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BT Group Debt surged on 46.1% in 2016 and Net Debt / EBITDA jumped on 0.6x from 1.6x to 2.2x

05 May 2016 • About BT Group ($BT.A) • By InTwits

BT Group reported FY2016 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 13.3%. At the same time it's in pair with industry average of 13.1%.
  • CAPEX is quite volatile: 1,021 in 2016, 561 in 2015, 401 in 2014, 503 in 2013, 264 in 2012
  • The company has highly profitable business model: ROIC is at 21.6%
  • It operates with high leverage: Net Debt/EBITDA is 2.2x while industry average is 1.4x
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. £201220132014201520162016/2015
P&L
Revenue18,89718,10318,28717,97919,0425.9%
EBITDA5,8985,7865,8386,0176,3645.8%
Net Income2,0031,9482,0182,1352,58821.2%
Balance Sheet
Cash33192469543449714.5%
Short Term Debt2,8871,7361,8731,9003,23770.4%
Long Term Debt7,5998,2777,9417,86811,03240.2%
Cash flow
Capex2,5782,4812,3562,4182,4662.0%
Ratios
Revenue growth-5.9%-4.2%1.0%-1.7%5.9%
EBITDA growth6.5%-1.9%0.9%3.1%5.8%
EBITDA Margin31.2%32.0%31.9%33.5%33.4%-0.0%
Net Income Margin10.6%10.8%11.0%11.9%13.6%1.7%
CAPEX, % of revenue13.6%13.7%12.9%13.4%13.0%-0.5%
ROIC23.6%27.0%34.7%37.5%21.6%-15.9%
ROE124.3%46.3%46.3%
Net Debt/EBITDA1.7x1.6x1.6x1.6x2.2x0.6x

Revenue and profitability


The company's Revenue increased on 5.9% in FY2016. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.63 pp from 24.1% to 24.7% in 2016.

Net Income marign increased slightly on 1.7 pp from 11.9% to 13.6% in FY2016.

Capital expenditures (CAPEX) and working capital investments


In FY2016 the company had CAPEX/Revenue of 13.0%. BT Group's CAPEX/Revenue decreased slightly on 0.75 pp from 13.7% in FY2013 to 13.0% in FY2016. Average CAPEX/Revenue for the last three years was 13.1%.

Return on investment


The company operates at high and attractive ROIC (21.57%) and ROE (46.26%). ROIC dropped on 15.9 pp from 37.5% to 21.6% in FY2016.

Leverage (Debt)


Debt level is 2.2x Net Debt / EBITDA and 2.2x Debt / EBITDA. Net Debt / EBITDA jumped on 0.6x from 1.6x to 2.2x in FY2016. Debt surged on 46.1% in FY2016 while cash jumped on 14.5% in FY2016.

Appendix 1: Peers in Fixed Line Telecommunications


Below we provide BT Group benchmarking against other companies in Fixed Line Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Telefonica Sa ($TDE)-0.8%-8.5%-23.8%26.4%
Alternative Networks ($AN.)-2.1%-0.4%17.5%9.2%
Adept Telecom ($ADT)-7.7%-4.1%-0.8%5.8%
Verizon Communications Inc ($VZC)4.5%4.1%5.4%3.6%
Telecom Egypt ($TEEG)1.6%11.0%9.2%0.2%
 
Median (12 companies)-0.8%-1.6%-1.6%-0.2%
BT Group ($BT.A)-4.2%1.0%-1.7%5.9%


Top companies by Gross margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Kt Corp ($KTCD)75.5%76.0%77.9%77.9%
Verizon Communications Inc ($VZC)60.1%62.8%60.7%60.1%
Telecom Egypt ($TEEG)41.4%41.9%44.2%41.6%
Alternative Networks ($AN.)39.0%39.2%41.2%41.3%
Adept Telecom ($ADT)32.2%34.5%36.4%37.6%
 
Median (5 companies)49.4%50.9%43.9%41.6%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Ooredoo Qsc ($ORDS)46.0%42.4%37.6%39.2%
Verizon Communications Inc ($VZC)25.6%40.3%28.4%37.3%
Rostelekom ($RKMD)39.7%39.0%33.0%33.4%
Koninklijke Kpn Nv ($0O8F)35.9%34.1%39.1%33.2%
Hellenic Telecom.Organization S.A. ($OTES)32.0%28.8%35.4%31.3%
 
Median (12 companies)34.0%33.1%31.7%29.5%
BT Group ($BT.A)31.2%32.0%31.9%33.5%33.4%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Ooredoo Qsc ($ORDS)21.9%27.5%25.3%26.5%
Telecom Egypt ($TEEG)5.1%6.8%13.0%21.4%
Rostelekom ($RKMD)31.7%23.6%19.3%21.1%
Telefonica Sa ($TDE)15.2%17.0%19.1%18.7%
Orange Polska Sa ($OPLD)16.6%16.9%17.6%16.9%
 
Median (12 companies)13.5%13.8%13.0%15.7%
BT Group ($BT.A)13.6%13.7%12.9%13.4%13.0%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Alternative Networks ($AN.)35.2%33.7%28.5%20.2%
Verizon Communications Inc ($VZC)8.0%16.7%10.1%19.3%
O2 Czech Republic As ($O2CZ)11.8%11.7%7.2%14.5%
Adept Telecom ($ADT)11.6%15.5%13.2%14.3%
Rostelekom ($RKMD)11.2%9.7%8.7%8.2%
 
Median (12 companies)9.6%8.5%7.7%6.7%
BT Group ($BT.A)23.6%27.0%34.7%37.5%21.6%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Telefonica Sa ($TDE)2.5x2.5x3.6x4.2x
Koninklijke Kpn Nv ($0O8F)3.8x3.4x3.0x3.6x
Verizon Communications Inc ($VZC)1.7x0.8x2.8x2.1x
Ooredoo Qsc ($ORDS)1.6x1.7x2.0x2.0x
Rostelekom ($RKMD)1.7x1.8x1.8x1.8x
 
Median (12 companies)1.6x1.1x1.4x1.2x
BT Group ($BT.A)1.7x1.6x1.6x1.6x2.2x


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