Business Overview
BT Group Plc (LON: BT.A) is a fixed-line telecommunication company, based out of London. The group’s business is built around the clients, delivering value and serving their needs persistently. The group is segregated into four customer-facing lines of business: Enterprise, Openreach, Consumer, and Global. The company’s operations are divided into four reportable division, namely Enterprise, Openreach, Consumer, and Global.

Recent News
On 16^th December 2019, the company had made the announcement that it is selling its Spanish managed ICT services business. This business includes the domestic network infrastructure to funds. It is managed by Portobello Capital. After fulfilling all the regulatory frameworks, the transaction is expected to complete in the first half of the year 2020.

Financial Highlights- H1 Financial year 2020 (30^th September 2019, GBP, million)
 
(Source: Interim Report, Company Website)

In the first half of the fiscal year 2020, driven by strategically reducing low margin business, a decline in the legacy products and effect of regulation, the company’s reported revenue decreased by 1 per cent to GBP 11,467 million versus GBP 11,588 million in H1 FY2019. Adjusted revenue declined by 2 per cent to GBP 11,413 million in H1 FY2020. Driven by a rise in the spectrum fees, content costs, and enhance competitive positioning investment, the adjusted EBITDA declined by 3 per cent to GBP 3,923 million. In H1 FY20, the PBT (profit before tax) stood at GBP 1,333 million versus GBP 1,340 million in H1 FY2019. The company’s basic earnings per share surged by 2 per cent from 10.6 pence in H1 FY2019 to 10.8 pence in H1 FY2020. Net cash inflow from operating activities stood at GBP 2,173 million in H1 FY20; normalised free cash flow was down by 38 per cent to GBP 604 million, driven by the increased capital expenditure, higher interest and tax payments, partly offset by one-off cash flows.

The company will announce its Q3 FY2020 results on 30^th January 2020.

Share Price Performance

Daily Chart as on 17^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 17^th, 2020, BT Group Plc shares were trading at GBX 183.52 at the time of writing before the market close (at 1:40 PM GMT), up by 0.28 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 241.40/GBX 157.67. The stock price has given negative 20.88 per cent returns during the previous year. In the last three months and one month, the stock price has given negative 11.07 per cent returns and negative 9.55 per cent returns respectively, and now some pullback relief rally is expected in the stock.

Conclusion
In the first half of the fiscal year 2020, the company’s financial performance has declined moderately, though it was in line with the expectations. The company’s net debt has increased due to net business cash outflows. However, the company is at a strong position. It has launched new products for consumer and business segments.  In Openreach segment, the company is the largest FTTP (Fibre to the Premises) network in the United Kingdom, including more than 2 million premises passed, 4 million by March 2021; ambition to pass 15 million by mid-2020s, subject to the right conditions; and ultimately wants to cover most of the UK. For the financial year 2021, the company’s transformational plans drive long-term growth, due to the cost transformation programme on track. The environment is shifting in a way that will reward large scale investment in FTTP over the 2020s. Over the last year, the company has de-risked the pension deficit, progressed ahead of target with the transformation plan, substantially launched 5G services and accelerated the FTTP build across the United Kingdom. The company’s prospects are looking good and it could prove an excellent opportunity to invest for the long term.

The company’s total revenue has grown from GBP 18,879 million in FY2016 to GBP 23,459 million in FY2019, giving approximately 7.5 per cent growth on a CAGR basis.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 182.22 (as on 17th January 2020, before the market close at 11:30 AM GMT).

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