BT Chief Allison Kirkby Receives £2.5m Bonus in First Year as Telecoms Giant Head

BT Chief Executive Allison Kirkby received £2.5m in her first year, including a £1.2m bonus and a base salary of £1.3m. Her payout is lower than her predecessor Philip Jansen's final year compensation of £3.7m, but significantly less than the £6.8m she could have earned under the executive pay plan. Investors have confidence in Kirkby, with the stock rising 71% since she took over.

British Telecom Plc (OTCPK: BTGOF) and Vodafone Group PLC (NASDAQ: VOD) have both undergone significant strategic restructuring in recent years, yet the market has responded differently to their stocks. BT has seen a substantial 65% gain since October 2022, while Vodafone has appreciated by only 12% over the same period. This divergence can be attributed to the distinct restructuring strategies and financial performances of the two companies.

Financial Metrics Comparison

For the fiscal year 2024, BT reported revenue of £20.4 billion, a 2% decrease year-on-year, primarily due to lower international sales and weaker handset trading. Despite this, BT achieved a 1% increase in adjusted EBITDA to £8.2 billion and a 12% rise in reported profit before tax to £1.3 billion. This was driven by £913 million in annualized cost savings. BT's normalized free cash flow (FCF) increased by 25% to £1.6 billion, allowing it to increase its dividend by 2% to 8.16p per share. In contrast, Vodafone reported a 2% increase in sales to €37.4 billion but suffered an operating loss of €411 million. This was mainly due to €4.5 billion in impairment charges in Germany and Romania, resulting in a reduced dividend to 4.5 eurocents per share.

Restructuring Strategies

Both BT and Vodafone are streamlining their operations and portfolios to simplify management layers and enhance customer experience. Vodafone has been more aggressive in reshaping its portfolio, selling underperforming assets in Spain and Italy, and obtaining regulatory approval to merge its UK operations with Three UK. BT, on the other hand, is focusing on its core UK market and divesting assets in other geographies. BT's target is to achieve £3 billion in savings by 2029, including a significant workforce reduction to 75K by 2030.

Valuations and Key Takeaways

BT's EBITDA margin of 36.13% is higher than Vodafone's 31.50%, and its operating profit increased by 12% for FY-25, while Vodafone suffered a loss. BT's forward EV-to-EBITDA of 4.58x should trade closer to Vodafone's 5.29x multiple, if not above it. However, BT's higher debt-to-equity ratio of 180.8% and higher capex due to fiber/5G rollout pose risks. Vodafone's net debt fell sharply to €22.4 billion, but this was helped by proceeds from asset sales.

Executive Compensation

BT Chief Executive Allison Kirkby received £2.5m in her first year, including a £1.2m bonus and a base salary of £1.3m. Her payout is lower than her predecessor Philip Jansen's final year compensation of £3.7m but significantly less than the £6.8m she could have earned under the executive pay plan. Despite this, investors have confidence in Kirkby, with the stock rising 71% since she took over.

Conclusion

Both BT and Vodafone are reducing geographic complexity and executing major restructuring programs focused on cost reduction and portfolio optimization. While Vodafone's lower debt looks better for the balance sheet, it's not an indicator of stronger fundamentals. BT's better margin, improved profitability, and clearer strategic direction make it a safer pick for investors.

References
[1] https://seekingalpha.com/article/4793628-comparing-restructuring-strategies-at-bt-group-and-vodafone