26th May 2005 06:08
CABLE AND WIRELESS PLCRESULTS FOR THE YEAR ENDED 31 MARCH 2005"CABLE & WIRELESS PROFITS FROM A YEAR OF HIGH ACTIVITY"HighlightsContinuing earnings per share before exceptional items and amortisation - up 16percent against prior yearTotal Group profit before tax and exceptional items ‚£377 million - up 36percent against prior yearOperating profit from continuing operations, before exceptional items ‚£277million - up 20 percent against prior yearOn track to achieve:‚£35 million of UK, Corporate and Europe operating cost savings in 2005/6, withannualised savings of ‚£50 million by March 2006 in connection with Groupreorganisation announced in November 2004‚£50 million of UK savings in outpayments and network costs in 2005/6 announcedin April 2005‚£22 million of net cost savings from Next Generation Network implementation in2007/8Acquired Bulldog Communications and today announced acceleration of rolloutplan to 600 exchanges by March 2006 and to 800 exchanges in H1 2006/7Acquired controlling interest in Monaco Telecom for ‚£108 million, earning anannualised after tax earnings return on gross capital invested of 17 percent in2004/5Announced investment of ‚£190 million in Next Generation Network over next threeyearsCompleted sale of Japanese domestic business for a consideration of ‚£71.7million (including assumption of ‚£9.4 million of debt) and exited the USdomestic business for ‚£220 million (‚£80 million lower than estimated cost)Group revenue from continuing businesses flat against prior year at constantcurrency‚£1,342 million net cash at 31 March 2005, after completing 30 percent of the ‚£250 million share repurchase programmeDeclared full year dividend of 3.80 pence - up 21 percent against prior yearfull year dividendThis announcement contains forward-looking statements that involve inherentrisks and uncertainties. We have identified certain important factors that maycause actual results to differ materially from those contained in suchforward-looking statements. See those that appear, or are referred to, in thecautionary statements section of the company's most recent Annual Report filedon Form 20-F.RESULTS FOR THE YEAR ENDED 31 MARCH 2005Total Group Result 2005 2004(incl. continuing and discontinued operations and exceptional items) ‚£m ‚£mGroup revenue 3,222 3,671Profit before tax and exceptional items 377 278Profit/(loss) after tax 377 (212)Profit/(loss) for the financial period 302 (237)Basic earnings per share 13.0p (10.2)pDiluted earnings per share 12.3p (10.2)pDividend per share 3.80p 3.15pNet cash 1,342 1,448The full profit and loss account, cashflow statement and balance sheet, drawnup in accordance with UK generally accepted accounting principles ('UK GAAP'),from which this information is extracted, are set out in the attachments.Continuing Operations 2005 2004‚£m ‚£mGroup revenue 3,023 3,130- change from prior year at constant currency -%Operating profit before exceptional items 277 231- change from prior year at constant currency 33 %Profit before tax and exceptional items 361 319Profit after tax before exceptional items and amortisation 293 259Earnings per share before exceptional items and amortisation 9.3p 8.0pCapital expenditure 332 326Announcing the full year results for Cable and Wireless plc for the year ended31 March 2005Cable & Wireless Chairman, Richard Lapthorne said:"The 2004/5 financial performance demonstrates our progress. For the year to 31March 2005, profit after tax and before exceptionals and amortisation for thecontinuing business was ‚£293 million equivalent to 9.3 pence per share. Revenuefrom continuing operations was ‚£3,023 million, a stable result at constantcurrency. The Board has recommended a full year dividend of 3.8 pence pershare, after paying 1.16 pence per share at the interim stage. This representsa 21 percent increase in the total dividend, indicating our confidence in theGroup."The past 12 months have been a time of transition, as Cable & Wireless entereda new phase in the three-year programme to revive the Company. By the end ofthe year, the Chief Executive and his new team were no longer preoccupied withthe issues of the Company's past, and had turned confidently to face thefuture."Over the past year, the management has delivered on the promises it made inJune 2003. We completed our exit from the US market at substantially lower costthan originally expected. This allowed the Chief Executive to concentrate onrestructuring our UK business and stabilising its performance. Customer focushas been central to our new structures. An enormous amount of work has goneinto improving operations and tightening cost controls in the legacybusinesses."We are also seeing some excellent groundwork in network development. A primeexample is our investment in Bulldog, the UK broadband operator, we acquiredlast May. Bulldog gives us network access across the 'last mile' to thecustomer, enabling us to offer an end-to-end service. Building our customerbase in this way is an important goal as we embark upon investment of ‚£190million over three years in our UK IP-based Next Generation Network ('NGN') andsystems. The new technology offers network economies that will benefit ourcustomers and improve our margins. In this context, we welcome Ofcom's visionof a UK telecommunications market based on realistic and sustainablecompetition among players willing to invest in future technological strength."Our National Telco businesses have become more aggressive when dealing withcompetition. Cooperation and communication have also improved, so that thesebusinesses can benefit from each other's experiences of the rapidlyliberalising telecom landscape. We are successfully capitalising on ourcontrolling stake in Monaco Telecom and will take opportunities to expand ourfootprint into new geographies as appropriate."The exit from the US and disposal of our Japanese business kept our cashintact which allowed us in November 2004 to launch a ‚£250 million sharebuyback. As at March 2005, we had bought back 60.5 million shares, at anaverage price of 124.4 pence."Our markets continue to suffer from excess capacity and severe pricecompetition. Performance improvement will come from efficiencies and costcutting, and a shift in our sales mix towards broadband, IP and mobile. We arein a unique position to help our customers embrace these new technologies and Ilook forward with confidence to the year ahead."Chief Executive, Francesco Caio, said:"Our results show we have produced a solid set of numbers, in a challengingmarket. This year we have made solid progress in strengthening Cable &Wireless' competitive position by focusing on markets where we can be thenumber one or number two operator, further reducing our cost base andaccelerating our investment in growth services. Specifically, we have:* Completed the US exit and sold our domestic business in Japan;* Acquired Bulldog and completed the first phase of its development to gain 30percent coverage of the UK broadband market;* Committed to invest ‚£190 million over three years to build a UK NextGeneration Network;* Reshaped our UK business around four key customer segments;* Refocused Europe on Carrier Services, reducing headcount and exiting non-corebusinesses;* Streamlined central functions, including relocating Group headquarters;* Initiated a programme to reduce headcount by more than 1,000 in the UK,corporate and Europe;* Invested in mobile and broadband in National Telcos; and* Established pan-regional initiatives including procurement and marketingplans for National Telcos."Our strategy is to establish a sustainable position as an infrastructure-basedcompetitor operating with its own access network, building a strong customerfranchise, both with consumers and businesses, investing in IP, broadband andmobile to pursue profitable growth in new services."Through our investments in UK Local Loop Unbundling ('LLU') and NextGeneration Network we have a unique opportunity to lead the telecom industry inits transition from traditional services to IP and redefine the competitivescenario to our advantage.National Telcos"Each of the 34 national markets in which our National Telcos operate is at adifferent stage of liberalisation, with its own customer profile but thecompetitive challenges are similar, our priorities are clear and we must:* Drive change and performance, especially in our sales and marketing responseto competition;* Shift the revenue mix to new services through further investment inbroadband, IP and mobile; and* Lower costs to protect margins in legacy services."We aim to be market leaders in mobile and have actively worked to reclaimbusiness. Our bmobile brand has increased market share in the Caribbean and inBahrain a pro-active response enabled Batelco to retain customer share againstcompetition from new entrants. We are leaders in most of our National Telcomarkets for broadband and IP and are working to maximise market penetration.Many of the countries in which we operate still have relatively low take-uplevels, and we are well positioned to offer services that assist customers inthe transition. We have started to invest in IP backbones in countries wheretraffic volumes justify the expenditure, including in the Caribbean wherehurricane damage has driven infrastructure replacement. Network upgrades arealso underway in Monaco, Macau, the Cayman Islands and Grenada."The need for continuing cost reduction remains high on our agenda and we haveinitiated a number of programmes, including outsourcing the Caribbean mobilesupply chain, leveraging our strengths in Group-wide procurement, consolidatingdata centres and rationalising our property portfolio. These are showingpositive initial results but our cost reduction needs to intensify in thecoming year.Next Generation Network ('NGN')"A migration of our UK network to NGN will be a further element of ourstrategy. We intend to invest ‚£190 million over three years to transform ourcore network into a single integrated IP platform. A large proportion of theanticipated capital expenditure will replace expenditure that would otherwisehave been needed to maintain our legacy systems, so that incremental UKinvestment is only ‚£35 million over the three years. The benefit of thisinvestment is a less complex, highly scalable network capable of accommodatingsignificant growth in traffic at a lower capital cost and permanently loweroperating and maintenance costs. Most importantly, our Next Generation Networkwill support customer demand, providing greater functionality and customisedsolutions at an attractive price.Ofcom Strategic Telecoms Review"The regulatory framework remains fundamental to our business and investmentdecisions. In particular, Ofcom's Strategic Telecoms Review provides anopportunity to create a more transparent and effective regulatory regime in theUK. We are encouraged by the review's emphasis on infrastructure-basedcompetition and the principle of equivalence. It is vital, however, the reviewdelivers an effective and enforceable regulatory settlement. Fair competitionmust be at the heart of the UK telecoms market if customers are to benefit fromthe variety of services that new technologies can offer.Bulldog"The acquisition in May 2004 of Bulldog Communications, the broadband operator,was an important step in advancing our UK access strategy, giving us control ofthe valuable 'last mile' and an expanding customer base. We now have coverageof 30 percent of the UK broadband market, reaching our initial target of 400unbundled exchanges by end of May 2005, seven months ahead of the originaltimetable."Based on the customer response we have seen to date we are today announcing anextension to our rollout plan and additional new services."We now intend to unbundle an additional 200 exchanges by the end of March2006, giving total unbundled exchanges of 600 and a further 200 exchanges inthe first half of 2006/7 bringing the total to 800 exchanges. This willincrease our investment losses in 2005/6 but we see it as vital in capturingthe real and increasing UK customer demand for broadband."We are also announcing the launch in June of a new SoHo offering, thatprovides up to 8 VoIP lines, data and fast internet access all through a singlepipe."We have reorganised the remaining UK business around customer segments andthrough our work this year we now have visibility of the economics of each ofour UK segments - Enterprise, Business and Carrier Services. This has assistedus in identifying priorities and targeting cost reductionsRetail: Enterprise and Business"During the year we successfully increased the percentage of IP spend withexisting Enterprise customers. The development of the NGN and an access networkpositions Cable & Wireless as a reliable, innovative, scale partner for ourEnterprise customers' migration to IP, offering lower prices and moresophisticated services. In Business, we are focusing on product differentiationand customer service.Carrier Services"Our intercontinental network is a major international carrier across 200countries, the world's sixth largest for international voice and fifth largestfor data. Carrier Services operates in a highly competitive market thatcontinues to suffer from over-capacity and pricing pressure. Nonetheless itprovides a useful means to improve our network economics so we have worked hardto improve market share and our innovative customer solutions have won somenotable contracts. We launched our global Carrier Multi Packet Labelling System('MPLS') service, which can transmit any type of traffic in internet protocol('IP') format, and have already signed up 8 significant carriers. During theyear revenues were impacted by the regulatory change in fixed to mobiletermination rates. In the future we will increase our focus on driving cashmargins from this profitable segment."In summary, I am pleased with progress over the year. We have delivered on thefirst two phases of our plan, reconstructing a competitive position for thecompany, through our more focused footprint and streamlined organisation. Wehave increased investment in broadband and IP and we have defined and arebuilding a clear path to the future across all our markets. In particular, I amconfident that our decision to invest in Next Generation Network for the UKwill reinforce our position as one of the only national infrastructure playerwith the scale, access and resources to provide a competitive offering tobusinesses and consumers."Outlook1We expect that operating profit margins within our established businesses willremain broadly stable in 2005/6 before the impact of the following:At the Group level we estimate:* Operating cost reductions amounting to ‚£35 million in 2005/6, as a result ofour reorganisation of the UK, corporate and Europe;* Outpayments and network UK cost savings of ‚£50 million in 2005/6, which willmitigate the impact of continued pricing pressure;* A 2005/6 Group depreciation charge of approximately ‚£240 million (includingNGN and Bulldog);* Group capital expenditure of between ‚£435 million and ‚£455 million. Thisincludes UK capital expenditure of approximately ‚£225 million (including NGN).It also includes capital expenditure relating to the Bulldog exchange rolloutof approximately ‚£70 million; and* A Group effective tax rate of approximately 15 percent for the next threeyears.Bulldog:We have announced today the extension of the Bulldog exchange rollout. We nowplan to unbundle 600 exchanges in total by end of March 2006 and 800 exchangesin total by end of June 2006. We expect Bulldog's performance to be:* Estimated 2005/6 EBITDA losses of ‚£75 million, due to a lag in prior year,customer provisioning, increased marketing and advertising spend and lossesassociated with the additional 200 exchanges;* Estimated 2005/6 depreciation of ‚£15 million;* Estimated 2005/6 cash capital expenditure of ‚£70 million reflecting the cashunderspend in 2004/5 of ‚£14 million and the rollout of the additional 200exchanges.Operating losses in 2006/7 are expected to halve compared to 2005/6, beyondwhich we anticipate minimal losses.EXECUTIVE SUMMARYTrading overviewRevenue from continuing operations for the year to 31 March 2005 was ‚£3,023million, a stable performance at constant currency compared to the prior yearand a 3 percent decline at reported rates.This result reflects strong performances in Panama where revenue increased by 6percent at constant currency and the Rest of the World2 where revenue increasedby 11 percent at constant currency, together with the contribution of revenuefrom Monaco Telecom, which was acquired in June 2004. Offsetting these strongperformances, revenue in Europe declined by 27 percent at constant currency,revenue in the UK declined by 4 percent and revenue in the Caribbean declinedby 3 percent at constant currency.Operating profit from continuing operations before exceptional items for theyear to 31 March 2005 was ‚£277 million, an improvement of ‚£46 million over theprior year, reflecting a 33 percent improvement at constant currency. The maindrivers of this improvement were the stronger UK performance and the ongoingfocus on cost reduction across the Group, together with the contribution fromMonaco Telecom.Profit before tax and exceptional items from continuing operations was ‚£361million for the year to 31 March 2005 compared to ‚£319 million in the prioryear.Acquisitions and DisposalsOn 28 May 2004, Cable & Wireless acquired Bulldog Communications ('Bulldog')for a consideration of ‚£18.6 million. Bulldog contributed revenue of ‚£11million and an operating loss before exceptionals and amortisation of ‚£30million for the period from acquisition to 31 March 2005. Results for Bulldogare separately disclosed on page 20 of this document.On 18 June 2004, Cable & Wireless acquired a 55 percent economic interest inMonaco Telecom S.A.M. ('Monaco Telecom') for a total consideration of ¢â€š¬162million (‚£108 million). Monaco Telecom contributed revenue of ‚£100 million andan operating profit before exceptionals and amortisation of ‚£21 million for theperiod from acquisition to 31 March 2005. Results for Monaco Telecom areseparately disclosed on page 27 of this document.On 26 October 2004, Cable & Wireless announced the sale of its stake in Cable &Wireless IDC, Inc. ('IDC'), its Japanese subsidiary, to SOFTBANK Corp('Softbank'). The sale was completed on 17 February 2005 and Cable & Wirelessreceived a consideration of ‚£71.7 million, comprising ‚£62.3 million of cash andSoftbank's assumption of ‚£9.4 million of debt. The consolidated Group financialstatements for the year ended 31 March 2005 recognise a profit on disposal of ‚£42 million relating to this transaction. Cable & Wireless retains a salesoffice and two network nodes in Japan to maintain services specifically for itsinternational Enterprise and Carrier Services customers.On 28 January 2005, Cable & Wireless sold its 3.4 percent stake in Intelsat(the satellite communications company). The stake was held both directly byCable and Wireless plc and through various Group subsidiaries and associates.Total cash proceeds from the disposal of this investment were US$104.8 million(‚£56 million). Cable & Wireless has now disposed of all of its satelliteshareholdings.RegulatoryThe UK regulator, Ofcom, is due to consult on the final decision of itsStrategic Telecoms Review in summer 2005. Ofcom's stated objective is that itwould seek to promote competition at the deepest level of infrastructure whereit is effective and sustainable to do so. Ofcom believes the optimum way toachieve this is through the concept of equality of access, which it believeswill lead to the creation of a more effectively competitive market in the UK.Implementing the concept of equality of access will ensure all players havefair and reasonable access to critical local infrastructure assets byneutralising BT's historic ability to leverage its unique position as both amonopoly local infrastructure owner and competitive retailer.Ofcom has made Local Loop Unbundling ('LLU') a central theme in achieving deeplevel infrastructure competition and the creation of an LLU adjudicator in 2004has resulted in more focused efforts to remove many of the barriers to widerscale rollout of LLU. However the critical elements of revaluing BT's localcopper network, the review of the regulated cost of capital to be applied toBT's existing and future investments, charges for wholesale line rental andfully unbundled local loops remain outstanding and the detail of the decisionsreached in the next few months will be vital in creating a sustainablecompetitive market in the UK.Discontinued operationsDiscontinued operations in the year to 31 March 2005 comprise IDC and creditsrelating to transactions associated with the exit of the US domestic businessin the prior year. Other items relate to the release of previously accruedcosts no longer required. Discontinued operations in the year to 31 March 2004also relate to TeleYemen.Exceptional itemsIn the year to 31 March 2005 the Group recognised a net exceptional chargebefore tax of ‚£14 million, comprising an exceptional charge in continuingoperations of ‚£159 million and an exceptional credit in discontinued operationsof ‚£145 million. Detailed analysis of exceptional items is given on page 11 ofthis document.Cash and fundingAt 31 March 2005, the Group's cash and short-term investments were ‚£2,166million. Total borrowings were ‚£824 million, of which long-term debt was ‚£801million. The net cash balance at 31 March 2005 was ‚£1,342 million. Cash andshort-term investments include ‚£14 million of treasury investments and ‚£80million of Credit Linked Notes referenced to the Group's 2012 ‚£200 million bond(which have a similar economic effect to repurchasing the bonds for the periodof the investment) and ‚£42 million ring-fenced in relation to performanceguarantees.During the year ended 31 March 2005 the Group bought back ‚£20 million of its8.625 percent 2019 bonds and ‚£16 million of its 8.75 percent 2012 bonds for anaggregate consideration of ‚£36 million.DividendThe Board reinstated the dividend in June 2004 and, in August 2004, a full yeardividend of 3.15 pence was paid in respect of the year ended 31 March 2004. Thefull year dividend comprised a notional interim dividend of 1.05 pence and afinal dividend of 2.1 pence.The Board has recommended a full year dividend for the year ended 31 March 2005of 3.80 pence, comprising 1.16 pence per share for the interim and 2.64 penceper share for the final dividend. The recommended dividend is subject toapproval of the shareholders at the Annual General Meeting to be held on 22July 2005. If approved, the final dividend will be paid on 11 August 2005 toordinary shareholders on the register as at 8 July 2005 and to AmericanDepositary Receipt holders on 18 August 2005 on the register as at 8 July 2005.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 Thursday 14 July 2005. Copies ofthe mandate form, and the scrip dividend brochure, can be obtained from LloydsTSB Registrars (UK callers: 0870 600 3975, overseas callers: +44 1903 502 541)or from the Company's website (www.cw.com).Return of capitalOn 10 November 2004, Cable & Wireless announced a ‚£250 million share repurchaseprogramme, reflecting the Board's view that a return of capital was possible asa result of the progress made in dealing with legacy issues such as the USexit, the sale of IDC and the sale of Intelsat.At 31 March 2005, 60.5 million shares had been repurchased at a total cost of ‚£75.3 million, equating to an average price per share of 124.4 pence. Sharesrepurchased are held as treasury shares. We expect the share repurchaseprogramme will be completed by 31 March 2006.FINANCIAL RESULTSThe results and commentary that follow focus on the continuing activities ofthe Group and the geographic businesses within the Group.The Group results presented below should be read in conjunction with theGroup's consolidated profit and loss, balance sheet and cash flow statementsand related notes on pages 31 to 41.Group Profit and LossContinuing Operations H1 H2 FY FY Constant2004/5 2004/5 2004/5 2003/4 CurrencyGrowth‚£m ‚£m ‚£m ‚£m %Revenue 1,507 1,516 3,023 3,130 -Outpayments and network costs (829) (820) (1,649) (1,745) 3Staff costs (262) (265) (527) (524) (4)Other costs (169) (202) (371) (408) 4Depreciation before exceptional items (98) (94) (192) (225) 9Operating profit before exceptional itemsand amortisation 149 135 284 228 38Amortisation of goodwill (1) (6) (7) 3Operating profit before exceptional items 148 129 277 231 33Exceptional items- depreciation (14) 6 (8) (404)- amortisation - - - (10)- other operating costs 12 (156) (144) (219)Joint ventures and associates 21 19 40 41Total operating profit/(loss) 167 (2) 165 (361)Exceptional (losses)/profits on sale andtermination of operations - (14) (14) 2Profits on disposal of fixed assetsbefore exceptional items 2 3 5 26Exceptional profits on disposal of fixed assets - 7 7 12Net interest income 16 19 35 18Other similar income/(charges) 5 (1) 4 3Profit/(loss) before tax 190 12 202 (300)Profit before tax and exceptional items 192 169 361 319The Trading overview section on page 7 provides additional commentary on theGroup's performance.The Group recorded a total operating profit from continuing operations of ‚£165million for the year ended 31 March 2005. This is after taking account ofexceptional operating costs of ‚£144 million, comprising costs associated withrestructuring and the impact of Hurricane Ivan. There was also an exceptionaldepreciation charge of ‚£8 million.Net interest income of ‚£35 million reflects an increase in the interest earnedcompared to the prior year due to the rising interest rate environment.There are various other non-trading items, totalling ‚£9 million, andexceptional items totalling ‚£7 million included in the profit before tax fromcontinuing operations of ‚£202 million in the year. These principally relate toprofits and losses on the sale of various fixed asset investments, includingIntelsat.Attributable profit/(loss) 2004/5 2003/4Underlying Underlying Amortisation Exceptional Reported Reportedcontinuing Group of goodwill Itemsoperations* result*‚£m ‚£m ‚£m ‚£m ‚£m ‚£mContinuing 368 368 (7) (159) 202 319Discontinued - 16 - 145 161 (543)Profit/(loss) before tax 368 384 (7) (14) 363 (224)Tax (75) (75) - 89 14 12Profit/(loss) after tax 293 309 (7) 75 377 (212)Minority interests (78) (78) - 3 (75) (25)Attributable profit/(loss) 215 231 (7) 78 302 (237)Earnings/(loss) per share (pence) 9.3 13.0 (10.2)* Excluding amortisation of goodwill and exceptional itemsExceptional itemsIn the year ended 31 March 2005 the Group recognised a ‚£14 million before-taxcharge in respect of exceptional items, of which a ‚£159 million charge relatedto continuing operations and a ‚£145 million credit related to discontinuedoperations.The exceptional tax credit of ‚£89 million comprises a ‚£4 million credit onexceptional items and a credit of ‚£85 million relating to the settlement ofvarious tax items at less than their expected cost, and further clarity as tothe expected cost of other overseas tax items.The analysis of the continuing exceptional charge of ‚£159 million is set out inthe table below.Continuing operations 2004/5 2003/4‚£m ‚£mOperating itemsUK restructuring (68) (147)Europe restructuring (39) (7)Corporate restructuring (31) (15)Asia restructuring (1) (4)National Telcos restructuring (2) (46)Hurricane costs (18) -Onerous contract provisions 15 -(144) (219)Depreciation (8) (404)Amortisation of goodwill - (10)Operating Costs (8) (414)Profits on disposal of fixed assets 7 12(Loss)/profits on sale and termination of operations (14) 2Non-operating items (7) 14Total exceptional items from continuing operations (159) (619)Restructuring in the UK has resulted in a charge of ‚£68 million comprisingproperty related costs of ‚£23 million, staff-related costs of ‚£29 million,network costs of ‚£10 million and other costs of ‚£6 million.In Europe, exceptional restructuring costs of ‚£39 million comprise propertyrelated costs of ‚£10 million, staff-related costs of ‚£29 million. There wasalso a European fixed asset impairment charge of ‚£5 million in the year as partof the restructuring.Costs associated with the corporate reorganisation (including the closure ofthe London headquarters) totalling ‚£31 million comprise property related costsof ‚£20 million, other costs of ‚£2 million and staff-related costs of ‚£9million.Costs of restructuring in Asia and the National Telcos of ‚£1 million and ‚£2million respectively relate to the final costs from previous restructurings.The impact of Hurricane Ivan in the Caribbean resulted in exceptional operatingcosts of ‚£18 million relating to business and network restoration. There wasalso a ‚£3 million fixed asset write-down.Provisions relating to onerous contracts totalling ‚£15 million have beenreleased in the year.Non-operating items of ‚£7 million relate to the disposal of investments andoperations previously exited.The analysis of the discontinued exceptional credit of ‚£145 million is set outin the table below:Discontinued operations 2004/5 2003/4‚£m ‚£mOperating itemsDepreciation - (122)US business restructuring - (22)Japan restructuring prior to disposal (1) (3)Total operating items (1) (147)Non-operating itemsProfits less (losses) on sale and termination of operations 130 248Profits on disposal of fixed assets 16 16Total non-operating items 146 264Total exceptional items from discontinued operations 145 117Exceptional items within discontinued operations relate to the disposal of IDCin the year (‚£42 million) together with the receipt of cash as part of theChapter 11 process of the US domestic business and the release of provisionsrelating to the US exit (‚£66 million) and previously accrued costs no longerrequired (‚£22 million).A profit of ‚£16 million was recognised on the disposal of trade investments inIDC.Exceptional operating items within discontinued operations in 2003/4 relatepredominantly to the impairment of IDC assets and the restructure of the formerUS operations. Non-operating items in 2003/4 predominantly relate to the gainon disposal of the Group's former US operations and the release of accrualspreviously set up on disposal of former Group businesses that were released asthey were no longer required.Group cash flowH1 H2 FY FY2004/5 2004/5 2004/5 2003/4‚£m ‚£m ‚£m ‚£mGroup operating profit before exceptional items 156 135 291 199Depreciation and amortisation 100 101 201 249Non-cash items (3) 6 3 (26)Working capital (27) 13 (14) (46)Net Cash outflow in respect of provisions (47) (88) (135) (303)Cash inflow from operating activities 179 167 346 73Dividends received, returns on investments andservicing of finance 14 1 15 (32)Taxation paid (18) (42) (60) (43)Capital expenditure (124) (220) (344) (342)Sale of current asset investments - - - 229Other financial investment 22 54 76 72Acquisitions and disposals (64) 29 (35) (118)Equity dividends paid (71) (26) (97) -Net cash outflow before financing and managementof liquid resources (62) (37) (99) ( 161)Gross cash 2,245 2,166 2,166 2,367Net cash 1,386 1,342 1,342 1,448Operating activities produced ‚£346 million of cash flow in the year to 31 March2005, which is an increase of ‚£273 million compared with the prior year.Tax paid of ‚£60 million in the year to 31 March 2005 primarily relates to theNational Telco businesses.Capital expenditure at ‚£344 million in the year was stable against 2003/4reflecting increased investment in customer service delivery (including networkbuild and local loop unbundling) offset by the completion of the initial rollout of GSM networks in the National Telcos.Financial investment generated net cash of ‚£76 million in 2005, primarilyrelated to the sale of Intelsat and a trade investment.The net cash outflow from acquisitions and disposals of ‚£35 million primarilyrelates to the acquisition of Monaco Telecom and Bulldog, offset by thedisposal of IDC.Cable & Wireless Performance AnalysisContinuing OperationsNational TelcosUK CWAO2 Europe Asia Bulldog Caribbean Panama Macau Monaco Rest Total Other FY2004/5of the NationalWorld‚³ Telcos‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mRevenue 1,602 16 186 39 11 550 257 117 100 167 1,191 (22) 3,023Outpayments andnetwork costs (1,066)(14) (143) (19) (13) (183) (90) (48) (55) (39) (415) 21(1,649)Staff costs (248) (4) (31) (7) (12) (92) (23) (11) (13) (27) (166) (59) (527)Other costs (138) (3) (24) (7) (14) (113) (38) (8) (5) (19) (183) (2) (371)Total operatingcosts‚¹ (1,452) (21) (198) (33) (39) (388) (151) (67) (73) (85) (764) (40)(2,547)Depreciation beforeexceptional items (60) - (1) (2) (58) (31) (15) (6) (18) (128) (1) (192)Operating profit/(loss)before exceptional itemsand amortisation 90 (5) (12) 5 (30) 104 75 35 21 64 299 (63) 284Amortisation - - - - (4) - - - (5) 2 (3) - (7)Joint ventures andassociates (8) - - - - 19 - - 1 28 48 - 40Total operating profit/(loss) before exceptionalitems 82 (5) (12) 5 (34) 123 75 35 17 94 344 (63) 317‚¹ Excluding depreciation, amortisation and exceptional items‚² Cable & Wireless Americas Operations, Inc ('CWAO') provides data and IPsolutions to international Enterprise and Carrier Services customers withservice requirements to, from and within the United States. CWAO startedtrading on 1 September 2003 after Cable & Wireless formalised its ongoingcommercial dealings between its former US business ('CWA') and the rest of theGroup‚³ 'Rest of the World' comprises the results of the Group's operations in theAtlantic, Pacific and Indian Oceans, the Middle East and GuernseyThe geographical financial information in the above table reflects themanagement structure of the organisation during the year to 31 March 2005.United KingdomH1 H2 FY FY Change as reported** Change as reported**2004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % %Enterprise 232 243 475 453 5% 5%Business 198 196 394 445 (1)% (11)%Carrier Services 380 353 733 763 (7)% (4)%Total revenue 810 792 1,602 1,661 (2)% (4)%Outpayments and network costs (554) (512) (1,066) (1,158) 8% 8%Staff costs (118) (130) (248) (254) (10)% 2%Other costs (65) (73) (138) (148) (12)% 7%Total operating costs* (737) (715) (1,452) (1,560) 3% 7%Depreciation (30) (30) (60) (68) - 12%Operating profit beforeexceptionals and amortisation 43 47 90 33 9% 100+%Joint ventures & associates (2) (6) (8) (1) (100+)% (100+)%Total operating profitbefore exceptionals 41 41 82 32 - 100+%Headcount (number)*** 4,410 4,499 4,499 4,398 (2)% (2)%Cash capex 47 91 138 101 (94)% (37)%Free cash flow 26 (14) 12 - (100+)% -*Excluding depreciation, amortisation and exceptional items**Positive percentage represents improvement*** H1 2004/5 restated to include 146 Group IT heads that were transferred toUK headcount in Jan 05Revenue for the six months to 31 March 2005 was ‚£792 million, a decline of 2percent against the prior half, principally due to the decline in CarrierServices revenue following the regulated reduction in mobile termination ratesfrom 1 September 2004. Revenue for the year was ‚£1,602 million, a decline of 4percent against the prior year, driven by declines in Carrier Services andBusiness revenue.Enterprise revenue for the full year increased by 5 percent from the prior yearas a result of continued expansion of sales to key financial servicescustomers. The UK supported Aviva's ongoing expansion of its customer contactcentres and network rollout across the United Kingdom and in April 2005 the UKexecuted a five-year contract with Ryanair, valued at ‚£5 million, to manage itspan-European IT and communications network.Business revenue for the full year declined by 11 percent from the prior yearand by 1 percent from H1 2004/5 reflecting the high price erosion and churnlevels experienced in this segment. Notwithstanding the difficult tradingconditions, recent initiatives undertaken in the UK have resulted in somenoteworthy wins. For example in H2 2004/5, the UK executed a three yearcontract with Scottish & Newcastle plc valued at ‚£2.1 million to provideinternet protocol virtual private network quality of service ('IP-VPN QoS') tointegrate 66 of its manufacturing distribution and sales sites to a single datanetwork.Carrier Services revenues for the full year declined by 4 percent due in largepart to the regulated reduction in mobile termination rates. Adjusting for thisimpact, Carrier Services revenue was stable against the prior year. To combatthe loss of revenue from the reduction in mobile termination rates and the highlevel of price erosion, the UK is working to increase volumes in most of thekey product sets and has extended contracts with existing customers such asCentrica and the Post Office in fixed line voice services.Outpayments and network costs declined by 8 percent against the prior year duein large part to the reduction in mobile termination rates and, to a lesserextent, the increased focus on cost savings through network efficiency andvendor re-negotiation programmes.Staff costs were stable against the prior year but increased by 10 percentagainst H1 2004/5 as a result of a transfer of costs relating to Group IT staffinto the UK's operating cost base and as a result of staff up-skillingnecessary to support the UK restructuring programme.The increase in losses from Joint ventures and associates in the second halfrelates to the write-off of Apollo undersea cable assets.Total operating profit before exceptionals for the full year was ‚£82 millioncompared to ‚£32 million in the prior year. This improvement results from thecost initiatives highlighted above, which offset the revenue decline. Inaddition, operating profit performance was positively impacted by an ‚£8 milliondepreciation benefit from the impairment taken in the prior year.Cash capital expenditure increased to ‚£138 million from ‚£101 million in theprior year, due to transformational investments. These include projects to linkorder processing, provisioning and billing systems and upgrades to financialreporting systems. The increase in capex in the second half of the yearresulted in a negative free cash flow in H2 2004/5.United States - Cable & Wireless Americas Operations, Inc. ( 'CWAO')¢â‚¬ H1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %Enterprise 4 5 9 4 25% 100+% 29% 100+%Business - - - - - - - -Carrier Services 3 4 7 7 33% - 37% 9%Total revenue 7 9 16 11 29% 45% 33% 59%Outpayments and network costs (7) (7) (14) (23) - 39% (3)% 33%Staff costs (2) (2) (4) (4) - - (3)% (9)%Other costs (2) (1) (3) - 50% - 47% -Total operating costs* (11) (10) (21) (27) 9% 22% 6% 15%Depreciation - - - - - - - -Total operating profitbefore exceptionals (4) (1) (5) (16) 75% 69% 73% 66%Headcount (number) 49 41 41 60 16% 32% - -Cash capex - - - - - - - -Free cash flow (4) (1) (5) (16) 75% 69% 73% 66%*Excluding depreciation, amortisation and exceptional items**Positive percentage represents improvementRevenue for the six months to 31 March 2005 was ‚£9 million, an increase of 33percent at constant currency against the prior half, principally due to theresolution of billing disputes and a successful billing audit. Revenue for theyear was ‚£16 million, an increase of 59 percent at constant currency againstthe prior year, driven by the longer trading period in 2004/5 and thesuccessful migration of customers from the former Cable & Wireless US network(now owned by SAVVIS Communications) to CWAO's purpose-built network.Enterprise revenue for the full year increased by more than 100 percent atconstant currency against the prior year due to the longer trading period andthe acquisition of new customers. Carrier Services revenue for the full yearincreased by 9 percent at constant currency from the prior year due to asignificant increase in sales to other US carriers which offset a decline insales to SAVVIS Communications.Outpayments and network costs declined by 33 percent at constant currency fromthe prior year. Taking into account the longer trading period in 2004/5, thissignificant cost reduction was due to the migration of customers onto CWAO'sown network.Staff costs increased by 9 percent at constant currency but were stable againstthe prior year at reported rates and due to headcount reductions during theperiod being offset by the longer trading period in 2004/5.Total operating loss before exceptionals was ‚£5 million, an improvement of 66percent at constant currency.EuropeH1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %Enterprise 13 9 22 40 (31)% (45)% (33)% (44)%Business 5 4 9 14 (20)% (36)% (23)% (34)%Carrier Services 78 77 155 208 (1)% (25)% (4)% (24)%Total revenue 96 90 186 262 (6)% (29)% (9)% (27)%Outpayments and network costs (73) (70) (143) (198) 4% 28% 7% 26%Staff costs (15) (16) (31) (40) (7)% 23% (3)% 21%Other costs (13) (11) (24) (30) 15% 20% 18% 18%Total operating costs* (101) (97) (198) (268) 4% 26% 7% 24%Depreciation - - - (1) - 100% - 100%Total operating profitbefore exceptionals (5) (7) (12) (7) (40)% (71)% (36)% (75)%Headcount (number) 489 423 423 519 13% 18%Cash capex 1 1 2 7 - 71% 3% 71%Free cash flow (6) (8) (14) (13) (33)% (8)% (30)% (10)%*Excluding depreciation, amortisation and exceptional items**Positive percentage represents improvementRevenue for the six months to 31 March 2005 was ‚£90 million, a decline of 9percent at constant currency against the prior half, due to a decline inEnterprise revenue. Revenue for the full year was ‚£186 million, a decline of 27percent at constant currency against the prior year due mainly to the declinein all revenue segments. Going forward, Europe will be focused on CarrierServices and will continue to provide voice, IP and Data services to UK-basedEnterprise customers.Enterprise revenue for the full year declined by 44 percent at constantcurrency compared to the prior year, reflecting the loss of a major contract inH1 2004/5 and the full year impact of domestic operations disposals in 2003/4.Business revenue for the full year declined by 34 percent at constant currencycompared to the prior year, also due to the impact of the domestic operationsdisposals in 2003/4 and the refocus of Europe on Carrier Services. CarrierServices revenues for the full year declined by 24 percent at constant currencycompared to the prior year as a result of excess capacity in the Europeancarrier market which drove aggressive pricing competition, together with ashift in revenue mix from high revenue to low revenue destinations. Despitethis decline, Europe has continued to market to new customers, recently winninga new contract with Belgacom to provide carrier Multi-Protocol Label Switching('MPLS') services.Outpayments and network costs declined by 26 percent at constant currencycompared to the prior year primarily due to the reduced scale of our operationsin Europe.Staff costs declined by 21 percent at constant currency compared to the prioryear due to cost savings from headcount reductions effected during 2003/4.Headcount in Europe reduced by 18 percent in 2004/5 and further reductions arescheduled by March 2006.Total operating loss before exceptionals was ‚£12 million compared to a loss of‚£7 million in the prior year due to the material decline in revenue,particularly in the Enterprise and Business segments.Cash capital expenditure reduced to ‚£2 million from ‚£7 million in the prioryear, due to the reduced scale of operations in Europe.Asia¢â‚¬ H1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %Enterprise 17 17 34 27 - 26% 3% 38%Business - - - 2 - (100)% - (100)%Carrier Services 1 4 5 3 100+% 67% 100+% 83%Total revenue 18 21 39 32 17% 22% 20% 34%Outpayments and network costs (9) (10) (19) (21) (11)% 10% (15)% 1%Staff costs (3) (4) (7) (8) (33)% 13% (37)% 4%Other costs (6) (1) (7) (4) 83% (75)% 81% (92)%Total operating costs* (18) (15) (33) (33) 17% - 14% (10)%Depreciation - (1) (1) (1) - - - (10)%Total operating profitbefore exceptionals - 5 5 (2) - 100+% - 100+%Headcount (number) 213 221 221 173 (4)% (28)%Cash capex 1 1 2 3 - 33% (3)% 27%Free cash flow (1) 5 4 (4) 100+% 100+% 100+% 100+%*Excluding depreciation, amortisation and exceptional items**Positive percentage represents improvementFollowing its disposal of Cable & Wireless IDC, Inc., (Cable & Wireless'Japanese subsidiary) on 19 February 2005, Cable & Wireless has refocused itsbusiness in Asia on serving Enterprise customers that require IP and manageddata services to and from Asia, and Carrier Services customers.Revenue for the six months to 31 March 2005 was ‚£21 million, an increase of 20percent at constant currency against H1 2004/5, due to increases in CarrierServices revenue. Revenue for the year was ‚£39 million, an increase of 34percent at constant currency against the prior year, driven by a strongperformance in both Enterprise and Carrier Services.Enterprise revenue for the full year increased by 38 percent at constantcurrency from the prior year as a result of improved marketing, including thelaunch of new Multi-Protocol Label Switching ('MPLS') and Managed Networkservices within the region. Cable & Wireless' operations in the Businesssegment were sold as part of the disposal of Cable & Wireless IDC, Inc. CarrierServices revenue for the full year increased by 67 percent at reported ratesand by 83 percent at constant currency from the prior year as a result ofincreased focus on this segment.Outpayments and network costs declined by 1 percent at constant currency fromthe prior year due to cost reduction initiatives, including a review of leasedcircuit costs and improvements to network routings. Staff costs declined by 4percent at constant currency from the prior year due to ongoing cost reductioninitiatives.Total operating profit before exceptionals was ‚£5 million, an increase of morethan 100 percent at constant currency.Bulldog¢â‚¬ H1 H2 FY FY2004/5 2004/5 2004/5 2003/4‚£m ‚£m ‚£m ‚£mTotal revenue 4 7 11 -Outpayments and network costs (4) (9) (13) -Staff costs (3) (9) (12) -Other costs (1) (13) (14) -Total operating costs* (8) (31) (39) -Depreciation - (2) (2) -Operating profit before exceptionalsand amortisation (4) (26) (30) -Amortisation (1) (3) (4) -Joint ventures & associates - - - -Total operating profit before exceptionals (5) (29) (34) -Headcount (number) 190 505 505 -Cash capex 4 23 27 -Free cash flow (8) (47) (55) -* Excluding depreciation, amortisation and exceptional items** Positive percentage represents improvementRevenue for the ten months to 31 March 2005 was ‚£11 million, reflecting strongdemand in the UK SoHo (small office or home office) and consumer market for thehigh speed broadband services offered by Bulldog. In particular, Bulldog hasseen high demand for its Super@ctive product that includes 4Mbps broadband plusunlimited national and local phone calls and its Inter@ctive product thatincludes 4Mbps broadband services.Outpayments and network costs of ‚£13 million represent the costs of Bulldog'sUK broadband network, including payments to Cable & Wireless UK for theutilisation of its voice and backbone network. Staff costs of ‚£12 millionrepresent the recruitment and salary costs of the employee base of 505 people.Bulldog's investment in advertising and marketing to increase its brandawareness as well as the costs of external expertise engaged to reviewBulldog's operational processes are the most substantial component of the ‚£14million within other costs.The depreciation charge of ‚£2 million relates to the capital investment beingmade in the expansion of Bulldog's local loop unbundled network and associatedsystems.The amortisation charge of ‚£4 million relates to the goodwill arising on theacquisition of Bulldog.During the year, Bulldog invested ‚£27 million of cash capex in the initialbuild out of its broadband network infrastructure. This investment was drivenby unbundling local exchanges (252 exchanges unbundled at 31 March 2005),installation of metronodes (6 installed at 31 March 2005) and investment ininformation technology.____________¢â‚¬ Cable & Wireless acquired Bulldog Communications ('Bulldog') on 28 May 2004.Accordingly, Bulldog Communications contributed to Cable &Wireless results forapproximately 4 months in H1 2004/5 and for the full period in H2 2004/5.National TelcosH1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %International voice 115 95 210 261 (17)% (20)% (14)% (12)%Domestic voice 180 171 351 392 (5)% (10)% (1)% (1)%Mobile 159 185 344 299 16% 15% 20% 26%Data & IP 75 79 154 150 5% 3% 9% 13%Other 47 85 132 85 81% 55% 82% 70%Total revenue 576 615 1,191 1,187 7% - 10% 10%Outpayments andnetwork costs (188) (227) (415) (368) (21)% (13)% (24)% (24)%Staff costs (79) (87) (166) (163) (10)% (2)% (13)% (12)%Other costs (91) (92) (183) (226) (1)% 19% (5)% 11%Total operating costs* (358) (406) (764) (757) (13)% (1)% (17)% (11)%Depreciation (66) (62) (128) (153) 6% 16% 3% 8%Operating profit beforeexceptionals andamortisation 152 147 299 277 (3)% 8% -% 18%Amortisation - (3) (3) 3 - (100+)% (100+)% (100+)%Joint venturesand associates 23 25 48 42 9% 14% 12% 25%Total operating profitbefore exceptionals 175 169 344 322 (3)% 7% 9% 36%Headcount (number) 9,092 8,766 8,766 8,430 4% (4)%Cash capex 65 96 161 195 (48)% 17% (53)% 9%Free cash flow 153 113 266 235 (26)% 13% (24)% 23%* Excluding depreciation, amortisation and exceptional items** Positive percentage represents improvementThe performances of the individual business units which comprise the NationalTelcos are discussed on pages 22 to 28.CaribbeanH1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %International voice 69 54 123 160 (22)% (23)% (18)% (15)%Domestic voice 94 84 178 204 (11)% (13)% (7)% (3)%Mobile 63 73 136 143 16% (5)% 20% 6%Data & IP 36 35 71 70 (3)% 1% 1% 13%Other 14 28 42 56 100% (25)% 100+% (17)%Total revenue 276 274 550 633 (1)% (13)% 3% (3)%Outpayments andnetwork costs (89) (94) (183) (203) (6)% 10% (10)% -Staff costs (44) (48) (92) (97) (9)% 5% (13)% (5)%Other costs (55) (58) (113) (142) (5)% 20% (9)% 12%Total operating costs* (188) (200) (388) (442) (6)% 12% (11)% 2%Depreciation (32) (26) (58) (76) 19% 24% 15% 15%Operating profitbefore exceptionalsand amortisation 56 48 104 115 (14)% (10)% (11)% -Joint ventures andassociates 12 7 19 30 (42)% (37)% (39)% (31)%Total operatingprofit beforeexceptionals 68 55 123 145 (19)% (15)% (16)% (6)%Headcount (number) 3,990 4,147 4,147 4,254 (4)% 3%Cash capex 42 44 86 134 (5)% 36% 9% (29)%Free cash flow 46 30 76 57 (35)% 33% (32)% 47%* Excluding depreciation, amortisation and exceptional items** Positive percentage represents improvementRevenue for the six months to 31 March 2005 was ‚£274 million, an increase of 3percent at constant currency compared to H1 2004/5. Revenue for the full yearwas ‚£550 million, a decline of 3 percent at constant currency compared to theprior year. This result reflects the decline in International voice revenuesthroughout the year as well as the adverse impact of Hurricane Ivan, offset bysignificant growth in Mobile revenue in H2 2004/5.Hurricane Ivan adversely impacted results in Cayman, Grenada and, to a lesserextent, Jamaica. The impact of Hurricane Ivan is estimated to be a revenue lossof ‚£12 million and operating profit reduction of ‚£11 million during the period.Domestic fixed line revenues and Data & IP revenues were the most materiallyimpacted.International voice revenue declined by 15 percent at constant currencycompared to the prior year. This reflects the ongoing pressure on internationalsettlement rates across all Caribbean markets and, specifically, a full year'scompetition in Cayman, rate reductions in the East Caribbean as well as theregulatory reductions in international settlement rates implemented in Jamaicain June 2004.Domestic voice revenue declined by 3 percent at constant currency compared tothe prior year due to rate reductions in the East Caribbean as well as fixed tomobile substitution across the Caribbean. Fixed line connections at 31 March2005 were 735,000 compared to 759,000 at 30 September 2004.Mobile revenue increased by 6 percent at constant currency from the prior yearand by 20 percent compared to H1 2004/5. The East and North Caribbean deliveredthe strongest performances reflecting growth in GSM customer numbers andincreases in international call revenues. Our enhanced roaming capabilities andpartnerships have also driven strong growth in roaming revenues across theCaribbean. Robust results in H2 2004/5 also reflect high demand for mobileservices experienced in Cayman and Grenada in the wake of Hurricane Ivan. Thetotal active Mobile customer base at 31 March 2005 was approximately 1,367,000compared to approximately 1,302,000 at 30 September 2004. Reductions reflectefforts to migrate higher value customers from Time Division Multiple Access('TDMA') to Global System for Mobile ('GSM').Data & IP revenue increased by 13 percent at constant currency from the prioryear due to ongoing growth in dial-up and ADSL customers partially offset bythe impact of Hurricane Ivan. Total Asynchronous Digital Subscriber Line('ADSL') customers were approximately 38,000 at 31 March 2005 compared toapproximately 20,000 at 30 September 2004.Total operating costs before depreciation, amortisation and exceptional itemswere ‚£388 million, a decline of 2 percent at constant currency from the prioryear. Adjusting for one-off items in the prior year, underlying operating costswere flat against the prior year.Outpayments and network costs were stable against the prior year at constantcurrency compared to a 3 percent decline in revenues at constant currency,primarily reflecting increasingly aggressive international competition. Staffcosts increased by 5 percent at constant currency against the prior year. Thisreflects efforts to increase the skill base of our employees, as well as wageinflation in Jamaica. Other operating costs declined by 12 percent at constantcurrency. However, adjusting for a one off in the prior year (‚£10 millionwrite-off of receivables), Other operating costs declined by 4 percent atconstant currency.Depreciation fell by 15 percent at constant currency from the prior year and by15 percent from H1 2004/5. The year on year decline in depreciation wasprincipally due to the impairments to assets carried out in 2003/4. The half onhalf decline in depreciation was due to the impact of Hurricane Ivan and theimpact of a substantial property asset in Barbados reaching the end of itsuseful life towards the end of H1 2004/5.Joint venture and associates declined by 31 percent at constant currency due tothe recognition of ‚£11 million of restructuring charges in H2 2004/5 in TSTT.Total operating profit before exceptional items was ‚£123 million for the year,a decrease of 6 percent at constant currency compared to the prior year. Afteradjusting for the impact of Hurricane Ivan in the current year and one-offitems recorded in FY2003/4, underlying operating profit declined by 4 percentat constant currency against the prior year.PanamaH1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %International voice 9 9 18 23 - (22)% 3% (14)%Domestic voice 61 56 117 139 (8)% (16)% (5)% (8)%Mobile 36 41 77 57 14% 35% 18% 48%Data & IP 15 15 30 29 - 3% 3% 13%Other 8 7 15 17 (13)% (12)% (9)% (3)%Total revenue 129 128 257 265 (1)% (3)% 3% 6%Outpayments andnetwork costs (41) (49) (90) (74) (20)% (22)% (23)% (33)%Staff costs (12) (11) (23) (27) 8% 15% 5% 7%Other costs (20) (18) (38) (55) 10% 31% 7% 24%Total operating costs* (73) (78) (151) (156) (7)% 3% (10)% (6)%Depreciation (15) (16) (31) (39) (7)% 21% (10)% 13%Total operating profitbefore exceptionals 41 34 75 70 (17)% 7% (14)% 17%Headcount (number) 1,891 1,818 1,818 1,881 4% 3%Cash capex 11 30 41 27 (100+)% (52)% (100+)% (66)%Free cash flow 45 20 65 82 (56)% (21)% (54)% (13)%* Excluding depreciation, amortisation and exceptional items** Positive percentage represents improvementRevenue for the six months to 31 March 2005 was ‚£128 million, an increase of 3percent at constant currency from H1 2004/5. Revenue for the full year was ‚£257million, an increase of 6 percent at constant currency compared to the prioryear. This revenue growth was due to the increase in Mobile and Data & IPrevenue during the period, offsetting a decline in International and Domesticvoice revenue.International voice revenue fell by 14 percent and domestic revenues fell by 8percent at constant currency from the prior year due to increasing competitionfollowing the liberalisation of international and domestic voice services from2 January 2003. In addition, Domestic voice revenue was adversely affected byfixed to mobile substitution, which particularly impacted payphone revenues.The decline in International and Domestic voice revenue was offset by continuedstrong growth in Mobile revenue which increased by 48 percent at constantcurrency against the prior year reflecting strong growth in GSM mobilesubscribers and an increase in the mobile market penetration in Panama. Themobile subscriber base increased to approximately 634,000 at 31 March 2005 fromapproximately 548,000 at 30 September 2004. Mobile market share was in linewith the prior year and H1 2004/5, with the increase in subscribers reflectingincreased mobile penetration from 33.3 percent at 30 September 2004 to 37.2percent at 31 March 2005.Data & IP revenue rose by 13 percent at constant currency compared to the prioryear due to the completion of a number of major corporate projects nowgenerating revenue and continued strong growth in internet revenues,particularly in Asynchronous Digital Subscriber Line ('ADSL') service, whichgrew by 152 percent. At 31 March 2005, the number of Mobile and ADSLsubscribers stood at approximately 634,000 and 38,000 respectively. Mobile andData & IP revenue now represents 42 percent of total revenue compared to 32percent in the prior year.Total operating costs before depreciation, amortisation and exceptional itemswere ‚£151 million, a 6 percent increase at constant currency compared to theprior year. Outpayments and network costs increased by 33 percent at constantcurrency from the prior year due to the higher volume generated by the increasein revenues and reflecting the changes in the sales mix as voice revenues withhigh margin are being substituted with lower margin Mobile and Data & IPrevenues. Staff costs fell by 7 percent at constant currency from the prioryear as a result of a reduction in the temporary payroll. In addition,headcount was reduced by 3 percent compared to last year following theimplementation of a voluntary retirement program in March 2005. Other costsdecreased by 24 percent at constant currency compared to the prior year due tocost reduction initiatives and lower legal costs following the ‚£9 millionsettlement of certain legal proceedings in H2 2003/4.Depreciation fell by 13 percent at constant currency from the prior year as aresult of the asset impairment in 2003/4. Nevertheless, there was an increaseof 10 percent at constant currency from H1 2004/5 as a result of newinvestments in GSM and ADSL networks.Total operating profit before exceptional items was ‚£75 million, an increase of17 percent at constant currency from the prior year.Cash capex was ‚£41 million, an increase of 66 percent at constant currency fromthe prior year due to the investments made in improving the service andcoverage of the GSM network and ADSL expansion.MacauH1 H2 FY FY Change as reported** Change as reported** cc growth1 cc growth12004/5 2004/5 2004/5 2003/4 H2 v H1 FY v FY H2 v H1 FY v FY‚£m ‚£m ‚£m ‚£m % % % %International voice 14 13 27 34 (7)% (21)% (4)% (13)%Domestic voice 9 8 17 18 (11)% (6)% (8)% 4%Mobile 22 22 44 47 - (6)% 3% 3%Data & IP 9 9 18 24 - (25)% 3% (18)%Other 3 8 11 5 100+% 100+% 100+% 100+%Total revenue 57 60 117 128 5% (9)% 9% -Outpayments andnetwork costs (24) (24) (48) (51) - 6% (3)% (3)%Staff costs (5) (6) (11) (12) (20)% 8% (24)% -Other costs (4) (4) (8) (7) - (14)% (3)% (25)%Total operating costs* (33) (34) (67) (70) (3)% 4% (7)% (5)%Depreciation (8) (7) (15) (18) 13% 17% 9% 9%Total operating profitbefore exceptionals 16 19 35 40 19% (13)% 23% (4)%Headcount (number) 908 932 932 881 (3)% (6)%Cash capex 3 6 9 16 (100)% 44% (100+)% 38%Free cash flow 21 20 41 42 (5)% (2)% (2)% 7%* Excluding depreciation, amortisation and exceptional items** Positive percentage represents improvementRevenue for the six months to 31 March 2005 was ‚£60 million, an increase of 9percent at constant currency compared to H1 2004/5. Revenue for the full yearwas ‚£117 million, in line with the prior year at constant currency.International voice revenue for the full year fell by 13 percent at constantcurrency from the prior year due to the reduction in international call ratesand a decline in outgoing traffic as a result of increased competition from theother two mobile operators. However, International voice revenue decreased byonly 4 percent at constant currency from H1 2004/5 due to an increase ininternational transit traffic. Domestic voice revenue for the full yearincreased by 4 percent at constant currency due to the increase in interconnectrevenue. Mobile revenue for the full year increased by 3 percent at constantcurrency compared to the prior year and as the increase in mobile incomingroaming revenue offset price reductions resulting from competition.Data & IP revenue for the full year fell by 18 percent at constant currencyfrom the prior year reflecting the transfer of the Asia Cities business.Underlying revenue from Data & IP rose by 12 percent at constant currency fromthe previous year primarily due to the growth in internet customer base. Otherrevenue rose by more than 100 percent at constant currency compared to theprior year primarily driven by the growth in enterprise solutions business tothe Macau Government, large corporations and small to medium size enterprisesthrough strategic alliances with major equipment and solutions suppliers.Total operating costs before depreciation, amortisation and exceptional itemswere ‚£67 million, a 5 percent increase at constant currency from the prioryear. Outpayments and network costs increased by 3 percent at constant currencydue to an increase in cost of sales relating to enterprise solutions and mobilehandsets sales. Staff costs were stable at constant currency. Other costsincreased by 25 percent at constant currency from the prior year due to highermarketing and repair and maintenance costs.Total operating profit before exceptional items was ‚£35 million, a decrease of4 percent at constant currency from the prior year driven by higher operatingcosts.Cash capex for the full year was ‚£9 million, a decline of 38 percent atconstant currency, principally due to the delay of invoices from suppliers.Monaco¢â‚¬ H1 H2 FY FY2004/5 2004/5 2004/5 2003/4‚£m ‚£m ‚£m ‚£mInternational voice 3 6 9 -Domestic voice 2 6 8 -Mobile 5 14 19 -Data & IP 3 5 8 -Other 17 39 56 -Total revenue 30 70 100 -Outpayments andnetwork costs (15) (40) (55) -Staff costs (4) (9) (13) -Other costs (1Related Shares:
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