DCF Studio

    BT-A.L · LSE · Communication Services

    BT Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 401.15

    Market price

    GBp 196.85

    Implied upside

    +103.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 401.15+103.8%
    Exit multiple
    GBp 144.68-26.5%
    Market price
    GBp 196.85

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 19.3bnGBP 19.0bnGBP 18.7bnGBP 18.4bnGBP 18.1bn-1.7%
    EBITGBP 3.3bnGBP 3.2bnGBP 3.2bnGBP 3.1bnGBP 3.1bn-1.7%
    NOPATGBP 2.5bnGBP 2.4bnGBP 2.4bnGBP 2.3bnGBP 2.3bn-1.7%
    Add depreciation & amortisationGBP 4.6bnGBP 4.5bnGBP 4.4bnGBP 4.3bnGBP 4.3bn-1.7%
    Less capital expenditureGBP -4.8bnGBP -4.8bnGBP -4.7bnGBP -4.6bnGBP -4.5bn-1.7%
    Less increase in working capitalGBP -330.9mGBP -325.3mGBP -319.8mGBP -314.4mGBP -309.1m-1.7%
    Free cashflow to firmGBP 1.9bnGBP 1.8bnGBP 1.8bnGBP 1.8bnGBP 1.7bn-1.7%
    Discount factor0.97220.91900.86870.82110.7762-
    Present valueGBP 1.8bnGBP 1.7bnGBP 1.6bnGBP 1.5bnGBP 1.3bn-7.1%
    Present Value Of The ForecastGBP 7.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.617Reported 0.428, pulled toward 1.0 (Blume)
    Cost of equity7.89%Risk-free + beta x equity risk premium
    Cost of debt5.33%Interest expense / average total debt
    Market capitalisationGBP 19.4bn46.1% of capital
    Total debtGBP 22.7bn53.9% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC5.79%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareGBP 4.01

    87% of EV

    Forecast FCFF, final year
    GBP 1.7bn
    Capex at depreciation, working capital in reinvestment
    GBP 3.1bn
    Less reinvestment at g/ROIC (30.2% of NOPAT)
    GBP -943.7m
    Capitalised
    GBP 2.2bn
    ROIC (reported)
    8.3%
    Terminal value, undiscounted
    GBP 67.9bn
    Terminal value, discounted
    GBP 52.7bn
    Enterprise value
    GBP 60.5bn
    Less net debt
    GBP 21.0bn
    Equity value
    GBP 39.5bn

    Exit at 4.8x EBITDA

    Value per shareGBP 1.45

    78% of EV

    Terminal value, undiscounted
    GBP 35.3bn
    Terminal value, discounted
    GBP 27.4bn
    Enterprise value
    GBP 35.3bn
    Less net debt
    GBP 21.0bn
    Equity value
    GBP 14.3bn

    Spread between methods: 94%.

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    3.79%8.4210.2713.5420.9253.47
    4.79%5.175.806.708.0910.55
    5.79%3.433.684.014.455.08
    6.79%2.352.452.582.732.93
    7.79%1.621.651.691.731.78

    Outlined: this model. Green text: above today's price of 1.97. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-1.7%-7.7%-6.0pp
    EBIT margin16.9%10.0%-7.0pp
    Discount rate5.8%7.4%+1.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.