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BT’s own goals cost the boss dearly

BT’s own goals cost the boss dearly. FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.

Two months ago, all Paris St Germain had to do to reach the quarter finals of the European Champions League was not concede three goals in the final 2 minutes of their match against Barcelona. Barcelona’s ensuing last-minute goal rush has since been described as one of the greatest sporting comebacks of all time. But to a Parisian fan, it must have have felt like the most unlikely example of snatching defeat from the jaws of victory.

And shareholders in the UK broadcaster of that match – BT – will know that feeling all too well.

A few years ago, BT was looking a bit like PSG after 88 minutes. It was dominating the football rights scene, outplaying flashier and much much fancied rival, Sky, to secure Premier League and European TV rights. All the hard work was paying off: its consumer arm scored an increase in revenue in 2014, for the first time in nearly five years. But then, this year, in the space of a few months, BT has somehow managed to concede four own goals: an accounting scandal at its Italian division; accusations of bid rigging at its Hong Kong operation, a profit warning amid a public sector slowdown; and a £42m fine for breaking rules over competitor access its broadband network.

It now faces difficult discussions its pension trustees over the £10bn company pension deficit. Oh, and the head of its TV sports business, Delia Bushell, has just left on a free transfer…

So BT shareholders – and indeed boss Gavin Patterson – could really do with a result. Unfortunately, its full-year results show that underlying revenue – excluding foreign exchange movements and disposals, and assuming EE had been part of the group from 1 April 2015 – fell by 0.2 per cent for the year and 0.9% for the quarter. Adjusted earnings per share for the year and quarter down 9 per cent and 13 per cent respectively.

BT has now lowered its earnings guidance and reduced its outlook for dividend growth to reflect its various problems. It will also cut 4,000 jobs in back office and managerial roles over the next two years at a coast of £300m.

As a result, the remuneration committee has decided that chief executive Gavin Patterson and outgoing finance director Tony Chanmugam will not receive a bonus for the 2016/17 financial year. Also, the value of their 2013 Incentive Share Plan has been reduced.

Mr Patterson 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. Openreach also received a fine from Ofcom after an investigation into historical Deemed Consent practices revealed it fell short of the high standards we expect. We take these issues extremely seriously and are putting in place new measures, controls and people to prevent them happening again. Learning from the challenges of this year will make BT a stronger company for the future.

However, he added that the integration of EE was going well, and BT’s UK consumer, SME and corporate businesses are performing strongly.

British football fans’ preferred casual look – the tight, tatt-revealing t-shirt – has been fuelling more high street sales for fashion retailer Supergroup. Its garments have been snapped up at a tremendous rate – despite their ‘Superdry’ logo giving a misleading impression of the wit and alcohol consumption of the person within them.

Group revenues for the full year increased by 27 per cent to £750.6m. One third of this was thanks to the beneficial effect of sterling weakness. But the remainder reflected strong positive sales momentum – particularly online – with like-for-like sales rising 12.7 per cent.

Wholesale revenue continued the rapid growth seen in the first half year, rising by 42.9 per cent. Supergroup attributed this to a focus on improved service levels, franchise expansion and product innovation.

However, adverse effects of foreign exchange meant gross margins were broadly flat year on year, and are anticipated to decline on a full year basis by 120 to 140 bps.

Chief executive Euan Sutherland said:

FY17 has seen another good year of sales and profit growth. This has been achieved by improving our product ranges and introducing new categories to excite, inspire and maintain the brand’s relevance while, in parallel, investing in our development markets and improving our infrastructure. … We remain confident in the continued delivery of sustainable revenue and profit growth.

And, finally, auditor PwC has been booked by the referee – again. It has been fined £5m by accounting watchdog the Financial Reporting Council for “misconduct” in relation to its audit of Connaught, a FTSE 250 company put into administration in 2010.

This represents one of the biggest fines ever administered by the FRC. PwC was also ordered to pay the FRC’s legal costs and to make an interim payment of £1.5 million. Stephen Harrison, a retired PwC audit partner, was fined £150,000 in relation to the case.

News of the yellow card comes after the accounting giant settled a $3bn lawsuit filed by the administrator of failed futures brokerage MF Global – the second time in eight months that its US arm paid out to halt a high-profile malpractice lawsuit mid-trial. It also follows embarrassment at this year’s Oscars when PwC partners handed out the wrong winner’s envelope.

Beyond the Square Mile

Asian markets were mostly higher on Thursday. Japan’s Topix was up 0.1 per cent, Hong Kong’s Hang Seng gained 0.3 per cent and Australia’s S&P/ASX 200 was 0.1 per cent higher.

Sterling was trading flat in Asia at $1.2938.

The dollar index tracking the currency against a basket of peers was flat at 99.637.

Oil prices were consolidating gains from a late-day rally on Wednesday that pushed Brent crude, the international benchmark, back above the $50-a-barrel mark. Brent was up 0.4 per cent in Asia trading at $50.43 a barrel. West Texas Intermediate, the US marker, was up 0.5 per cent at $47.55 a barrel.

Gold was flat at $1,219.51 an ounce.


In the US, index futures suggest the S&P 500 will shed 3.1 points to 2,396.5, when trading gets under way later in New York

The main event on this side of the pond is the Bank of England’s interest rate decision. Policymakers are expected to keep rates on hold. Still, the decision comes at an interesting time, with the British pound flirting with the $1.30 level for the first time since October.

Companies reporting today include: Enel, Deutsche Telekom, Telefonica, Credit Agricole, Supergroup, BT, as well as annual general meetings for Serco, Ascential, Direct Line, Lloyds Bank, SIG and RBS.

Here is today’s economic calendar (London times):

08.15: Switzerland inflation
08.30: Sweden inflation
09.30: UK industrial and manufacturing production
09.30: UK trade balance
10.00: Greek unemployment
10.00: ECB growth forecasts
10.30: South Africa mining production
12.00: Bank of England policy decision
13.00: BoE presser

The markets at 07:45

Asian markets
Nikkei 225 up +61.46 (+0.31%) at 19,962
Topix up +1.67 (+0.11%) at 1,587
Hang Seng up +112.89 (+0.45%) at 25,128

US markets
S&P 500 up +2.71 (+0.11%) at 2,400
DJIA down -32.67 (-0.16%) at 20,943
Nasdaq up +8.56 (+0.14%) at 6,129

European markets
Eurofirst 300 up +2.92 (+0.19%) at 1,557
FTSE100 up +43.03 (+0.59%) at 7,385
CAC 40 up +2.45 (+0.05%) at 5,400
Dax up +8.34 (+0.07%) at 12,757

€/$ 1.09 (1.09)
$/¥ 114.10 (114.23)
£/$ 1.29 (1.29)
€/£ 0.8402 (0.8397)

Commodities ($)
Brent Crude (ICE) up +0.28 at 50.50
Light Crude (Nymex) up +0.43 at 47.76
100 Oz Gold (Comex) up +2.70 at 1,220
Copper (Comex) up +0.02 at 2.51

10-year government bond yields (%)
US 2.40%
Germany 0.43%

CDS (closing levels)
Markit iTraxx SovX Western Europe at 19.9bp
Markit iTraxx Europe -0.14bps at 62.19bp
Markit iTraxx Xover +0.63bps at 252.9bp
Markit CDX IG -0.74bps at 61.64bp

Sources: FT, Bloomberg, Markit

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