Analysis of BT Group which looks at financials, technicals and summary.

Financials

A brief comparison of the financial year of 2023 versus 2022. Revenue fell by almost £200 million but profit after tax actually grew by £631 million year-on-year. One reason for this was due to a tax rebate of £308 million. As a result, earnings per share grew by 50%. Looking at the balance sheet, total assets (concludes of current and non-current), increased by almost 6% but total liabilities also increased and by almost 11%. This was predominantly because the company’s loans and borrowings were raised by more than double and retirement benefit obligations were reported at 174% higher than in the previous year. Therefore, this led to a fall in equity by 5% YoY. Additionally, cash-on-hand fell by £385 million.

If we look at previous years, BT Group has not actually shown any real potential for growth. They have increased their revenue by £1.6 billion since 2016 but are actually generating less profit after tax, with a decrease of 35% in earnings per share. Its equity value is also less than half of what it was back in 2016.

Technicals

From a technical viewpoint, we can see that its share price is currently trading at around 124p a share. The price has fallen heavily from the start of 2016, losing around 69% of its value over the last 7 years. Then between September and November of 2020, a base was created which led to a breakout. In theory, this was an indication the price of the stock has began a new bullish trend with a retracement that started in July 2021 due to profit-taking. Looking at the RSI we can also see it was heavily overbought. Fast forward to February 2022, there was an attempt for a new breakout towards the upside but the resistance was overpowering. The momentum tried to remain intact but a second rejection occurred which led to a huge sell-off. We can see that bears are now in control once again with the key support level sitting at 110p a share. A break and close below this level could see the price fall back towards the major support level from 2020 (94p). Looking at the technical indicators, MACD has turned negative and the RSI is also negative as it reads 37. 

Summary

To summarise, even though the company had a more profitable 2023 year versus 2022, it is actually generating less profit than it was 7 years ago. The balance sheet highlights that they are taking on more debt in loans and borrowings. Back in June UBS warned that BT is facing pressure regarding its free cash flow, which creates a risk that may force the company to cut its dividend in half. According to Proactive Investors, analysts project that the company will need to borrow at least £900 million a year over the course of the next three without a dividend cut. But as interest rates are rising, borrowing to fund both the pension deficit and dividend may not be such a good idea.

Based on the technicals, the stock does not present any real opportunity for upside movement. There has been a sell-off after the most recent rejection and looks like bears are in control. In Minipip's view, unless the price consolidates around current levels and a clear support base is created, this looks pretty negative for the time being.

Note: this is not financial advice or a signal for traders or investors to buy/sell the stock. Every individual is responsible for their own actions. Investing and trading carries RISK.