25th May 2006 07:00
AnnouncementCABLE AND WIRELESS plcRESULTS FOR THE YEAR ENDED 31 MARCH 2006Increase in earnings per share of 9% before exceptionals and Bulldog investment losses Creation of two separate and distinct business units - UK and International Solid growth in revenue, operating profit and cash flow in the International business Acquisition in the UK of Energis for net consideration of ‚£608 million, contributing ‚£266 million of revenue and ‚£35 million of EBITDA since 11 November 2005 UK defined benefit pension scheme fully funded on an ongoing basis after a topup payment of ‚£98 million Increase in the full year dividend of 18% to 4.5p ContentsGroup results. 3Chairman's statement4Executive summary - Group Managing Director, Central4Analysis of Group results. 5Group results before exceptional items. 5Group exceptional items. 6Group earnings per share. 7Reconciliation of Group EBITDA to net cash flow before financing. 8Discontinued operations. 9Group cash and debt9International business. 11Introduction. 11International business key performance indicators. 12International business income statement13Reconciliation of International business EBITDA to net cash flow beforefinancing. 16UK business. 17Introduction. 17UK business key performance indicators. 18UK business income statement19Reconciliation of UK business EBITDA to net cash flow before financing. 22Bulldog. 23Introduction. 23Bulldog key performance indicators. 24Bulldog income statement25Reconciliation of Bulldog EBITDA to net cash flow before financing. 26Group outlook. 27Group non-operating matters. 27Dividend. 27Return of capital27Pensions. 27Incentive schemes. 28De-listing from NYSE and de-registration from SEC. 28Adoption of International Financial Reporting Standards (IFRS)28Exchange rate movements. 29Group results detail30International business results detail31UK business results detail32Extracts from the financial statements and additional information. 33Preliminary results. 33Basis of preparation. 33Consolidated income statement34Consolidated balance sheet35Consolidated statement of recognised income and expense. 36Consolidated cash flow statement37Cash flow from operating activities. 38Earnings per share. 39Provisions for liabilities and charges. 40Minority interests. 41Joint ventures and associates - our share. 41Application of IFRS 1. 42Contacts. 43Glossary of terms. 44Group resultsThe Group results presented below should be read in conjunction with theGroup's consolidated income statement, balance sheet and cash flow statementand related notes on pages 33 to 42. 2005/06 2004/05 Pre-except-ional Except-ional1 Total Pre-except-ional Except- ional1 Total ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Revenue 3,230 - 3,230 2,948 - 2,948 Outpayments and network costs (1,914) (1) (1,915) (1,631) (8) (1,639) Staff costs (527) (34) (561) (527) (70) (597) Other costs (378) 14 (364) (366) (65) (431) Total operating costs before depreciation and amortisation2 (2,819) (21) (2,840) (2,524) (143) (2,667) EBITDA3 411 (21) 390 424 (143) 281 Depreciation and software amortisation (263) (232) (495) (185) (8) (193) Group operating profit/(loss) before amortisation of acquired intangibles 148 (253) (105) 239 (151) 88 Amortisation of acquired intangibles (11) (5) (16) (5) - (5) Group operating profit/(loss) 137 (258) (121) 234 (151) 83 Share of post-tax profit of joint ventures and associates 52 2 54 48 - 48 Total operating profit/(loss) 189 (256) (67) 282 (151) 131 Gains and losses on sale of non-current assets 2 81 83 5 (8) (3) Net interest and other income4 18 78 96 39 - 39 Profit before income tax 209 (97) 112 326 (159) 167 Income tax (expense)/ credit (29) 2 (27) (64) 89 25 Profit/(loss) for the year from continuing operations 180 (95) 85 262 (70) 192 Profit for the year from discontinued operations 2 88 90 22 140 162 Profit/(loss) for the year 182 (7) 175 284 70 354 Attributable to equity holders of the Company 120 (41) 79 221 73 294 Attributable to minority interests 62 34 96 63 (3) 60 Profit/(loss) for the year 182 (7) 175 284 70 354 Earnings per share from continuing operations attributable to equity holders (pence) 5.2p (5.6)p (0.4)p 8.6p (2.9)p 5.7p Earnings per share attributable to equity holders (pence) 5.2p (1.7)p 3.5p 9.5p 3.2p 12.7p Dividend per share (pence) 4.5p 3.8p Capital expenditure (416) (373) Cash and cash equivalents 1,127 2,021 1 Exceptionals comprise items considered exceptional by virtue of their size,nature or incidence and include restructuring and impairment charges, releasesof certain provisions and profits and losses on disposal of non-current assets2 Includes operational releases3 Earnings before interest, tax, depreciation and amortisation4 Includes interest income, interest expense and other incomeChairman's statementCommenting on the performance of the Group, Richard Lapthorne, Chairman, said:"The last year has been one of change and of progress in which we have takensignificant steps to continue the turnaround of Cable & Wireless. Theacquisition of Energis and the separation of the business into twoself-contained business units - International and UK, were particularlyimportant."In the last three years, we have removed substantial risks to the Group'sfinancial security with exits from unsustainable markets. We have successfullyrebalanced the International business towards the growth areas of broadband andmobile, whilst absorbing the impact of liberalisation. The UK now has the toolsto execute its strategy."With our strategic repositioning complete, our priorities for the next threeyears are clear - delivery and execution. Our commitment is to deliver for ourcustomers and our shareholders."I am pleased to announce a final dividend of 3.1 pence per share. The totaldividend for the year of 4.5 pence per share represents an increase of 18% overthe prior year. The rise in the dividend reflects the increased visibility ofthe future prospects for the Group, which the move to the execution phase ofour turnaround gives us."Executive summary - Group Managing Director, CentralGroup financial resultsThe Group's financial performance for the year is described on pages 5 to 10and is discussed in more detail in the International and UK sections thatfollow on pages 11 to 16 and 17 to 26, respectively.Group structureFollowing the acquisition of Energis in November 2005, we announced, in January2006, a restructure of the Group into two self-contained operational units -International and the UK (including our consumer broadband and telephonybusiness, Bulldog).Our Corporate Centre (Central) functions have been reshaped to ensure thecontinuation of proper governance and control. However, Central will no longerprovide shared services to the two business units. As a result of moving sharedservices into the business units, around 65 employees have been transferredfrom Central to International and the UK - and around 35 are leaving the Group.We expect that this, together with other savings, will reduce costs by a net ‚£20 million in 2006/07; Central costs will be reduced by ‚£27 million, with theInternational business absorbing ‚£7 million.Subject to shareholder approval, the Remuneration Committee has approved a newmanagement incentive scheme for senior executives of the UK and Internationalbusinesses. The new scheme is designed to ensure that these individuals'remuneration is fully aligned with the goals of their business unit and inproportion to the future shareholder value created by their business.Cash and cash equivalentsDespite the Group's acquisition of Energis and our continued investment inlocal loop unbundling through Bulldog, we continue to have a solid cashposition with cash and cash equivalents of ‚£1,127 million and net cash of ‚£343million at 31 March 2006. Following the development of our UK strategy, postthe acquisition of Energis, and the top-up of the UK defined benefit pensionscheme, we have decided to discontinue the balance of the ‚£250 million sharerepurchase programme. This will also allow us to retain a robust cash positionand have the resources to take advantage of the high-return opportunities thatexist - especially in the International business' market.UK defined benefit pension schemeFollowing the latest triennial funding valuation of the scheme as at 31 March2005, completed in March 2006, we agreed a revised funding programme with thepension trustees, with an immediate top-up contribution of ‚£98 million, paid on31 March 2006. As a result of this contribution, the scheme is fully funded onan ongoing basis, based on the 2005 funding valuation.DividendThe proposed full year dividend of 4.5 pence per share represents an increaseof 18% over the prior year. We have taken the opportunity to rebase thedividend at a level that we feel reflects the new Group structure, theincreased visibility with the move to the execution phase of the turnaround andthe Board's confidence in our ability to achieve our objectives.Analysis of group resultsThe commentary that follows refers to the Group pre-exceptional results. Foranalysis of exceptional items see page 6.Group results before exceptional itemsGroup revenueThe increase in Group revenue principally reflects the integration of Energisfrom 11 November 2005 and a solid performance in the International business,where growth in mobile and broadband revenues have more than offset thedownward pressure on traditional fixed-line services. In the UK, both Servicesand Carrier revenues continue to be affected by churn and price erosion, drivenin part by the trend from legacy to IP services.Group operating costsThe main increases in operating costs relate to the consolidation of Energis,the outpayments associated with a higher volume of lower-margin Carrierbusiness in the UK, the increase in mobile customers with associated customeracquisition costs in the International business and the investment in Bulldogas we drive customer growth. These increases have been partly offset byrestructuring and other cost control activities, particularly in the UK, wherewe have made a gross reduction of 1,474 in the headcount of the combined Cable& Wireless UK and Energis business. In addition, UK operating costs havebenefited from the impact of operational releases. These releases reflect thenature of telecoms services and largely relate to accruals made in previousyears for liabilities with customers, suppliers, interconnect providers andother third parties. Whilst individually not material, an increased focus onsettling outstanding issues in the year has resulted in an overall increasedbenefit to UK operating costs in 2005/06.Group EBITDA and depreciationThe trends in revenues and operating costs described above result in marginallylower EBITDA compared with last year.Depreciation has increased significantly year on year. This increase reflects anatural rise from historically low levels following the fixed asset impairmentsbetween 2002 and 2004, the consolidation of Energis, mobile and broadbandrollout in International and the investment in local loop and backhaulinfrastructure in Bulldog.Group share of post-tax profit of joint ventures and associatesThe main contributors to our share of post-tax profits of joint ventures andassociates are the International business' investments in Bahrain, the Maldivesand Trinidad & Tobago.Group net interest and other incomeNet interest and other income, before exceptionals, has declined year on yearlargely as a result of the lower gross cash balance. Additionally, inconverting to reporting under International Financial Reporting Standards(IFRS), the adoption of IAS 32 and IAS 39, from 1 April 2005, resulted in anadditional, non-cash interest charge of ‚£9 million in respect of the revisedtreatment of our convertible bond under IFRS.Group taxWe expect the pro-forma effective tax rates of the two business units to remainat current-year levels for the foreseeable future: nil in the UK, due to taxlosses and unclaimed capital allowances, and in the low to mid twenties for theInternational business.The total tax charge for continuing operations before exceptionals representsoverseas tax and amounts to ‚£29 million. There is no tax charge or credit inrespect of discontinued items in 2005/06.Group exceptional items 2005/ 06 International UK Central Total ‚£m ‚£m ‚£m ‚£m Operating items: Restructuring (13) (8) (20) (41) Hurricane costs (6) - - (6) Write-down of non-current assets - (237) - (237) Share of joint ventures and associates and other 1 - 27 28 Exceptional items within total operating profit (18) (245) 7 (256) Non-operating items: Profit on disposal of non-current assets 70 11 - 81 Hurricane insurance receipts 6 - - 6 Reversal of unused provisions and settlements relating to the Group's insurance subsidiary - - 72 72 Exceptional items below total operating profit 76 11 72 159 Total exceptional items before tax 58 (234) 79 (97) Tax on exceptional items 2 - - 2 Total exceptional items from continuing operations 60 (234) 79 (95) Total exceptional items from discontinued operations 17 3 68 88 Total exceptional items 77 (231) 147 (7) In 2005/06, we recognised a net exceptional charge before tax of ‚£97 millionfor continuing operations. The main items reflected asset impairments,restructuring costs, profits on the sale of various investments and amountsresulting from the resolution of claims and other risks in our insurancesubsidiary, Pender. The tax credit on these exceptional items amounted to ‚£2million.The ‚£237 million write down of assets in the UK business (excluding Energis) isprimarily due to the change in the UK strategy to focus on fewer, largercustomers - supporting them with the migration from legacy to IP solutions -and duplication arising from the combination with Energis. As a result, as partof the year-end review of asset carrying values required under IFRS, assetshave been written down if they are surplus to requirements or obsolete due torecent changes in technology.The International business recognised a profit of ‚£70 million on the disposalof MobileOne, of which ‚£34 million is attributable to minority interests.We recognised income of ‚£72 million in relation to Pender, our insurancesubsidiary, through the release of unused provisions and accruals and thereceipt of cash in respect of legal settlements, following progress inresolving outstanding claims and other risks.Of the ‚£88 million credit from discontinued operations, ‚£68 million reflectscredits arising from the release of certain provisions no longer required,associated with the exit from the US business. Profits on the disposal of ourSakhalin and Spanish businesses account for the remaining ‚£20 million.Other operating items principally comprise the release of balances held inrespect of capacity transactions in prior years, which are no longer required.Group earnings per share Before exceptionals Exceptionals Reported ‚£m ‚£m ‚£m Profit for the year from continuing operations before investment in Bulldog 307 (95) 212 Attributable to equity holders 246 (129) 117 Attributable to minority interests 61 34 95 Bulldog loss for the year (127) - (127) Profit/(loss) for the year from continuing operations 180 (95) 85 Attributable to equity holders 119 (129) (10) Attributable to minority interests 61 34 95 Profit for the year from discontinued operations 2 88 90 Profit/(loss) for the year 182 (7) 175 Attributable to equity holders 120 (41) 79 Attributable to minority interests 62 34 96 Earnings/(losses) per share from continuing operations before investment in Bulldog attributable to equity holders of the Company during the year (pence) 10.7p (5.6)p 5.1p 2004/05 9.8p (2.9)p 6.9p Earnings/(losses) per share from continuing operations attributable to equity holders of the Company during the year (pence) 5.2p (5.6)p (0.4)p 2004/05 8.6p (2.9)p 5.7p Earnings/(losses) per share attributable to equity holders of the Company during the year (pence) 5.2p (1.7)p 3.5p 2004/05 9.5p 3.2p 12.7p Reconciliation of number of shares in issue to weighted average number ofshares in issue 31 March 31 March 2006 2005 '000 '000 Reported number of shares in issue 2,421,046 2,394,822 Shares held in treasury (74,950) (60,500) Shares held by employee share ownership plan trust (50,990) (54,759) Relevant number of shares in issue for EPS calculation 2,295,106 2,279,563 2005/06 2004/05 Weighted average number of shares in issue 2,286,129 2,322,459 Earnings per share attributable to the equity holders of the Company during theyear of 3.5 pence represent a decline of 72% compared with 2004/05. The maincontributors to this decline are higher depreciation and amortisation, lowernet interest income, significantly higher exceptional charges and a higher taxcharge. Excluding the impact of exceptionals, earnings per share were 5.2p, adecline of 45% compared with the prior year.Excluding exceptionals and our investment in local loop unbundling, ourunderlying earnings per share showed a 9% increase year on year.Reconciliation of Group EBITDA to net cash flow before financing 2005/ 06 ‚£m EBITDA1 411 Exceptional items (21) EBITDA less exceptionals 390 Share based payments 14 Defined benefit pension scheme expense 6 Defined benefit pension cash top-up contributions (98) Defined benefit pension scheme other cash contributions (17) Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries) (104) (Decrease)/increase in provisions (135) Cash received in respect of other income 44 Cash generated from continuing operations 100 Income taxes paid (47) Interest received 107 Dividends received 34 Purchase of property, plant, equipment and intangible assets (434) Acquisitions and disposals (484) Redemption of credit linked notes 40 Other investment income 5 Cash generated from discontinued operating and investing activities 30 Net cash outflow before financing activities (649) 1 Earnings before interest, tax, depreciation, amortisation and exceptionalsThe Group net cash outflow of ‚£649 million represents outflows of ‚£889 millionin the UK business and ‚£163 million in Bulldog and inflows of ‚£363 million inInternational and ‚£40 million in Central1. Further details in respect ofInternational, the UK and Bulldog are included on pages 16, 22 and 26,respectively.The significant movements between EBITDA and net cash flow before financing inCentral are explained here.Share-based payments of ‚£14 million reflect the non-cash charge in the incomestatement in respect of our outstanding share option schemes.Central paid a top-up payment of ‚£39 million to the UK defined benefit pensionscheme. Following this year's top-up payments, the scheme is fully funded on anongoing basis, based on the 2005 funding valuation.During 2005/06, we sold ‚£40 million of credit-linked notes referenced to our2012 convertible bond in order to improve the liquidity of our investments.Cash interest received in Central was ‚£99 million in the year.Discontinued operationsDiscontinued operations in 2005/06 represent the post tax results of theSakhalin and Spanish businesses prior to their sale and the gains on theirdisposal. Discontinued operations in 2004/05 additionally represent the posttax results of IDC in Japan prior to its sale and the gains on its disposal,together with further costs and credits from previously discontinuedoperations, primarily in the US.Group cash and debtCash and cash equivalents 31 March 2006 31 March 2005 ‚£m ‚£m UK 18 29 International 261 222 Central 887 1,850 Group cash and short-term investments 1,166 2,101 Less: credit-linked notes (39) (80) Group cash and cash equivalents 1,127 2,021 Our cash position remains strong, with cash and cash equivalents of ‚£1,127million at 31 March 2006. The reduction in gross cash during the year waslargely attributable to the acquisition of Energis for net consideration of ‚£608 million. In addition, the UK business and Bulldog received ‚£281 million and‚£163 million respectively for operational funding and capital investment. TheInternational business remitted ‚£148 million to Central. The disposals of ourSakhalin business, our stake in MobileOne and our training centre generated ‚£130 million in aggregate, of which ‚£44 million is attributable to minorityinterests. We paid dividends of ‚£80 million and made a ‚£98 million top-upcontribution to the pension fund.Cash and cash equivalents at 31 March 2006 exclude credit-linked notes with afair value of ‚£39 million referenced to our 2012 ‚£200 million bond, which havea similar economic effect to repurchasing the bonds for the period of theinvestment. ‚£50 million of cash and cash equivalents is not available for useby the Group in the short term: ‚£33 million of bank deposits pledged ascollateral against bank guarantees issued and ‚£17 million held by the Group'sinsurance subsidiary, Pender, against potential future claim settlements.‚£60 million of cash held in the Seychelles is excluded from cash, as exchangecontrols make it unlikely that the cash will be repatriated in the short-term.Debt Due in Due in more Due in less than 1 but Due in more than more than 1 less than 2 2 but not more than 5 year years than 5 years years Total ‚£m ‚£m ‚£m ‚£m ‚£m UK 9 9 11 - 29 International 28 11 26 18 83 Central 106 - 202 364 672 Group debt at 31 March 2006 143 20 239 382 784 Group debt at 31 March 2005 23 143 29 629 824 Group debt at 1 April 2005 23 128 29 569 749 Our main outstanding debt instruments are three publicly quoted bonds and aloan from the European Investment Bank (EIB), with a carrying value of ‚£672million in aggregate, all borrowed by, or guaranteed by, Cable and Wirelessplc. In addition, there are ‚£83 million of borrowings in International, ofwhich Cable and Wireless plc has guaranteed ‚£42 million. There are also ‚£29million of finance lease liabilities in the UK acquired with Energis. The ‚£106million EIB loan, together with a related currency swap of ‚£15 million, maturesin September 2006 and we expect to repay this from existing cash resources.Given the well-spread maturity profile of our debt, and the substantial cashresources still available to Cable and Wireless plc, we are satisfied that wecan meet our working capital requirements for at least the next twelve months.Consequently, we have no current intention to conduct any major fundingactivity and see no need to maintain any significant committed facilities.In transitioning to reporting under International Financial ReportingStandards, we adopted IAS 32 and IAS 39 on 1 April 2005. The table above setsout the position immediately before and after adoption together with theposition at 31 March 2006. The impact of the adoption is set out in detail inthe annual report for the year ended 31 March 2006, which will be available onor around 20 June 2006.International businessIntroductionThe International business operates telecommunications companies in 33countries. Our principal operations are in the Caribbean, Panama, Macau, Monacoand the Channel Islands. In the majority of our markets we are the leadingtelecoms provider.Our ambition is to be the first choice for customers in all our markets and akey partner for Governments by investing in technology, our people and ourbrands.We provide mobile services in 22 markets and continue to invest significantlyin our mobile networks to ensure that we are providing a reliable, qualitymobile service to our customers.We provide broadband services in 21 markets. Our investment in broadbandinfrastructure and marketing is meeting the growing demand for broadbandservices. Improving access via a range of distribution channels - as well asincreased speeds and enhanced services - have contributed to this growth indemand.We face challenges in our fixed-line business where margins are under pressurefrom competition and mobile substitution. International direct-dial pricescontinue to fall and we anticipate that this decline will accelerate with VoIPbecoming more commonplace. The growth in demand for VoIP services led us tolaunch our own product in the Cayman Islands and, following its success, wehave started to roll this out in our other markets.Across our markets, we face broadly the same issues. New technologies aredriving down the value of existing offerings. At the same time, liberalisationhas seen new entrants seeking to challenge our position, driving price erosionas these players compete aggressively. Additionally we are dealing withcontinuing developments in regulatory and government policy. Approximately 93%of our revenues are now earned in markets open to competition.International business key performance indicators 31 March 2006 '000 Mobile customers 2,746 Broadband customers 275 Fixed line connections 1,497 We had over 2.7 million mobile customers at the year-end, an increase of 22%over last year, with increased penetration across our business. As anticipated,our TDMA customer base continued to decline, but was more than offset by 56%year on year growth in our GSM customer base to over 1.9 million customers at31 March 2006.Our investment in broadband infrastructure and marketing is meeting the growingdemand for these services, resulting in a 97% increase in customer numbers yearon year.The number of fixed line connections has increased slightly year on year.Increasing connections in Panama and modest growth across the business haveoffset the trend for fixed to mobile substitution.International business income statementCommenting on the year ended 31 March 2006, Harris Jones, Group ManagingDirector, International, said:"I am pleased to report a solid set of financial results due to our unstintingfocus on mobile and broadband, supported by tight management of our operatingcosts. In the year, we have seen a 22% increase in mobile customers and a 97%increase in our broadband customers." Constant currency 2005/ 2004/ Change as 06 05 reported1 change2 ‚£m ‚£m % % International voice 188 205 (8) (10) Domestic voice 338 338 - (1) Mobile 360 302 19 17 Broadband and dial-up internet 66 49 35 34 Data 104 99 5 2 Enterprise and other3 156 131 19 18 Total revenue 1,212 1,124 8 6 Outpayments and network costs (466) (401) (16) (14) Staff costs (163) (158) (3) (2) Other costs (166) (178) 7 8 Total operating costs before depreciation and amortisation (795) (737) (8) (6) EBITDA4 417 387 8 6 Depreciation and software amortisation (136) (121) (12) (11) Operating profit before amortisation of acquired intangibles 281 266 6 4 Amortisation of acquired intangibles (6) (5) (20) (20) Operating profit before joint ventures and associates 275 261 5 4 Share of post-tax profit of joint ventures and associates 58 56 4 1 Operating profit before exceptional items 333 317 5 3 Exceptional items (18) (22) 18 Total operating profit 315 295 7 Capital expenditure (142) (171) 17 18 Headcount5 at 31 March (number) 8,150 8,077 (1) N/a The International business result analysed between the Caribbean, Panama,Macau, Monaco and Rest of the World is included on page 31. Rest of the Worldcomprises operations in the Channel Islands, the Middle East and the Atlantic,Pacific and Indian Oceans1 Positive percentages represent improvement2 Constant currency growth rates based on the restatement of prior periodcomparatives at current period's reported average exchange rates. Positivepercentages represent improvement3 Includes enterprise solutions for corporate customers, internationalmanagement contracts, directory services and equipment rentals4 Earnings before interest, tax, depreciation, amortisation and exceptionals5 Full time equivalentsThe commentary that follows focuses on changes at constant currency in order tohighlight the underlying trends in the business.RevenueTotal revenue increased by 6% year on year as our strong performance in thegrowth areas of mobile and broadband more than offset declines in fixed linerevenues.Fixed line revenueIncreasing competition, particularly in Barbados following liberalisation ofthe market in February 2005, was the main driver of the 10% decline ininternational voice revenues year on year. Fixed to mobile substitution alsoplayed a part across the whole of the Caribbean. The Rest of the Worldbusinesses also faced increasingly competitive markets and regulatory pricingpressure.Mobile revenueThe 17% year on year revenue growth is due to strong customer demand, driven byour compelling propositions and brand development. We continue to invest inmobile networks and services in the 22 markets where we have a mobile presence.Broadband and dial-up internet revenueThe growth in demand for broadband services has resulted in a 97% increase inour customer base and a 72% year on year growth in revenue, to ‚£57 million.This growth has more than offset the 47% decline in dial-up internet revenue ascustomers migrate to higher speed services.Data revenueData revenue comprises internet hosting, leased circuits and legacy dataservices. The 2% growth year on year is primarily driven by increased demandfrom business customers for direct internet access.Enterprise and other revenueEnterprise and other revenue comprises enterprise solutions for corporatecustomers, international management contracts, such as the services provided byMonaco Telecom to its associate in Afghanistan, directory services andequipment rentals.The 18% increase year on year is principally due to a full year's consolidationof Monaco Telecom in 2005/06 and growth in enterprise solutions in Macau.Operating costsOutpayments and network costs, which include cost of sales and some fixednetwork costs, increased by 14% year on year, reflecting the acquisition costsassociated with the growth of our mobile and broadband customer bases. Despitethese increased customer acquisition costs, our efforts to drive efficiencieshave controlled our underlying operating cost base to maintain EBITDA marginsabove 34%.Staff costs increased 2% year on year, primarily due to the impact ofconsolidating a full year of Monaco Telecom. The 1% increase in headcountreflected small increases in the Caribbean, Panama and Monaco, partly offset bya decrease in the Rest of the World businesses.Other costs, largely comprising property costs and professional fees, have beenreduced by 8% as a result of the continued focus on cost control. Progress innegotiating supplier disputes in Monaco allowed us to release an accrual of ‚£7million.These results are in spite of a blended inflation rate across our business of4%.Depreciation and capital expenditureThe 11% rise in depreciation reflects our investment over recent years inmobile and broadband to support growing customer demand for these services.Capital expenditure as a percentage of revenue has decreased from 15% in 2004/05 to 12% in 2005/06. We have focused on high-return investments such as ourmobile networks in Jamaica and Panama and the rollout of the broadbandinfrastructure in Jamaica. We also invested in the launch of mobile services inthe Falkland Islands, enhanced our coverage in the Seychelles and are rollingout a new network to prepare for the launch of our mobile services in Jersey.In addition, we continued to invest in our fixed networks. Capital expenditurein 2004/05 was higher than usual, principally due to our major mobiletechnology upgrade from TDMA to GSM.Joint ventures and associatesThe main contributors are Batelco (Bahrain), Dhiraagu (Maldives) and TSTT(Trinidad & Tobago). Small declines in the profitability of all three wereoffset by growth in Monaco Telecom's investment in its associate, Roshan, whichoperates in the rapidly developing Afghanistan mobile market.Exceptional itemsExceptional items in 2005/06 principally represent restructuring activitiesaround the business. The main exceptional items in 2004/05 related to theimpact of Hurricane Ivan.Reconciliation of International business EBITDA to net cash flow beforefinancing1 2005/ 06 ‚£m EBITDA2 417 Exceptional items (20) EBITDA less exceptionals 397 Pension payments, net movement in working capital, provisions and intercompany 16 Cash generated from continuing operating activities 413 Income taxes paid (46) Interest received 7 Dividends received from joint ventures and associates 31 Purchase of property, plant, equipment and intangible assets (170) Acquisitions and disposals 96 Other investment income 6 Cash generated from discontinued operating and investing activities 26 Net cash inflow before financing activities 363 1 Source: International business management accounts2 Earnings before interest, tax, depreciation, amortisation and exceptionalsOur net movement in pensions, working capital, provisions and intercompanybalances is small, and offsets exceptional items, which principally representthe costs of our restructuring activities.Our cash capital expenditure of ‚£170 million, principally on mobile andbroadband, represents the main utilisation of cash generated from operatingactivities.Cash tax paid, of ‚£46 million, is offset by interest received, dividend incomeand other investment income.We generated ‚£363 million of net cash flow before financing activities,including ‚£110 million of cash proceeds from the disposal of our stake inMobileOne and our Sakhalin business. ‚£44 million of the disposal proceeds areattributable to minority interests.In 2005/06 we remitted to Central ‚£148 million, reflecting 92% of our share ofcash generated by subsidiaries, together with ‚£31 million of dividends receivedfrom joint ventures and associates. In 2006/07, cash remittance will remain anarea of focus and we expect to raise the proportion of operating cash flow ofsubsidiaries remitted to Central, to 100%.UK businessIntroductionIn the UK business, we serve the largest users of telecoms services across theUK, continental Europe, Asia and the US - and consumer and small businessbroadband services in the UK through Bulldog. To date, there has been littleoverlap between the UK corporate and Bulldog businesses. However, as we moveinto 2006/07, we aim to use the local loop investment in Bulldog to further ourcorporate access strategy. Bulldog's performance is described in more detail onpages 23 to 26. The remaining pages 17 to 22 describe the UK corporatebusiness.Our ambition for the UK corporate business is to serve the UK's largest usersof telecoms services, here and internationally, with high quality managed IPservices supported by a great service experience. This points us at a veryspecific segment of the overall market - encompassing 3,000 corporates,carriers and public institutions. We have in place the right foundations toachieve this ambition and have begun executing our strategy.We have two distinct sales channels that focus on our different customermarkets - Services and Carrier. Our Services team works primarily with largecorporates, systems integrators and public institutions. Our Carrierorganisation provides for the needs of other telecoms carriers, serviceproviders and resellers.We are investing in the key areas of IP and hosting technology - areas thatallow us to develop new, flexible solutions core to our customers' long-termrequirements, rather than simply using IP to replicate existing products. Thiswill translate into a gradual shift in our revenue mix - taking us from abusiness dominated by voice revenues to a business where IP solutionsconstitute a much larger portion of our revenues.The following analysis of the UK business key performance indicators, incomestatement and cash flow reconciliation refer only to the corporate business andso exclude Bulldog. Equivalent analysis for Bulldog is on pages 23 to 26.UK business key performance indicators 31 March 2006 Customer strategy Number of customers 21,000 Operating model Reduction in monthly operating cost run rate from November 2005 ‚£4.4 million Headcount 5,614 LLU capability Number of exchanges unbundled 411 The KPIs above are metrics that our management team currently uses in assessingour progress against our objectives. The KPIs we use are likely to evolve as wemove through our turnaround plan.Customer strategyWe have reduced the number of customers we serve from 30,000 to 21,000 sinceNovember 2005; our aim is to have 18,000 customers by 30 September 2006. Arelatively small proportion of our revenues currently come from IP products. Weenvisage the future UK business being focused on 3,000 customers, with 60% ofrevenues being derived from IP and hosting products. We have made good progressso far against this objective.Operating modelOur customer strategy enables us to simplify our business and therefore operatewith a lower cost base. We aim to reduce the monthly operating cost run rate by‚£5 million per month from November 2005 to 30 September 2006. Progress to theend of March 2006 has already shown a ‚£4.4 million per month reduction.From an opening position of 5,528, headcount reduced by a net 647 people in theperiod leading up to the acquisition of Energis. On 11 November 2005, as partof the acquisition of Energis, 1,560 people joined the business. Since then, asa result of integrating the UK and Energis, a further 827 people have left thebusiness, leaving headcount at 5,614 at 31 March 2006. We expect to reduceheadcount to 5,200 by 30 September 2006.LLU capabilityLocal loop unbundling is a fundamental part of our UK corporate accessstrategy, which we will leverage in the future as part of our move to nextgeneration and IP networks. At 31 March 2006, we had unbundled 411 exchangesand expect to have 800 unbundled by 30 September 2006.UK business income statementCommenting on the year ended 31 March 2006, John Pluthero, Group ManagingDirector, UK, said:"This year, through the acquisition of Energis, we have put in place the finalbuilding block of our strategy to create the first built-for-purpose nextgeneration telecoms company. Over the coming months and years, we willtransform our business, taking out complexity, reducing our cost base andproviding our customers with market-leading service. As we transform, we willtake a leaner, fitter business into the future, generating ‚£2 billion ofrevenue and double-digit operating profit margin within three to five years." Constant currency 2005/ 2004/ Change as 061 05 reported2 change 3 ‚£m ‚£m % % Services 965 935 3 3 Carrier 1,063 900 18 18 Total revenue 2,028 1,835 11 10 Outpayments and network costs (1,421) (1,238) (15) (15) Staff costs (290) (291) - - Other costs (168) (171) 2 2 Total operating costs before depreciation and amortisation4 (1,879) (1,700) (11) (10) EBITDA5 149 135 10 10 Depreciation and software amortisation (118) (61) (93) (93) Operating profit before amortisation of acquired intangibles 31 74 (58) (58) Amortisation of acquired intangibles (5) - >(100) >(100) Operating profit before joint ventures and associates 26 74 (65) (65) Share of post-tax loss of joint ventures and associates (6) (8) 25 25 Operating profit before exceptional items 20 66 (70) (70) Exceptional items (245) (99) >(100) Total operating loss (225) (33) >(100) Capital expenditure (207) (155) (34) (34) Headcount6 at 31 March (number) 5,614 5,528 (2) N/a 1 Energis consolidated from 11 November 20052 Positive percentages represent improvement3Constant currency growth rates based on the restatement of prior periodcomparatives at current period's reported average exchange rates. Positivepercentages represent improvement4 Includes operational releases5 Earnings before interest, tax, depreciation, amortisation and exceptionals6 Full time equivalents. The opening headcount position has been restated toinclude contractors working full-time on capital projects.Integration, recovery and transformationSince the acquisition of Energis on 11 November 2005, we have been working onintegrating the two businesses - a programme that we completed by 31 March2006.We are now focused on transforming the integrated business into one thatprovides managed IP services to the largest corporates, carriers and publicinstitutions in the UK and across the world.The first step is to recover the business. In 2006/07, we expect to achieveEBITDA of between ‚£135 million and ‚£145 million. This will include a full yearof Energis' results, offset by ‚£20 million of EBITDA reduction from changes tothe scope of the business. Based on our past experience, we also expect this toinclude operational releases in the region of ‚£30 million to ‚£40 million,compared with ‚£76 million in 2005/06, when we had particular focus on resolvingoutstanding legacy issues. As a result, if we had chosen to focus purely onshort-term performance and ignored our strategic ambition of ‚£2 billion revenueand double digit operating profit margin, we would be targeting a significantlyhigher short-term EBITDA.Our cost reduction activities are progressing well, and we expect to achievemore than the target of ‚£55 million operating cost reduction by 2007/08, givenat the time of acquiring Energis. By 31 March 2006, we had achieved annualisedoperating cost savings in excess of ‚£50 million. By the end of the third yearfollowing the Energis acquisition, we expect annualised operating cost savingsto have reached about ‚£150 million. We expect the cost of delivering theheadcount and property elements of these savings to be approximately ‚£147million over the three years from acquisition, with ‚£21 million of that alreadyincurred in 2005/06.EnergisThe year on year comparison of results is affected by the consolidation ofEnergis' results in 2005/06. The following commentary on the results, indiscussing underlying trends, analyses the year on year changes excluding theimpact of consolidating Energis in 2005/06. Energis contributed ‚£266 million ofrevenue and ‚£35 million of EBITDA to the UK results from the date of itsacquisition. Energis' EBITDA margin for 2005/06 was 13% compared with the UKEBITDA margin (excluding Energis) of 6%.Services revenueExcluding the impact of Energis, Services revenues have declined 13% year onyear. This decline is the product of customer churn and price erosion and thehistorically poor service experience. Additionally, 2004/05 revenues includedone-off revenue items that did not repeat in 2005/06.Carrier revenueExcluding the impact of Energis, underlying Carrier revenues have increased by8% year on year. The increase has been driven by higher volumes, utilisingspare network capacity, offset in part by continued price pressure and the fullimpact of the September 2004 reduction in mobile termination rates.Additionally, revenues have benefited from a number of operational releasestotalling ‚£16 million. The general nature of operational releases is explainedin more detail in the operating costs section below.Operating costsExcluding the impact of Energis, total operating costs are marginally loweryear on year.During the year, operating costs have benefited from the impact of operationalreleases. Operational releases have been an ongoing feature of the UK business,reflecting the nature of the telecoms services we provide and the environmentin which we provide them. These relate largely to accruals made in previousyears for liabilities with customers, suppliers, interconnect providers andother third parties. Due to an increased focus on settling these items in 2005/06, there has been a benefit to operating costs. Whilst individually notmaterial, the total impact on operating costs from operational releases in theyear is ‚£60 million.Staff costs, as a percentage of revenue, have improved from around 16% to 14%as initiatives to control staff costs, such as consolidating support activitiesacross the UK and continental Europe, offset rising employment costs.Other costs have reduced slightly year on year. The principal elements of othercosts are property costs, travel costs and professional fees. The reductionreflects ongoing programmes to minimise cost in these areas.Depreciation and software amortisation and capital expenditureDepreciation has increased significantly year on year. This increase reflects anatural rise from historically low levels following the fixed asset impairmentsbetween 2002 and 2004 and the consolidation of Energis.Capital expenditure has increased year on year due to the impact of Energis andincreased investment in IP products and platforms. More than half of ourcapital expenditure in 2005/06 related directly to customer delivery and nextgeneration implementation.Joint ventures and associatesThe result represents our share of the post-tax losses of companies thatoperate submarine cable systems. The reduction in the loss compared to theprior year is due to the closure of Gemini in 2004/05 and an impairment ofassets in Apollo in 2004/05.Exceptional itemsExceptional items in 2005/06 are mainly due to a write down of obsolete assetsin the UK business (excluding Energis), as discussed on page 6. We expectoperating profit in 2006/07 to benefit by around ‚£70 million from lowerdepreciation as a result.In 2004/05, exceptional items primarily arose from restructuring.Acquisitions and disposalsOn 11 November 2005, we acquired Energis for net consideration of ‚£608 million.In the third year following completion, we will pay a contingent considerationof between zero and ‚£80 million, payable in cash or shares at our option,dependent on the level of Cable & Wireless' share price.On 29 April 2005, we sold our training centre for ‚£20 million, resulting in aprofit on disposal of ‚£11 million.On 8 April 2005, we announced the completion of the disposal of our Spanishretail business for ‚£4 million, resulting in a profit on disposal of ‚£3million.Reconciliation of UK business EBITDA to net cash flow before financing1 2005/06 ‚£m EBITDA2 149 Exceptional items (8) EBITDA less exceptionals 141 Defined benefit pension scheme cash top up payment (59) Defined benefit pension scheme other cash contributions (11) Net increase in working capital and intercompany (67) Movement in provisions (91) Cash generated from continuing operating activities (87) Purchase of property, plant, equipment and intangible assets (221) Acquisitions and disposals (585) Cash generated from discontinued operating and investing activities 4 Net cash outflow before financing activities (889) 1 Source: UK business management accounts2 Earnings before interest, tax, depreciation, amortisation and exceptionalsThe cash outflow during the year principally reflects EBITDA of ‚£149 million,the acquisition of Energis, capital expenditure, a pension top-up contributionand working capital movements.The ‚£8 million of exceptional costs and provision movements of ‚£91 millioninclude restructuring programme costs relating to the integration of the UK andEnergis businesses. Other headcount, property and network cost reductionprogrammes, initiated in previous years, are also included in these costs.The pension payment of ‚£59 million reflects a top-up contribution to the UKdefined benefit scheme. Following this top-up payment, along with a further ‚£39million from Central, the scheme is fully funded on an ongoing basis, based onthe 2005 funding valuation.The net increase in working capital and intercompany includes the impact of ‚£76million of operational releases, as described on page 20.The net outflow of ‚£585 million for acquisitions and disposals primarilyrepresents the acquisition of Energis for net consideration of ‚£608 million.BulldogIntroductionUsing local loop unbundling (LLU), we provide broadband and telephony servicesto residential and small business customers in the UK. However, LLU is also afundamental part of our overall UK corporate access strategy, which we intendto leverage in the future as part of our move to next generation and IPnetworks.Using full LLU, rather than shared, allows us to maintain end-to-end bandwidthcontrol and differentiate our services from those of our competitors. In 2005/06, we increased our broadband speeds from a maximum of 4Mbps to 8Mbps and,since the year-end, to a maximum of 16Mbps.Competition in consumer broadband services is tough and is likely to increaseas the rapid take up of broadband slows. Providers will increasingly competewith each other to win existing, rather than acquiring new, broadbandcustomers. Pricing pressure is, therefore, likely to remain a feature of themarket.In the coming year, we will focus on sustaining our share of gross customeradditions and on maintaining average revenue per customer, through innovativeservice offerings. To support our proposition of delivering excellent service,we will continue to invest in our systems, processes and people.Bulldog key performance indicators 31 March 2006 Customers: Residential LLU customers 112,000 Business LLU customers 6,000 Total customers 118,000 Number of exchanges unbundled 411 Average monthly revenue per residential customer (March 2006) ‚£36 Customer care: Orders provided on time 88% Average time from order to delivery 14 days Fault tickets resolved in less than 5 days >90% The KPIs above are benchmarks that our management team uses to assess progressagainst our plans to grow the business and provide customers with a high levelof service. We will continue to monitor these KPIs and use them to drivecontinued performance improvement.CustomersThe increase in the LLU footprint from 252 to 411 exchanges, along withincreased marketing and brand awareness and the launch of a range of innovativeproducts, has driven customer growth to 118,000 at 31 March 2006.Despite strong competition in the consumer broadband market, our averagemonthly revenue per customer in March 2006 was ‚£36, comprising line rental,voice calls and broadband.We expect to have 800 unbundled exchanges by 30 September 2006, driving furthercustomer growth.Customer careAs the first full local loop unbundler in the UK, we encountered significantchallenges during the year as we grew our customer base. Our provisioningprocess has now improved dramatically and we are provisioning 88% of customerson time compared with 32% last year. The average time from order to delivery isnow 14 days compared with 22 days last year. Openreach's process accounts forat least 10 of the current 14 days.During the year, we made a number of changes to our provisioning, customer careand billing processes. As a result, in October 2005, Ofcom closed theinvestigation it had launched earlier in the year following a number ofcustomer complaints.Our improvement in provisioning and support services has halved the level offaults per customer despite the ten-fold increase in customer numbers. At thesame time, we have invested heavily in our ability to resolve customers'problems when they do arise and are now resolving more than 90% of faultswithin five days of them being reported.Bulldog income statement 2005/06 2004/05 ‚£m ‚£m Total revenue 33 11 Outpayments and network costs (66) (13) Staff costs (28) (12) Other costs (44) (14) Total operating costs before depreciation and amortisation (138) (39) EBITDA1 (105) (28) Depreciation and software amortisation (15) (2) Total operating loss (120) (30) Capital expenditure (70) (40) Headcount2 at 31 March (number) 651 505 1 Earnings before interest, tax, depreciation and amortisation2 Full time equivalentsRevenueRevenue growth was driven by increasing the customer base from almost 10,000 inMarch 2005 to 118,000 residential and business customers in March 2006, as thenumber of unbundled exchanges increased from 252 to 411. A lesser factor wasthe consolidation of a full year in 2005/06 compared with 10 months from theacquisition of Bulldog in 2004/05.Operating costsOutpayments and network costs rose to ‚£66 million in the year, largely due tothe rise in the number of unbundled exchanges and the increase in customernumbers. The main elements that contribute to outpayments and network costs arethe connection fees and rental charges payable to Openreach for each customer,the rental of space for our equipment in each Openreach exchange, the cost ofterminating our customers' voice calls on third party networks and the cost oftransporting data between the local exchange and its source or destination.Staff costs increased to ‚£28 million as overall headcount increased by 146 inthe year. The increase in headcount reflects the growth phase that the businessis in and the steps taken to improve customer care levels. The increase in costper employee represents the higher skill levels of our new employees.Marketing, customer operations and other general and administrative expensesaccount for the majority of other costs. The increase from the prior year ismainly due to the "Open the gate" advertising campaign and other brandmarketing activities.Depreciation and capital expenditureThe increase in depreciation has been driven by the capital invested inexpanding our LLU footprint.Capital expenditure was principally in respect of the unbundling of anadditional 159 exchanges in the year, the provision of backhaul to thoseexchanges and investment in provisioning, billing and other support systems.Reconciliation of Bulldog EBITDA to net cash flow before financing1 2005/06 ‚£m EBITDA2 (105) Net movement in working capital and intercompany 3 Cash utilised from continuing operating activities (102) Purchase of property, plant, equipment and intangible assets (61) Net cash outflow before financing activities (163) 1 Source: Bulldog management accounts2 Earnings before interest, tax, depreciation and amortisationCash invested in operations amounted to ‚£102 million, comprising outpayments,network, staff, customer operations and general administrative costs,supporting rapid customer growth.Capital expenditure of ‚£61 million was invested in exchanges, metronodes,backhaul and IT infrastructure as we continued to expand our LLU footprint.group outlookAs indicated on page 20, EBITDA for the UK in 2006/07 will be in the range of ‚£135 million to ‚£145 million. While International establishes itself as anoperationally discrete business, and invests in growth opportunities, itsprospects remain good, albeit subject, as ever, to fluctuations in foreignexchange rates.Group non-operating mattersDividendThe Board has recommended a full year dividend of 4.5 pence per share inrespect of the year ended 31 March 2006, an increase of 18% compared with lastyear's dividend of 3.8 pence per share. Of this year's full year dividend of4.5 pence per share, 1.4 pence per share was paid as an interim dividend. Thefinal dividend of 3.1 pence per share will be paid on 11 August 2006 toordinary shareholders on the register as at 16 June 2006.The scrip dividend scheme will be offered in respect of the final dividend.Those shareholders who have already elected to join the scheme need do nothingsince the final dividend will be automatically applied to the scheme.Shareholders wishing to join the scheme for the final dividend (and all futuredividends) should return a completed mandate form to: Lloyds TSB Registrars,The Causeway, Worthing, West Sussex, BN99 2DZ by 14 July 2006. Copies of themandate form, and the scrip dividend brochure, can be obtained from Lloyds TSBRegistrars (UK callers: 0870 600 3975, overseas callers: +44 1903 502 541) orfrom the Company's website www.cw.com.Return of capitalFollowing the acquisition of Energis and the top-up of the pension scheme, wehave decided to discontinue the balance of the ‚£250 million share buybackprogramme. At 31 March 2006, we had bought back 74,950,000 shares at an averageprice of 123.687 pence per share.PensionsThe most recent triennial funding valuation of the UK defined benefit schemewas made as at 31 March 2005. We completed discussions with the trustees andthe scheme actuary in March 2006, resulting in us paying a ‚£98 millioncontribution on 31 March 2006. As a result of our top-up payment, the scheme isfully funded on an ongoing basis, based on the 2005 funding valuation. Ourordinary contribution rate for 2005/06, including administration costs and anallowance for the pension protection fund levy, was 22.3% of our employees'pensionable pay, or ‚£13 million.We used the latest, generally adopted mortality tables and other assumptionsfor the funding valuation, adjusted to reflect the scheme's actual experience,and included an allowance for future improvements in life expectancy. Underthese assumptions, the average life expectancy is 26.5 years for a man aged 60and 28.1 years for a woman aged 60. A one year change in the life expectancyassumption would have increased or decreased the scheme liabilities by around ‚£40 million. A change of 0.25% in the assumed rate of return on schemeinvestments would have increased or decreased the funding required by around ‚£86 million. A change of 0.25% in the assumed rate of wage and salary increaseswould have increased or decreased the funding required by around ‚£7 million.The IAS 19 deficit at 31 March 2006, for the main UK scheme, is ‚£89 million,compared with ‚£176 million at 31 March 2005. The assumptions used for the IAS19 calculation are different from those adopted by the trustees and the schemeactuary to determine the funding position of the scheme. In particular, IAS 19requires the Fund's liabilities to be discounted at an AA corporate bond rate,whereas the funding valuation discounts the liabilities at a higher expectedrate of return on the scheme assets. We have further unfunded pensionliabilities in the UK of ‚£23 million.A number of our overseas businesses also operate defined benefit pensionschemes. The aggregate IAS 19 surplus of these schemes is ‚£10 million at 31March 2006, compared with a deficit of ‚£5 million at 31 March 2005.Incentive schemesAs a result of the creation of the two distinct businesses, we have madeseveral changes to Directors' remuneration, and further changes are proposed.In summary, we propose to adjust base salaries to reflect levels ofresponsibilities in the new Group structure, restrict maximum potential bonusto 100% of salary and put in place new long-term incentive schemes.We propose that Executive Directors receive one-off long-term incentive awardsin 2006 as follows:Restricted share planTo encourage our Executive Directors to align their interests withshareholders, they received a matching award of restricted shares with TotalShareholder Return (TSR) performance conditions attached, on investing theirown funds into Company shares.Share option planWe awarded the Directors with Central functions, Tony Rice and GeorgeBattersby, a one-off award of share options with a face value of ten timesbasic salary. The vesting of these share options is subject to relative TSRperformance conditions.Cash Long-Term Incentive Plan (Cash LTIP)Subject to shareholder approval, John Pluthero and Harris Jones willparticipate in a new Cash LTIP. This plan will create a reward pool for each ofthe two business units over a four-year period. If a business grows by lessthan the pre-set hurdle rate of 8% per annum compounded, there will be noreward pool for that business. If a business grows by more than the hurdlerate, then 10% of the growth in value in excess of the hurdle rate goes intothe reward pool. If the business grows by less than 20% per annum, then JohnPluthero and Harris Jones will receive no more than they would receive under atraditional long-term incentive scheme. John Pluthero and Harris Jones willeach receive a 20% share of their business' reward pool, with the remainder forsenior executives in each business. 75% will be payable to all participants atthe end of year three, and 100% (less any year-three payments) will be payableat the end of year four (2010).De-listing from NYSE and de-registration from SECWe previously maintained an American Depository Receipt (ADR) programme listedon the New York Stock Exchange (NYSE). Given the very small percentage ofshares that were held and traded through the ADR programme, we concluded thatthe additional cost of its administration outweighed its potential benefits.Similarly, we determined that the costs of maintaining our registration withthe US Securities and Exchange Commission (SEC) outweigh the associatedbenefits.On 9 September 2005, we announced our intention to de-list from the NYSE andterminate our ADR programme as part of the process of terminating ourregistration with the SEC.We de-listed from the NYSE and terminated our ADR programme, effective 4pmEastern Standard Time, 13 December 2005, and are in the process of ending ourSEC registration. We expect to terminate our SEC registration during June 2006,which will ultimately remove our US reporting obligations.Adoption of International Financial Reporting Standards (IFRS)We have successfully completed the adoption of IFRS and have prepared the 2005/06 numbers on this basis. We have restated the 2004/05 comparative numbers, onan IFRS basis, throughout this announcement.As previously announced, the principal areas of impact for the Group in thetransition to IFRS were the deconsolidation of our Maldives business, pensionaccounting and share-based payments.Exchange rate movementsYear on year average exchange rates show a 2.4% appreciation of the US dollaragainst sterling and a 0.6% depreciation of the Jamaican dollar againststerling. These trends have had a ‚£7 million positive impact on theInternational business' current year EBITDA as many of its businesses report incurrencies that are linked or pegged to the US dollar or the Jamaican dollar.A one US cent change in the US$:‚£ exchange rate has an approximately ‚£2 millionimpact on the EBITDA of the International business.The 3.0% relative decline of the Jamaican dollar against the US dollar had anadverse impact on the Jamaican business, where certain payments are denominatedin US dollars. 2005/06 2004/05 US$ : ‚£ Average 1.7946 1.8388 Period end 1.7406 1.8701 Jamaican$ : ‚£ Average 112.6044 111.9637 Period end 113.7600 113.8890 Group results detailYear ended 31 March 2006 compared with the year ended 31 March 2005 2005/06 (‚£m) 2004/05 (‚£m) CC change1 (%) Group Group Group Inter-national2 UK2 Central3 Total Inter-national2 UK2 Central3 Total Inter-national2 UK2 Central3 Total Revenue 1,212 2,040 (22) 3,230 1,124 1,843 (19) 2,948 6 12 (16) 9 Outpayments and network costs (466) (1,466) 18 (1,914) (401) (1,248) 18 (1,631) (14) (19) - (17) Staff costs (163) (318) (46) (527) (158) (303) (66) (527) (2) (5) 30 - Other costs (166) (212) - (378) (178) (185) (3) (366) 8 (14) 100 (2) Total op costs before dep'n and amort'n (795) (1,996) (28) (2,819) (737) (1,736) (51) (2,524) (6) (16) 45 (11) EBITDA4 417 44 (50) 411 387 107 (70) 424 6 (59) 29 (5) Depreciation and software > amortisation (136) (133) 6 (263) (121) (63) (1) (185) (11) (100) >100 (41) Operating profit/ > (loss)5 281 (89) (44) 148 266 44 (71) 239 4 (100) 38 (39) Amortisation of acquired > intangibles (6) (5) - (11) (5) - - (5) (20) (100) - >(100) Operating profit before JVs and > associates5 275 (94) (44) 137 261 44 (71) 234 4 (100) 38 (43) Joint ventures & associates 58 (6) - 52 56 (8) - 48 1 25 - 6 Total operating profit/ > (loss)5 333 (100) (44) 189 317 36 (71) 282 3 (100) 38 (34) > Exceptional (100) items (18) (245) 7 (256) (22) (99) (30) (151) 186 6 >1006 (70)6 Total operating > profit/ (100) >(100)(loss) 315 (345) (37) (67) 295 (63) (101) 131 76 6 636 6 Capital expenditure (142) (277) 3 (416) (171) (195) (7) (373) 18 (42) >100 (11) Headcount7 at 31 March 8,150 6,265 156 14,571 8,077 6,033 326 14,436 (1) (4) 52 (1) 1 Constant currency growth rate based on the restatement of prior periodcomparatives at current period's reported average exchange rates. Positivepercentages represent improvement2 Cable & Wireless announced the creation of two self-contained operationalunits, UK (including Bulldog) and International, on 31 January 20063"Central" is composed of the corporate centre and intra-group eliminationsbetween the businesses4 Earnings before interest, tax, depreciation, amortisation and exceptionals5 Excluding exceptionals6 At reported exchange rates7 Full time equivalentsInternational business results detailYear ended 31 March 2006 compared with year ended 31 March 2005 2005/06 (‚£m) 2004/05 (‚£m) CC change1 (%) Carib-bean Panama Macau Monaco RoW2 Total Carib-bean Panama Macau Monaco RoW2 Total Carib-bean Panama Macau Monaco RoW2 International voice 107 18 30 10 23 188 123 18 27 9 28 205 (14) (2) 8 11 (19) Domestic voice 182 109 19 9 19 338 178 117 17 8 18 338 1 (9) 9 12 4 Mobile 153 104 49 24 30 360 136 77 44 19 26 302 11 32 8 26 15 Broadband & dial-up internet 32 13 13 3 5 66 25 8 10 2 4 49 30 59 27 49 24 Data 47 22 8 7 20 104 46 22 8 6 17 99 (1) (2) (3) 16 16 Enterprise & other 43 18 17 71 7 156 42 15 11 56 7 131 1 17 50 26 (1) Revenue 564 284 136 124 104 1,212 550 257 117 100 100 1,124 1 8 13 24 3 Outpayments and network costs (196) (110) (63) (70) (27) (466) (183) (90) (48) (55) (25) (401) (6) (19) (28) (27) (7) Staff costs (87) (23) (11) (19) (23) (163) (88) (23) (11) (13) (23) (158) 2 2 3 (46) 1 Other costs (94) (46) (9) (3) (14) (166) (113) (38) (8) (5) (14) (178) 18 (18) (10) 40 1 Total op costs before dep'n and amort'n (377) (179) (83) (92) (64) (795) (384) (151) (67) (73) (62) (737) 3 (16) (21) (26) (2) EBITDA3 187 105 53 32 40 417 166 106 50 27 38 387 11 (3) 3 18 4 Dep'n and software amortisation (63) (35) (16) (7) (15) (136) (58) (31) (15) (6) (11) (121) (7) (10) (4) (16) (35) Operating profit4 124 70 37 25 25 281 108 75 35 21 27 266 13 (9) 3 19 (9) Amortisation of acquired intangibles - - - (6) - (6) - - - (5) - (5) - - - (20) - Op profit before JVs and associates4 124 70 37 19 25 275 108 75 35 16 27 261 13 (9) 3 18 (9) Joint ventures & associates 11 - - 5 42 58 14 - - 1 41 56 (22) - - >100 - Total operating profit4 135 70 37 24 67 333 122 75 35 17 68 317 9 (9) 3 41 (3) >Exceptional >(100) (100)items (16) - - (3) 1 (18) (21) - - - (1) (22) 245 -5 -5 5 5 Total operating profit 119 70 37 21 68 315 101 75 35 17 67 295 185 (7)5 65 245 15 Capital >expenditure (78) (25) (11) (10) (18) (142) (104) (44) (14) (3) (6) (171) 26 45 24 >(100) (100) Headcount6 at 31 March 4,175 1,852 940 496 687 8,150 4,147 1,818 932 458 722 8,077 (1) (2) (1) (8) 5 1 Constant currency growth rate based on the restatement of prior periodcomparatives at current period's reported average exchange rates. Positivepercentages represent improvement2 Rest of the World comprises operations in the Channel Islands, the MiddleEast and the Atlantic, Pacific and Indian Oceans3 Earnings before interest, tax, depreciation, amortisation and exceptionals4 Excluding exceptionals5 At reported exchange rates6 Full time equivalentsUK business results detailYear ended 31 March 2006 compared with the year ended 31 March 2005 CC change1 2005/06 (‚£m) 2004/05 (‚£m) (%) UK UK UK including including including Europe, Europe, Europe, US, Asia2 Bulldog Eliminations Total US, Asia2 Bulldog Eliminations Total US, Asia2 Services 965 - - 965 935 - - 935 3 Carrier 1,063 - (21) 1,042 900 - (3) 897 18 Bulldog - 33 - 33 - 11 - 11 - Revenue 2,028 33 (21) 2,040 1,835 11 (3) 1,843 10 Outpayments and network costs3 (1,421) (66) 21 (1,466) (1,238) (13) 3 (1,248) (15) Staff costs (290) (28) - (318) (291) (12) - (303) - Other costs (168) (44) - (212) (171) (14) - (185) 2 Total op costs before dep'n and amort'n (1,879) (138) 21 (1,996) (1,700) (39) 3 (1,736) (10) EBITDA4 149 (105) - 44 135 (28) - 107 10 Depreciation and software amortisation (118) (15) - (133) (61) (2) - (63) (93) Operating profit/(loss)5 31 (120) - (89) 74 (30) - 44 (58) Amortisation of acquired intangibles (5) - - (5) - - - - >(100) Operating profit before JVs and associates5 26 (120) - (94) 74 (30) - 44 (65) Joint ventures & associates (6) - - (6) (8) - - (8) 25 Total operating profit/ (loss)5 20 (120) - (100) 66 (30) - 36 (70) Exceptional items (245) - - (245) (99) - - (99) >(100) Total operating profit/ (loss) (225) (120) - (345) (33) (30) - (63) >(100) Capital expenditure (207) (70) - (277) (155) (40) - (195) (34) Headcount6 at 31 March 5,614 651 - 6,265 5,528 505 - 6,033 (2) 1 Constant currency growth rate based on the restatement of prior periodcomparatives at current period's reported average exchange rates. Positivepercentages represent improvement2 UK and Energis excluding Europe, US and Asia contributed ‚£1,791 million ofrevenue and ‚£140 million of EBITDA. Energis contributed ‚£266 million of revenueand ‚£35 million of EBITDA to the UK result3 Includes operational releases4 Earnings before interest, tax, depreciation, amortisation and exceptionals5 Excluding exceptionals6 Full time equivalentsExtracts from the financial statements and additional informationPreliminary resultsThe financial information set out in this announcement does not constitute theCompany's statutory report and accounts for the year ended 31 March 2006.Statutory accounts will be delivered to the Registrar of Companies followingthe Company's annual general meeting on 21 July 2006. The auditor has confirmedthat it will report without qualification on those accounts.The report of the auditor on the statutory accounts for the year ended 31 March2005, prepared under UK GAAP, was unqualified and did not contain a statementunder Section 237 (2) or (3) of the Companies Act 1985.The comparative financial information for the year ended 31 March 2005 has beenrestated as a result of the adoption of IFRS, as described in the 'Applicationof IFRS 1' section on page 42.A full copy of the financial statements or the annual review will be mailed toshareholders on or about 20 June 2006 and can be obtained thereafter from NickCooper, Company Secretary, The Point, 37 North Wharf Road, Paddington, London,W2 1LA.Basis of preparationAs required by EU regulation, these consolidated financial statements have beenprepared in accordance with International Financial Reporting Standards('IFRS') adopted by the European Union ('Adopted IFRS'). Adopted IFRS aresimilar to IFRS issued by the IASB, except for certain provisions concerninghedge accounting that have no impact on the financial statements of the Group.These are the Group's first consolidated financial statements under IFRS andIFRS 1 First-time adoption of International Financial Reporting Standards hasbeen applied. An explanation of how the transition to IFRS has affected the reportedfinancial position, financial performance and cash flows of the Group isprovided in the statutory accounts for the year ended 31 March 2006.The Group established its IFRS accounting policies for the year ending 31 March2006 and applied these standards retrospectively to determine the IFRS openingbalance sheet at its date of transition, 1 April 2004, except where permittedor required by IFRS 1 or other applicable standards. The accounting policiesset have been applied consistently to all periods presented in theseconsolidated financial statements and in preparing an opening IFRS balancesheet at 1 April 2004 for the purposes of the transition to IFRS except forthose relating to the classification and measurement of financial instrumentsand insurance contracts. The Group has made use of the exemption availableunder IFRS 1 First-time adoption of International Financial AccountingStandards to apply IAS 32 Financial instruments: disclosure and presentation,IAS 39 Financial instruments: recognition and measurement and IFRS 4 Insurancecontracts from 1 April 2005. The policies applied to financial instruments forthe years ended 31 March 2005 and 31 March 2006 are disclosed separately. Thesepolicies are set out in the statutory accounts for the year ended 31 March2006.The accounting policies have been applied consistently by Group entities.Consolidated income statementFor the years ended 31 March 2005/06 2004/05 Pre-except-ional Except-ional Total Pre-except-ional Except-ional Total ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m Revenue 3,230 - 3,230 2,948 - 2,948 Operating costs before depreciation and amortisation (2,819) (21) (2,840) (2,524) (143) (2,667) Amortisation (46) (60) (106) (20) - (20) Depreciation (228) (177) (405) (170) (8) (178) Group operating profit/ (loss) 137 (258) (121) 234 (151) 83 Share of post-tax profit of joint ventures and associates 52 2 54 48 - 48 Total operating profit/ (loss) 189 (256) (67) 282 (151) 131 Gains and losses on sale of non-current assets 2 81 83 5 (8) (3) Other income 7 78 85 5 - 5 Interest income 80 - 80 102 - 102 Interest expense (69) - (69) (68) - (68) Profit/ (loss) before income tax 209 (97) 112 326 (159) 167 Income tax (expense)/ credit (29) 2 (27) (64) 89 25 Profit/ (loss) for the year from continuing operations 180 (95) 85 262 (70) 192 Profit for the year from discontinued operations 2 88 90 22 140 162 Profit/ (loss) for the year 182 (7) 175 284 70 354 Attributable to equity holders of the Company 120 (41) 79 221 73 294 Attributable to minority interests 62 34 96 63 (3) 60 Profit/ (loss) for the year 182 (7) 175 284 70 354 Earnings per share attributable to the equity holders of the Company during the year (pence) Basic 3.5p 12.7p Diluted 3.4p 12.1p Earnings per share from continuing operations attributable to the equity holders of the Company during the year (pence) Basic (0.4)p 5.7p Diluted (0.4)p 5.7p Earnings per share from discontinued operations attributable to the equity holders of the Company during the year (pence) Basic 3.9p 7.0p Diluted 3.6p 6.4p Consolidated balance sheetAs at 31 March 31 March 31 March 2006 2005 ‚£m ‚£m ASSETS Non-current assets Intangible assets 682 206 Property, plant and equipment 1,489 1,268 Investments in associates and joint ventures 176 245 Trade investments - 33 Available for sale financial assets 15 - Deferred tax asset 17 29 Retirement benefit asset 41 26 Trade and other receivables 43 43 2,463 1,850 Current assets Inventories 31 26 Trade and other receivables 944 805 Tax asset 2 - Financial assets at fair value through income statement 39 - Current asset investment - 80 Cash and cash equivalents 1,127 2,021 2,143 2,932 Assets held for sale 105 18 2,248 2,950 Total assets 4,711 4,800 LIABILITIES Current liabilities Trade and other payables 1,381 1,293 Current tax liabilities 123 158 Loans and obligations under finance leases 143 23 Derivative financial instruments 15 - Provisions for other liabilities and charges 89 279 1,751 1,753 Liabilities associated with assets held for sale - 4 1,751 1,757 Net current assets 497 1,193 Non-current liabilities Loans and obligations under finance leases 641 801 Deferred tax liabilities 51 49 Provisions for other liabilities and charges 193 188 Retirement benefit obligations 143 227 1,028 1,265 Net assets 1,932 1,778 EQUITY Capital and reserves attributable to the Company's equity holders Share capital 605 599 Share premium 24 8 Reserves 961 876 1,590 1,483 Minority interest 342 295 Total equity 1,932 1,778 Consolidated statement of recognised income and expenseFor the years ended 31 March 2005/ 2004/ 06 05 ‚£m ‚£m Fair value gains on available for sale financial assets 10 - Fair value gains on available for sale financial assets recycled to income statement on sale (70) - Actuarial (losses)/gains in the value of defined benefit retirement plans (9) 76 Cumulative translation differences recycled on disposal of foreign investment - (2) Exchange differences on translation of foreign operations 67 (38) Tax on items taken directly to or transferred from equity (1) (3) Net (loss)/income recognised directly in equity (3) 33 Profit for the period 175 354 Total recognised income and expense for the period 172 387 Effect of adoption of IAS 32 and IAS 39 on 1 April 2005 on: Fair value reserve 32 - Retained loss 13 - Minority interest 31 - 76 - 248 387 Attributable to equity holders of the Company 133 328 Attributable to minority interests 115 59 248 387 Consolidated cash flow statementFor the years ended 31 March 2005/ 2004/ 06 05 ‚£m ‚£m Continuing operations Cash flows from operating activities Cash generated from continuing operations (see page 38) 100 279 Cash generated from discontinued operations (see page 38) 3 28 Income taxes paid (47) (60) Net cash from operating activities 56 247 Cash flows from investing activities Interest received 107 88 Other investment income 5 4 Dividends received 34 31 Proceeds on disposal of trade investments 89 51 Proceeds on disposal of property, plant and equipment 35 9 Proceeds on disposal of intangible assets 2 - Purchase of property, plant and equipment (412) (278) Purchase of intangible assets (22) (43) Purchase of credit linked notes - (80) Proceeds from redemption of credit linked notes 40 50 Proceeds from disposal of associates and joint ventures 1 - Acquisition of associates and joint ventures (1) (7) Acquisition of shareholdings in subsidiaries (net of cash received) (610) (77) Net cash from continuing operations (732) (252) Discontinued operations Proceeds on disposal of trade investment - 17 Proceeds on disposal of subsidiaries 27 96 Proceeds on disposal of associate and joint ventures - 7 Purchase of property, plant and equipment - (9) Net cash from discontinued operations 27 111 Net cash used in investing activities (705) (141) Net cash (outflow)/inflow before financing activities (649) 106 Cash flows from financing activities Dividends paid to minority interests (59) (27) Dividends paid to shareholders (80) (97) Repayments of borrowings (46) (82) Loan to minority interest (44) - Interest paid (61) (67) Proceeds from borrowings 39 1 Purchase of treasury shares (17) (74) Net proceeds on issue of ordinary share capital 11 6 Net cash used in financing activities (257) (340) Discontinued operations - (4) Net cash used in financing activities (257) (344) Net decrease in cash and cash equivalents (906) (238) Cash and overdrafts at the beginning of the period 2,021 2,270 Exchange gains and losses on cash and cash equivalents 12 (4) 1,127 2,028 Less cash reflected as assets held for sale - (7) Cash and cash equivalents at the end of the period 1,127 2,021 Cash flow from operating activitiesReconciliation of net profit to cash generated from operations 2005/ 2004/ 06 05 ‚£m ‚£m Continuing operations Net profit 85 192 Adjustments for: Tax expense/(credit) 27 (25) Depreciation 228 170 Amortisation 46 20 Impairment 237 8 Gains and losses on sale of non-current assets (83) 3 Other income (7) (5) Interest and similar income (80) (102) Interest and similar charges 69 68 (Decrease)/increase in provisions within operating profit (135) 95 (Decrease)/increase in provisions below operating profit (34) - Share-based payments 14 10 Defined benefit pension scheme expense 6 19 Defined benefit pension scheme top-up contributions (98) (100) Defined benefit pension scheme other contributions (17) (27) Share of results after tax of associates (54) (48) Operating cash flows before working capital changes 204 278 Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries) (Increase)/decrease in inventories (4) 5 Decrease in trade and other receivables 8 116 Increase/(decrease) in payables (108) (120) Cash generated from continuing operations 100 279 Discontinued operations Net profit 90 162 Adjustments for: Tax expense - 2 Depreciation and amortisation - 1 Profit on disposal of investments (20) (16) Profit on disposal of property, plant and equipment (4) - Interest and similar charges - 1 Profit on sale of operations - (130) Decrease in provisions (64) - Changes in working capital 1 8 Cash generated from discontinued operations 3 28 Cash generated from operations 103 307 Earnings per shareBasic earnings per ordinary share are based on the profit for the yearattributable to shareholders and the weighted average number of shares inissue, excluding ordinary shares purchased by the Company and held as treasuryshares. 2005/ 2004/ 06 05 ‚£m ‚£m Profit for the financial year attributable to shareholders 79 294 Interest saved on loan stock conversion 20 11 Diluted profit for the financial year attributable to shareholders 99 305 Weighted average number of ordinary shares in issue (millions) 2,286 2,322 dilution effects of: share options 38 28 convertible unsecured loan stock 178 178 Diluted weighted average number of shares 2,502 2,528 Basic earnings per share (p/share) 3.5p 12.7p Diluted earnings per share (p/share) 3.4p 12.1p Continuing operations Profit/(loss) from continuing operations for the financial year attributable to shareholders (10) 132 Diluted profit/(loss) from continuing operations for the financial year attributable to shareholders 10 143 Basic earnings/(losses) per share from continuing operations (p/share) (0.4)p 5.7p Diluted earnings/(losses) per share from continuing operations (p/share) (0.4)p 5.7p Discontinued operations Profit from discontinued operations for the financial year attributable to shareholders 89 162 Diluted profit from discontinued operations for the financial year attributable to shareholders 89 162 Basic earnings per share from discontinued operations (p/ share) 3.9p 7.0p Diluted earnings per share from discontinued operations (p/ share) 3.6p 6.4p Cable & Wireless uses the non-IFRS financial measure 'Basic earnings perordinary share before exceptional items' as one of the key performanceindicators for evaluating the financial performance of the business. The Boardconsiders that this measure provides an important measure of the underlyingoperating performance of the Group because it excludes non-recurring items. For the year ended 31 March 2006, the Basic earnings per ordinary share beforeexceptional items was 5.2p (2004/05: 9.5p) computed as: 2005/ 2004/ 06 05 ‚£m ‚£m Profit for the financial year attributable to shareholders 79 294 Impact of exceptional items after tax and minority interest 41 (73) Profit for the financial year before exceptional items 120 221 Weighted average number of ordinary shares in issue (millions) 2,286 2,322 Basic earnings per ordinary share before exceptional items 5.2p 9.5p Provisions for liabilities and charges Network and asset retirement Property Redundancy obligations Other Total ‚£m ‚£m ‚£m ‚£m ‚£m At 31 March 2005 119 59 112 177 467 Current portion 60 57 48 114 279 Non-current portion 59 2 64 63 188 Charged to income statement additional provision 4 43 23 19 89 amounts used (43) (57) (27) (53) (180) unused amounts reversed (28) (9) (41) (53) (131) Acquisitions 3 - 21 10 34 Discount adjustment - - 3 - 3 At 31 March 2006 55 36 91 100 282 Current portion 6 36 11 36 89 Non-current portion 49 - 80 64 193 PropertyProvision has been made for the lower of the best estimate of the unavoidablelease payments or cost of exit in respect of vacant properties. Unavoidablelease payments represent the difference between the rentals due and any incomeexpected to be derived from the vacant properties being sub-let. The provisionis expected to be utilised over the shorter of the period to exit and the leasecontract life.RedundancyProvision has been made for the total employee-related costs of redundanciesannounced prior to 1 April 2005. Agreement had been reached with the localemployee or union representatives that specified the number of staff involvedand quantified the total amounts payable to those made redundant. Network and asset retirement obligationsProvision has been made for the best estimate of the unavoidable costsassociated with redundant network capacity. We expect to use the provision overthe shorter of the period to exit and the lease contract life.Provision has also been made for the best estimate of the asset retirementobligation associated with office sites, technical sites, domestic and sub-seacabling. We expect to use this provision at the end of the life of the relatedasset on which the obligation arises.OtherOther provisions include amounts relating to the disposal of the previouslydiscontinued US businesses which are to be used within 12 months, amountsrelating to specific claims held against the Group's insurance subsidiary andamounts relating to acquisitions and disposals of Group companies andinvestments. The reversal of unused amounts reflects the resolution of claimsand other risks during the year.Minority interests Total ‚£m Balance as at 31 March 2005 295 Share of total recognised income and expenditure for the year 117 Dividends paid (59) Disposals (9) Balance as at 31 March 2006 344 Joint ventures and associates - our share Revenue Post-tax profit 2005/06 2004/05 2005/06 2004/05 ‚£m ‚£m ‚£m ‚£m UK Gemini - 1 - (1) Apollo 1 - (3) (7) Others - - (3) - 1 1 (6) (8) International Trinidad & Tobago (TSTT) 123 107 12 14 Bahrain (Batelco) 63 60 26 26 Afghanistan (Roshan) 36 - 5 1 The Maldives (Dhiraagu) 26 24 12 15 Fiji (Fintel) 8 8 2 2 Others 7 6 1 (2) 263 205 58 56 Total before exceptionals 264 206 52 48 Exceptionals: Dhiraagu - - 2 - Total 264 206 54 48 Application of IFRS 1The Group established its IFRS accounting policies for the year ended 31 March2006 and applied these standards retrospectively to determine the IFRS openingbalance sheet at its date of transition, 1 April 2004, except where permittedor required by IFRS 1 or other applicable standards.On transition to IFRS, the Group recognised all assets and liabilities asrequired by IFRS and derecognised all assets and liabilities not permitted byIFRS. Assets and liabilities were all measured in accordance with IFRS. Exceptwhere noted below, IFRS recognition and measurement principles were appliedretrospectively. As permitted by IFRS 1, the Directors have elected to adopt IAS 32 Financialinstruments: disclosure andpresentation, IAS 39 Financial instruments:recognition and measurement and IFRS 4 Insurance contracts from 1 April 2005.The Group has continued to account for and disclose financial instruments inaccordance with FRS 4 Capital instruments and FRS 13 Derivatives and otherfinancial instruments: disclosures for periods ending before that date. Theimpact of the adoption of IAS 32, IAS 39 and IFRS 4 is provided in thestatutory accounts for the year ended 31 March 2006.As permitted by IFRS 1, the Directors have elected not to apply IFRS 3 Businesscombinations to business combinations that occurred before the date oftransition. Business combinations that occurred before the date of transitionare accounted for in accordance with UK GAAP. The Group had no unamortisedpositive goodwill recognised under UK GAAP as at 1 April 2004, so no review ofthe goodwill for compliance with the IFRS measurement principles was necessary.Negative goodwill has been credited to reserves on transition, as it is notcarried on the balance sheet under IFRS 3.The Directors have elected to take advantage of the IFRS 1 exemption from theprovisions of IAS 21 The effects of changes in foreign exchange rates for thecumulative translation differences that existed at the date of IFRS transition.Consequently, cumulative translation differences on retranslation ofsubsidiaries' net assets as at 1 April 2004 have been set to zero.IFRS 2 Share-based payments has been applied only to grants of equity settledshare-based payments made after 7 November 2002 that had not vested by 1January 2005.ContactsInvestor Relations Ashley Director, Investor [email protected] +44 (0)20 7315 Rayfield Relations 4460 Craig Thornton Manager, Investor [email protected] +44 (0)20 7315 Relations 6225 Media Clare Waters Director of External [email protected] +44 (0)20 7315 Affairs 4088 Antonia Graham Head of Corporate and UK [email protected] +44 (0)7803 724 PR 111 Press office Cable & Wireless +44 (0)1344 818 888 Rollo Head Finsbury +44 (0)20 7251 3801 James Finsbury +44 (0)20 7251 Wyatt-Tilby 3801 Glossary of termsTerms used in Brief description of meaning this release Access/ Broadband or dial-up connections, which allow customers to internet access the internet from their own premises access ADR American Depository Receipt ARPU Average monthly revenue per customer Carrier A business segment dealing with other telecommunications companies around the world Central The Group's Corporate Centre Company Cable and Wireless plc Constant Constant currency growth rate based on the restatement of prior Currency period comparatives at current period's reported average exchange rates Data Services Services to transmit data over fixed-line, IP or mobile platforms using leased lines, Frame Relay, ATM or IP-based products such as IP-VPN EIB The European Investment Bank EPS Earnings per share Frame Relay A legacy data product that allows broadband data transmission with an additional layer of intelligence and functionality beyond leased lines GAAP Generally Accepted Accounting Principles Group Cable and Wireless plc and its subsidiaries GSM Global System for Mobile Communications or a digital mobile platform that allows the transmission of voice data and global roaming IAS International Accounting Standards IFRS International Financial Reporting Standards Interconnect Connection arrangements between carriers International Collectively, the Caribbean, Panama, Macau, Monaco and the Rest business of the World IP Internet Protocol or a set of rules that govern how interconnected devices communicate IP-VPN An internet-based network used to provide companies with an internal communications system, linking employees in different offices worldwide Liberalised Markets that were previously restricted that are now open to markets/ competition liberalisation Local Loop Telecommunications connection from the local exchange to the customer premises LLU Local Loop Unbundling is the process of installing DSL Equipment in rented space within an incumbent operator's local exchange Mbps Megabits per second: Method of measuring the speed at which data is transmitted Mobile Delivery of voice and data services to mobile handsets through Services wireless technologies Network costs Network costs include the purchase of bandwidth, operating and maintenance of equipment, operation of software and cables, wayleaves, customer acquisition costs, cost of goods sold, licences and associated royalties payable to government Next IP-based network Generation Network NYSE The New York Stock Exchange Ofcom The Office of Communications in the United Kingdom: the independent regulatory body set up under the Communications Act 2003 which has responsibility for the enforcement and monitoring, and where appropriate initiating modification, of telecommunications licences in the United Kingdom Openreach Openreach, which is a new part of BT, has been created to deliver installation and maintenance services on behalf of Britain's telephone and internet service providers Outpayments Payments to other network operators to carry traffic on behalf of Cable & Wireless' customers Services The part of the UK business working primarily with large corporates, systems integrators and public institutions Switched voice Abbreviation of telecommunications services provided over the Public Switched Telephone Network, which refers to the international telephones system based on copper wires carrying analogue voice data TDMA Time Division Multiple Access or digital mobile technology that assigns a specific radio frequency to each user to deliver mobile voice and data Transit A term to describe moving data from a source point to a destination point using various network elements UK UK including Energis, Europe, US, Asia and Bulldog VoIP Voice over Internet Protocol or an IP voice service that provides enhanced functionality, such as the delivery of voice, video, data, with the reliability and features associated with switched voice networks VPN Virtual Private Network or a corporate network provided to a customer by a telecommunications operator using elements of a switched network. To the customer, it offers all the features of a private network, such as direct dialling between offices in different countries ENDCable & Wireless PLCRelated Shares:
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