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Annual Financial Report

16th Jun 2009 14:47

RNS Number : 9837T

Cable & Wireless PLC

16 June 2009

Annual financialreport Announcement

16 June 2009

CABLE AND WIRELESS plc

Annual financial report Announcement FOR THE year ENDED 31 march 2009

Cable and Wireless plc (Cable & Wireless or the Company) has submitted copies of the following documents to the UK Listing Authority:

Combined letter from the Directors and Notice of Annual General Meeting (AGM);

Form of Proxy;

Annual Report and Accounts for the year ended 31 March 2009;

Annual Review and summary financial statements for the year ended 31 March 2009; and

Proposed Articles of Association (marked and clean copies).

These documents will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London E14 5HS

Tel: 020 7066 1000

The Annual Report and Accounts or Annual Review together with the combined letter from the Directors and Notice of AGM and the Form of Proxy are being posted to shareholders today, 16 June 2009. Copies of these documents (with the exception of the Form of Proxy) together with copies of the current and proposed Articles of Association will shortly be available on the Company's website (www.cw.com) and from the Company Secretary, 26 Red Lion Square, London WC1R 4HQ .

This announcement should be read in conjunction with the Company's annual results announcement issued on 21 May 2009. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Cable & Wireless 2008/09 Annual Report and Accounts.

The financial information included within this annual financial report announcement has been extracted from the audited consolidated financial statements of Cable and Wireless plc for the year ended 31 March 2009 (which will shortly be delivered to the Registrar of Companies) but does not constitute the Company's statutory financial statements for 2008/09 or 2007/08 under Section 240 of the Companies Act 1985.

Those accounts are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and those parts of the Companies Act 1985 applicable to companies reporting under IFRSs. They have been reported on by the Group's auditors, whose audit report (i) was unqualified, (ii) did not include a reference to any matters by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

The financial information in this annual financial report announcement has been prepared in accordance with IFRSs, with the exception of the disclosure requirements.

CABLE & WIRELESS
Clare Waters	Director of External Affairs	[email protected]	+44 (0)20 7315 4088
Ashley Rayfield	Director, Investor Relations	[email protected]	+44 (0)20 7315 4460
Mat Sheppard	Manager, Investor Relations	[email protected]	+44 (0)20 7315 6225
Lachlan Johnston	Director of Public Relations	[email protected]	+44 (0)7800 021 405
	Press Office		+44 (0)1344 818 888
FINSBURY	Rollo Head		+44 (0)20 7251 3801

EXTRACTS FROM THE CABLE & WIRELESS 2008/09 ANNUAL REPORT AND ACCOUNTS

The information below has been extracted from the Cable & Wireless 2008/09 Annual Report and Accounts and is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports.

Consolidate income statement

For the year ended 31 March 2009

			2008/09			2007/08
	Pre-			Pre-
	exceptional	Exceptional		exceptional	Exceptional
	items	items	Total	items	items	Total
	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	3,646	-	3,646	3,152	-	3,152
Operating costs before depreciation and amortisation	(2,841)	(133)	(2,974)	(2,574)	(53)	(2,627)
Depreciation and impairment	(316)	-	(316)	(252)	(37)	(289)
Amortisation	(63)	-	(63)	(47)	-	(47)
Other operating income	2	-	2	9	53	62
Other operating expense	(4)	-	(4)	(4)	-	(4)
Group operating profit/(loss)	424	(133)	291	284	(37)	247
Share of post-tax profit of joint ventures	34	-	34	37	-	37
Total operating profit/(loss)	458	(133)	325	321	(37)	284
Gains and losses on sale of non-current assets	7	-	7	1	-	1
Gain on termination of operations	3	-	3	8	6	14
Finance income	29	-	29	53	-	53
Finance expense	(75)	(56)	(131)	(75)	(10)	(85)
Profit/(loss) before income tax	422	(189)	233	308	(41)	267
Income tax (expense)/credit	(24)	7	(17)	(56)	9	(47)
Profit/(loss) for the year from continuing operations	398	(182)	216	252	(32)	220

Discontinued operations
Profit for the year from discontinued operations	10	-	10	-	-	-
Profit/(loss) for the year	408	(182)	226	252	(32)	220

Attributable to:
Equity holders of the Company	322	(179)	143	191	(27)	164
Minority interest	86	(3)	83	61	(5)	56
	408	(182)	226	252	(32)	220
Earnings per share attributable to the equity holders
of the Company during the year (pence per share)
- basic			5.8p			6.8p
- diluted			5.7p			6.6p
Earnings per share from continuing operations
attributable to the equity holders of the Company
during the year (pence per share)
- basic			5.4p			6.8p
- diluted			5.3p			6.6p
Earnings per share from discontinued operations
attributable to the equity holders of the Company
during the year (pence per share)
- basic			0.4p			-
- diluted			0.4p			-

Consolidated balance sheet

As at 31 March 2009

	31 March	31 March
	2009	2008
	£m	£m
ASSETS
Non-current assets
Intangible assets	1,191	807
Property, plant and equipment	2,053	1,488
Investments in joint ventures	225	142
Available-for-sale financial assets	38	27
Deferred tax asset	64	26
Retirement benefit assets	27	32
Other receivables	52	60
	3,650	2,582
Current assets
Inventories	23	17
Trade and other receivables	973	856
Cash and cash equivalents	545	699
	1,541	1,572
Non-current assets held for sale	1	5
	1,542	1,577
Total assets	5,192	4,159
Current liabilities
Trade and other payables	1,509	1,219
Financial liabilities at fair value	25	59
Current tax liabilities	124	130
Loans and obligations under finance leases	90	59
Provisions	108	92
	1,856	1,559
Net current (liabilities)/assets	(314)	18
Non-current liabilities
Trade and other payables	11	40
Financial liabilities at fair value	140	73
Loans and obligations under finance leases	832	397
Deferred tax liabilities	37	30
Provisions	186	135
Retirement benefit obligations	85	46
	1,291	721
Net assets	2,045	1,879
EQUITY
Capital and reserves attributable to the Company's equity shareholders
Share capital	643	634
Share premium	197	156
Reserves	988	897
	1,828	1,687
Minority interest	217	192
Total equity	2,045	1,879

Consolidated statement of recognised income and expenses

For the year ended 31 March 2009

	2008/09	2007/08
	£m	£m
Actuarial losses in the value of defined benefit retirement plans	(76)	(100)
Exchange differences on translation of foreign operations	315	(8)
Exchange differences relating to hedging instrument	(45)	-
Fair value gains on available-for-sale assets	-	2
Tax on items taken directly to or transferred from equity	-	11
Amounts recognised directly in equity	194	(95)
Profit for the year	226	220
Total recognised income and expense for the year	420	125

Attributable to:
Equity holders of the Company	271	81
Minority interest	149	44
	420	125

Consolidated cash flow statement

For the year ended 31 March 2009

	2008/09	2007/08
	£m	£m
Cash flows from operating activities
Cash generated from continuing operations	669	504
Cash generated from discontinued operations	-	-
Income taxes paid	(65)	(46)
Net cash from operating activities	604	458

Cash flows from investing activities
Continuing operations
Finance income	22	49
Other expense	(2)	-
Dividends received	17	15
Increase in available-for-sale financial assets	-	(10)
Purchase of available-for-sale financial assets	(1)	-
Proceeds on disposal of non-current assets held for sale	-	93
Proceeds on disposal of property, plant and equipment	3	5
Purchase of property, plant and equipment	(413)	(342)
Purchase of intangible assets	(36)	(63)
Disposal of subsidiaries and minority interests	6	-
Acquisition of subsidiaries (net of cash received) and minority interests	(343)	(74)
Net cash used in continuing operations	(747)	(327)
Discontinued operations	-	-
Net cash used in investing activities	(747)	(327)

Net cash flow before financing	(143)	131

Cash flows from financing activities
Continuing operations
Dividends paid to shareholders	(147)	(138)
Dividends paid to minority interests	(77)	(58)
Repayments of borrowings	(169)	(258)
Finance expense	(79)	(49)
Proceeds from borrowings	417	12
Proceeds on issue of shares on settlement of share options	5	14
Purchase of shares for share awards	(2)	(2)
Net cash used in continuing operations	(52)	(479)
Discontinued operations	-	-
Net cash used in financing activities	(52)	(479)

Net decrease in cash and cash equivalents	(195)	(348)
Cash and cash equivalents at 1 April	699	1,043
Exchange gains on cash and cash equivalents	41	4
Cash and cash equivalents at 31 March	545	699

1. Summary of significant accounting policies

Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union (EU) as they apply to the financial statements of the Group for the year ended 31 March 2009.

The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2008, with the following exceptions:

Amendments to IAS 39 & IFRS 7 Reclassification of Financial InstrumentsThe amendments allow an entity to reclassify certain non-derivative financial assets out of the fair value through the income statement category in particular circumstances, and to transfer certain financial assets from the available-for-sale category to the loans and receivables category.This amendment did not have a material impact on the Group.

Amendments to IFRS 2 Share-based Payment: Vesting Conditions and CancellationsThe amendment clarifies that vesting conditions are service conditions and performance conditions only. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment, which results in the acceleration of the charge.This amendment did not have a material impact on the Group.

IFRIC 13 Customer Loyalty ProgrammesThe IFRIC clarifies that where goods or services are sold together with a customer loyalty incentive, the arrangement is a multiple-element arrangement and the consideration receivable from the customer should be allocated between the components of the arrangement in proportion to their fair values.This interpretation did not have a material impact on the Group.

In addition, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty in these consolidated financial statements are the same as those that applied to the consolidated financial statements as at and for the year ended 31 March 2008.

2 Segment information

Continuing operations

The primary reporting segment results for the year ended 31 March 2009 are presented below:

			Other1 and
	CWI	Worldwide	eliminations	Total
	£m	£m	£m	£m
Revenue	1,392	2,268	(14)	3,646
Pre-exceptional operating costs	(1,037)	(2,171)	(14)	(3,222)
Exceptional operating costs	(49)	(76)	(8)	(133)
Group operating profit/(loss)	306	21	(36)	291
Share of post-tax profit of joint ventures	34	-	-	34
Total operating profit/(loss)	340	21	(36)	325
Other income				10
Net finance expense				(102)
Profit before income tax				233
Tax				(17)
Profit for the year from continuing operations				216

1 Other includes Central expenses.

Inter-segment sales are not significant and are charged at arm's length prices.

The segment assets and liabilities, capital expenditure and other items as at and for the year ended 31 March 2009 are:

			Other1 and
	CWI	Worldwide	eliminations	Total
	£m	£m	£m	£m
Segment assets	1,860	2,715	392	4,967
Joint ventures	225	-	-	225
Total assets	2,085	2,715	392	5,192
Total liabilities	(772)	(1,434)	(941)	(3,147)
Capital expenditure	(192)	(265)	-	(457)
Acquisitions	(7)	(571)	-	(578)
Depreciation and amortisation	(167)	(212)	-	(379)
Increase/(decrease) in provisions	15	58	(6)	67

1 Other includes Central and non-operating assets and liabilities.

Other and eliminations includes assets and liabilities held centrally by the Group, primarily cash and borrowings, and other non-operating items including tax balances.

Discontinued operations

Discontinued operations represent those businesses which have been disposed of or are classified as held for sale at the year end. There were no businesses held for sale at 31 March 2009.

A profit of £10 million relating to discontinued operations for the year ended 31 March 2009 is recorded in the Other and eliminations segment.

3 Exceptional items within operating costs

		2008/09	2007/08
	Note	£m	£m
Staff costs	(i)	73	44
Property costs	(ii)	25	6
Other costs	(iii)	35	6
Legal costs		-	11
Gain on Seychelles cash repatriation		-	(14)
Impairment of assets		-	37
Total exceptional operating costs		133	90

i) Staff costs principally relate to redundancy costs arising from the restructuring of the Group's operations in continuing businesses.

In 2008/09, the expenses relate to CWI (£34 million net of £8 million of gains from restructuring post-retirement plans in Jamaica and Barbados) and Worldwide (£39 million net of a £2 million provision release) and include redundancy related pension curtailment losses of £4 million. In 2007/08 the expenses related to CWI (£14 million) and Worldwide (£30 million net of a £1 million provision release and a redundancy related pension curtailment credit of £2 million).

ii) Property costs in 2008/09 include provisions relating to vacant property in Worldwide (£17 million net of £14 million of provision releases) and in Central (£8 million). In 2007/08, property costs included provisions relating to vacant property in Worldwide and was net of £4 million of provision releases.

iii) Other costs in 2008/09 relate to the provision for network costs of £14 million (net of £6 million of provision releases) and other restructuring costs of £6 million in Worldwide and £15 million of restructuring charges relating to the 'One Caribbean' programme in CWI. Other costs in 2007/08 related to the provisions for onerous network costs and other restructuring costs in CWI (£2 million) and Worldwide (£4 million).As a consequence of (i) to (iii) above, in 2008/09 an exceptional tax credit of £7 million was recognised. 4 Finance income and expense

			2008/09			2007/08
	Pre-			Pre-
	exceptional	Exceptional	Total	exceptional	Exceptional	Total
	£m	£m	£m	£m	£m	£m
Finance income
Interest on cash and deposits	23	-	23	52	-	52
Investment income	-	-	-	1	-	1
Foreign exchange gains on deposits	6	-	6	-	-	-
Total finance income	29	-	29	53	-	53

Finance expense
Interest on bank loans	22	-	22	13	-	13
Interest on other loans	28	-	28	46	-	46
Finance charges on leases	2	-	2	2	-	2
Unwinding of discounts on provisions	7	-	7	8	-	8
Unwinding of discount on Monaco put option liability	14	-	14	8	-	8
Impairment of financial asset	4	-	4	-	-	-
Losses on derivative foreign exchange contracts	-	56	56	-	-	-
Loss on convertible bonds repurchase	-	-	-	-	10	10
	77	56	133	77	10	87
Less: Interest capitalised	(2)	-	(2)	(2)	-	(2)
Total finance expense	75	56	131	75	10	85

During the period, the Group entered into various foreign exchange contracts to lock in the Sterling cash value of the forecast cash repatriations from foreign operations as well as that of the drawdowns on the Group's $415 million bank facility. This resulted in an exceptional finance expense of £56 million from expiry of these contracts during the year and re-measuring open contracts to fair value at year end.

5 Intangible assets

				Customer
			Licences and	contracts and
	Goodwill	Software	concessions	relationships	Other	Total
	£m	£m	£m	£m	£m	£m
Cost
At 1 April 2007	523	678	74	132	33	1,440
Business combinations	19	-	-	-	-	19
Additions	-	51	15	-	2	68
Disposals	-	(1)	-	-	-	(1)
Transfers between categories	-	(4)	4	-	-	-
Transfers from property, plant and equipment	-	7	-	-	-	7
Exchange differences	7	(2)	9	-	5	19
At 31 March 2008	549	729	102	132	40	1,552
Business combinations	353	-	1	15	5	374
Additions	-	33	1	-	2	36
Disposals	-	(5)	-	-	(1)	(6)
Exchange differences	13	14	23	(1)	9	58
At 31 March 2009	915	771	127	146	55	2,014
Amortisation and impairment
At 1 April 2007	-	640	11	17	27	695
Charge for the year	-	24	5	13	5	47
Disposals	-	(1)	-	-	-	(1)
Exchange differences	-	(1)	2	1	2	4
At 31 March 2008	-	662	18	31	34	745
Charge for the year	-	34	7	15	7	63
Disposals	-	(5)	-	-	(1)	(6)
Exchange differences	-	11	4	-	6	21
At 31 March 2009	-	702	29	46	46	823

Net book value
At 31 March 2009	915	69	98	100	9	1,191
At 31 March 2008	549	67	84	101	6	807

Goodwill balances can be summarised as follows:

		At 1 April		Foreign exchange	At 31 March		Foreign exchange	At 31 March
	Reporting	2007	Additions	movements	2008	Additions	movements	2009
	segment	£m	£m	£m	£m	£m	£m	£m
Energis	Worldwide	421	10	-	431	-	-	431
Thus	Worldwide	-	-	-	-	341	-	341
Apollo	Worldwide	-	-	-	-	9	3	12
Monaco Telecom	CWI	102	(1)	7	108	4	9	121
Connecteo	CWI	-	10	-	10	(1)	1	10
Total		523	19	7	549	353	13	915

6 Property, plant and equipment

				2008/09				2007/08
	Land and	Plant and	Assets under		Land and	Plant and	Assets under
	buildings	equipment	construction	Total	buildings	equipment	construction	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Cost
At 1 April	505	6,834	145	7,484	461	6,583	204	7,248
Additions	1	80	340	421	2	26	309	337
Movements in asset retirement obligations	6	5	-	11	6	-	-	6
Business combinations	11	193	-	204	-	2	-	2
Disposals	(33)	(302)	(3)	(338)	(3)	(93)	(1)	(97)
Transfers between categories	19	305	(324)	-	42	316	(358)	-
Transfer to intangibles	-	-	-	-	-	-	(7)	(7)
Exchange differences	71	713	27	811	(3)	-	(2)	(5)
At 31 March	580	7,828	185	8,593	505	6,834	145	7,484

Depreciation
At 1 April	339	5,657	-	5,996	315	5,468	-	5,783
Charge for the year	27	289	-	316	11	241	-	252
Impairment	-	-	-	-	-	37	-	37
Disposals	(32)	(300)	-	(332)	(2)	(90)	-	(92)
Transfers between categories	-	-	-	-	11	(11)	-	-
Exchange differences	42	518	-	560	4	12	-	16
At 31 March	376	6,164	-	6,540	339	5,657	-	5,996

Net book value at 31 March	204	1,664	185	2,053	166	1,177	145	1,488

7 Earnings per share

Basic earnings per ordinary share is based on the profit for the year attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding.

	2008/09	2007/08
	£m	£m
Profit for the financial year attributable to ordinary shareholders	143	164

Weighted average number of ordinary shares outstanding (millions)	2,486	2,424
Dilutive effect of share options (millions)	26	42
Number of ordinary shares used to calculate diluted earnings per share (millions)	2,512	2,466

Basic earnings per share (pence per share)	5.8p	6.8p
Diluted earnings per share (pence per share)	5.7p	6.6p
Continuing operations
Profit (and adjusted profit) from continuing operations for the financial year attributable to shareholders	133	164
Basic earnings per share from continuing operations (pence per share)	5.4p	6.8p
Diluted earnings per share from continuing operations (pence per share)	5.3p	6.6p
Discontinued operations
Profit (and adjusted profit) from discontinued operations for the financial year attributable to shareholders	10	-
Basic earnings per share from discontinued operations (pence per share)	0.4p	-
Diluted earnings per share from discontinued operations (pence per share)	0.4p	-

The convertible bonds (extinguished in 2007/08) were excluded from the number of ordinary shares used to calculate diluted earnings per share in that year as they were not dilutive.

8 Dividends declared and paid

	2008/09	2007/08
	£m	£m
Final dividend in respect of the prior year	123	100
Interim dividend in respect of the current year	71	61
Total dividend paid	194	161

During the year ended 31 March 2009 the Group declared and paid a final dividend of 5.00 pence per share (2007/08 - 4.15 pence per share) in respect of the year ended 31 March 2008. The Group also declared and paid an interim dividend of 2.83 pence per share (2007/08 - 2.50 pence per share) in respect of the year ended 31 March 2009.

In respect of the year ended 31 March 2009, the Directors have proposed a final dividend of 5.67 pence per share (2007/08 - 5.00 pence per share), totalling £142 million (2007/08 - £123 million), for approval by shareholders at the AGM to be held on 17 July 2009. These financial statements do not reflect the proposed dividend, which will be accounted for in shareholders' equity as an appropriation of retained earnings in the year ended 31 March 2010.

9 Share premium and other reserves

	Share premium	Special reserve	Foreign currency translation and hedging reserve	Fair value reserve	Capital and other reserves	Retained earnings	Total
	£m	£m	£m	£m	£m	£m	£m
At 31 March 2008	156	1,553	(128)	5	101	(634)	1,053
Cash received in respect of employee share schemes	-	-	-	-	-	2	2
Own shares purchased	-	-	-	-	-	(2)	(2)
Acquisition of minority interest	-	-	-	-	1	-	1
Profit for the year	-	-	-	-	-	143	143
Net actuarial losses recognised (net of deferred taxation)	-	-	-	-	-	(75)	(75)
Foreign currency translation reserve	-	-	204	-	-	-	204
Share-based payment costs	-	-	-	-	-	12	12
Dividends	-	-	-	-	-	(194)	(194)
Shares allotted under share option schemes	2	(3)	-	-	-	3	2
Shares allotted under scrip dividend scheme	39	(47)	-	-	-	47	39
At 31 March 2009	197	1,503	76	5	102	(698)	1,185

10 Retirement benefits obligations

During the year, the Pension Trustees of the main UK defined benefit scheme agreed a buy-in of the UK pensioner element of the scheme with Prudential Insurance. The buy-in involved the purchase of a bulk annuity policy by the scheme under which Prudential Insurance assumed responsibility for the benefits payable to the scheme's UK pensioners with effect from 1 August 2008. The pensioner liabilities and the matching annuity policy remain within the scheme. The premium for the annuity policy was approximately £1 billion which the scheme settled with a combination of cash and assets including an additional Group contribution of £10 million.

Changes in the present value of the defined benefit and post-retirement medical plan obligations are as follows:

			2008/09			2007/08
	Main UK			Main UK
	scheme	Other	Total	scheme	Other	Total
	£m	£m	£m	£m	£m	£m
Obligation at 1 April	(1,740)	(211)	(1,951)	(2,036)	(202)	(2,238)
Service cost	(8)	(5)	(13)	(10)	(6)	(16)
Interest cost	(116)	(20)	(136)	(106)	(15)	(121)
Actuarial gains/(losses) recognised in equity	97	13	110	346	(2)	344
Employee contributions	(2)	(3)	(5)	(2)	(2)	(4)
Obligations extinguished	-	20	20	-	-	-
Obligations acquired	-	(62)	(62)	-	-	-
Settlements	-	(10)	(10)	-	-	-
Curtailments	2	12	14	2	3	5
Benefits paid	74	9	83	66	10	76
Exchange differences on foreign plans	-	(38)	(38)	-	3	3
Obligation at 31 March	(1,693)	(295)	(1,988)	(1,740)	(211)	(1,951)

Changes in the fair value of defined benefit assets are as follows:

			2008/09			2007/08
	Main UK			Main UK
	scheme	Other	Total	scheme	Other	Total
	£m	£m	£m	£m	£m	£m
Fair value of assets as at 1 April	2,115	227	2,342	2,079	210	2,289
Expected return	136	27	163	135	20	155
Actuarial (losses)/gains recognised in equity	(538)	(46)	(584)	(63)	1	(62)
Contributions by employer	20	8	28	28	7	35
Employee contributions	2	3	5	2	2	4
Assets divested	-	(32)	(32)	-	-	-
Assets acquired	-	63	63	-	-	-
Benefits paid	(74)	(9)	(83)	(66)	(10)	(76)
Exchange differences on foreign plans	-	37	37	-	(3)	(3)
Fair value of assets as at 31 March	1,661	278	1,939	2,115	227	2,342

11 Loans and obligations under finance leases

	31 March	31 March
	2009	2008
	£m	£m
Loans
Sterling unsecured bonds repayable in 2012 and 2019	342	308
Sterling secured loans repayable in 2012	124	-
US$415 million secured loan repayable in 2010 ($50 million) and 2011 ($365 million)	283	-
US dollar and currencies linked to the US dollar loans repayable at various dates up to 2013	114	81
Other currency loans repayable at various dates up to 2038	37	48
	900	437
Loans - current	80	45
Loans - non-current	820	392

Finance leases
Obligations under finance leases	22	19
Obligations under finance leases - current	10	14
Obligations under finance leases - non-current	12	5

Loans and obligations under finance leases - current	90	59
Loans and obligations under finance leases - non-current	832	397

During the period, the Group arranged:

a) A three year secured bank facility of US$415 million, repayable in 2010 ($50 million) and 2011 ($365 million), which was drawn down in full;

b) A three year secured bank facility of £200 million, repayable in 2012, of which £99 million has been drawn down; and

c) A £29 million loan facility secured by the 2019 bonds held by the Group. This loan is repayable in February 2012.

The agreements for the US$415 million and £200 million facilities entered into during the year contain financial and other covenants which are standard to these type of arrangements.

12 Cash flows from operating activities

Reconciliation of net profit to net cash inflow from operating activities:

	2008/09	2007/08
	£m	£m
Continuing operations
Profit for the year	216	220
Adjustments for:
Tax expense	17	47
Depreciation	316	289
Amortisation	63	47
Gain on termination of operations	(2)	(9)
Gains and losses on sale of non-current assets	(7)	(1)
Loss/(gain) on disposal of property, plant and equipment	2	(56)
Finance income	(29)	(53)
Finance expense	131	85
Decrease in provisions	(3)	(9)
Employee benefits	2	5
Defined benefit pension scheme buy-in contribution	(10)	-
Defined benefit pension scheme top-up contribution	-	(19)
Defined benefit pension scheme other contributions	(18)	(16)
Share of post-tax results of joint ventures	(34)	(37)
Operating cash flows before working capital changes	644	493

Changes in working capital (excluding effects of acquisition and disposal of subsidiaries)
(Increase)/decrease in inventories	(6)	6
Decrease /(increase)in trade and other receivables	85	(5)
(Decrease)/increase in payables	(54)	5
Decrease in other assets	-	5
Cash generated from continuing operations	669	504

Discontinued operations
Profit for the year	10	-
Adjustments for:
Decreases in provisions and changes in working capital	(10)	-
Cash generated from discontinued operations	-	-
Cash generated from operations	669	504

13 Reconciliation of net funds

Net funds are defined as cash at bank and in hand, money market funds, short-term deposits, loans, bonds and finance lease obligations. Debt is defined as loans, bonds and finance lease obligations.

A reconciliation of net cash flow to movement in net funds is as follows:

	2008/09	2007/08
	£m	£m
Decrease in cash during the year	(195)	(348)
(Increase)/decrease in debt and lease financing	(248)	246
Cash outflow in net funds	(443)	(102)
Conversion of debt to equity	-	22
Finance leases entered into during the year	(12)	(9)
Net funds of businesses acquired	(119)	-
Exchange differences	(46)	5
Movement in net funds in the year	(620)	(84)
Net funds at 1 April	243	327
Net funds at 31 March	(377)	243

Analysis of changes in net funds:

	As at 31 March 2008	Cash flow	Finance leases entered into during the year	Acquisitions	Exchange movements	As at 31 March 2009
	£m	£m	£m	£m	£m	£m
Cash at bank and in hand	106	45	-	-	26	177
Short-term deposits	593	(240)	-	-	15	368
Cash and cash equivalents	699	(195)	-	-	41	545

Debt due within one year	(59)	(2)	(4)	(6)	(19)	(90)
Debt due after one year	(397)	(246)	(8)	(113)	(68)	(832)
Total debt	(456)	(248)	(12)	(119)	(87)	(922)
Total net funds	243	(443)	(12)	(119)	(46)	(377)

14 Related party transactions

During the year, two Directors of Cable & Wireless purchased bonds issued by Cable & Wireless. These bonds were purchased for £2,371,691 on the open market (including £118,980 of accrued interest) and had a nominal value of £2,630,000. The interest earned on those bonds during the year was £60,732 of which £54,607 remained unpaid at year end.

During the year, the spouse of a Director of Cable & Wireless purchased bonds issued by Cable & Wireless. These bonds were purchased for £437,178 on the open market (including £38,180 of accrued interest) and had a nominal value of £480,000. The interest earned on those bonds during the year was £3,743 of which £681 remained unpaid at year end.

There were no other material transactions with key management personnel except for those relating to remuneration and shareholdings.

15 Minority interests

	2008/09	2007/08
	£m	£m
Balance as at 1 April	192	209
Share of total recognised income and expenditure for the year	149	44
Dividends paid	(123)	(58)
Disposals	(1)	(3)
Balance as at 31 March	217	192

16 Acquisition of Thus

On 1 October 2008, Cable & Wireless obtained control of Thus Group plc (Thus) for a total consideration of £343 million. The consideration comprised £336 million to acquire the share capital of Thus and £7 million of direct costs.

The acquisition is summarised below:

								£m
Consideration paid								343
Goodwill arising on acquisition								341
Fair value of net assets acquired								2
Cash outflows on acquisition								343
Less: cash acquired								(13)
Net cash outflow on acquisition								330

From the date of its acquisition on 1 October 2008, Thus contributed £237 million to Group revenue and a loss of £17 million to Group profit. If the acquisition had occurred on 1 April 2008 the contribution to Group revenue would have been £518 million and the contribution to Group profit would have been a loss of £34 million.

The Directors have made a provisional assessment of the fair values of the assets and liabilities. The fair values, which will be finalised in the year ending 31 March 2010, are as follows:

		Alignment of
	Book	accounting	Fair value	Fair
	value	policy	adjustments	value
	£m	£m	£m	£m
Property, plant and equipment	282	-	(80)	202
Purchased goodwill	50	-	(50)	-
Customer contracts and relationships	-	-	15	15
Trademarks and other intangibles	8	-	(3)	5
Trade and other receivables	130	5	(29)	106
Inventories	7	-	(7)	-
Deferred tax	56	(56)	-	-
Defined benefit pension scheme	4	(4)	-	-
Cash and cash equivalents	13	-	-	13
Available-for-sale financial assets	10	-	-	10
Trade and other payables	(111)	(64)	(28)	(203)
Loans and other borrowings	(113)	-	-	(113)
Provisions	-	(33)	-	(33)
Total	336	(152)	(182)	2

The acquiree's carrying amounts were previously recorded in accordance with IFRSs.

Goodwill arising on the acquisition of Thus includes the value of expected synergies resulting from the integration into the existing Worldwide business, and workforce valuations and other intangible assets that do not meet the recognition criteria set out in IAS 38 Intangible assets.

RISK OVERVIEW

We've made good progress over the last few years, and we're confident in our ability to keep up this momentum. However, like any business, we face a number of potential risks in achieving our strategic goals. Some of these risks are shared by all businesses, such as competition and the economic climate as well as social, ethical and environmental risks, and some are more specific to our Group.

Our Directors have identified the following key risks that could affect our future success. In addition to the other information contained in this Annual Report, investors in Cable & Wireless should consider these risks carefully.

Group-wide risks Like most businesses, we are exposed to the current economic environment. This could affect our growth and profitability as well as our ability to finance our business and pay dividends. However, we're confident that our Group structure - two separate businesses with distinct products, services and geographies - helps reduce our exposure. Both our businesses monitor key recession indicators closely and have plans in place to address any sustained impact of the downturn. In addition, we have raised sufficient debt to meet our medium term liquidity needs and continue to maintain good relationships with our core banks.

Our financing agreements mean that we're subject to certain financial and other covenants. If we're unable to meet these covenants, we may have to repay facilities early, adversely affecting our cash position. We monitor covenant positions against our forecasts and budgets to ensure that we continue to operate within our covenant limits.

We believe that with our Group structure and incentive schemes, we are well positioned to deliver increased value to our shareholders. However, if this structure and these incentive schemes are not effective, we may not achieve our strategic goals which could have an adverse effect on our results and reputation. We manage this risk with clear governance structures, including Operating Boards for each business that review strategy and performance formally, to help us create value for the Group as a whole.

Our main defined benefit pension scheme, based in the UK, is well managed and measures have been taken to reduce financial risk exposures. However, the value of the scheme's assets and liabilities are affected by market movements and we may also have to make additional contributions to the scheme if the scheme's assumptions change. We engage in regular dialogue with the scheme Trustees who manage the scheme's assets with appropriate external advice. We purchased annuities for all of our UK pensioner liabilities during the year, significantly reducing the risk relating to these obligations.

We generate a significant proportion of our profits outside the UK. These profits and associated investments are exposed to exchange rate fluctuations which affect our results and financial condition. Often the effects of exchange rate movements naturally offset in the short term. We use foreign exchange hedging contracts and where appropriate, we borrow locally (or in linked currencies) in order to match operating and financing cash flows.

The risk of litigation from customers and competitors is always present, as it is for most large organisations. Regions such as Panama and the Caribbean are especially litigious. Unfavourable outcomes could significantly affect our financial performance or reputation. Where and when litigation is brought against us, we defend our position robustly using appropriate legal advice and services.

We make a number of estimates and assumptions relating to the reporting of our operating results and our financial condition when preparing the consolidated financial statements. Our results may differ significantly from these estimates under different assumptions and conditions. In particular, some of our accounting policies require subjective and complex judgements about the effect of matters that are often uncertain. We have outlined the Group's critical accounting policies in our Annual Report in order to help users of our accounts understand the basis for forming these judgements.

We operate in many international locations, and our profits are taxed according to the differing tax laws of these jurisdictions. As a result, our effective tax rate could be altered by changes in legislation, management assessments or in the geographical allocation of our income and expense. An alteration in this rate would influence our financial results and so we constantly monitor actual and proposed changes to legislation to anticipate any tax effects.

We're dependent on our employees for our future success. From 2006 we have rewarded and retained our key senior managers through long term incentive plans linked to our two businesses or Group performance. In order to retain these individuals and their valuable skills and experience, we have developed long term incentive proposals including a one year extension of the existing LTIP and will be asking shareholders to approve these proposals at the 2009 AGM.

Our global network is a critical asset, enabling us to provide customers with efficient and extensive telecommunication services. We operate, manage, bill and support these services, and manage our financial information, with our IT systems. Like other telecoms operators, our network and IT systems are vulnerable to interruption and damage from natural disasters, fire, security breaches, terrorist action, human error and other factors outside of our control. If we were to experience full or partial network or IT failure we might lose customers or receive claims from customers based on loss of service, affecting our reputation and results. We are confident that we have appropriate business continuity and disaster recovery plans, crisis management and emergency response teams and insurance cover. In addition, we strive constantly to improve our network and add resilience where issues are identified.

Many of our business strategies rely on mobile telecommunications technology. There have been some concerns expressed that mobile phones and transmitters may pose long term health risks. If these claims are proven, we might lose a strategic revenue stream or be exposed to litigation. We continue to keep abreast of research in this field.

Risks specific to CWI Our CWI businesses are transforming themselves into competitive enterprises to respond to the liberalisation of our markets - putting in place initiatives to enhance the customer experience and improve cost efficiency. A key initiative is our 'One Caribbean' programme in which we're bringing together 13 subsidiaries under one management structure with one brand and a common set of products and services. While we're confident that this programme will help us achieve our goals, it involves managing 13 sets of stakeholders, and as with all business transformation initiatives, implementation is complex, time consuming and expensive. To counter this, we're driving the initiatives through detailed transformation programmes with key milestones and objectives.

Competition continues to increase in some of our markets, notably Panama. Our revenue and margins may be adversely affected by new entrants taking market share and pushing prices down through aggressive pricing. We prepared well for the new competition in Panama by differentiating ourselves from the competition through marketing promotions and focusing on excellent customer service and network coverage. In many markets, we are the only company to offer a full service proposition. In addition, we share competitor analysis across our businesses to help us preempt the effect of competitors' actions.

New revenue sources, such as mobile value added services, managed services and enterprise solutions, are crucial to our growth strategy. If these fail to develop as well as we're expecting, our revenue may fall as our other core services reach full market penetration. We're confident in our new product development and marketing strategies and the improvements we've made to the way new products are introduced and are developing CWI-wide product implementation strategies to ensure our new revenue sources are as successful as we can make them.

We believe we have all of the necessary regulatory licences and concessions we need to operate in our markets. If we fail to renew our licences when necessary, we would not be able to operate in certain locations. To address this risk, we actively work with governments and regulatory bodies to help them deliver a regulatory environment that best suits the needs of consumers and local governments whilst enabling continuing stability for, and investment in, our business.

Our joint ventures contributed £34 million to our profit this year. However, without management control, we are often unable to influence their performance or ensure that they do not underperform. To minimise underperformance, we're maintaining regular dialogue with key stakeholders, actively engaging with local management and seeking to be involved operationally. We also seek to gain management control wherever possible.

Risks specific to Worldwide The strategy of the Worldwide business is to serve the largest users of telecommunication services in the UK and internationally. To achieve this, we're transforming our service quality (with increased automation), our go to market capability (with new products and services) and our economics. Furthermore in October 2008, we acquired Thus and are now integrating it into our existing business to create value and generate significant cost synergies. Implementing a business transformation and integrating an acquired business is complex, time consuming and expensive. Such activities are vulnerable to issues such as poor data integrity and associated processes that can jeopardise our customer solutions and reduce the speed of the overall process. If we fail to execute our plans properly, our operations and results may be adversely affected. That's why we've established detailed transformation programmes with key milestones, designed to ensure we achieve our aims.

It's important to ensure that we maintain the security of our customers' data, especially where services are delivered outside the UK. If the large amounts of sensitive data passing through our network were to fall into the wrong hands, we would be exposed to significant legal and regulatory consequences. To increase security further, we've started an IT security mitigation programme to review our offshore operating model and implement onshore controls and business support processes.

Like all major telecoms operators in the UK, we're reliant on BT's network to deliver some services to our customers. BT is also our largest competitor with over 50% share of our core market of enterprise customers. Because BT is both the main competitor and main supplier to telecommunications operators in the UK, the regulator, Ofcom, must regulate BT's practices adequately to ensure that a fair competitive environment is maintained. If it doesn't, we may be unable to compete effectively, which could have a material effect on our results. We engage with Ofcom to encourage balanced regulation and appeal against decisions that are perceived to favour the interests of BT.

BT is due to introduce its next generation network (21CN) and next generation fibre roll out. This network and fibre roll out is likely to lead to a substantial change in commercial relationships between telecommunications operators' networks, as well as to the terms on which services are delivered. The timing of the introduction of BT's 21CN and what impact these new commercial arrangements will have on us is unclear at this stage. We are actively engaging with Ofcom as regulation will be a key factor in shaping these new arrangements.

DIRECTORS' RESPONSIBILITY STATEMENT

The following statement is extracted from page 60 of the Cable & Wireless 2008/09 Annual report and accounts and is repeated here for the purposes of Disclosure and Transparency Rule 6.3.5 to comply with Disclosure and Transparency Rule 6.3. This statement relates solely to the Cable & Wireless 2008/09 Annual report and accounts and is not connected to the extracted information set out in this announcement or the annual results announcement.

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names and functions are listed on pages 40 to 41 of the Cable & Wireless 2008/09 Annual Report and Accounts, confirm that, to the best of each person's knowledge and belief:

The financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

The Directors' report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company and Group, together with a description of the principal risks and uncertainties that they face.

A list of current Directors is also maintained on the Cable and Wireless plc website: www.cw.com

By order of the Board

Nick Cooper

Group General Counsel and Company Secretary

16 June 2009

This information is provided by RNS

The company news service from the London Stock Exchange

END

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