BT: We're stocking warehouses with kit ahead of Brexit to avoid shortages

BT has got Brexit licked, it told the stock market today – the former state telco said it has modelled for the worst outcome and is stockpiling products in case the UK exits with no trade deal in place and supply chains falter.

Britain is due to split with the EU from 29 March and like the rest of the tech and comms industry, BT has looked at all the potential eventualities that include a soft, hard or no Brexit, though the latter seems unlikely.

“There continues to be significant uncertainty following the UK’s vote to leave the European Union. We have plans in place or ensure that we’re prepared for the final outcome go the negotiations between the UK and the EU, including the possibility of a no deal Brexit,” BT said in a statement that accompanies its profit and loss accounts for Q2 of fiscal ’19.

“Our contingency planning is focused on ensuring we can continue to provide uninterrupted service to our customers, including maintaining sufficient inventory to protect against potential import delays,” it added.

Respected channel analyst Canalys warned last month that should Britain exit without an agreement in place, the local economy could sink into a deep recession, and that product shortages may become a reality as importing kit become less fluid and beset with bureaucracy.

And Forrester forecast UK tech sales to grow 0.5 per cent this year to £105bn and 0.4 per cent growth in 2019. It said businesses including Airbus, BMW and Siemens were all planning to spend less on their infrastructure in Britain.

El Reg is certain that BT’s claims will bring peace of mind to millions of Brits that are watching how things play out between now and near the end of March.

Hurrah for job cuts

In other news today, BT reported declines across nearly all of its divisions in Q2 of fiscal ’19 ended 30 September, it also confirmed cashflow had been whacked by £2bn worth of pension payments in the quarter, but said axing staff had eased overhead pressure and boosted profit.

As such, the stock market responded positively and BT’s share price rose by almost 10 per cent in morning trading – there is nothing investors like more than a blood-stained bottom line.

BT confirmed group sales of £5.908bn for the three months ended 30 September, a drop of 0.5 per cent on the same period a year ago.

A 4 per cent jump in the consumer unit to £2.616bn – 2.1 per cent ahead of analyst consensus – made the quarter more upbeat in tone. This was fuelled by "higher volume and mix of smartphones, growth in the SIM-only base of customers", and by receipts from BT Sport.

With the bright spot out of the way, BT revealed the Business and Public sector unit, which includes the old resellers acquired a decade ago, turned over £1.11bn, down 3 per cent year-on-year.

The drop was “mainly due to the ongoing decline in fixed voice where revenues declined 9 per cent, broadly in line with an 11 per cent decline in our traditional line base,” BT said. The drop was offset by a jump in IP, Mobile and Networking sales.

The Wholesale and Venture line of business reported an 8 per cent dip in revenue to £470m.

This was “driven by lower voice usage and customers migrating to newer IP technologies, ongoing price competition in the wholesale broadband market, a decline in the broadband base and the ongoing migration of customers from Partial Private Circuits to newer technologies,” BT said.

The long troubled Global Services business was down 6 per cent in the quarter to £1.185bn. BT hatched a plan in September to “transform” the unit to focus on “multi-national” clients and apparently add “real value” – not just fake value – around “cloud and network infrastructure”, and “cloud collaboration and cyber security”.

The German part of Global Services was sold to German reseller Bechtle last month. BT also confirmed it has laid off 2,000 staff in the quarter – with "the largest element being from Global Services”. The aim is to remove enough cost to make the business profitable, improve cashflow and “deliver a double digit return on capital employed in two years”.

Operating costs for the unit fell to £1.072bn in Q2 from £1.184bn a year earlier.

The clock is ticking. In reality, BT is all about the consumer and the UK. We think Global Services sticks out like a sore thumb, and that BT will still want to get shot of the division when it can improve the finances and find a buyer willing to pay money for it.

Openreach was down marginally on Q2 of fiscal ’17 to £1.255bn. As expected, some 31,000 staff transferred from BT to the business last month. The revenue decline was due to regulated price reductions on Fibre-to-the-channel and Ethernet kit.

Profit before tax was £636m in Q2 ’18 versus £666m in Q2 ’17. ®