Telecommunications giant BT have experienced another accounting error as its pension deficit has been underestimated by £500m.
Due to “isolated human error”, BT’s independent actuary, Willis Towers Watson, failed to calculate its pension deficit correctly back in March.
This has now been corrected and the company’s restated pension deficit stands at £3.9bn as at the end of June.
BT said the mistake amounted to less than one percent of its total pension liabilities of just over £57bn.
The second blow follows the accounting scandal which hit the group’s Italian unit last year, causing it to lose £8bn from its stock market value. This cost the business £530m and a profit fall of 42%.
The recent £500m miscalculation represented less than one percent of BT’s pension scheme. BT have confirmed that the revised figure is accurate.
Global advisory and brokerage company, Willis Towers Watson, said the error was due to “an actuarial assumption not being accurately reflected in our actuarial calculations”.
Simon Lowth, chief financial officer at BT, said: “We spent a lot of time with WTW making sure we understand what created the error. It was an isolated human error that they identified. We are also working on what they need to do to strengthen their controls.”
BT Group also said, in its quarterly results, that they have received certified assurance from WTW that there are no other errors as at 31 March. The Group are separately reviewing procedure around their calculation.
After the Italian scandal the FRC launched an investigation into PwC’s audits of BT’s financial statements between March 2015 and 2017.
It found irregularities in BT Italia, which was discovered to have been overstating its earnings for a number of years.
In June last year BT terminated its contract with PwC, which had been in place since the group was first listed on the stock exchange in 1984. Big Four rival KPMG replaced them as the Group’s auditor.
While the BT Italia scandal damaged group profits, BT said the incorrect valuation of its pension deficit will not have an impact on its income, cash flow, or its final dividend.
Outgoing BT CEO, Gavin Patterson, said: “We are making positive progress against our strategy.”
He believes BT have made a good start to the year and are on track to meet its targets. It has already cut 900 jobs out of 1,300 which will be axed over the next three years to save £1.5bn.
The Group have had a slightly above-target performance in the second quarter, sparking a 4% share price rise following the series of negative news which caused share prices to drop.
However, BT’s total revenue has fallen by two percent to £5.7bn. Its reported profit prior to tax increased by 68% to £704m and its adjusted profit was up three percent at £816m while net debt rose from £8.8bn to £11.2bn.
The Group’s broadband and TV subscriber numbers have fallen in the last two quarters, as it reports to be focusing on increasing average revenue per customer instead.
Independent telecoms analyst, Paolo Pescatore, said: “All providers will be seeking to lure households with attractive offers ahead of the new Premier League season. BT must do a better job of signing up TV subscribers and maximise BT Sport across its base.”
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