BT Group Plc

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.

Recent News
On 24^th March 2020,BT Group announced that it had entered into exclusive negotiations with Computacenter. As per the negotiations, the Computacenter will acquire BT's domestic operations in the French market.

On 19^th March 2020,BT Group announced that it had entered into an agreement with CIH (CIH Telecommunications Americas LLC). As per the agreement, BT will sell selected infrastructure and domestic operations to CIH.

Board Changes
On 16^th March 2020, BT Group announced the selection of Sara Weller CBE and Sir Ian Cheshire as directors non-executive. Sara will be the member of Nominations Committee and will be joining before AGM on 16^th July 2020 and Ian will be a member of Nominations Committee and Remuneration Committee effective immediately.

Covid-19 Update
On 12^th March 2020, BT Group released an update on the impact of Covid-19. Philip Jansen, the group’s CEO, tested positive for COVID-19 and as suggested by Public Health England went into self-isolate. The group is working in sync with Public Health England to sanitise its headquarters and ensures that all employees who contacted Philip are properly advised. The group has enabled remote access for their employees and operations are working smoothly without any disruptions.

Trading Update - Nine Months Financial Year 2020 (31st December 2019, GBP, million)
On 30th January 2020, BT Group released an update for 9 months trading ending 31st December 2019. Driven by challenges face from the competition, a decline in legacy product and regulation, the company’s reported revenue declined by 2 per cent to GBP 17,246 million for the period. The adjusted revenue declined by 2 per cent to GBP 17,192 million. Due to lower revenue, higher Openreach’s operating costs, investment in customer experience and high spectrum fees, the company’s adjusted EBITDA declined by 3 per cent to GBP 5,900 million. The reported PBT (Profit before tax) stood at GBP 1,911 million for the period.

Share Price Performance

Daily Chart as of April15^th, 2020, after the market close (Source: Thomson Reuters)

BT Group Plc shares closed at GBX 118.65 at the time of writing after the market close on 15^th April 2020. Stock's 52 weeks High is GBX 231.50 and Low is GBX 102.90.

Conclusion
In the nine months period ending 31st December 2019, the company’s financial performance has declined moderately, though it was in line with the expectations. However, the company is in a strong position. It has launched new products for consumer and business segments.  For the financial year 2021, the company’s transformational plans drive long-term growth, due to the cost transformation programme on track. The group has been selling its selected operations, which will provide additional funds to the company to focus on its core operations.

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 19,042 million in FY16 to GBP 23,428 million in FY2019. Compounded annual growth rate (CAGR) stood at 7.15 per cent.

Based on the decent prospects, we have given a “BUY” recommendation at the closing price of GBX 118.65 (as on 15^th April 2020).

Johnson Matthey Plc

Johnson Matthey Plc (LON: JMAT) is a British multinational speciality chemicals company. The group’s operations have been organised into four segments: Clean Air, Efficient Natural Resources, Health and New Markets.

The group will release its full-year results on 28^th May 2020.

Recent News
On 1^st April 2020,Johnson Matthey announced the selection of Linda Bruce-Watt. Ms Linda will hold the responsibilities of Interim Company Secretary.

Pre-Closing Trading Update
On 30^th March 2020, Johnson Matthey released an update for pre-close trading ending 31^st March 2020 and impact of Covid-19 on the business performance. The group’s operating performance was in-line with the expectations prior to the outbreak of coronavirus. The group expect its trading performance will be impacted by GBP 50 million due to Covid-19. The group witnessed a decline in demand for Clean Air and delayed shipments due to logistics challenges will cost its other businesses with around GBP 20 million.The company expect its operating performance will be lower than expectations. The group has a resilient, high quality and diverse business portfolio exposed across multiple geographies and markets. The group is focused on ensuring the health and safety of its employees and is closely monitoring the developments related to Covid-19. The group has temporarily closed Clean Air plants globally due to lower consumer demand and lockdown imposed by the governments.The facilities in China are opening up and are returning to full capacity as the region started recovering from the outbreak. In Efficient Natural Resources and other business, the group’s operations are not materially impacted but are facing issues with the supply chain, which resulted in orders delays. The group has a flexible cost base and around 75 per cent of costs related to Clean Air are variable. The group has taken the required steps to reduce its cost and preserve the cash. At present, the group is not able to quantify the impact of Covid-19 and will provide a further update in the full-year results. The group has a strong balance sheet with adequate liquidity of around GBP 250 million and Revolving Credit Facility of GBP 1 billion.

Share Price Performance

Daily Chart as of April15^th, 2020, after the market close (Source: Thomson Reuters)

Johnson Matthey Plc shares closed at GBX 1,860.50 at the time of writing after the market close on 15^th April 2020. Stock's 52 weeks High is GBX 3,475.00 and Low is GBX 1,614.00.

Valuation Methodology

*Peers: Victrex Plc, Croda International Plc, Linde Plc, Synthomer Plc and Scapa Group Plc.

Conclusion
The group has been performing well prior to the outbreak and were in-line with the expectations. Due to lower consumer demand and lockdown imposed by the governments, the group has temporarily closed multiple facilities globally, while in the Chinese market, plants are returning to full recovery which will help the company to meet demand on time. The group doesn’t expect any material impact on Efficient Natural Resources and other business. The group has a flexible cost base and around 75 per cent of costs related to Clean Air are variable and has taken required steps to reduce its cost and preserve the cash to offset the impact of Covid-19.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the closing price of GBX 1,860.50 (as on 15^th April 2020) with single-digit upside potential based on 10.10x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

* The “BUY” recommendation in the report is also valid for the current price as on 16^th April 2020.

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