Shares in communications company BT (LON:BT.A) dropped nearly 4 percent in early trading on Friday, after revealing a 40 percent drop in profits in the first quarter.

The company’s finances took a hit in the first quarter of the financial year after it paid out £225 million shareholders Deutsche Telekom and Orange, in the wake of an accounting scandal at its Italian operation.

BT said the £225m payout represents a “full and final settlement in respect of these issues”, with chief executive Gavin Patterson, the BT chief executive saying that: “Whilst this is clearly disappointing. it is the best possible outcome for all shareholders as it avoids a potential protracted legal process.”

BT’s shares sunk in January after it was revealed that the accounting scandal would cost the company £530 million.

Pre-tax profits slumped 42 percent from £717 million to £418 million during the quarter. Stripping out the impact of the one-off £225 million payment, BT’s adjusted profits still fell by 2 percent to £1.78 billion in its first quarter.

Shares in BT are currently trading down 3.64 percent at 304.80 (1032GMT).