Essay Available:
Pages:
11 pages/≈3025 words
Sources:
10
Style:
Harvard
Subject:
Mathematics & Economics
Type:
Essay
Language:
English (U.K.)
Document:
MS Word
Date:
Total cost:
$ 53.46
Topic:
Financial analysis of BT Group Plc Company
Essay Instructions:
PLEASE INCLUDE ALL SOURCES, and calculations.
See Brief uploaded.
SECTION ONE
Carry out an analysis of the Report and Financial Statements 2010 of BT Group plc, a UK-based telecoms business
http://www(dot)btplc(dot)com/Sharesandperformance/Annualreportandreview/pdf/BTGroupAnnualReport2010.pdf
The analysis in this order should include
1. A comparison of 2010 results with 2009 results
2. A ratio analysis of both years 2010 and 2009
3. A comparison with industry average figures as available
4. A discussion and explanation of your results
PLEASE SHOW ALL WORKINGS
The chosen techniques of analysis identify and apply reliable and valid performance measurement tools and techniques based on data taken from the case study and from outside sources
Prepare a detailed and structured report/essay (pretending) it's addressed to the directors of BT Group plc. Please include evidence of all research materials including full workings of financial analysis at the end of the essay.
The report must include the following headings:
1. Liquidity
2. Solvency,
3. Working capital management
4. Profitability
5. Asset efficiency
Each heading must incliude a minimum of three (3) ratio analysis under each of the above headings for each of the two years covered. The choice of analysis techniques highlights the interdependencies of ratios
**********
SECTION TWO
Following on from the research above, on financial analysis of the performance of BT Group plc to include financial and non-financial performance indicators. Carry out a performance audit of an organization including reference to internal and external factors
a) Using information published information and materials from above (Section ONE), prepare a balanced scorecard for the directors of BT Group plc.
b) Describe and explain how each aspect of the scorecard can assist BT Group plc in achieving its goals and targets.
The outcome of this task is an extension from Section One. All assumptions, systems and procedures must be suitably referenced in research.
*******
SECTION THREE
Commonly-used investment project appraisal methods include Net present value of the project, Payback period and Internal rate of return.
Make recommendations based on a post-audit appraisal on the appropriateness of selected investment project decisions
(a) Explain clearly, using an example from published information concerning BT Group plc, the decision rule underlying each of the appraisal methods used above and how BT Group plc might apply each of these rules in making a long-term financial and strategic investment, such as introducing fiber-optic cabled broadband.
BT Group plc as a public limited company is accountable to its shareholders in law. In addition to this accountability that it shares with all public limited companies, historical events around its formation have left it with a Universal Service Obligation (USO) to provide certain services to all sectors of the population regardless of ability to pay.
(b) Identify, describe and explain investment appraisal methods that would be appropriate to include in BT's decision-making process when seeking to comply with the USO.
Use the balanced scorecard developed in SECTION Two to suggest how the directors of BT could conduct an appraisal of the success of a project they have initiated some time (say 5 years) after the project was implemented.
THE FINAL WORK SHOULD HAVE: SUITABLE CONCLUSIONS, BACKED WITH RELEVANT CITATIONS AND RESEARCH. RECOMMENDATIONS MUST BE SUITABLE, TO THE POINT, AND REALISTIC IN THE CONTEXT.
THE FINAL WORK SHOULD BE logical and complete steps followed in analyzing, explaining and integrating results.
MUST HAVE substantial investigation into the assignment subject has been carried out
Essay Sample Content Preview:
Running head: Financial analysis of BT Group Plc Company
Name:
Course:
Institution:
Date of submission:
FINANCIAL ANALYSIS OF BT GROUP PLC.BUSINESSES
INTRODUCTION
BT Group plc (BT) is an integrated group of businesses that provides voice and data services. It is involved in providing communications solutions and services around the world and these include networked IT services, local, national and international telecommunications services, higher value broadband and internet products and services. The company serves a wide customer base including major corporate, business, wholesale and consumer. It also operates its business across four divisions namely, BT Global services, BT Retail and BT wholesale and open reach (BT Group,2010).
FINANCIAL ANALYSIS
1 A COMPARISON OF 2010 RESULTS WITH 2009 RESULTS
Group results
2010 £m
2009 £m
change
Revenue
-adjusted
£20,911
£21,431
2%
-reported
£20,859
£21,390
2%
EBITDA
-adjusted
£ 5,639
£ 5,238
8%
-reported
£ 5,162
£ 3,191
62%
Profit(loss) before taxation
-adjusted
£ 1,735
£ 1,454
19%
-reported
£ 1,007
£ 244
£ 1,251 m
Earnings(loss) per share
-adjusted
17.3p
14.1p
23%
-reported
13.3p
2.5p
15.8p
Proposed full year dividend
6.9p
6.5p
6%
Fresh cash flow
£ 1,933
£ 737
£ 1,196m
Net debt
£ 9,283
£ 10,361
£ 1,078m
PERFORMANCE AGAINST THE OUTLOOK FOR 2010
Outlook may 2009
Outlook updated
outcome
Outlook achieved
Adjusted revenue decline
4%-5%
3%-4%
2%
yes
Total underlying cost reductions
>£1 bn
>£1.5bn
£ 1.75 bn
yes
Adjusted EBITDA before leaver costs
_
c.£ 5.7 bn
£ 5.8 bn
yes
Capital expenditure
c.£ 2.7 bn
c.£ 2.5 bn
£ 2.5 bn
yes
Free cash flow
>£ 1 bn
c.£ 1.7 bn
£ 1.9 bn
yes
Full year dividend
_
c.5% up
6% up
yes
Net debt
_
<£ 10.0 bn
£ 9.3 bn
yes
2 A RATIO ANALYSIS OF BOTH YEARS 2010 AND 2009
2010 £m
2009 £m
Ratio
Revenue
8,297
8,663
0.95:1
Net operating costs
6,447
6,999
0.92:1
Adjusted EBITDA Depreciation and amortization
1,850
459
1,664
426
1.1:1
1.07:1
Adjusted operating profit
1,391
1,238
1.12:1
Capital expenditure
417
471
0.88:1
Operating cash flow
1,640
1,064
1.54:1
3.A COMPARISON WITH INDUSTRY AVERAGE FIGURES AS AVAILABLE
Net finance expense
2010 £m
2009 £m
Interest on borrowings
886
935
Loss arising on derivatives not in a designated hedge relationship
19
29
Interest on pension scheme liabilities
2,211
2,308
Finance expense
3,116
3,272
Less :interest on qualifying assets
3
_
Total finance expense
3,113
3,272
Other interest and similar income
12
31
Expected return on pension scheme assets
1,932
2,621
Total finance income
1,944
2,652
Analyzed as: adjusted net finance expense
Net interest on pensions
890
279
933
313
Net finance expense before specific items
Specific items
1,169
11
620
_
Net finance expense 1,158 620
1. LIQUIDITY
This refers to the ability of current assets meeting the current liabilities when due. The level of liquidity of an asset is the duration of time anticipated to expire until the asset is realized or else converted into cash. For the BT plc Group company the main sources of group liquidity for the year 2010 and 2009 was cash generated from operations and borrowing through short-term and long-term issuances in the capital markets (Ciaran, 2010).
These, as well as committed bank facilities are expected to remain the key sources of liquidity for the coming future. Otherwise possible, surplus funds for the group are managed by the centralized treasury operation.
FREE CASH FLOW STATEMENT
2010 £m
2009 £m
Ratios
Cash generated from operations
4,476
4,934
0.9:1
Net income taxes received(paid)
349
228
1.5:1
Net cash inflow from operating activities
4,825
4,706
1.02:1
Add back pension deficit payment
525
-
Net capital expenditure
2,480
3,038
0.8:1
Net purchase of non current financial assets
_
_
Dividends from associates and joint ventures
3
6
0.5:1
Interest paid
956
956
1:1
Interest received
16
19
0.84:1
Free cash flow
1,933
737
2.6:1
Deduct pension deficit payment
525
_
Acquisitions and disposals
68
227
0.29:1
Net(purchase) sale of current financial assets
246
286
0.86:1
Net (repayment) drawdown of borrowings
497
522
0.95:1
Dividends paid
265
1,222
0.21:1
Net issue (purchase) of treasury shares
4
209
0.01:1
Foreign exchange
7
54
0.12:1
Net increase(decrease) in cash and cash equivalents
329
59
5.57:1
Cash and cash equivalents at the start of the year
1,115
1,174
0.94:1
Cash and cash equivalents at the end of the year
1,444
1,115
1.29:1
NET CASH INFLOW FROM OPERATING ACTIVITIES
In the year 2010 cash generated from operations was £ 4,476 m, with a decrease of 9% compared with 2009 hence reflecting improvements in profitability offset by a pension deficit payment of £525m.In 2010 the group received a net tax repayment of £349m comprising tax payments of £76m offset by a tax repayment of £215 m following the agreement of substantially all outstanding tax matters. Whereas in 2009 the group paid net tax of £228 m, compared with anet tax refund of £229m received in 2008 (Leo, 2008).
CAPITAL EXPENDITURE
On an accrual basis the capital expenditure totaled to £ 2,533m in 2010 compared with £ 3,088m in the year 2009. Even though the original outlook in May 2009 was for the capital expenditure in 2010 to be around £ 2.7 bn, it however was subsequently reduced to an outlook of around £ 2.5 bn that was achieved. Of the capital expenditure,£280m arose outside of the UK in 2010,compared with £316 m in 2009. The contracts placed for ongoing capital expenditure totaled to £383m at 31 march 2010 and £451m in 2009. The net cash outflow for capital expenditure in 2010 was £2,480 and £3,038 for 2009.
2. SOLVENCY
In business terms this simply refers to the financial ability of a business to be able to pay debts when they become due whereas solvency ratios is any of the formulas used to gauge a company`s ability to meet its long term obligations. For the case of BT plc Group Company the solvency is characterized by the following (Satish, 2007).
Interest
The interest paid in 2010 was £959 which remained at the same level as in the year 2009 due to the impact of the coupon payments on bond issuance made in 2009 offsetting the lower debt levels. Interest received was £16m in 2010, a reduction as a result of lower average interest rates on deposits held.
ACQUISITIONS AND DISPOSALS
There were no significant acquisitions or disposals in 2010. Net cash outflow on acquisition was £ 68m in 2010 and £ 227 in 2009. Principally this comprised deferred consideration payments relating to the acquisition of Albacom in prior period (BT Group, 2010). Total consideration for acquisitions in 2009 was £ 186m, giving rise to goodwill of £ 131 m with net cash outflow for BT retail acquisitions which included Wire One Holdings Inc and Ufindus Ltd (total consideration of £98m, net assets acquired of £24m, goodwill arising of £74m).
During the year 2009 the net cash outflow for BT Innovate and Design acquisitions comprised Ribbit Corporation and Moor house consulting Ltd (total consideration of £75 m, net assets acquired of £28m, goodwill arising of £47m). BT Global services acquired Stemmer GmbH and SND GmbH (total consideration of £ 13 m, net assets acquired of £ 3m, goodwill of £ 10m).
NET (PURCHASE) SALE OF CURRENT AND NON CURRENT FINANCIAL ASSETS
In the year 2010 the net cash flow from the net sale of investments was £246m, compared with an inflow of £286m in 2009. The cash flows in all financial years mainly were relating to changes in amounts held in liquidity funds.
NET (REPAYMENT) DRAWDOWN OF BORROWING
During the year 2010 borrowings adding up to £ 1,028m matured, principally consisting of £ 697m commercial paper and £ 331m of other long-term debt. The group raised a € 600m Euro bond in 2...
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now: