25th Jan 2005 07:01
Cable and Wireless plc Third Quarter 2004/5 Trading Statement Solid progress with focus on cash margins and cost control Cable and Wireless plc today (25 January 2005) issued its third quarter tradingstatement, for the three months to 31 December 2004, with revenue fromcontinuing businesses of ‚£808 million and a net cash balance of ‚£1,384 million.Francesco Caio, Chief Executive of Cable and Wireless plc, said:"The results this quarter contain no surprises and demonstrate solid progressin our transformation of the business. Across all our businesses we continue topursue profitable revenue streams and cash generative margins, with a strongfocus on control of operating costs and capital expenditure. In the UK we arestarting to exploit the growth in broadband through local loop unbundling,enabling full service differentiation and margin improvement from network costreductions. In the National Telcos we are continuing to develop our mobile andIP services, in order to complement our strengths as the incumbent operator andhelp sustain margins."Revenue in the UK Business and Enterprise businesses was stable in the thirdquarter over the prior quarter. In our Carrier Services business revenue wasimpacted by the reduction in mobile termination rates, which has a negligibleprofit impact. As anticipated, market conditions across the Group remainedchallenging in the third quarter, especially in the UK business segment wherepricing pressure continues."In the third quarter the UK Enterprise segment won a number of substantialcontracts, including contracts with Volkswagen Group, the Go-Ahead Group plcand Scottish Courage for the provision of IP VPN services."In Bulldog Communications we have focused on execution of our local loopstrategy, announcing and launching the implementation of our broadband rolloutwith 68 exchanges unbundled at the end of December and an additional 317exchanges selected for unbundling and now at different stages of the planningand installation process. We are encouraged by the response within our Londonmarket and will be ready to move to a full commercial launch by mid 2005, whenwe intend to report key metrics on Bulldog Communication's development. This isin line with our initial plan to unbundle 400 exchanges by the end of 2005."The reorganisation of the UK business, Corporate Centre and European operationis progressing in line with our timetable. To date the UK business has achievedoperating cost reductions, primarily in the area of staff and other operatingcost reductions. As announced in November, we are now targeting additional costreductions in the areas of operations and networks and this remains a focus forthe newly appointed team in the UK."National Telcos performance in the third quarter was in line with ourexpectations, with a robust performance in a number of our mobile operations.The impact of Hurricane Ivan on the Caribbean results to date is in line withestimates provided at our interim results in November. We are still assessingthe trading impact of the Indian Ocean Tsunami on our business in the Maldivesbut at this stage we do not expect it to be large. The reported results of anumber of our National Telcos were further impacted by the decline in the USdollar against sterling in the quarter."At the interim results we announced a ‚£250 million share repurchase over thenext eighteen months. To date we have bought back 24.8 million shares, at anaverage price of 117 pence."Trading reviewIn the three months ended 31 December 2004, Group revenue from continuingbusinesses was ‚£808 million, a decrease of one percent at actual rates and twopercent at constant currency when compared to the prior quarter (Q2 2004/5: ‚£820 million). When compared to the third quarter of the prior year, revenuefrom continuing businesses showed a decrease of four percent at actual rates,but was flat at constant currency. The businesses acquired this year, MonacoTelecom and Bulldog Communications, contributed revenue of ‚£30 million in thequarter (Q2 2004/5: ‚£29 million).In the UK, third quarter revenue of ‚£390 million was down four percent againstthe prior quarter and six percent against the prior year. This trend wasprincipally attributable to the reduction in mobile termination rates(introduced by Ofcom from 1 September 2004) on revenue from the CarrierServices segment. Revenue in the Business and Enterprise segments was stable inthe third quarter over the prior quarter.Third quarter revenue in the National Telcos of ‚£306 million increased fourpercent against the prior quarter and 14 percent against the prior year atconstant currency. Adjusting for Monaco Telecom, there is an increase of fourpercent at constant currency against the prior year. Within National Telcos, atconstant currency Caribbean revenue of ‚£139 million increased two percentagainst the prior quarter and was four percent lower against the prior year.Cayman mobile revenues supported Caribbean revenue growth over the previousquarter. The decline against the prior year was due in large part to moreintense competition in international services, particularly in Cayman andJamaica. Elsewhere in National Telcos, revenue was in line with management'sexpectations.Based on our third quarter results, management maintains its expectation thatGroup profit before exceptional items and tax in the second half of the yearwill be a reasonable reflection of that achieved in the first half. This isbefore taking into account our initial investment in local loop unbundling,amortisation of intangibles and the impact of both Hurricane Ivan and theIndian Ocean Tsunami.Net CashCable & Wireless' net cash balance at 31 December 2004 was ‚£1,384 million (30September 2004: ‚£1,386 million). The level of net cash maintained reflectscontinued tight operational cash control less the cash flow associated with theshare repurchase programme and the investment in local loop unbundling. Grosscash was ‚£2,228 million (including ‚£12 million of treasury instruments) andgross debt was ‚£844 million, of which long term debt was ‚£814 million (30September 2004: gross cash ‚£2,245 million and gross debt ‚£859 million).In the third quarter cash capital expenditure was ‚£108 million (Q2 2004/5: ‚£74million, Q3 2003/4: ‚£94 million). The increase in capital expenditure in thequarter reflects the unbundling of further exchanges and the upgrade incapacity and functionality of the backhaul network by Bulldog Communicationsand the phasing of capital expenditure across the Group. Cash capitalexpenditure in the nine months to 31 December 2004 totalled ‚£232 million (Ninemonths to 31 December 2003 ‚£266 million). Capital expenditure for the full year2004/5 is now expected to be between ‚£350 million and ‚£370 million, includinginvestment in local loop unbundling and capital expenditure by Monaco Telecom.As indicated in November, in anticipation of the triennial valuation of the UKdefined benefit pension scheme at 31 March 2005, the company will make aninterim contribution of ‚£100 million in the final quarter of the year.Cable & Wireless - Group Revenue and Cash‚£ million Q3 Q2 Q3 (unaudited and at actual rates) 2004/5 2004/5 2003/4 Revenue UK 390 405 413 CWAO 5 4 6 Europe 46 47 62 Japan & Asia 66 65 71 Bulldog Communications 4 3 - UK Group 511 524 552 National Telcos (excluding Caribbean 141 134 134and Monaco) Caribbean 139 136 159 Monaco Telecom 26 26 - National Telcos 306 296 293 Inter-group eliminations (9) - (6) Revenue from continuing businesses 808 820 839 Group Revenue 808 820 917 Cash Gross Cash 2,228 2,245 2,547 Gross Debt (844) (859) (946) Net Cash 1,384 1,386 1,601Notes to the Quarterly Trading StatementRevenue from continuing businesses excludes the US domestic businesses thatwere deconsolidated from the Group accounts on 8 December 2003 and TeleYementhat ceased operating following the expiry of its licence on 31 December 2003.The analysis of revenue in the table above is based on existing disclosure.From the year ending 31 March 2005, the geographies comprising the UK Groupwill be analysed as Enterprise, Business, Carrier Services and BulldogCommunications (For comparative purposes geographic analysis will be retainedfor the 2004/5 full year results only).The sale of Cable & Wireless IDC Inc ("C&W IDC Japan") is expected to completein the fourth quarter of 2004/5. Until completion of the transaction, resultsfrom C&W IDC Japan will be classified within continuing businesses. C&W IDCJapan revenue for the three months ended 31 December 2004 was ‚£57 million (Q22004/5: ‚£55 million, Q3 2003/4: ‚£61 million).Shares purchased under the share repurchase programme have not been cancelledbut are instead being held as Treasury stock: 2004/5 2004/5 2003/4 31 Dec 04 30 Sep 04 30 Sep 03 Number of shares 2,365,410,136 2,388,599,080 2,383,596,194outstanding Average and period end US and Jamaican dollar exchange rates used in thecurrent period and prior year are shown below:Against Sterling 2004/5 2004/5 2003/4 Q3 YTD Q2 YTD Q3 YTD US$ - Average 1.8185 1.8073 1.6338 - Period end 1.9355 1.8027 1.7629 Jamaican$ - Average 110.4882 109.3445 95.0725 - Period end 118.6460 110.5020 105.6860Final ResultsCable & Wireless will announce its results for the full year to 31 March 2005on 26 May 2005.Contacts:Investor Relations:Louise Breen Director, Investor Relations +44 20 7315 4460Virginia Porter VP, Investor Relations +1 212 551 3563Craig Thornton Manager, Investor Relations +44 20 7315 6225Media:Lesley Smith Group Director of Corporate & Public Affairs +44 20 7315 4410Steve Double Group Head of Media Communications +44 20 7315 6759Peter Eustace Head of Media Relations +44 20 7315 4495About Cable & WirelessCable & Wireless is one of the world's leading international communicationscompanies. It provides voice, data and IP (Internet Protocol) services tobusiness and residential customers, as well as services to other telecomscarriers, mobile operators and providers of content, applications and internetservices.Cable & Wireless' principal operations are in the United Kingdom, continentalEurope, Asia, the Caribbean, Panama, and the Middle East.For more information about Cable & Wireless, go to www.cw.com.This announcement contains forward-looking statements that involve inherentrisks and uncertainties. We have identified certain important factors that maycause actual results to differ materially from those contained in suchforward-looking statements. See those that appear, or are referred to, in thecautionary statements section on the first page of the company's Form 20F 2004. ENDRelated Shares:
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