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BT.A Bt Group Plc

-0.35 (-0.3%)
27 Sep 2023 - Closed
Delayed by 15 minutes

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Share Name Share Symbol Market Stock Type
Bt Group Plc BT.A London Ordinary Share
  Price Change Price Change % Share Price Last Trade
-0.35 -0.3% 117.30 16:35:11
Open Price Low Price High Price Close Price Previous Close
117.35 116.50 117.90 117.30 117.65
more quote information »
Industry Sector

Bt BT.A Dividends History

Announcement Date Type Currency Dividend Amount Ex Date Record Date Payment Date

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Top Posts
Posted at 23/9/2023 15:36 by rathkum
BT Group: Shares Back In The Doldrums But Remain Cheap
Sep. 23, 2023 3:28 AM ETBT Group plc (BTGOF)
Mark Dockray

BT shares have turned sharply lower since around April. No stranger to disappointment, in this case there is little to grumble about operationally.

Concerns around the pension deficit may be a factor, given its size and exposure to assets like equities and property.

These shares once again trade at a deep discount to my estimate of fair value, albeit with a fair amount of uncertainty embedded in them.

BT Group (OTCPK:BTGOF) is nothing if not frustrating. Shares of the British telco have technically done just fine since my previous update in Q4 2022, returning around 13.5% in local currency and 11.5% for the ADRs, but performance to date still rankles a little given the stock was up over 40% as recently as April.

Data by YCharts

This company doesn't exactly have good form when it comes to not disappointing the market, but in this case I do think concerns are unrelated to what is happening at the business level. Indeed, I'd say that operationally the company is doing just fine. Growth is never going to blow the doors off of course, but a combination of low-single-digit revenue growth and operating leverage means that profits are up nicely at the moment. CapEx also appears to be by-and-large in line with expectations - one of my previous concerns given recent high inflation and the current large investment program.

My guess is that the pension scheme is what is weighing on the share price. That top-up payments to plug the deficit are a drag on free cash flow isn't anything new, but with the size of BT's pension scheme vast compared to its current market-cap I do wonder whether there is concern that the company might be on the hook for higher payments down the line.
All Looks Okay Operationally

BT's customer facing units are pulling in different directions. Like most of its peers, the segment that houses business customers (~20% of group EBITDA) is grappling with declines in legacy products like fixed voice. On the flip side, Consumer (~32% of EBITDA) is showing modest growth as broadband and cell phone contract renewals are linked to inflation. Openreach (~48% of EBITDA), which manages the UK's largest fixed-line network, is also putting in nice growth, likewise benefitting from inflation-linked pricing as well as the ongoing rollout of fiber-to-the-premises ("FTTP") broadband (which attracts higher revenue per user).

Most recent financial results are a little out of date now given we are near the end of the company's fiscal Q2, but Q1 was solid enough and was not the driver of its share price decline. Inflation-linked pricing mentioned above means that revenue and earnings growth are currently a little ahead of my long-term yardstick, with group FY23/24 Q1 sales up around 4% YoY and EBITDA up a shade more at 5%. Expected declines in Business (-11% YoY EBITDA) were more than offset by higher-margin Openreach (+12% YoY EBITDA) as well as Consumer (+6% YoY EBITDA). The full-year outlook - which sees growth in both revenue and EBITDA - was affirmed.
Little Change On Cashflow Forecast

One thing that had posed a slight concern to me was the impact of inflation on CapEx. BT's ongoing rollout of FTTP and 5G has seen CapEx rise to around 25% of revenue versus around 12% in the mid-2010s, and with higher inflation comes the risk that CapEx budgets end up heading unexpectedly higher still. That would mean even more of a squeeze on the company's already meagre free cash flow.

BT Group plc: CapEx To Revenue (FY15/16 - FY22/23)

BT Group CapEx To Revenue (FY16 - FY23)

Data Source: BT Group plc Annual Reports

Last year's CapEx spending landed broadly in line with prior guidance at circa £5B, and I reiterate that all the FY24 outlook metrics have been reconfirmed. That includes reported CapEx of £5B to £5.1B, with that seen steady out to the FY26 investment program peak.

BT Group plc FY30/31 Free Cash Flow Targer

Source: BT Group plc FY22/23 Annual Results Presentation

BT's longer-term free cash flow forecast remains unchanged, with base FCF (i.e. ignoring any contribution from growth) set to double from FY22 levels to around £3B by the end of the decade. Most of that (~66%) is from normalizing CapEx; the rest will follow from the associated lower costs (e.g. less maintenance) required to run a FTTP network versus the legacy copper one. This is all low hanging fruit for the company and I don't really see any risks in achieving this.
Pension Scheme Concerns To Blame?

Normalized free cash flow was £1.3B last year and is expected to be £1B this year at the low end. Taken at face value that all looks fine and dandy - enough to cover the dividend outlay (~£750m) with some change to spare.

The elephant in the room is the pension deficit. The situation is well-known to followers of the company and indeed it has been mentioned in most of my prior articles on the stock, but for the benefit of new readers, the short version is that BT has to support a huge pension scheme relative to the size of its actual business.

Top-up payments to address its pension deficit are substantial, coming in at a circa £1B cash outflow item last year and only expected to moderate to around £600m per annum from 2024 out to 2030. Subtracting this from the above free cash flow numbers leave us with relatively little actual near-term surplus cash.

BT Pension Scheme Asset Breakdown

Source: BT Pension Scheme Fact Sheet

Now, most of the scheme's assets are obviously in investment grade credit including government bonds. However, a not insignificant amount is in equities, property and other growth assets. My guess is that the market is worried that BT might end up on the hook for higher payments into the scheme should those asset values fall. Property, for example, is experiencing a fair bit of a pain right now due to the higher interest rate environment.
Shares Still Look Cheap

BT shares trade for 120 pence apiece at time of writing. As it stands, my DCF-derived fair value estimate from last time remains largely unchanged. That is based on consensus estimates for FY24-FY26 normalized free cash flow, plus management's longer-term forecasts (as show in the "Little Change On Cashflow Forecast" segment above), all discounted to the present at an annual rate of 9%. Subtracting net debt gets me to around £21B in equity value, or 210 pence per share (~$2.55 per ADR at the current GBP/USD exchange rate).

The wildcard is the pension scheme. Suffice to say that increased payments to plug the deficit would materially lower medium-term free cash flow and alter any DCF model substantially. Even so, an implied 80% discount to fair value already incorporates lower free cash flow to a large extent, and so I do think this is a risk worth taking. Strong Buy.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

This article was written by
Mark Dockray profile picture
Mark Dockray
I like to take a long term, buy-and-hold approach to investing, with a bias toward stocks that can sustainably post high quality earnings. Mostly found in the dividend and income section. Blog about various US/Canadian stocks at 'The Compound Investor', and predominantly UK names on 'The UK Income Investor'.
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Posted at 13/9/2023 16:48 by smurfy2001
Got my dividend. Easy decision to re-invest given the yield.
Posted at 13/9/2023 10:47 by maxplus2
Have dividend been paid out ?
Posted at 12/9/2023 10:54 by leadingladies
Cynically what typically happens here is that they rise upto payment of dividend. Then for those of us that opt for dividend reinvestment then they buy at the higher price then fall back again. I do hope I am wrong this time and that you hold onto your profits but beware !!
Posted at 06/9/2023 15:34 by willoicc
Dividends can only be paid from retained profits which implies that free cash flow has been earned.

Considering BT is investing huge amounts of money in the fibre roll out, it is a bit OTT to say that dividends are being financed from debt.

Capex year to 31.3.2023 £5307 million

Cash dividend year to 31.3.2023 £ 751 million

Free cash flow year to 31.3.2023 £1339 million

Reference should be made to BT's published accounts to check the accuracy of these figures.
Posted at 01/8/2023 13:53 by dipa11
Bought few more today as FOMO and price & most important Dividend. Surprisingly not much price movement but worth to eat or swallow the Dividend. Fingers crossed Good luck
Posted at 31/7/2023 08:31 by dipa11
hTTps://www.tipranks.com/stocks/gb:bt.a/dividends"BT Group plc's upcoming ex-dividend date is onĀ Aug 02, 2023. BT Group plc shareholders who own GB:BT. A stock before this date will receive BT Group plc's next dividend payment of 5.39p per share on Sep 12, 2023"Good morning
Posted at 28/7/2023 23:08 by pj84
BT - price rises give performance a boost

Matt Britzman | 27 July 2023 | A A A
No recommendation
No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

BT Group plc Ordinary 5p
Sell: 124.20 | Buy: 124.30 | Change 0.25 (0.20%)
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BT reported first-quarter underlying revenue of £5.2bn, a rise of 4%. Openreach was the standout, where higher prices and a growing fibre footprint helped deliver 8% growth.

Openreach is now 44% of the way through its full fibre build, expanding to 11m premises. First-quarter fibre orders were up 34%, but the overall broadband base was down as the shift away from copper lines continues.

Underlying cash profit (EBITDA) was up 5% to £2.0bn as higher revenue and cost controls were able to more than offset cost inflation.

Full year remains intact, which looks for growth in revenue and cash profit, as well as underlying free cash flow of £1.0-£1.2bn.

The shares fell 1.9% in early trading.


Our view
First quarter trading benefited from recent price hikes, and it was pleasing to see full year guidance was reiterated, pointing to growth in the top and bottom line. Management hasn't put any figures on that, but consensus is looking for a little over 1% on both, so nothing to shoot the lights out.

Cost cuts were in focus back at full-year results, led by the news that the workforce is planned to drop by up to 42% by 2030. Job cuts are hardly surprising, but the plans' scale surprised markets and pointed to many of the issues BT's been facing.

Costs have been a bugbear, and the £2.1bn in savings already delivered has undoubtedly helped. But once the fibre and 5G infrastructure is built and adopted, a much leaner operation is needed to generate long-term growth.

The wider strategy involves significantly modernising and simplifying operations and product line. This includes digitising customer journeys and moving customers onto the new 5G and fibre broadband networks, which have lower running costs than legacy infrastructure.

The real workhorse for this is the group's infrastructure arm, Openreach, which is responsible for maintaining and building out the new fibre networks. It hopes to reach 25m premises by 2026 and spending's set to ramp up even further as BT looks to take advantage of government tax breaks. This technical-heavy business is unique and higher margin, and an asset to the business.

However, substantial improvements aren't free. Constant investment is one of the realities of the telecoms business, as infrastructure needs to be maintained and upgraded. We worry that despite the progress and the goal of reducing spend once infrastructure's in place, BT will have to keep shelling out to keep itself on the cutting edge. It doesn't help that telecoms is an inherently difficult sector to try and deliver attractive margins. Both regulators and customers will always want more for less.

Another drain on cash is BT's large pension deficit. The current payment plan cost just shy of £1bn last year, and we're expecting details on the latest review shortly. There's the potential for a write-down on the some of the assets, increasing the deficit. That won't necessarily mean higher payments, but at the very least it'll extend their duration. Add to that the debt pile, especially in the current higher-interest rate, and the demands on cash are considerable.

BT has its attractions. Its mobile networks are broad and generally high quality, while Openreach is unique and higher margin. But it needs to leverage all of its advantages if it's to satisfy the never-ending investment demands and return to sustained dividend growth.

BT key facts
Forward price/earnings ratio (next 12 months): 6.9
Ten year average forward price/earnings ratio: 10.0
Prospective dividend yield (next 12 months): 5.9%
Ten year average prospective dividend yield: 5.0%
Posted at 27/7/2023 09:09 by careful
Set up well for the future.
Undrevalued, as is most of the UK market.

Really odd, wise capital spend on fast fibre, big takeup, good future earnings.
PE in single figures, hight dividend yield.

At some time in the future the pension issue will go away, even BT workers don'y live forever.

As Jansen said, going forward there will be a much smaller workforce.
A long term hold if ever there was one.

Crazy, I see Meta has risen well over 100% this year and after last nights impressive results the PE is down to about 40. so away she goes.
Dividend zero.

I will stick with BT
Posted at 27/6/2023 17:30 by millerman1007
BT Group tumbled on Tuesday after UBS downgraded the shares to 'sell' from 'neutral' and cut the price target to 120p from 146p, as it assumed a halving of the dividend amid free cash flow pressures.

"We think the market has underestimated the impact of rising interest rates and accounting changes at BT Sport that impacts free cash flow," the bank said.

"Without a dividend cut, BT Group will have to borrow more than £900m per annum over the next three years.

"Borrowing to fund both the dividend and pension deficit payments when the cost of debt is rising presents risks and we assume a halving of the dividend to 3.85p (from 7.7p)."
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