Final Results

24th May 2007 07:02

Cable & Wireless PLC24 May 2007 CABLE AND WIRELESS plc RESULTS FOR THE YEAR ENDED 31 MARCH 2007 • Group EBITDA before exceptionals up 20% (up 26% at constant currency) to £492 million. Group EBITDA guidance for 2007/08 in the range of £573 million to £608 million • Strong performance from International, with EBITDA before exceptionals of £430 million, an increase of 8% at constant currency. International EBITDA guidance for 2007/08 in the range of US$840 million to US$860 million (between £438 million and £448 million) • Europe, Asia & US (previously known as UK) turnaround ahead of schedule with EBITDA before exceptionals for 2006/07 of £159 million. EBITDA guidance for 2007/08 in the range of £210 million to £220 million and significantly reduced cash envelope for turnaround from £340 million to £280 million, all excluding C&W Access • Group profit before income tax (including exceptionals) more than doubled to £249 million • Group cash and cash equivalents of £1,048 million • Proposed full year dividend of 5.85 pence (2005/06: 4.50 pence), an increase of 30% Chairman's statement Commenting on the results, Richard Lapthorne, Chairman of Cable and Wirelessplc, said: "It's been a good year. The success of the structural changes we made a year agois there for all to see. International has performed well delivering growth incustomers and revenue and, as a result, improved EBITDA. We have made a veryencouraging start to the Europe, Asia & US turnaround and we now have sufficientvisibility to believe that we'll deliver on our ambitious targets. All of whichreinforces our confidence in our future prospects which is reflected in thedividend. I'm delighted to announce that we're recommending a 34% increase inthe final dividend to 4.15 pence, which with the interim of 1.7 pence gives afull year dividend of 5.85 pence, an increase of 30% over 2005/06." Contacts GROUP Clare Waters Director of External Affairs [email protected] +44 (0)20 7315 4088 Ashley Rayfield Director, Investor Relations [email protected] +44 (0)20 7315 4460 Mat Sheppard Manager, Investor Relations [email protected] +44 (0)20 7315 6225 EUROPE, ASIA & US Antonia Graham Head of Public Relations [email protected] +44 (0)7803 724 111 Press Office +44 (0)1344 818 888 INTERNATIONAL Paul Wood Head of Communications [email protected] +44 (0)7909 906819 FINSBURY Rollo Head / James Wyatt-Tilby +44 (0)20 7251 3801 1 Contents Chairman's statement 1Contacts 1Group results 3Analysis of Group results 4Group results before exceptional items 4Group exceptional items 6Group earnings per share 7Dividend 7Reconciliation of Group EBITDA to net cash flow before financing 8Group cash and debt 9Group outlook 11International 12International key performance indicators 12International income statement 14Reconciliation of International EBITDA to net cash flow before financing 18Reconciliation of International net cash flow before financing to repatriation 19Europe, Asia & US 20Europe, Asia & US key performance indicators 21Europe, Asia & US income statement 22Reconciliation of Europe, Asia & US EBITDA to net cash flow before financing 25C&W Access income statement 26Reconciliation of C&W Access EBITDA to net cash flow before financing 27Group results detail 28International results detail 29International results detail (continued) 30International results detail (continued) 31Europe, Asia & US results detail 32Extracts from the financial statements and additional information 33Basis of preparation 33Consolidated income statement 35Condensed consolidated balance sheet 36Consolidated statement of recognised income and expense 37Consolidated cash flow statement 38Cash flow from operating activities 39Provisions for liabilities and charges 40Minority interests 41Dividends paid and proposed 41 2 GROUP RESULTS The Group results presented below should be read in conjunction with the Group'sconsolidated income statement, balance sheet and cash flow statement and relatednotes on pages 33 to 41. 2006/07 2005/06 1 Pre-except- Except- Total Pre-except- Except Total ionals ionals 2 ionals -ionals 2 £m £m £m £m £m £m Revenue 3,348 - 3,348 3,230 - 3,230 Outpayments & (2,024) - (2,024) (1,914) (1) (1,915)network costs Staff costs (509) (41) (550) (527) (34) (561) (excluding LTIP charge) Other costs (323) (37) (360) (378) 14 (364) Operating costs (2,856) (78) (2,934) (2,819) (21) (2,840) EBITDA 3 492 (78) 414 411 (21) 390 LTIP charge (27) - (27) - - - Depreciation & (256) (13) (269) (263) (232) (495) amortisation Amortisation of (17) - (17) (11) (5) (16) acquired intangibles Net other 11 2 13 - 17 17 operating income Operating profit/ 203 (89) 114 137 (241) (104) (loss) Share of post-tax 18 (29) (11) 52 2 54 profit of joint ventures & associates 4 Total operating 221 (118) 103 189 (239) (50) profit/(loss) Net finance (28) - (28) 6 - 6 (expense)/income Gains on sale of - 153 153 2 70 72 non-current assets Gain on 3 18 21 - 72 72 termination of operations Profit/(loss) 196 53 249 197 (97) 100 before income tax Income tax (44) 1 (43) (29) 2 (27) (expense)/credit Profit/(loss) for 152 54 206 168 (95) 73 the year from continuing operations Profit for the - 28 28 2 88 90 year from discontinued operations Profit/(loss) for 152 82 234 170 (7) 163 the year Attributable to 92 82 174 118 (42) 76 equity holders of the Company Attributable to 60 - 60 52 35 87 minority interests Profit/(loss) for 152 82 234 170 (7) 163 the year Earnings/(losses) 4.0p 2.3p 6.3p 5.1p (5.7)p (0.6)p per share from continuing operations attributable to equity holders (pence) Earnings/(losses) 4.0p 3.5p 7.5p 5.2p (1.9)p 3.3p per share attributable to equity holders (pence) Dividend per share 5.85p 4.5p (pence) Capital (403) (416) expenditure (£m) Cash & cash 1,048 1,127 equivalents (£m) 1 Results adjusted to reflect revised accounting for Monaco Telecom and other presentational points as set out on pages 33 to 34. 2005/06 results include the consolidation of Energis from the date of acquisition on 11 November 2005 2 Exceptionals comprise items considered exceptional by virtue of their size, nature or incidence and include restructuring and impairment charges, and releases of certain provisions and certain profits and losses on disposal of non-current assets. For further details on exceptionals refer to page 6 3 Earnings before interest, tax, depreciation and amortisation, long term incentive plan (LTIP) charge and net other operating income. For further details on the LTIP refer to page 4 4 Joint ventures & associates include Batelco (Bahrain) to the 16 January 2007, the date of its disposal 3 ANALYSIS OF GROUP RESULTS The Group's financial performance is described on pages 4 to 11 and theperformance of the individual businesses is discussed in more detail in theInternational and the Europe, Asia & US sections that follow on pages 12 to 19and 20 to 27 respectively. The UK business has changed its name to Europe, Asia & US to give a betterreflection of the nature of its activities and the markets in which it operates.The nature and geographic extent of the business has not changed. The commentary that follows refers to the Group results before exceptionalitems. For analysis of exceptional items see page 6. Group results before exceptional items Revenue The increase in Group revenue of £118 million to £3,348 million principallyreflects the full year impact of the revenue from customers acquired as part ofthe Energis transaction on 11 November 2005. This has more than offset theimpact of the anticipated churn and erosion Europe, Asia & US encountered insubsequently restructuring the business to focus on larger, more profitablecustomers. In addition, this growth was supported by a strong revenueperformance from International where further increases in mobile and broadbandrevenue have compensated for the shift away from fixed line voice services andthe translation impact of a weaker US dollar. Operating costs The increase in operating costs of £37 million to £2,856 million was alsopredominantly driven by the impact of servicing the customers acquired withEnergis. In International, operating costs have increased by £3 million in comparisonwith 2005/06 due to the increase in costs associated with the acquisition of newmobile and broadband customers, partially offset by savings in other operatingcosts. The operating costs of Central, equivalent to its EBITDA loss, have reducedsignificantly from £50 million in 2005/06 to £22 million in 2006/07 followingthe restructuring of the Group. This is mainly driven by a reduction inconsultancy costs and a headcount decrease from 156 at 31 March 2006 to 75 at 31March 2007. EBITDA The trends in revenue and operating costs described above resulted in a 20% (26%at constant currency) improvement in EBITDA of £81 million to £492 million,compared with 2005/06. Long term incentive plan (LTIP) charge In line with the increase in the total shareholder return from 1 April 2006 to31 March 2007 of approximately 59%, the total LTIP charge for the year ended 31March 2007, in accordance with IAS 19, is £27 million. This does not representthe committed amount to participants in the plan which will depend onperformance over the life of the plan in accordance with the plan's rules. Depreciation and amortisation The depreciation and amortisation charge decreased by £7 million to £256 millionreflecting the impact of the impairment charge in Europe, Asia & US in 2005/06.This has more than offset the impact of increasing depreciation in C&W Accessand International. Net other operating income Group other operating income of £11 million mainly relates to the profits on thedisposal of properties within Europe, Asia & US. Share of post-tax profit of joint ventures and associates Our share of post-tax profits of joint ventures and associates decreased by £34million to £18 million following the disposal of Batelco, our associate inBahrain, and the poor performance of TSTT, our joint venture in Trinidad andTobago. Further analysis of the 2006/07 performance of these businesses can befound on pages 16 to 17. 4 Net finance expense The £28 million net finance expense for 2006/07 compares to an income of £6million in 2005/06. Finance income has decreased by £35 million to £52 milliondue principally to a reduced average cash balance. Finance expense of £80million has decreased by £1 million compared with 2005/06. Income tax expense The tax expense for 2006/07 before exceptionals of £44 million comprises: • an overseas tax expense of £54 million • a UK deferred tax credit of £10 million The increase of £15 million compared with 2005/06 arises mainly as a result ofthe mix of profits and losses and tax rates across the countries in which weoperate. We currently expect that: • the tax rate for International will remain in the mid to low twenties until at least 2008/09 • the current tax rate for Europe, Asia & US will be effectively nil for the foreseeable future as a result of unclaimed capital allowances. At 31 March 2007, we had unclaimed capital allowances of approximately £3.8 billion Pensions The IAS 19 surplus for the main UK defined benefit pension scheme at 31 March2007 is £43 million (31 March 2006: deficit £89 million). On an actuarial basis,the fund had a surplus of £92 million at 31 March 2007, based on an approximateupdate of the 2005 triennial valuation to reflect changes in the value of thefund's assets and liabilities since that time. The next triennial valuationreview will be based on the position at March 2008. We also have unfunded pension liabilities in the UK of £22 million (31 March2006: £23 million). The net IAS 19 surplus of the overseas defined benefit pension schemes is £7million at 31 March 2007 (31 March 2006: £10 million). 5 Group exceptional items 2006/07 International Europe, Central Total Asia & US 1 £m £m £m £m Operating items: Restructuring (13) (65) - (78) Write-off of redundant assets - (13) - (13) Net loss on sale of C&W Access - (11) - (11) customer base Insurance receipts and related 13 - - 13 provision releases Trinidad & Tobago (TSTT) asset (29) - - (29) impairment Exceptional items within total (29) (89) - (118) operating profit Non-operating items: Profit on disposal of our 153 - - 153 Bahrain associate, Batelco Release of unused accruals - - 18 18 related to our former insurance operation, Pender Exceptional items below total 153 - 18 171 operating profit Total exceptional items before 124 (89) 18 53 tax Tax on exceptional items 1 - - 1 Total exceptional items from 125 (89) 18 54 continuing operations Exceptional items from - - 28 28 discontinued operations: Release of unused provisions related to our former US business and other transactions Total exceptional items 125 (89) 46 82 1 Europe, Asia & US includes C&W Access In 2006/07, we recognised an £82 million profit in respect of exceptional items. Headcount reduction and property rationalisation programmes resulted in a totalcharge of £78 million. The headcount reduction programmes took place acrossInternational (£13 million) and Europe, Asia & US (£28 million - net of a £6million pension credit and including C&W Access - £3 million). In addition, as aresult of headcount reduction in Europe, Asia & US, we have vacated a number ofbuildings resulting in an exceptional property rationalisation charge of £37million, of which £28 million relates to the exit from the former Energisheadquarters in Reading. The sale of the C&W Access retail customer base resulted in a net loss of £11million comprising net proceeds of £9 million more than offset by the write offof £20 million of acquired intangible assets and goodwill relating to thebusiness sold. Subsequently, we have also taken a £13 million charge relating tothe write off of redundant IT assets. We also recognised £13 million of exceptional credits relating to insurancereceipts and related provision releases in International. As a result of thepoor trading performance of our joint venture, TSTT, we have written down ourshare of TSTT's net assets by £29 million. The sale of our Bahrain associate as announced in January 2007 for net proceedsof £256 million generated a profit on disposal of £153 million. Following progress in resolving historical claims and other risks, we havereleased £18 million of unused accruals relating to Pender, our former insuranceoperation. A £28 million credit from discontinued operations has arisen from the release ofunused provisions primarily associated with the exit of our former US businessand other transactions. 6 Group earnings per share 2006/07 Before Exceptionals Reported exceptionals £m £m £m Profit for the year from continuing 152 54 206 operations Attributable to equity holders 92 54 146 Attributable to minority interests 60 - 60 Profit for the year from discontinued - 28 28 operations Profit for the year 152 82 234 Attributable to equity holders 92 82 174 Attributable to minority interests 60 - 60 Earnings/(loss) per share from 4.0p 2.3p 6.3p continuing operations attributable to equity holders of the Company during the year (pence) 2005/06 5.1p (5.7)p (0.6)p Earnings/(loss) per share 4.0p 3.5p 7.5p attributable to equity holders of the Company during the year (pence) 2005/06 5.2p (1.9)p 3.3p Earnings per share attributable to equity holders during the year of 7.5 pencemore than doubled compared with 2005/06, due to the factors described in theGroup commentary above. Excluding the profit from exceptional items, earningsper share was 4.0 pence, a decline of 23% compared with the prior year. Reconciliation of shares in issue to shares outstanding at year end As at 31 March 2007 As at 31 March 2006 '000 '000 Number of shares in issue 2,460,484 2,421,046 Shares held in treasury (74,950) (74,950)Shares held by employee share (36,793) (50,990)ownership plan trust Number of shares outstanding 2,348,741 2,295,106 Weighted average number of 2,324,305 2,286,129 shares outstanding during the year for the EPS calculation Dividend We are proposing a full year dividend of 5.85 pence per share, which representsan increase of 30% over the 2005/06 full year dividend and reflects the Board'sconfident outlook, as well as the progress made in 2006/07. Of this year'sproposed full year dividend of 5.85 pence per share, 1.7 pence was paid as aninterim dividend on 19 January 2007. The final proposed dividend of 4.15 pence per share will be paid on 10 August2007 to ordinary shareholders on the register as at 15 June 2007. 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, TheCauseway, Worthing, West Sussex, BN99 2DZ by 13 July 2007. Copies of the mandateform, and the scrip dividend brochure, can be obtained from Lloyds TSBRegistrars (UK callers: 0870 600 3975, overseas callers: +44 121 415 7047) orfrom our website www.cw.com. 7 Reconciliation of Group EBITDA to net cash flow before financing 2006/07 1 £m EBITDA 2 492 Exceptional items (78) EBITDA less exceptionals 414 Movement in exceptional provisions (25) Movement in working capital and other (99)provisions Income taxes paid (46)Finance income 66 Purchase of property, plant, equipment & (378) intangible assets Acquisitions & disposals 305 Other income 9 Net cash inflow before financing activities 246 1 Based on our management accounts 2 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income The Group net cash inflow before financing of £246 million comprises outflows of£162 million in Europe, Asia & US and £110 million in C&W Access,(W1) , offsetby cash inflows of £482 million in International and £36 million in Central.Further details in respect of International, Europe, Asia & US and C&W Accesscash flows are included on pages 18, 25 and 27 respectively. The £36 million net cash inflow before financing in Central comprises interestincome of £36 million and proceeds from the redemption of credit-linked notes(£40 million) for cash. This is offset by an EBITDA loss of £22 million and amovement in working capital of £3 million. In addition, acquisitions anddisposals include £15 million of dividends paid to minority shareholders inMonaco. 8 Group cash and debt Cash and cash equivalents As at 31 March 2007 As at 31 March 2006 £m £m Europe, Asia & US 1 20 18 International 143 261 Central 885 887 Group cash and short term 1,048 1,166 investments Less: credit-linked notes - (39) Group cash and cash equivalents 1,048 1,127 1 Europe, Asia & US numbers include £5 million classified in assets held for sale and £4 million of cash at C&W Access Our Group cash position remains strong with cash and cash equivalents of £1,048million at 31 March 2007, largely unchanged compared to 31 March 2006 (£1,127million). Europe, Asia & US and C&W Access had net cash outflows beforefinancing of £162 million and £110 million respectively covering operationalfunding and capital investment. International had a net cash inflow beforefinancing of £482 million, including the £256 million net proceeds from thedisposal of our stake in Batelco. We repaid a net £90 million of third partydebt, which mainly relates to the repayment of the £106 million EuropeanInvestment Bank (EIB) loan and associated cross currency swap (£15 million)during the year, partially offset by £60 million net proceeds of Internationalexternal financing activities. We paid cash dividends of £83 million to ourequity holders and £93 million was paid to minority shareholders. The remaining£23 million outflow related mainly to Central items and interest payments. Debt Due in Due in Due in Total Due in more than more than more than less 1 but 2 but not 5 years than 1 less than more than year 2 years 5 years £m £m £m £m £m Europe, Asia & US 9 11 - - 20International 68 10 52 13 143Central - - 213 340 553Group debt as at 31 March 77 21 265 353 7162007 Group debt as at 31 March 143 20 239 382 7842006 Europe, Asia & US debt has reduced by £9 million to £20 million followingscheduled payments on a finance lease. We have increased the amount of debt in our International subsidiaries in Panamaand the Caribbean during the year by £60 million to £143 million to optimise ourcost of capital and, in the case of Jamaica, to mitigate foreign exchange risk. During 2006/07, Central debt has reduced by £119 million to £553 million largelyas a result of the repayment of the EIB loan (£106 million) and the repurchaseof the 2012 and 2019 bonds (£22 million), partially offset by the amortisationof the premium on the convertible bond (£11 million). Following the repayment ofthe EIB loan in September 2006, the £553 million (31 March 2006: £672 million)external funding in Central is now all in the form of publicly quoted bonds.These bonds have either been issued or guaranteed by Cable and Wireless plc.Their maturity profile is spread between 2010 and 2019. The £340 million 2012and 2019 bonds are shown net of £58 million bonds which have been repurchasedand are held in treasury. 9 A convertible bond with a par value of £258 million (carrying value of £213million) matures in July 2010. Conversion is at the option of bondholders at ashare price of £1.45 (subject to adjustment for certain corporate actions or achange of control). We can give notice to redeem the bond from 17 July 2007onwards at par should the share price exceed £1.885 for a total of 20 businessdays in a period of 30 consecutive business days. Depending upon the performanceof the share price before maturity of the bond, the convertible bond may beredeemed by the issue of shares rather than cash. Given the maturity profile of our debt and the substantial cash resources stillavailable to the Group, we are satisfied that we can meet our working capitalrequirements for at least the next 12 months. 10 GROUP OUTLOOK The following statements reconfirm guidance previously given or made for thefirst time: Group EBITDA 2007/08Range: Low High US$m US$m International 840 860 £m £m International 438 448 Europe, Asia & US 1 210 220 C&W Access (45) (35)Total Europe, Asia & US 165 185 Central (30) (25)Group EBITDA 573 608 1 Excludes C&W Access We expect the following outcomes: For International: • EBITDA for 2007/08 in the range of US$840 million to US$860 million (£438 million to £448 million) • Sustainable EBITDA margin between 35% and 37% by 2008/09; • Capital expenditure to continue at 12% to 14% of revenue; • The percentage tax rate to be in the mid to low twenties until at least 2008/09; • Cash repatriation to be at least 100% of our proportionate share of net cash flow after external financing from our subsidiaries; • Working capital movement to be zero as a percentage of revenue by 2008/09. For Europe, Asia & US (excluding C&W Access) • EBITDA for 2007/08 in the range of £210 million to £220 million; • Total cash outflow before Europe, Asia & US becomes cash generative to be no more than £280 million (excluding the £88 million sale and leaseback transaction announced on 2 April 2007), from 1 April 2006. This includes £180 million of exceptional cash items relating to the Europe, Asia & US turnaround along with capital expenditure, working capital requirements and payments against provisions made in prior periods. Following the cash outflow of £162 million in 2006/07, this leaves £118 million of cash outflow remaining, of which £110 million relates to exceptional cash items; • Total net cash outflow before financing for 2007/08 to be about £80 million (excluding the impact of the sale and leaseback transaction announced on 2 April 2007); • Capital expenditure of approximately 10% of revenue for the foreseeable future; • The percentage current tax rate to be effectively nil for the foreseeable future; • Future Europe, Asia & US with about £2 billion revenue and double digit operating margin. For C&W Access: • EBITDA loss for 2007/08 in the range of £35 million to £45 million; • Net cash outflow before financing for 2007/08 of approximately £70 million. For Central: • EBITDA cost for 2007/08 in the range of £25 million to £30 million. 11 International Cable & Wireless International is the world's pre-eminent telecoms provider forsmall to medium markets, with particular expertise and presence in islandeconomies. We operate in 33 countries, through 25 subsidiaries and eight jointventures. Our principal businesses are in the Caribbean, Panama, Macau, Monacoand Islands (Islands comprises operations in the Channel Islands, Isle of Manand the Indian, Atlantic and Pacific Oceans). We aim to be the telecoms provider of choice in all of our markets by offeringour customers attractive products and services using high quality networkscoupled with a superior customer experience. Commenting on the results for 2006/07, Harris Jones, Chief Executive ofInternational said: "International has performed well. By putting the customer first, investing inthe growth areas of mobile and broadband and being mindful of our costs we'veachieved an 8% increase, at constant currency, in our EBITDA. Our relentlessfocus on cash is reflected in the over half a billion pounds we've remitted toCentral. We exit this year stronger than we began and have set the foundationfor an even better performance in 2007/08." International key performance indicators As at: 31 March 2007 30 September 2006 1 31 March 2006 1 ('000) ('000) ('000) Total active 2 GSM mobile 5,033 4,290 3,485 customers Subsidiaries 2,611 2,085 1,750 Joint ventures 2,422 2,205 1,735 Total broadband customers 401 338 288 Subsidiaries 378 321 275 Joint ventures 23 17 13 Total fixed line 1,902 1,876 1,867 connections Subsidiaries 1,531 1,505 1,497 Joint ventures 371 371 370 1 For ease of comparison, March 2006 and September 2006 numbers have been restated to exclude Batelco (Bahrain) 2 An active customer is defined as one having performed a revenue-generating event in the previous 60 days Active GSM mobile customers We had over five million customers at the end of 2006/07 across 24 markets, anincrease of 44% compared with 31 March 2006. We are the market leader in all butfour of these markets. Our subsidiaries' active GSM mobile customer base increased 49% in 2006/07 to2.6 million customers. We saw growth in all our markets, with the largest gainsin Panama, Jamaica and the East Caribbean. Panama's customer base grew to over one million this year driven by our improvednetwork quality and coverage, innovative promotional activity on prepaidproducts and further migration from TDMA services. In Jamaica, we have grown ourcustomer numbers by 47% to 545,000 by improving our network coverage andsimplifying our pricing plans. This has led to growth in our market share offour percentage points to 27%. Customer numbers in the East Caribbean increased34% to 306,000 in 2006/07 driven by attractive handset pricing and usagepromotions. Our investment in the performance and coverage of our mobile networks has alsobeen a key driver of growth in other markets such as North Caribbean and Islandswhere customer numbers grew by 39% and 33% respectively. The number of customers in our joint ventures increased by 40% in 2006/07compared with 2005/06 driven by growth in Roshan of 39% to 1.2 million, Dhiraaguof 31% to 185,000 and TSTT where migration of customers from TDMA and underlyingmarket growth drove a 43% increase in GSM customer numbers to over one million. 12 Broadband customers Our total broadband customers increased by 39% to over 400,000 customers in 2006/07. We are the market leader in all 26 of our broadband markets. Our subsidiaries' broadband customers increased by 37% in 2006/07 to 378,000customers. This was primarily driven by strong growth across the Caribbean -Jamaica almost doubled its customer base to 79,000 customers by offering higherspeeds for similar prices. Barbados increased numbers by 75% to 28,000 as aresult of promotional offers, such as the offer of a free modem andinstallation. East Caribbean customer numbers grew by 42% driven by revampedpricing plans, further rollout of Netspeak (our VoIP product) and promotionaloffers. Customer numbers in Macau increased 38% to 102,000 driven by extended networkcoverage and the launch of high speed ADSL 2+ services to every home andbusiness. We continue to extend our broadband network in all our markets and to upgradeour customer proposition to higher speed services. 17 of our markets (includingjoint ventures) still have market penetration rates of less than 50% offeringfurther opportunity for growth. Fixed line connections The number of fixed line customers remained steady over the 12 month period to31 March 2007 at approximately 1.9 million customers. We are the market leaderin all but one (Jersey) of our 26 fixed line services markets. In Jamaica customer numbers grew 14% compared with 2005/06 to 360,000 driven bythe introduction in June 2006 of a prepaid fixed line product and the launch ofa single national rate. This increase was largely offset by small declines inour other subsidiaries driven by substitution with other products. 13 International income statement 2006/07 2005/06 Change as Constant reported 1 currency change 2 £m £m % % Mobile 406 360 13% 19% Broadband 77 56 38% 45% Domestic voice 307 338 (9)% (3)% International voice 168 188 (11)% (5)% Enterprise, data & other3 264 260 2% 6% Other internet 6 10 (40)% (37)% Total revenue 1,228 1,212 1% 7% Cost of sales (418) (386) (8)% (14)% Gross margin 810 826 (2)% 3% Other operating costs (380) (409) 7% 2% (excluding LTIP charge) EBITDA4 430 417 3% 8% LTIP charge (10) - nm nm Depreciation & (140) (136) (3)% (9)% amortisation Amortisation of acquired (5) (6) 17% 17% intangibles Net other operating income 2 - nm nm Operating profit before 277 275 1% 6% joint ventures & associates Share of post-tax profit 21 58 (64)% (63)% of joint ventures & associates Operating profit before 298 333 (11)% (7)% exceptional items Exceptional items (29) (12) nm nm Total operating profit 269 321 (16)% (12)% Capital expenditure (168) (142) (18)% (25)% Headcount (full time 7,876 8,150 3% n/a equivalents at 31 March) nm represents % change not meaningful 1 Positive percentages represent improvement 2 Constant currency growth rates are based on the restatement of prior year comparatives at current year's reported average exchange rates. Positive percentages represent improvement 3 Includes corporate solutions, international management contracts, internet hosting, leased circuits, legacy data services, directory services, equipment rentals and television services 4 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income 14 The commentary that follows focuses on percentage changes at constant currencyin order to highlight the underlying trends in International. However, whereabsolute amounts are quoted, they reflect actual exchange rates. Revenue Total revenue increased 7% to £1,228 million compared with 2005/06. Growth inmobile and broadband contributed an additional £67 million of revenue in 2006/07and together now represent almost 40% of our total revenue. Mobile revenue Mobile revenue grew £46 million to £406 million in 2006/07, a 19% increasecompared with 2005/06. Mobile is our largest segment representing about a thirdof our total revenue. Panama's revenue increased 24% compared with 2005/06 to £123 million driven bythe growth in the customer base and our continued investment in improving theperformance of our network to maintain this competitive advantage. Jamaica's mobile revenue increased 24% to £47 million as we continued to winback customers. Our market share grew by four percentage points to 27% -evidence that the turnaround of the Jamaican business is underway. This growthwas the result of expanding our network coverage and simpler and cheaper callingplans. The 16% increase in mobile revenue in Macau to £54 million was driven by growthin roaming revenue as a result of the negotiation of roaming agreements andincreased tourist arrivals associated with the economic growth. Broadband revenue Our broadband revenue increased by 45% compared with 2005/06 to £77 million,with growth in all our regions. The largest gain was in Jamaica where ourrevenue almost doubled to £14 million compared with 2005/06. Growth was driven by increased coverage, a focus on improving the quality andspeed of service, lower pricing, further rollout of Netspeak and the migrationof customers from dial up services. Domestic and international voice revenue Domestic and international voice revenue decreased 3% and 5% respectivelycompared with 2005/06 to £307 million and £168 million, principally as a resultof competitive and regulatory pressure on pricing and substitution by mobile andbroadband. In particular, international voice revenue in the North Caribbean declined by £8million to £19 million, a 25% decrease compared with 2005/06, as high broadbandpenetration rates drove increased VoIP substitution. However, in Jamaica, fixed line revenue grew despite the general marketconditions, largely due to the introduction of a prepaid fixed line service anda new prepaid calling card with low international rates, driving 2% growth inboth domestic and international revenue. In Macau, international voice revenueincreased 5% driven by the influx of a large number of workers to support therapidly expanding gaming industry. Enterprise, data and other revenue Enterprise, data and other revenue increased 6% to £264 million in 2006/07. This growth was driven by Monaco's international traffic management contracts,such as those with PTK in Kosovo and Roshan in Afghanistan as those marketscontinued to develop. Gross margin Gross margin increased 3% in 2006/07 to £810 million. As a percentage ofrevenue, gross margin declined two percentage points to 66%. This was driven byincreased subscriber acquisition costs as we grew our market share, competitivepricing pressure and lower percentage margin revenue streams from Monaco'sinternational traffic management contracts. 15 Other operating costs Other operating costs reduced £29 million to £380 million, a 2% decreasecompared with 2005/06. As a percentage of revenue, other operating costs havedeclined from 34% in 2005/06 to 31% in 2006/07 reflecting the restructuring ofour businesses and cost control with a 3% decrease in headcount to 7,876 at 31March 2007. Our other operating costs include net head office costs transferred toInternational of £3 million and additional investments in Jersey and the Isle ofMan totalling £3 million. These costs have been more than offset by accrualreleases totalling £10 million. £7 million of these accrual releases relate tothe settlement of contractual disputes on better than expected terms in Monaco. EBITDA Our EBITDA before exceptionals increased 8% in 2006/07 to £430 million from £417million in 2005/06. Our reported EBITDA margin was 35.0% in 2006/07 comparedwith 34.4% in 2005/06. After allowing for the items in other operating costs above, the EBITDA marginfor 2006/07 was 34.7%. In the second half of 2006/07, our EBITDA margin washigher than in the first half mainly as a result of the accrual releases of £10million. For 2007/08, we expect that our EBITDA will be between US$840 million and US$860million. At the mid point, this represents a 5% increase on the imputed US$EBITDA result for 2006/07 of US$810 million. Assuming an average dollar exchangerate of 1.95 for 2007/08 and taking into account our exposure to othercurrencies, this represents EBITDA of £438 million to £448 million. Capital expenditure and depreciation We increased our capital expenditure by £26 million compared with 2005/06 to£168 million with a focus on extending our mobile networks and improving thespeed and coverage of our broadband networks. We will continue to invest in our broadband coverage and service capability. ByDecember 2007, we are aiming to enable 90% of our broadband network to offer atleast 8Mb. Depreciation increased by 9% compared with 2005/06 to £140 million driven mainlyby our investment in mobile and broadband. As we continue to invest in newertechnologies, our asset life cycles are decreasing, resulting in risingdepreciation charges. Joint ventures and associates Our share of revenue Our share of post-tax profit Ownership as at 31 March 2007 2006/07 2005/06 2006/07 2005/06 % £m £m £m £m Trinidad & Tobago 49 120 123 (12) 12 (TSTT) Bahrain (Batelco)1 0 52 63 12 26 Afghanistan 37 38 36 2 5 (Roshan) The Maldives 45 25 26 12 12 (Dhiraagu) Fiji (Fintel) 49 8 8 2 2 Others 6 7 5 1 Total pre 249 263 21 58 exceptional items Exceptionals: - - - 2 Dhiraagu Exceptionals: TSTT - - (29) - Total post 249 263 (8) 60 exceptional items 1 Batelco (Bahrain) results only applicable up to the date of disposal, 16 January 2007 Our share of post-tax loss (post exceptionals) from our joint ventures andassociates was £8 million (including a £29 million exceptional write downrelating to TSTT) compared with a £60 million profit in 2005/06. The mainfactors of this reduction are the poor performance of Trinidad and Tobago (TSTT)and the disposal of our stake in our associate in Bahrain (Batelco). 16 Our share of pre-exceptional post-tax loss in TSTT was £12 million in 2006/07compared with a £12 million profit in 2005/06. In addition to the poor financialperformance, there was evidence of weak controls, which are being addressed bythe new management. We are engaged with the Government of Trinidad and Tobago,the majority shareholder, on restructuring efforts targeted at improvingperformance. Monaco Telecom's joint venture in Afghanistan (Roshan) contributed £3 millionless than in the prior year due to the introduction of a ten percent sales tax,an increase in depreciation from mobile investment, higher interest charges andadverse movements in foreign exchange rates. Our joint venture in the Maldives (Dhiraagu) faced its first full year of mobilecompetition in 2006/07 and has competed strongly to maintain its marketleadership - Dhiraagu contributed £12 million to our share of post-tax profit inline with results for 2005/06. Exceptional items As a result of the trading performance of our joint venture, TSTT, we havewritten down our share of TSTT's net assets by £29 million. As a result, ourshare of TSTT's net assets reduced to £72 million. International exceptional items also include £13 million costs followingheadcount reduction programmes in the Caribbean and Islands, which are offset by£13 million exceptional credits relating to insurance receipts and relatedprovision releases. Exchange rate movements During 2006/07, both the US and the Jamaican dollar weakened against sterling,by 5% and 11% respectively. In 2006/07, we sold International US$ remittancesforward against sterling at $1.86. In the light of current US dollar weaknessand the fact that 2007/08 remittances are expected to be primarily receivedduring the second half of the financial year, to date we have not entered intoany further hedging contracts. A one cent change in the US$:£ rate has approximately a £2 million impact on thefull year EBITDA of International. A one dollar change in the Jamaican $:£exchange rate has approximately a £0.5 million impact on the reported full yearEBITDA of International. During 2006/07, approximately 70% of International EBITDA was earned in USdollar denominated or related currencies. Given that the US dollar is thedominant currency of International, from 2007/08, we will report theInternational results in US dollars to give a better reflection of theunderlying performance of our business. 2006/07 2005/06 US$ : £ Average 1.8807 1.7946Year end 1.9631 1.7406 Jamaican$ : £ Average 124.72 112.60Year end 132.74 113.76 17 Reconciliation of International EBITDA to net cash flow before financing 2006/07 1 £m EBITDA2 430 Exceptional items (13) EBITDA less exceptionals 417 Movement in exceptional provisions (6) Movement in working capital and other provisions (15) Income taxes paid (44) Purchase of property, plant, equipment & intangible assets (164) Finance income 30 Acquisitions & disposals 261 Other income 3 Net cash inflow before financing activities 482 1 Based on our management accounts 2 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income We generated net cash flow of £482 million before financing activities in 2006/07 including £256 million of net proceeds from the disposal of our 20% stake inour associate in Bahrain (Batelco). The £19 million exceptional outflow represents costs associated withrestructuring our businesses to drive operational efficiencies principallythrough headcount reductions. Our £15 million movement in working capital is mainly driven by Monaco where anaccrual release following the settlement of supplier disputes and therenegotiation of contract payment terms relating to our contract with PTK inKosovo had a negative impact on working capital of £14 million. Finance income consists of £23 million of dividends received from joint venturesand associates, and £7 million of interest and other income. Cash capital expenditure was £164 million. For more details on the key areas ofexpenditure, see page 16. 18 Reconciliation of International net cash flow before financing to repatriation 2006/07 £m Net cash inflow before financing activities 482 Net inflow from external financing activities 60 Net cash inflow after external financing 542 Less: Batelco disposal net proceeds (256) Joint venture and associate dividends (23) Net cash inflow after external financing generated by 263 subsidiaries Less: Share attributable to minority interests (76) International proportionate share of net cash inflow after 187 external financing Surplus cash balances from subsidiaries repatriated 64 Operational repatriation 251 Operational repatriation efficiency2 134%Batelco disposal net proceeds 256 Joint venture and associate dividends 23 Total repatriation 530 1 Based on our management accounts 2 Operational repatriation efficiency is calculated by dividing operational repatriation by International share of net cash inflow after external financing In 2006/07, we remitted £530 million to Central. This remittance included £256million of net proceeds from the Batelco disposal, and £60 million proceeds fromexternal financing activities in Panama and the Caribbean. At an operational level, we remitted £251 million to Central in 2006/07representing 134% of our share of net cash flow generated by subsidiaries afterexternal financing. This exceeds our target to remit at least 100% of our shareof cash generated and includes the return of surplus cash balances from oursubsidiaries which is not expected to recur to the same extent in 2007/08. 19 Europe, Asia & US Cable & Wireless Europe, Asia & US provides enterprise and carrier solutions tothe largest users of telecoms services across the UK, Europe, Asia and the US. The UK business has changed its name to Europe, Asia & US to give a betterreflection of the scope of its activities and markets. The nature and geographicextent of the business has not changed. Our strategy is to serve the largest users of telecoms with high qualityIP-based services tailored to their specific business needs and to deliver thema superior level of service. Our turnaround is based on three phases: integration, completed early in 2006/07; our ongoing recovery programme; and finally transformation that creates anew business which delivers excellent service to our customers. During 2006/07,our main objectives were to improve service, improve margin, reduce costs, andcontinue to execute our strategy. Commenting on the results for 2006/07, John Pluthero, Chairman of Europe, Asia &US said: "We've made more progress than expected in 2006/07 on the underlying drivers ofour long term success. The impact is already coming through in our results withEBITDA and cash flow well ahead of plan. "It's only a start, but a good start. We're looking forward to the next fewyears." 20 The following analysis of the Europe, Asia & US key performance indicators,income statement and cash flow reconciliation refers to Europe, Asia & USexcluding C&W Access. The equivalent analysis for C&W Access is on pages 26 to27. Europe, Asia & US key performance indicators As at: 31 March 30 September 31 March 2007 2006 2006 Number of customers 9,992 14,566 21,000 % Services revenue1 48% 44% 44%% IP, data and hosting revenue1 37% 32% 27%Reduction in monthly operating cost £7.3m £7.1m £4.4mrun rate from November 2005 Headcount (full time equivalents) 5,341 5,179 5,614 Number of exchanges unbundled 802 685 411 1 Calculated on the basis of six months ending Our programme to reduce the number of customers is progressing well and we nowhave fewer than 10,000 customers. We expect to reduce the overall number ofcustomers to about 3,000, comprising large corporates, carriers, resellers andpublic institutions. The proportion of services revenue has increased from 44% to 48% since thesecond half of 2005/06. We are seeing growth in our global enterprise customersand have expanded our dedicated services portfolio. We expect to see furthergrowth in this area as a result of winning three additional dedicated servicescustomers in 2006/07. The proportion of IP, data & hosting revenue has increased from 27% to 37% sincethe second half of 2005/06. This is a result of organic growth in our servicescustomers, migration of customers from legacy data products to IP and areduction in traditional voice. The monthly operating cost reduction since November 2005 is £7.3 millionrepresenting a reduction in monthly costs of £2.9 million since 31 March 2006 ofwhich £2.7 million was achieved during the first half of 2006/07. During thesecond half of this year, we have continued to reduce costs, but savings havebeen partially offset by our investment in service. This investment largelyrelates to new colleagues and upgrades to improve network resilience. We had 5,341 colleagues in the business at 31 March 2007. While this representsa net reduction of 273 since 31 March 2006, we have added a net 162 in thesecond half of this year as a result of our decision to improve service to ourcustomers through the recruitment of 445 colleagues. Our local loop rollout programme is complete. We have backhaul connectivity toour multi service platform (MSP) from 802 unbundled exchanges, resulting in 52%coverage of UK households and businesses. In addition, we intend to use ourfootprint to provide services to corporate and SME customers using ADSL andSDSL. 21 Europe, Asia & US income statement 2006/07 2005/06 1 Change as reported 2 £m £m % IP, data and hosting 727 513 42% Legacy products 191 227 (16)% Traditional voice 1,201 1,288 (7)% Total revenue 2,119 2,028 4% Outpayments & network costs (1,516) (1,421) (7)% Staff costs (excluding LTIP (289) (290) 0% charge) Other costs (155) (168) 8% Operating costs (1,960) (1,879) (4)% EBITDA3 159 149 7% LTIP charge (17) - nm Depreciation & amortisation (92) (118) 22% Amortisation of acquired (12) (5) nm intangibles Net other operating income 8 - nm Operating profit before joint 46 26 77% ventures & associates Share of post-tax loss of joint (3) (6) 50% ventures & associates Operating profit before 43 20 nm exceptional items Exceptional items (60) (234) 74% Total operating profit (17) (214) 92% Capital expenditure (204) (207) 1% Headcount (full time equivalents 5,341 5,614 5% at 31 March) nm represents % change not meaningful 1 Energis consolidated from 11 November 2005 2 Positive percentages represent improvement 3 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income 22 Energis We have included the results of Energis from the date of its acquisition - 11November 2005. Revenue Revenue has increased by £91 million to £2,119 million in 2006/07. This islargely due to the inclusion of a full year of Energis in 2006/07. This has morethan offset the impact of the anticipated churn and erosion encountered inrestructuring the business to focus on larger, more profitable customers. Whilst we remain a customer-centric business, revenue has been split on aproduct basis for ease of understanding the performance of the business. Forconsistency with previous reporting, the services revenue was £978 million (46%)and £846 million (42%) for 2006/07 and 2005/06 respectively. The carrier revenuewas £1,141 million and £1,182 million for the same periods respectively. IP, data & hosting IP, data & hosting products underpin our strategy - enabling us to offer ourcustomers high quality global connectivity and market-leading services andapplications, with the ability to converge onto a single platform. IP, data & hosting revenue of £727 million in 2006/07 has increased by £214million, which is an increase of 42% compared with 2005/06, and now represents34% of total revenue compared with 25% in 2005/06. The improvement is largelydriven by demand for our IP-VPN QoS product, both through organic growth andmigration from legacy products, as well as higher uptake of our wholesalebandwidth and hosting products. Legacy products Our legacy products, like frame relay and narrowband internet, are currentlybeing phased out as a result of new technologies. The speed of the migrationwill be determined by our customers' needs. Revenue of £191 million in 2006/07 has reduced by £36 million compared with 2005/06. The decline is largely a result of the migration of customers from framerelay to IP-VPN and lower market demand for narrowband internet services. Traditional voice Traditional voice includes our range of non-IP voice products - from theprovision of termination for switched traffic to the delivery of telebusinessapplications via our Intelligent Network. Traditional voice revenue of £1,201 million in 2006/07 has reduced by £87million compared with 2005/06 as a result of a reduction in carrier voicerevenue due to our move away from low margin traffic and lower mobiletermination rates on some European destinations. Operating costs Operating costs of £1,960 million are £81 million higher than in 2005/06 as aresult of the increased cost base following the Energis acquisition, but havereduced as a proportion of revenue. Excluding the impact of operational releaseswithin operating costs (£25 million in 2006/07 and £58 million in 2005/06),these costs have reduced by 2% as a proportion of revenue excluding operationalreleases (£3 million in 2006/07 and £18 million in 2005/06). Outpayments and network costs of £1,516 million are higher than in 2005/06largely as a result of outpayments relating to the increased revenue. However,excluding operational releases within outpayments and network costs (£25 millionin 2006/07 and £51 million in 2005/06), these costs represent a lower proportionof revenue as a result of improved product mix and cost savings driven throughour recovery programme. More specifically, the savings relate to optimisation ofinterconnection charges, renegotiation of equipment and cable maintenancecontracts and lower rental and lease costs associated with network buildings andfibre. Despite including a full year of Energis, staff costs of £289 million haveremained broadly flat but are better as a proportion of revenue compared to 2005/06. During 2006/07, we have continued to simplify processes enabling furtherreduction in colleagues across the business. The cost savings related to thisreduction have been partially offset by the increased cost associated with therecruitment of 445 additional colleagues into service-related roles. Other costs of £155 million primarily relate to property costs, travel,consultancy and professional fees and have reduced by £13 million against 2005/06. The reduction represents a 1% decrease in other costs as a percentage ofrevenue. 23 EBITDA Reported EBITDA before exceptionals has increased by 7% to £159 million thisyear. Excluding operational releases of £28 million (2005/06: £76 million),EBITDA has increased by 79% to £131 million. For 2007/08, we expect that our EBITDA will be in the range of £210 million to£220 million. Capital expenditure and depreciation and amortisation Capital expenditure of £204 million in 2006/07 represents just under 10% ofrevenue and we expect capital expenditure to continue at about 10% of revenuefor the foreseeable future. In 2006/07, we continued to invest according to our customers' needs and spent£63 million on customer specific projects, which represents a relative increasein customer capital expenditure compared to 2005/06 (from 29% to 31%). Theremaining balance of our investment is largely attributable to networkinfrastructure and new product development. In 2006/07, we completed our MSP andthe provision of GigE backhaul to local exchanges from our network and we haveupgraded the resilience of our network in Asia. Depreciation and amortisation of £92 million in 2006/07 is lower than in 2005/06, mainly as a result of an impairment of our fixed assets at the end of 2005/06. Net other operating income Net other operating income of £8 million primarily relates to the profit on thedisposal of property. Joint ventures and associates The £3 million loss represents our share of Apollo, a submarine cabling company. Exceptional items Exceptional items of £60 million in 2006/07 primarily relate to restructuringactivities as part of our recovery programme. £24 million of the charge relatesto our redundancy programme, the remainder relates to our propertyrationalisation programme and to a lesser extent, rationalisation of networkinfrastructure. Exceptional items in 2005/06 principally related to £237 millionfor the write down of assets. 24 Reconciliation of Europe, Asia & US EBITDA to net cash flow before financing 2006/07 1 £m EBITDA2 159 Exceptional items (60) EBITDA less exceptionals 99 Movement in exceptional provisions (10) Movement in working capital and other provisions (74) Income taxes paid (1) Purchase of property, plant, equipment & intangible assets (186) Acquisitions & disposals 10 Net cash outflow before financing activities (162) 1 Based on our management accounts 2 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income The net cash outflow before financing of £162 million for the year principallyreflects EBITDA, exceptional items relating to restructuring costs, workingcapital movement and capital expenditure. Exceptional items of £60 million and movement in exceptional provisions of £10million are attributable to restructuring costs relating to colleagueredundancy, property and networks. Working capital movement of £74 million includes £28 million of operationalreleases. The majority of the £46 million balance reflects timing differences inreceipts and payments during the period and carried forward from the prior year. Cash capital expenditure of £186 million reflects a mix of investments in bothcustomer and infrastructure projects, as described on page 24. Acquisitions and disposals relate to the sale of properties and exclude the saleand leaseback transaction completed on 2 April 2007 for £88 million. Based on the 2006/07 performance, we are updating our guidance for the totalcash outflow before Europe, Asia & US becomes cash generative to be no more than£280 million from 1 April 2006, excluding the £88 million cash from the sale andleaseback transaction, announced on 2 April 2007. This includes £180 million ofexceptional cash outflow relating to the turnaround, capital expenditure,working capital requirements and payments against provisions made in priorperiods. Of this amount, we expect the net cash outflow for 2007/08 to be about£80 million. Following the cash outflow of £162 million in 2006/07, this leaves£118 million of cash outflow remaining, of which £110 million relates toexceptional cash items. Post balance sheet events On 2 April 2007, we signed a 25 year sale and leaseback agreement, covering nineproperties for which we received £88 million. Lease payments for the first fiveyears will be £4.5 million per year and subject to reviews every five yearsthereafter. 25 CABLE & WIRELESS ACCESS Through local loop unbundling, C&W Access provides broadband and telephonyservices to business and residential end users through wholesale agreements withmajor UK broadband service providers. On 8 June 2006, we announced a revised strategy to leverage returns from ourlocal loop unbundled (LLU) network asset by offering a wholesale product tomajor broadband service providers and ceasing residential sales. On 7 September2006, we announced the formation of C&W Access and our first wholesale customer,Pipex. We also sold our residential Bulldog customer base and brand to Pipex for£9 million of net cash. Following this, we are integrating a number ofactivities into Europe, Asia & US. C&W Access income statement 2006/07 1 2005/06 Change as £m £m reported 2 Total revenue 43 33 30% Outpayments & network costs (66) (66) 0% Staff costs (19) (28) 32% Other costs (31) (44) 30% Operating costs (116) (138) 16% EBITDA2 (73) (105) 30% Depreciation & amortisation (26) (15) (73)%Total operating loss before exceptional (99) (120) 18% items Exceptional items (29) - nm Total operating loss (128) (120) (7)% Capital expenditure (31) (70) 56% Headcount (full time equivalents at 31 187 651 71% March) 1 The results for the year reflect 5 months and 6 days of performance under the previous retail strategy and 6 months and 24 days of the wholesale strategy 2 Earnings before interest, tax, depreciation and amortisation, exceptionals and net other operating income Revenue Revenue in the first half of 2006/07 was primarily generated through residentialsales relating to the Bulldog customer base. Following the sale of our customerbase to Pipex, our revenue is now primarily generated from our wholesaleagreement with Pipex. Revenue of £43 million in 2006/07 is £10 million higher than 2005/06 andreflects the increase in our average end user base over the year. In the secondhalf of 2006/07, revenue declined due to the impact of reduced average revenueper user (ARPU) as a result of our move to a wholesale strategy. Operating costs Outpayments and network costs in 2006/07 are £66 million, flat compared to 2005/06. Outpayments have increased proportionately to the larger average end userbase over the year and relate to fixed per-line fees, charged to us by BTOpenreach, and voice termination costs. Despite the increase in associatednetwork costs related to our enlarged LLU footprint, we have managed to offsetthe impact through cost savings and efficiencies gained through the integrationof activities into Europe, Asia & US. Staff costs of £19 million were £9 million lower than last year. Following thechange in strategy, we have significantly reduced our headcount, particularly inthe sales and marketing functions, and through the integration of activitiesinto Europe, Asia & US. Other costs relate primarily to the provision of support services. These havedecreased by £13 million in comparison to 2005/06 as a result of ceasing salesand marketing activities to the retail market from 8 June 2006. 26 EBITDA EBITDA before exceptionals reflects the previous residential customer strategyfor the first half of 2006/07 and the wholesale strategy for the second half of2006/07. The execution of the new strategy and the integration of a number ofactivities into Europe, Asia & US have resulted in an improved EBITDA lossbefore exceptionals of £73 million for 2006/07. For 2007/08, we expect that our EBITDA loss will be in the range of £35 millionto £45 million. Capital expenditure and depreciation Capital expenditure of £31 million is primarily related to the completion of thelocal loop rollout programme in the period. Depreciation has increased £11 million to £26 million as a result of ourinvestment in our LLU footprint expansion. Exceptional items Exceptional costs of £29 million include £5 million for restructuring activitiesrelated to the move to a wholesale strategy and integration, as well as a £13million write off related to redundant IT assets. A further £11 million ofexceptional costs reflects the write off of £20 million of acquired intangibleassets and goodwill recognised on the acquisition of Bulldog, offset by £9million of net cash proceeds from the sale of the customer base. The goodwillhas been written off following the move to provide wholesale access. Reconciliation of C&W Access EBITDA to net cash flow before financing 2006/07 1 £m EBITDA2 (73) Exceptional items (5) EBITDA less exceptionals (78) Movement in working capital and other provisions (13) Purchase of property, plant, equipment & intangible assets (28) Acquisitions & disposals 9 Net cash outflow before financing activities (110) 1 Based on our management accounts 2 Earnings before interest, tax, depreciation and amortisation, exceptionals and net other operating income The cash outflow of £110 million for the year primarily reflects the EBITDA lossof £73 million, capital expenditure of £28 million and the £9 million of netcash proceeds from the sale of the Bulldog customer base and brand. Cash capital expenditure is related to the unbundling of exchanges in the periodto deliver our wholesale strategy. Exceptional items relate to restructuring activities as part of the change to awholesale strategy and to a lesser extent integration into Europe, Asia & US. For 2007/08, we expect our net cash outflow before financing activities to beapproximately £70 million. 27 Group results detail Year ended 31 March 2007 compared with year ended 31 March 2006 £m 2006/07 International Europe, Central 3 Group Asia & Total US 2 Revenue 1,228 2,139 (19) 3,348 Outpayments & (482) (1,561) 19 (2,024) network costs Staff & other (316) (494) (22) (832) costs Operating costs (798) (2,055) (3) (2,856) EBITDA4 430 84 (22) 492 LTIP charge (10) (17) - (27) Depreciation & (140) (116) - (256) amortisation Amortisation of (5) (12) - (17) acquired intangibles Net other 2 8 1 11 operating income Operating 277 (53) (21) 203 profit/(loss) before JVs & associates5 Joint ventures 21 (3) - 18 & associates Total operating 298 (56) (21) 221 profit/(loss)5 Exceptional (29) (89) - (118) items Total operating 269 (145) (21) 103 profit/(loss) Capital (168) (235) - (403) expenditure Headcount6 7,876 5,528 75 13,479 £m 2005/06 International Europe, Central 3 Group Asia & Total US 2 Revenue 1,212 2,040 (22) 3,230 Outpayments & (466) (1,466) 18 (1,914)network costs Staff & other (329) (530) (46) (905) costs Operating costs (795) (1,996) (28) (2,819)EBITDA4 417 44 (50) 411 LTIP charge - - - - Depreciation & (136) (133) 6 (263) amortisation Amortisation of (6) (5) - (11) acquired intangibles Net other - - - - operating income Operating 275 (94) (44) 137 profit/(loss) before JVs & associates5 Joint ventures 58 (6) - 52 & associates Total operating 333 (100) (44) 189 profit/(loss)5 Exceptional (12) (234) 7 (239) items Total operating 321 (334) (37) (50) profit/(loss) Capital (142) (277) 3 (416) expenditure Headcount6 8,150 6,265 156 14,571 £m CC change 1 (%) International Europe, Central 3 Group Asia & Total US 2 Revenue 7% 5% 14% 6% Outpayments & (7)% (7)% 6% (7)% network costs Staff & other (1)% 7% 52% 6% costs Operating (4)% (3)% 89% (3)% costs EBITDA4 8% 93% 56% 26% LTIP charge nm nm nm nm Depreciation & (9)% 13% nm (0)% amortisation Amortisation 17% nm - (55)% of acquired intangibles Net other nm nm - nm operating income Operating 6% 44% 52% 65% profit/(loss) before JVs & associates5 Joint ventures (63)% 49% - (65)% & associates Total (7)% 44% 52% 27% operating profit/(loss)5 Exceptional nm 62% nm 51% items Total (12)% 57% 43% nm operating profit/(loss) Capital (25)% 15% nm 1% expenditure Headcount6 3% 12% 52% 7% nm represents % change not meaningful 1 Constant currency growth rate based on the restatement of prior year comparatives at current year's reported average exchange rates. Positive percentages represent improvement 2 Europe, Asia and US results above include C&W Access 3 "Central" comprises the corporate centre and intra-group eliminations between the businesses 4 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income 5 Excluding exceptionals 6 Full time equivalents as at 31 March 28 International results detail Year ended 31 March 2007 compared with year ended 31 March 2006 £m Jamaica 2006/07 2005/06 CC change 1 Mobile 47 42 24% Broadband 14 8 94% Domestic 80 87 2% voice International 34 37 2% voice Enterprise, 24 27 (2)% data & other Other 1 2 (45)% internet Revenue 200 203 9% Cost of sales (72) (66) (21)% Gross margin 128 137 3% Other (67) (77) 4% operating costs EBITDA2 61 60 13% LTIP charge - - - Dep'n & (19) (24) 12% amortisation Amortisation - - - of acquired intangibles Net other 1 - nm operating income Op profit 43 36 32% before JVs & associates3 Joint - - - ventures & associates Total 43 36 32% operating profit3 Exceptional (3) (2) (66)% items Total 40 34 30% operating profit Capital (33) (28) (31)% expenditure Headcount4 1,351 1,689 20% £m Barbados 2006/07 2005/06 CC change Mobile 32 27 24% Broadband 6 3 nm Domestic 24 28 (10)% voice International 19 19 5% voice Enterprise, 17 20 (11)% data & other Other 1 2 (48)% internet Revenue 99 99 5% Cost of sales (26) (27) (1)% Gross margin 73 72 6% Other (32) (35) 4% operating costs EBITDA2 41 37 16% LTIP charge - - - Dep'n & (9) (8) (18)% amortisation Amortisation - - - of acquired intangibles Net other - - - operating income Op profit 32 29 15% before JVs & associates3 Joint - - - ventures & associates Total 32 29 15% operating profit3 Exceptional (1) - nm items Total 31 29 12% operating profit Capital (13) (14) 3% expenditure Headcount4 818 826 1% £m North Caribbean 2006/07 2005/06 CC change Mobile 46 43 14% Broadband 10 9 18% Domestic 29 30 3% voice International 19 27 (25)% voice Enterprise, 18 19 2% data & other Other - 1 nm internet Revenue 122 129 1% Cost of sales (32) (29) (18)% Gross margin 90 100 (4)% Other (45) (48) (0)% operating costs EBITDA2 45 52 (8)% LTIP charge - - - Dep'n & (14) (13) (15)% amortisation Amortisation - - - of acquired intangibles Net other - - - operating income Op profit 31 39 (15)% before JVs & associates3 Joint (12) 11 nm ventures & associates Total 19 50 (60)% operating profit3 Exceptional (23) (1) nm items Total (4) 49 nm operating profit Capital (15) (16) 2% expenditure Headcount4 560 553 (1)% £m East Caribbean 2006/07 2005/06 CC change Mobile 48 41 23% Broadband 10 7 50% Domestic 32 36 (6)% voice International 31 34 (4)% voice Enterprise, 21 22 0% data & other Other 1 1 5% internet Revenue 143 141 7% Cost of sales (42) (40) (12)% Gross margin 101 101 5% Other (62) (63) (3)% operating costs EBITDA2 39 38 7% LTIP charge - - - Dep'n & (19) (18) (10)% amortisation Amortisation - - - of acquired intangibles Net other - - - operating income Op profit 20 20 4% before JVs & associates3 Joint - - - ventures & associates Total 20 20 4% operating profit3 Exceptional (2) (4) 48% items Total 18 16 17% operating profit Capital (16) (20) 16% expenditure Headcount4 1,033 1,052 2% £m Panama 2006/07 2005/06 CC change Mobile 123 104 24% Broadband 15 12 31% Domestic 97 109 (7)% voice International 18 18 5% voice Enterprise, 36 40 (6)% data & other Other - 1 nm internet Revenue 289 284 7% Cost of sales (103) (100) (8)% Gross margin 186 184 6% Other (71) (79) 6% operating costs EBITDA2 115 105 15% LTIP charge - - - Dep'n & (38) (35) (14)% amortisation Amortisation - - - of acquired intangibles Net other 1 - nm operating income Op profit 78 70 17% before JVs & associates3 Joint - - - ventures & associates Total 78 70 17% operating profit3 Exceptional (1) - nm items Total 77 70 15% operating profit Capital (31) (25) (30)% expenditure Headcount4 1,836 1,852 1% nm represents % change not meaningful 1 Constant currency growth rate based on the restatement of prior yearcomparatives at current year's reported average exchange rates. Positivepercentages represent improvement 2 Earnings before interest, tax, depreciation and amortisation, exceptionals,LTIP charge and net other operating income 3 Excluding exceptionals 4 Full time equivalents as at 31 March 29 International results detail (continued) Year ended 31 March 2007 compared with year ended 31 March 2006 £m Macau 2006/07 2005/06 CC change Mobile 54 49 16% Broadband 15 12 31% Domestic 17 19 (6)% voice International 30 30 5% voice Enterprise, 26 25 9% data & other Other 1 1 5% internet Revenue 143 136 10% Cost of sales (62) (55) (18)% Gross margin 81 81 5% Other (26) (28) 3% operating costs EBITDA2 55 53 9% LTIP charge - - - Dep'n & (15) (16) 2% amortisation Amortisation - - - of acquired intangibles Net other 1 - nm operating income Op profit/ 41 37 16% (loss) before JVs & associates3 Joint - - - ventures & associates Total 41 37 16% operating profit/(loss) 3 Exceptional - - - items Total 41 37 16% operating profit/(loss) Capital (19) (11) (71)% expenditure Headcount4 927 940 1% £m Monaco 2006/07 2005/06 CC change Mobile 24 24 1% Broadband 3 3 1% Domestic 10 9 12% voice International 8 10 (19)% voice Enterprise, 91 78 17% data & other Other - - - internet Revenue 136 124 10% Cost of sales (72) (60) (21)% Gross margin 64 64 1% Other (30) (32) 6% operating costs EBITDA2 34 32 7% LTIP charge - - - Dep'n & (9) (7) (29)% amortisation Amortisation (5) (6) 17% of acquired intangibles Net other - - - operating income Op profit/ 20 19 6% (loss) before JVs & associates3 Joint 2 5 (60)% ventures & associates Total 22 24 (8)% operating profit/(loss) 3 Exceptional - (3) nm items Total 22 21 6% operating profit/(loss) Capital (10) (10) (1)% expenditure Headcount4 487 496 2% £m Islands 1 2006/07 2005/06 CC change Mobile 32 30 9% Broadband 5 3 70% Domestic 18 19 (2)% voice International 20 23 (10)% voice Enterprise, 32 27 20% data & other Other 2 2 0% internet Revenue 109 104 7% Cost of sales (22) (16) (41)% Gross margin 87 88 1% Other (47) (48) (0)% operating costs EBITDA2 40 40 2% LTIP charge - - - Dep'n & (15) (15) (2)% amortisation Amortisation - - - of acquired intangibles Net other (1) - nm operating income Op profit/ 24 25 (2)% (loss) before JVs & associates3 Joint 31 42 (26)% ventures & associates Total 55 67 (17)% operating profit/(loss) 3 Exceptional (1) 1 nm items Total 54 68 (20)% operating profit/(loss) Capital (22) (18) (28)% expenditure Headcount4 660 687 4% £m Elims/head office 2006/07 2005/06 CC change Mobile - - Broadband (1) (1) 0% Domestic - 1 nm voice International (11) (10) (10)% voice Enterprise, (1) 2 nm data & other Other - - - internet Revenue (13) (8) (63)% Cost of sales 13 7 86% Gross margin - (1) nm Other - 1 nm operating costs EBITDA2 - - - LTIP charge (10) - nm Dep'n & (2) - nm amortisation Amortisation - - - of acquired intangibles Net other - - - operating income Op profit/ (12) - nm (loss) before JVs & associates3 Joint - - - ventures & associates Total (12) - nm operating profit/(loss) 3 Exceptional 2 (3) nm items Total (10) (3) nm operating profit/(loss) Capital (9) - nm expenditure Headcount4 204 55 nm £m Total 2006/07 2005/06 CC change Mobile 406 360 19% Broadband 77 56 45% Domestic 307 338 (3)% voice International 168 188 (5)% voice Enterprise, 264 260 6% data & other Other 6 10 (37)% internet Revenue 1,228 1,212 7% Cost of sales (418) (386) (14)% Gross margin 810 826 3% Other (380) (409) 2% operating costs EBITDA2 430 417 8% LTIP charge (10) - nm Dep'n & (140) (136) (9)% amortisation Amortisation (5) (6) 17% of acquired intangibles Net other 2 - nm operating income Op profit/ 277 275 6% (loss) before JVs & associates3 Joint 21 58 (63)% ventures & associates Total 298 333 (7)% operating profit/(loss) 3 Exceptional (29) (12) nm items Total 269 321 (12)% operating profit/(loss) Capital (168) (142) (25)% expenditure Headcount4 7,876 8,150 3% nm represents % change not meaningful; Constant currency growth rate based onthe restatement of prior year comparatives at current year's reported averageexchange rates. 1 Islands comprises operations in the Channel Islands, Isle of Man and the Atlantic, Pacific and Indian Oceans. The joint ventures & associates line includes Batelco (Bahrain) up until 16 January 2007, the date of its disposal 2 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income 3 Excluding exceptionals 4 Full time equivalents as at 31 March 30 International results detail (continued) GSM ACTIVE MOBILE CUSTOMERS ('000s) 31 March 31 March % 2007 2006 Change Jamaica 545 371 47% Barbados 159 125 27% North Caribbean 115 83 39% East Caribbean 306 228 34% Caribbean 1,125 807 39% Panama 1,091 626 74% Macau 255 205 24% Monaco 36 34 6% Islands 104 78 33% Cable & Wireless 2,611 1,750 49% subsidiaries TSTT 1,005 703 43% Roshan 1,203 868 39% Dhiraagu 185 141 31% Solomon Telekom 7 7 -% Telekom Vanuatu 22 16 38% Cable & Wireless 2,422 1,735 40% joint ventures & associates1 Total Cable & 5,033 3,485 44% Wireless International BROADBAND CUSTOMERS ('000s) 31 March 31 March % 2007 2006 Change Jamaica 79 41 93% Barbados 28 16 75% North Caribbean 19 16 19% East Caribbean 37 26 42% Caribbean 163 99 65% Panama 87 83 5% Macau 102 74 38% Monaco 11 9 22% Islands 15 10 50% Cable & Wireless 378 275 37% subsidiaries TSTT 16 11 45% Roshan - - - Dhiraagu 5 2 nm Solomon Telekom 1 - nm Telekom Vanuatu 1 - nm Cable & Wireless 23 13 77% joint ventures & associates1 Total Cable & 401 288 39% Wireless International FIXED LINE CUSTOMERS ('000s) 31 March 31 March % 2007 2006 Change Jamaica 360 316 14% Barbados 134 135 (1)% North Caribbean 60 61 (2)% East Caribbean 169 169 0% Caribbean 723 681 6% Panama 422 435 (3)% Macau 177 175 1% Monaco 34 34 0% Islands 175 172 2% Cable & Wireless 1,531 1,497 2% subsidiaries TSTT 324 324 0% Roshan - - - Dhiraagu 32 31 3% Solomon Telekom 8 8 0% Telekom Vanuatu 7 7 0% Cable & Wireless 371 370 0% joint ventures & associates1 Total Cable & 1,902 1,867 2% Wireless International nm represents % change not meaningful 1 For ease of comparison joint ventures & associates numbers for 31 March 2006have been restated to exclude Batelco (Bahrain) following its disposal on 16January 2007 31 Europe, Asia & US results detail Year ended 31 March 2007 compared with year ended 31 March 2006 £m 2006/07 Europe, Asia C&W Access Eliminations Total & US IP, data and hosting 727 - - 727 Legacy products 191 - - 191 Traditional voice 1,201 - - 1,201 C&W Access - 43 - 43 Eliminations - - (23) (23) Revenue 2,119 43 (23) 2,139 Outpayments & network (1,516) (66) 21 (1,561) costs Staff costs (289) (19) - (308) Other costs (155) (31) - (186) Operating costs (1,960) (116) 21 (2,055) EBITDA2 159 (73) (2) 84 LTIP charge (17) - - (17) Depreciation & (92) (26) 2 (116) amortisation Amortisation of (12) - - (12) acquired intangibles Other operating 8 - - 8 income Operating profit/ 46 (99) - (53) (loss) before JVs & associates3 Joint ventures & (3) - - (3) associates Total operating 43 (99) - (56) profit/(loss)3 Exceptional items (60) (29) - (89) Total operating loss (17) (128) - (145) Capital expenditure (204) (31) - (235) Headcount4 5,341 187 - 5,528 £m 2005/06 1 Europe, Asia C&W Access Eliminations Total & US IP, data and hosting 513 - - 513 Legacy products 227 - - 227 Traditional voice 1,288 - - 1,288 C&W Access - 33 - 33 Eliminations - - (21) (21) Revenue 2,028 33 (21) 2,040 Outpayments & network (1,421) (66) 21 (1,466) costs Staff costs (290) (28) - (318) Other costs (168) (44) - (212) Operating costs (1,879) (138) 21 (1,996) EBITDA2 149 (105) - 44 LTIP charge - - - - Depreciation & (118) (15) - (133) amortisation Amortisation of (5) - - (5) acquired intangibles Other operating - - - - income Operating profit/ 26 (120) - (94) (loss) before JVs & associates3 Joint ventures & (6) - - (6) associates Total operating 20 (120) - (100) profit/(loss)3 Exceptional items (234) - - (234) Total operating loss (214) (120) - (334) Capital expenditure (207) (70) - (277) Headcount4 5,614 651 - 6,265 1 2005/06 includes results for Energis from the date of acquisition - 11 November 2005 2 Earnings before interest, tax, depreciation and amortisation, exceptionals, LTIP charge and net other operating income 3 Excluding exceptionals 4 Full time equivalents as at 31 March 32 Extracts from the financial statements and additional information The financial information set out in this announcement does not constitute theCompany's statutory report and accounts for the year ended 31 March 2007.Statutory accounts will be delivered to the Registrar of Companies following theCompany's Annual General Meeting on 20 July 2007. The auditor has reported onthose accounts; their report was unqualified and did not contain a statementunder Section 237 (2) or (3) of the Companies Act 1985. A full copy of the financial statements or the annual review will be mailed toshareholders on or about 20 June 2007 and can be obtained thereafter from NickCooper, Company Secretary, The Point, 37 North Wharf Road, Paddington, London,W2 1LA. Basis of preparation The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ('IFRS'). They comply with IFRS asissued by the International Accounting Standards Board (IASB) and as adopted bythe European Union ('Adopted IFRS'). Adopted IFRS are similar to IFRS issued bythe IASB, except for certain provisions concerning hedge accounting that have noimpact on the financial statements of the Group. There have not been any changesto IFRS during the year that have had a material impact on the Group. The Group's accounting policies have been applied consistently. Changes inaccounting policy have been applied retrospectively and comparative amounts havebeen restated. Monaco put option As part of the Group's acquisition of Monaco Telecom, the Principality of Monacoacquired an option to put its 45% holding in the shares of Monaco Telecom to theGroup at a future date. In the light of IAS 32 Financial Instruments:Presentation and developing accounting practice, the Group has decided to changeits accounting policy for this transaction. Previously, the 45% holding of thePrincipality of Monaco was accounted for as a minority interest. It is nowaccounted for as a liability representing the potential obligation of the Groupfor its purchase, even though this outcome is considered remote. As a result,the investment is now accounted for as if the Group held 100% of the shares. Theeffect on the reserves and the minority interests of the Group at 1 April 2005was £13 million and £59 million respectively. The effect of the change to the 31March 2006 financial statements is tabulated below. Basic and diluted earningsper share for year ending 31 March 2006 have been reduced by 0.2 pence. Change in 2005/06 results (£m)Balance sheet Increase in intangible assets 40 Increase in non-current financial liabilities (106)Decrease in minority interest 61 Decrease in reserves (5) Income statement Increase in finance expense 12 Decrease in profit for the year 12 Decrease in profit attributable to minority interests 9 Decrease in profit attributable to equity holders of the Company 3 33 Reclassification of income statement items The Group has revised the format of its income statement in the current periodto reflect better the classification of certain items between operating andnon-operating profit. These items have not changed the profit for the year ended31 March 2006. The impact on the previously reported income statement is asfollows: * £11 million - representing the exceptional gain on the sale of Coventry College (the Group's training centre) has been reclassified from gains and losses on the sale of non-current assets to other operating income; and * £6 million - representing exceptional insurance proceeds relating to restoration work after Hurricane Ivan has been reclassified from other non-operating income to other operating income; and * £7 million - representing dividend income that has been reclassified from other non-operating income to finance income. Reclassification of balance sheet items During the current period, we have reclassified a balance of £11 million fromtrade and other receivables to other non-current cash. This balance representscash that is not readily available due to foreign exchange restrictions and hasbeen reclassified to reflect better the nature of the balance. The correspondingbalance of £15 million in the prior period balance sheet has been adjusted inorder to be consistent. Earnings per share The Group has amended the reported diluted earnings per share in the comparativeperiod as there was no dilution in this period. Diluted earnings per share fordiscontinued operations was also adjusted as there was no dilution in theperiod. The effect of these changes is to align diluted earnings per share withbasic earnings per share. 34 Consolidated income statement 2006/07 2005/06 1 Pre-exceptionals Exceptionals2 Total Pre-exceptionals Exceptionals2 Total £m £m £m £m £m £m Revenue 3,348 - 3,348 3,230 - 3,230 Operating (2,883) (78) (2,961) (2,819) (21) (2,840)costs before depreciation & amortisation Depreciation (234) (2) (236) (228) (177) (405) Amortisation (39) (11) (50) (46) (60) (106) Other 13 13 26 - 17 17 operating income Other (2) (11) (13) - - - operating expense Operating 203 (89) 114 137 (241) (104) profit/(loss) Share of 18 (29) (11) 52 2 54 post-tax profit of joint ventures & associates Total 221 (118) 103 189 (239) (50) operating profit/(loss) Gains & - 153 153 2 70 72 losses on sale of non-current assets Gain on 3 18 21 - 72 72 termination of operations Finance 52 - 52 87 - 87 income Finance (80) - (80) (81) - (81) expense Profit/(loss) 196 53 249 197 (97) 100 before income tax Income tax (44) 1 (43) (29) 2 (27) expense Profit/(loss) 152 54 206 168 (95) 73 for the year from continuing operations Profit for - 28 28 2 88 90 the year from discontinued operations Profit/(loss) 152 82 234 170 (7) 163 for the year Attributable 92 82 174 118 (42) 76 to equity holders of the Company Attributable 60 - 60 52 35 87 to minority interests Profit/(loss) 152 82 234 170 (7) 163 for the year Earnings per share attributable to the equity holders of the Company during the year (pence) Basic 7.5p 3.3p Diluted 7.4p 3.3p Earnings per share from continuing operations attributable to the equity holders of the Company during the year (pence) Basic 6.3p (0.6)pDiluted 6.2p (0.6)p Earnings per share from discontinued operations attributable to the equity holders of the Company during the year (pence) Basic 1.2p 3.9p Diluted 1.2p 3.9p 1 Results adjusted to reflect revised accounting for Monaco Telecom and other presentational points as set out on page 33 to 34 2 Exceptionals comprise items considered exceptional by virtue of their size, nature or incidence and include restructuring and impairment charges, and releases of certain provisions and certain profits and losses on disposal of non-current assets 35 Condensed consolidated balance sheet As at: 31 March 31 March 2007 20061 £m £m ASSETS Non-current assets Intangible assets 745 722 Property, plant & equipment 1,465 1,489 Investments in associates & joint 117 176 ventures Other non-current assets 191 131 2,518 2,518 Current assets Inventories 23 31 Financial assets at fair value - 39 Trade & other receivables 855 931 Cash & cash equivalents 1,043 1,127 1,921 2,128 Assets held for sale 52 105 1,973 2,233 Total assets 4,491 4,751 LIABILITIES Current liabilities Trade & other payables 1,221 1,381 Financial assets at fair value 60 - Current tax liabilities 122 123 Loans & obligations under finance 77 143 leases Derivative financial instruments - 15 Provisions 72 89 1,552 1,751 Liabilities associated with assets 10 - held for sale 1,562 1,751 Net current assets 411 482 Non-current liabilities Trade & other payables 65 - Financial liabilities at fair 75 106 value Loans & obligations under finance 639 641 leases Deferred tax liabilities 59 51 Provisions 154 193 Retirement benefit obligations 47 143 1,039 1,134 Net assets 1,890 1,866 EQUITY Capital & reserves attributable to the Company's equity holders Share capital 615 605 Share premium 56 24 Reserves 1,010 956 1,681 1,585 Minority interests 209 281 Total equity 1,890 1,866 1 Adjusted to reflect revised accounting for Monaco Telecom and otherpresentational points as set out on page 33 to 34 36 Consolidated statement of recognised income and expense 2006/07 2005/061 £m £m Actuarial gains/(losses) in the value of 105 (9) defined benefit retirement plans Exchange differences on translation of (172) 68 foreign operations Fair value gains on available for sale - 10 financial assets Fair value gains on available for sale - (70) financial assets recycled to income statement on sale Tax on items taken directly to or (5) (2) transferred from equity Net loss recognised directly in equity (72) (3) Profit for the year 234 163 Total recognised income & expense for 162 160 the year Attributable to equity holders of the 138 85 Company Attributable to minority interests 24 75 162 160 1 Results adjusted to reflect revised accounting for Monaco Telecom as set out on page 33 to 34 37 Consolidated cash flow statement 2006/07 2005/061 £m £m Cash generated from continuing 299 100 operations (see page 40) Cash generated from discontinued - 3 operations (see page 40) Income taxes paid (46) (47) Net cash from operating activities 253 56 Cash flows from investing activities Interest received 43 107 Other income 9 5 Dividends received 23 34 Proceeds on disposal of trade - 89 investments Proceeds on disposal of property, plant 15 35 & equipment Proceeds on disposal of intangible - 2 assets Purchase of property, plant & equipment (338) (412) Purchase of intangible assets (40) (22) Proceeds from redemption of 40 40 credit-linked notes Proceeds from disposal of associates and 256 1 joint ventures Acquisition of associates & joint - (1) ventures Acquisition of subsidiaries (net of cash (15) (618) received) Net cash from continuing operations (7) (740) Discontinued operations Proceeds on disposal of subsidiaries - 27 Net cash from discontinued operations - 27 Net cash used in investing activities (7) (713) Net cash inflow/(outflow) before 246 (657) financing activities Cash flows from financing activities Dividends paid to minority interests (93) (51) Dividends paid to shareholders (83) (80) Repayments of borrowings (212) (46) Loan to minority interest - (43) Interest paid (55) (61) Proceeds from borrowings 122 38 Purchase of treasury shares - (17) Net proceeds on share awards 3 - Net proceeds on issue of ordinary share 15 11 capital Net cash used in financing activities (303) (249) Net decrease in cash & cash equivalents (57) (906) Cash & cash equivalents at 1 April 1,127 2,021 Exchange gains & losses on cash & cash (22) 12 equivalents Cash & cash equivalents at 31 March 1,048 1,127 Less: Cash reflected as assets held for (5) - sale Net cash and cash equivalents 1,043 1,127 1 Results adjusted to reflect revised accounting for Monaco Telecom as set out on page 33 to 34 38 Cash flow from operating activities 2006/07 2005/061 £m £m Continuing operations Profit for the year 206 73 Adjustments for: Tax expense 43 27 Depreciation 236 228 Amortisation 50 46 Impairment - 237 Gain on termination of operations (15) (34) Gains and losses on sale of non-current (153) (72) assets Profit on disposal of property, plant (11) (11) and equipment Sale of Bulldog brand & retail broadband 11 - customer base Finance income (52) (87) Finance expense 80 81 Decrease in provisions (28) (135) Share-based payments 25 14 Defined benefit pension scheme (credit)/ (11) 6 expense LTIP charge 27 - Defined benefit pension scheme top-up - (98) contributions Defined benefit pension scheme other (18) (17) contributions Share of results after tax of joint (18) (54) ventures and associates Impairment of TSTT fixed asset 29 - Operating cash flows before working 401 204 capital changes Changes in working capital (excluding effects of acquisitions & disposals of subsidiaries) Decrease/(increase) in inventories 8 (4) Decrease/(increase) in trade & other 76 8 receivables Increase/(decrease) in payables (186) (108) Cash generated from continuing 299 100 operations Discontinued operations Profit for the year 28 90 Adjustments for: Profit on disposal of investments - (20) Profit on disposal of property, plant - (4) and equipment Changes in working capital - 1 Decrease in provisions (28) (64) Cash generated from discontinued - 3 operations Cash generated from operations 299 103 1 Results adjusted to reflect revised accounting for Monaco Telecom as set out on page 33 to 34 39 Provisions for liabilities and charges Property Redundancy Network & Other Total asset retirement obligations £m £m £m £m £m At 31 March 2006 55 36 91 100 282 Current portion 6 36 11 36 89 Non-current portion 49 - 80 64 193 Charged to income statement additional 53 39 7 17 116 provision amounts used (8) (65) (7) (28) (108) unused amounts (19) (2) (14) (28) (63) reversed Transfers 1 - 1 1 3 Exchange - (1) (1) (2) (4) At 31 March 2007 82 7 77 60 226 Current portion 25 7 12 28 72 Non-current portion 57 - 65 32 154 Analysed between: Current portion International - 3 9 3 15 Europe, Asia & US 18 4 3 - 25 and C&W Access Central 7 - - 25 32 Non-current portion International - - 6 8 14 Europe, Asia & US 57 - 59 1 117 and C&W Access Central - - - 23 23 Total International - 3 15 11 29 Europe, Asia & US 75 4 62 1 142 and C&W Access Central 7 - - 48 55 Property Provision 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. Redundancy Provision has been made for the total costs of redundancies announced prior to31 March 2007. Amounts provided and spent in the year primarily relate torestructuring in Europe, Asia & US and C&W Access. Network and asset retirement obligations Provision 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 hasalso been made for the best estimate of the asset retirement obligationassociated with office sites, technical sites, domestic and sub-sea cabling. Weexpect to use this provision at the end of the life of the related asset onwhich the obligation arises. Amounts utilised in the year relate predominantlyto cash spend against the unavoidable costs associated with redundant networkcapacity. 40 Other Other provisions includes amounts relating to specific legal claims against theGroup, the disposal of the previously discontinued US businesses, amountsrelating to the Group's former insurance operation and amounts relating toacquisitions and disposals of Group companies and investments. The release ofunused amounts reflects the resolution of historical claims and other risksduring the year. Minority interests Total1 £m Balance as at 31 March 2006 281 Share of total recognised income & expenditure for the year 24 Dividends paid (96)Balance as at 31 March 2007 209 1 Results adjusted to reflect revised accounting for Monaco Telecom as set outon page 33 to 34 Dividends paid and proposed 2006/07 2005/06 £m £mDeclared & paid during the year ended 31 March Dividends on ordinary shares: Final dividend in respect of the prior year 71 60 Declared & paid during the year ended 31 March Dividends on ordinary shares: Interim dividend in respect of the current year 40 32 This announcement contains forward-looking statements that are based on currentexpectations or beliefs, as well as assumptions about future events. Theseforward-looking statements can be identified by the fact that they do not relateonly to historical or current facts. Forward-looking statements often use wordssuch as anticipates, target, expect, estimate, intend, plan, goal, believe,will, may, should, would, could or other words of similar meaning. Unduereliance should not be placed on any such statements because, by their verynature, they are subject to known and unknown risks and uncertainties and can beaffected by other factors that could cause actual results, and Cable & Wireless'plans and objectives, to differ materially from those expressed or implied inthe forward-looking statements. There are several factors that could cause actual results to differ materiallyfrom those expressed or implied in forward-looking statements. Among the factorsthat could cause actual results to differ materially from those described in theforward-looking statements are changes in the global, political, economic,business, competitive, market and regulatory forces, future exchange andinterest rates, changes in tax rates and future business combinations ordispositions. A summary of some of the potential risks faced by Cable & Wirelessis set out in the Company's most recent Annual Report. Cable & Wireless undertakes no obligation to revise or update anyforward-looking statement contained within this announcement, regardless ofwhether those statements are affected as a result of new information, futureevents or otherwise. This information is provided by RNS The company news service from the London Stock Exchange

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Related Shares:

CWC.L