Latest Updates On Two Stocks: Equiniti Group PLC And BT Group PLC

Equiniti Group PLC

Equiniti Group PLC (EQN) offers complex payment and administration services, maintained by technology platforms, to a variety of established organizations. The company’s operations are differentiated into four segments being Intelligent Solutions, Investment Solutions, Pension Solutions, and Interest.

The Investment Solutions segment provides a variety of services, including the administration of SAYE (save as you earn) schemes and share incentive plans, and share registration for about half the FTSE (Financial Times Stock Exchange) 100. The company also offers international payments to corporates, its employees and clients, wealth management, and share dealing, as well as direct to retail consumers. The Intelligent Solutions segment provides enterprise workflow for credit services, case and complaints management, a specialist resource for rectification and remediation, and on-boarding new clients. The Pension Solutions business provides payment and administration services to pension schemes, as well as life and pensions administration, data solutions, and pension software.

Financial Highlights (H1 FY2019, £ million)

(Source: Interim Reports, Company Website)

In H1 FY19, the company’s reported revenue increased by 8.3 per cent to £275.1 million as compared with the corresponding period of the last year, while revenue adjusted for acquisition and foreign exchange rates increased organically by 3.2 per cent. Underlying EBITDA increased by 3.9 per cent to £60.9 million against the £58.6 million in H1 FY18, due to solid divisional growth offset by the projected decrease in Pension Solutions with a margin decrease of 1pts. Operating cash flow conversion reduced by 18pts to 83 per cent as compared to 101 per cent in H1 FY18, due to a higher level of seasonal payments. Earnings before interest and tax rose by 79.5 per cent to £20.1 million as compared with the corresponding period of the last year. Profit before tax stood at £11.6 million against the £3.6 million in H1 FY18. Profit after tax surged to £9.3 million as compared with the previous year same period, reflecting a reduction in non-operating charges related to the acquisition of EQ US and underlying EBITDA growth. Diluted earnings per share increased to 2.3 pence against the 0.2 pence in H1 FY18. Underlying earnings per share inched up by 1.3 per cent to 7.7 pence as compared with the corresponding period of the last year. The interim dividend per share stood at 1.95 pence, an increase of 7.1 per cent against the 1.82 pence in H1 FY18. Net debt increased to £370.2 million as compared with £352.9 million in H1 FY18. On a post-IFRS 16 basis, leverage stood at 2.8x, a decrease of 0.2x against the 3x in H1 FY18.

Outlook

In this operating environment, the company expect the uncertainty to continue, but the outlook remains strong. In the UK market, the company expect further organic growth, in the UK as relationships with the exceptional customer base is being built. Based on market opportunity, the Unites States provides a platform for enhanced growth and the prospect to cross-sell digitised services into the blue-chip consumer base, and the potential to take market share.

The company’s business model gives outstanding visibility of revenues. In the first half of 2019, the operations are extremely scalable through platform characteristics. Based on this, the company is expected to report an increase in efficiency and reduce marginal costs. This, along with further operational improvements and progressive deleveraging, will allow increasing underlying profits and earnings and will also underpin the self-assurance in the delivery of market expectations for the financial year 2019.

In the company’s medium-term guidance, the organic revenue is likely to increase in the range of 3- 7% per annum supplemented by capability-enhancing acquisitions. An increase in the gradual margin of around 25bps per annum is expected. The cash tax rate is likely to be around 13 per cent in 2019 and 17 per cent in 2020, while average cash conversion is likely to be of 95 per cent. Capital expenditure is likely to be in the range of 6-7% of revenue, and net debt/underlying EBITDA ratio is expected to be 2-2.5x on post-IFRS16.

Share Price Performance

 Daily Chart as of August 02, 2019, after the market closed (Source: Thomson Reuters)

On August 02, 2019, Equiniti Group PLC shares closed at GBX 211.20 and increased by 0.763 per cent from the last day closing price. Stock’s 52-week High is GBX 267, and 52-week Low is GBX 167.05. The share was down by 20.9 per cent against the 52 weeks High and was up by 26.43 per cent against the 52 weeks low. Stock’s average traded volume for 5 days, 30 days, and 90 days was 345,094.00, 449,832.87, and 493,149.24. The average traded volume for five days reduced by 23.28 per cent against the thirty days average traded volume.

The company’s stock beta stood at 0.04, reflecting lower volatility from the benchmark index. The company’s total outstanding market capitalisation was around £769.90 million, and the dividend yield was 2.54%.

The company’s stock has delivered a price return of positive 1.01 per cent at year-on-year basis, the stock decreased by 3.19 per cent at the year-to-date basis and was down by around 2.51 per cent in the past three months. In the past one month, the company’s stock price decreased by 4.99 per cent. In the past five trading sessions, the stock declined by around 3.41 per cent.

BT Group

BT Group Plc (BT. A) is a London based communication services organisation. The company’s services portfolio consists of managed networked IT services, fixed voice and data, mobility, television, connectivity, and broadband services. It also offers copper and fibre connections between exchanges, homes and businesses. The company has a business existence across Asia-Pacific, Europe, the Middle East, Africa and the Americas.

Q1 FY2020 Trading Update (as on 2nd August 2019)

(Source: Trading Update, Company Website)

In Q1 FY2020, the company’s reported revenue decreased by 1 per cent to £5,633 million as compared with the corresponding period of the last year, due to a decrease in consumer, enterprise, and Global. Adjusted EBITDA decreased by 1 per cent to £1,958 million against the £1,800 million in H1 FY18, due to higher spectrum fees and content costs and lower revenues, partly offset by a decrease in costs from transformation and restructuring programmes. There was impact of higher upfront interest expense on the IFRS 16 lease liabilities recognised from 1st April 2019, as a result the reported profit before tax of the company came in at £642 million and Adjusted profit before tax at £749 million. Normalised free cash flow was £323 million, a decrease of 36 per cent, due to an increase in capital expenditure and higher tax and interest payments, mainly offset by working capital phasing. Reported capital expenditure increased by 11 per cent to £931 million, driven by the consumer-driven cost and network investment.

Outlook

For its first quarter to the end of June, the company reported soft results in the consumer market. The company was well placed to achieve the government’s goal but that it first needed to reach a deal. UK homes can connect to a full-fibre line of less than 8 per cent, according to Ofcom, which lower in comparison to other countries in Asia and Europe. Full-fibre lines, which entirely replace old copper networks to the consumer’s door, are expensive to build but deliver much quicker and more reliable speeds. A ramp-up in fibre spending is likely to intensify pressure on the company to cut its dividend after it warned at its annual meeting that it was prepared to reduce the payout to invest in the technology.

In the consumer market, the company reported a soft first quarter, with earnings before interest, tax, depreciation and amortisation decreasing by 5 per cent. The company said that the overall revenue in the first quarter decreased by 1 per cent year-on-year to £5.6 billion, with profits before tax declining to £642 million from £704 million a year earlier because of higher costs. The company had restated its outlook for the financial year 2019, but problems are brewing in the consumer business amid high competition in 5G and broadband.

Share Price Performance

 Daily Chart as of August 02, 2019, after the market closed (Source: Thomson Reuters)

On August 02, 2019, BT Group PLC shares closed at GBX 186.02 down by 4.074 per cent from the last day closing price. Stock’s 52-week High is GBX 268.80, and 52 week-Low is GBX 185.86. The share decreased by 30.80 per cent against the 52-week High and increased by 0.09 per cent against the 52 week-low. Stock’s average traded volume for 5 days, 30 days, and 90 days was 23,212,453.20, 24,115,862.23, and 21,561,091.68. The average traded volume for five days declined by 3.75 per cent against the thirty days average traded volume.

The company’s latest stock beta stood at 0.81, reflecting lower volatility from the benchmark index. The company’s total outstanding market capitalisation was around £18.38 billion and a dividend yield of 7.94%.

The company’s stock has delivered a price return of negative 15.61 per cent at year-on-year basis, the stock decreased by 18.56 per cent at year-to-date basis and was down by around 15.32 per cent in the past three months. In the past one month, the company’s stock price reduced by 0.76 per cent, while in the past five trading sessions, the stock surged by around 2.46 per cent.

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