UK telecommunications company BT, parent firm of pay-television broadcaster BT Sport, has reported a fall in its annual pre-tax profits of 19 per cent admitting it has faced a “challenging” year in the wake of an accounting scandal involving its Italian division.
BT today (Thursday) revealed its financial results for the year ending March 31, 2017. Pre-tax profit fell to £2.354bn (€2.79bn/$3.04bn) as BT accommodated the impact of the scandal. In January, BT disclosed that the scandal was much worse than originally stated, outlining that it expected profits to be hit as a result.
BT previously announced on October 27 that an initial internal investigation of accounting practices in its Italian business had identified certain historical accounting errors and areas of management judgement requiring reassessment.
At that time, BT announced the write down of items on the balance sheet by £145m, stating this was the best estimate of the financial impact of these issues. Following a thorough investigation of the matter, BT in January said the adjustments identified had increased from the £145m announced in its half-year update.
As announced at quarter three, adjustments relating to the investigation of BT’s Italian business amount to £268m for prior year errors, for which BT revised prior periods, and a specific item charge of £245m in the current year for changes in accounting estimates. BT today said an additional £15m of investigation costs were incurred in quarter four.
After a detailed review of its operations in seven countries, BT today said it was confident that the wrongdoing is confined to Italy. BT’s full year sales were £24.062bn, up 27 per cent following the £12.5bn takeover of mobile operator EE.
Regarding BT Sport, BT said its customer base continues to grow and during the quarter it added 11,000 new customers, taking its base to 1.7 million. BT Sport’s average annual audience figures increased 12 per cent, excluding the Showcase and digital channels.
BT hailed a major sports rights deal secured in March. BT Sport maintained its hold on rights to Uefa competitions in the UK by extending its contract for the Champions League and Europa League. The new three-season deal will run across the 2018-19 to 2020-21 campaigns and will be worth around £394m per year, or £1.182bn in total. BT paid around £897m for its current contract, which spans the 2015-16 to 2017-18 seasons.
Under the new agreement, BT Sport will remain the exclusive UK home of all Champions League and Europa League football. BT’s rights for the first time bring together exclusivity across all live games, highlights and in-match clips of both competitions.
BT chief executive Gavin Patterson, who will forgo his annual bonus owing to today’s news, said: “This has been a challenging year for BT. We’ve faced headwinds in the UK public sector and international corporate markets and must learn from what we found in our Italian business.”
He added: “Securing exclusive rights to top-flight European football until 2021 puts our consumer businesses in a strong position.”