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BT Group reports 5.8% Net Income growth while 1.7% Revenue decline

07 May 2015 • About BT Group ($BT.A) • By InTwits

BT Group reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • BT Group has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.4%. At the same time it's in pair with industry average of 13.0%.
  • CAPEX is quite volatile: 1,386 in FY2015, 1,625 in FY2014, 3,030 in FY2013, 2,491 in FY2012, 1,231 in FY2011
  • The company has highly profitable business model: ROIC is at 37.5%
  • It operates with medium-size leverage: Net Debt/EBITDA is 1.6x while industry average is 1.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

BT Group ($BT.A) key annual financial indicators

mln. £201120122013201420152015/2014
P&L
Revenue20,07618,89718,10318,28717,979-1.7%
SG&A1,384
EBITDA5,5405,8985,7865,8386,0173.1%
Net Income1,5022,0031,9482,0182,1355.8%
Balance Sheet
Cash351331924695434-37.6%
Short Term Debt4852,8871,7361,8731,9001.4%
Long Term Debt9,3717,5998,2777,9417,868-0.9%
Cash flow
Capex2,6452,5782,4812,3562,4182.6%
Ratios
Revenue growth-3.8%-5.9%-4.2%1.0%-1.7%
EBITDA growth7.2%6.5%-1.9%0.9%3.1%
EBITDA Margin27.6%31.2%32.0%31.9%33.5%1.5%
Net Income Margin7.5%10.6%10.8%11.0%11.9%0.8%
SG&A, % of revenue6.9%0.0%
CAPEX, % of revenue13.2%13.6%13.7%12.9%13.4%0.6%
ROIC23.3%23.6%27.0%34.7%37.5%2.8%
ROE124.3%0.0%
Net Debt/EBITDA1.7x1.7x1.6x1.6x1.6x-0.0x

Revenue and profitability


The company's Revenue decreased slightly on 1.7% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.5 pp from 31.9% to 33.5% in FY2015.

Net Income marign increased slightly on 0.84 pp from 11.0% to 11.9% in FY2015.

Capital expenditures (CAPEX) and working capital investments


The company's CAPEX/Revenue was 13.4% in FY2015. CAPEX/Revenue showed almost no change from FY2012 to FY2015. It's average CAPEX/Revenue for the last three years was 13.3%.

Leverage (Debt)


Company's Net Debt / EBITDA is 1.6x and Debt / EBITDA is 1.6x. Net Debt / EBITDA decreased slightly on 0.011x from 1.6x to 1.6x in FY2015. Debt showed almost no change in FY2015 while cash dropped on 37.6% in FY2015.

Valuation


The company's trades at EV/EBITDA 1.6x and P/E 0.3x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 2.8x with the industry average at 4.7x.

Appendix 1: Peers in Fixed Line Telecommunications


Below you can find BT Group benchmarking vs. other companies in Fixed Line Telecommunications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Alternative Networks ($AN.)21.9%-2.1%-0.4%17.5%
Telecom Egypt ($TEEG)-3.4%1.6%11.0%9.2%
Verizon Communications Inc ($VZC)4.0%4.5%4.1%5.4%
Rostelekom ($RKMD)7.4%-0.2%-1.6%2.8%
Adept Telecom ($ADT)-7.7%-7.7%-4.1%-0.8%
 
Median (12 companies)0.6%-1.4%-2.8%-1.8%
BT Group ($BT.A)-5.9%-4.2%1.0%-1.7%


Top companies by Gross margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Kt Corp ($KTCD)81.6%75.5%76.0%77.9%
Verizon Communications Inc ($VZC)58.6%60.1%62.8%60.7%
Telecom Egypt ($TEEG)45.0%41.4%41.9%44.2%
Alternative Networks ($AN.)38.1%39.0%39.2%41.2%
Adept Telecom ($ADT)35.9%32.2%34.5%36.4%
 
Median (5 companies)45.0%41.4%41.9%44.2%


Top companies by EBITDA margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
O2 Czech Republic As ($O2CZ)41.6%39.1%38.6%41.0%
Koninklijke Kpn Nv ($0O8F)39.5%35.9%34.1%39.1%
Ooredoo Qsc ($ORDS)45.9%46.0%42.4%37.6%
Hellenic Telecom.Organization S.A. ($OTES)33.0%32.0%28.8%35.4%
Orange Polska Sa ($OPLD)39.2%34.3%30.1%33.2%
 
Median (12 companies)36.1%34.2%33.3%32.4%
BT Group ($BT.A)27.6%31.2%32.0%31.9%33.5%


Top companies by CAPEX/Revenue, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Ooredoo Qsc ($ORDS)20.7%21.9%27.5%25.3%
Rostelekom ($RKMD)28.0%31.7%23.6%19.3%
Telefonica Sa ($TDE)14.5%15.2%17.0%19.1%
Orange Polska Sa ($OPLD)17.5%16.6%16.9%17.6%
Hellenic Telecom.Organization S.A. ($OTES)14.2%11.7%14.8%15.4%
 
Median (12 companies)14.3%13.7%14.3%13.3%
BT Group ($BT.A)13.2%13.6%13.7%12.9%13.4%


Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Alternative Networks ($AN.)36.7%35.2%33.7%28.5%
Adept Telecom ($ADT)11.9%11.6%15.5%13.2%
Hellenic Telecom.Organization S.A. ($OTES)4.8%8.2%5.4%10.4%
Verizon Communications Inc ($VZC)7.8%8.0%16.7%10.1%
Rostelekom ($RKMD)15.5%11.2%9.7%8.7%
 
Median (12 companies)11.1%9.4%9.1%7.7%
BT Group ($BT.A)23.3%23.6%27.0%34.7%37.5%


Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Telefonica Sa ($TDE)3.0x2.5x2.5x3.6x
Kt Corp ($KTCD)2.0x2.1x2.1x3.1x
Koninklijke Kpn Nv ($0O8F)2.4x3.8x3.4x3.0x
Verizon Communications Inc ($VZC)1.4x1.7x0.8x2.8x
Ooredoo Qsc ($ORDS)1.7x1.6x1.7x2.0x
 
Median (12 companies)1.6x1.6x1.2x1.6x
BT Group ($BT.A)1.7x1.7x1.6x1.6x1.6x


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