.
But this week BT said that the extent and complexity of "inappropriate behaviour" was "far greater than previously identified". BT increased its writedown to £530m, and said revenue would be down by £200m a year for the next two years.
Analysts were "at a loss to explain how BT Italia", which had earnings of below £100m last year and makes up just 1% of BT's overall earnings, "could generate such a large write-off", says Nic Fildes in the Financial Times. In addition to the financial blow, BT now risks a "credibility hit", Citi's Simon Weeden told the FT. But Italy was "just the antipasti", as Alistair Osborne put it in The Times. The outlook for the UK public sector and international corporate markets "has deteriorated", says BT. bNow it expects a "double-digit" decline in fourth-quarter profits, and "broadly flat" revenue for the next two years. But it still expects to grow its dividend per share by 10%. All in all, it was a "bad day at the office" for chief executive Gavin Patterson, says Simon Jack on BBC.co.uk. The share price slide left him £2m poorer.
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Profit warnings are coming thick and fast these days, says Matthew Vincent in the Financial Times. And many firms are not content with just one. Essentra, the packaging firm formerly known as Filtrona, has just issued its third since June. Outsourcer Mitie has issued three in four months. Defence manufacturer Cobham is up to four in 14 months, while publisher Pearson is on its fifth since 2012. "None looks like the product of a macroeconomic shift," says Vincent. They are down to "poor management of information, internal controls or IT". If the guilty companies don't want to "avoid a repeat performance", they will "need to act quickly".
"Investors are betting that President Donald Trump will make earnings great again in 2017," says Justin Lahart in The Wall Street Journal. Analysts seem to think that, too. bBut company executives are being a little more wary. No wonder. We have yet to hear any specific proposals on infrastructure or tax cuts, and it's far from clear what Congress would pass. Trump's policies may also have unintended consequences. And while many executives won't predict how their business will perform, "few will openly criticise" the new president either because they fear "becoming the subject of a presidential tweet".
Theresa May's latest big idea a 132-page green paper called "Building our Industrial Strategy" is "half built" and about "as strategic as a shopping list", says Alistair Osborne in The Times. The analysis is "passable enough... but "what's the strategy for sorting it"? May is "without any business experience whatsoever", and can "barely make a speech on the subject without an instant U-turn". Business might prefer things, he says, if "meddling May just simplified taxes, cut red tape, planning constraints and business rates and kept out of the way".
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