13th Nov 2007 07:02
Cable & Wireless PLC13 November 2007 ANNOUNCEMENT CABLE AND WIRELESS plc INTERIM MANAGEMENT REPORT RESULTS FOR THE six months ENDED 30 september 2007 • Group EBITDA before exceptionals up 29% to £284 million, up 40% at constant currency • Europe, Asia & US EBITDA before exceptionals quadrupled from £24 million to £99 million, an EBITDA margin of 10%. Gross margin 41%, up from 35% in first half of last year. Revenue expected to grow from the second half of 2007/08 • Europe, Asia & US (excluding C&W Access) expected to be cash flow positive in the second half of 2007/08 • International EBITDA before exceptionals grew by 6% to US$398 million - mobile and broadband customers up 34% and 30% to 5.7 million and 439,000 respectively • Group profit before income tax more than doubled to £166 million • Interim dividend of 2.5 pence (2006/07: 1.7 pence), an increase of 47%. The full year dividend is expected to be approximately 7.5 pence, an increase of 28% • Europe, Asia & US EBITDA guidance up £35 million to between £205 million and £215 million. International guidance down US$20 million to between US$820 million and US$840 million. Sterling Group EBITDA guidance essentially unchanged CHAIRMAN'S STATEMENT Commenting on the results, Richard Lapthorne, Chairman of Cable and Wirelessplc, said: "It's been another good six months. The Europe, Asia & US turnaround is aheadof our own, and market, expectations with the successful execution of ourstrategy clearly visible in gross margin and EBITDA. Turning cash flow positivein the second half will be a significant milestone for the business.International continues to deliver good growth from mobile and broadband. I ampleased to announce that we intend to pay a dividend of 2.5 pence, a furtherdemonstration of our confidence in the current performance and future potentialof both our businesses." CONTACTS GROUPClare Waters Director of External Affairs [email protected] +44 (0)20 7315 4088Ashley Rayfield Director, Investor Relations [email protected] +44 (0)20 7315 4460Mat Sheppard Manager, Investor Relations [email protected] +44 (0)20 7315 6225Antonia Graham Head of EAU & Corporate PR [email protected] +44 (0)7803 724 111 Press Office +44 (0)1344 818 888FINSBURY Rollo Head / Don Hunter +44 (0)20 7251 3801 CONTENTS Chairman's statement ContactsGroup resultsAnalysis of Group results Group results before exceptional items Group exceptional items Dividend Reconciliation of Group EBITDA to net cash flow before financing Group cash and debt Exchange rate movementsManagement changeGroup outlookInternational International key performance indicators International income statement Reconciliation of International EBITDA to net cash flow before financing.Europe, Asia & US Europe, Asia & US key performance indicators Europe, Asia & US income statement Reconciliation of Europe, Asia & US EBITDA to net cash flow before financing.Group results detail International results detail International results detail (continued) International results detail (continued) Half year financial report Condensed consolidated interim income statement Condensed consolidated interim balance sheet Condensed consolidated interim statement of recognised income and expense Condensed consolidated interim cash flow statement Reconciliation of net profit to net cash flow from operating activities Notes to the condensed financial statementsIndependent review report to Cable and Wireless plcResponsibility statement GROUP RESULTS The Group results presented below should be read in conjunction with the Group'scondensed consolidated income statement, balance sheet and cash flow statementand related notes on pages 27 to 38. For the six months ended For the six months ended 30 September 2007 30 September 2006 Pre- Exceptionals Total Pre- Exceptionals Total exceptionals (1) exceptionals (1) £m £m £m £m £m £m Revenue 1,563 - 1,563 1,718 - 1,718Cost of sales (766) - (766) (917) - (917) Gross margin 797 - 797 801 - 801Operating costs (excluding LTIP charge) (513) (8) (521) (580) (22) (602) EBITDA(2) 284 (8) 276 221 (22) 199LTIP charge (30) - (30) (5) - (5)Depreciation and amortisation (137) - (137) (130) - (130)Net other operating income/ (expense) 3 53 56 9 (9) - Operating profit/(loss) 120 45 165 95 (31) 64Share of post-tax profit of joint ventures and associates 18 - 18 21 - 21 Total operating profit/(loss) 138 45 183 116 (31) 85Net finance expense (12) (10) (22) (16) - (16)Gain on sale of non-current assets 2 - 2 - - -Gain on termination of operations 3 - 3 - 10 10 Profit/(loss) before income tax 131 35 166 100 (21) 79Income tax expense (29) (5) (34) (24) - (24) Profit/(loss) for the period from continuing operations 102 30 132 76 (21) 55Profit for the period from discontinued operations 2 - 2 - 3 3 Profit/(loss) for the period 104 30 134 76 (18) 58 Attributable to equity holders of the Company 74 30 104 49 (18) 31Attributable to minority interests 30 - 30 27 - 27 Profit/(loss) for the period 104 30 134 76 (18) 58 Earnings/(losses) per share from continuing operations attributable to equity holders (pence) 3.0p 1.2p 4.2p 2.1p (0.9)p 1.2pEarnings/(losses) per share attributable to equity holders(pence) 3.1p 1.2p 4.3p 2.1p (0.8)p 1.3pEarnings/(losses) per share excluding LTIP charge (pence) 4.3p 1.2p 5.5p 2.3p (0.8)p 1.5p Dividend per share (pence) 2.5p 1.7p Capital expenditure (£m) (173) (174) Cash and cash equivalents (£m) 757 774 (1) 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 (2) Earnings before interest, tax, depreciation and amortisation, Long Term Incentive Plan (LTIP) charge and net other operating income/expense ANALYSIS OF GROUP RESULTS The Group's financial performance and outlook are described on pages 4 to 10 andare discussed in more detail in the International and Europe, Asia & US sectionsthat follow on pages 11 to 17 and 18 to 22 respectively. The results and thesupporting commentary compare performance for the six months 1 April to 30September 2007 to the corresponding six months in 2006. As we stated in May 2007, given that the US dollar is the dominant currency forInternational, we are now reporting International's results in US dollars togive a better reflection of the underlying performance of our business. Theaverage US$:£ exchange rate for the period was 1.9921 compared to 1.8272 for thefirst half of 2006/07. 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 strategy of Europe, Asia & US to focus on serving larger customers withhigher margin IP services, while actively shedding lower margin customers, hasresulted in the fall in Group revenue to £1,563 million. International revenueincreased 7% in US dollar terms as a result of continued growth in mobile andbroadband revenue more than offsetting declines in fixed line voice revenue.When translated into sterling, International revenue shows a 2% (£12 million)decrease due to the weaker US dollar. Gross margin On a constant currency basis, our gross margin has increased 4% to £797 million,predominantly driven by mobile and broadband growth in International. Whentaking into account the weakening of the US dollar, our reported gross marginfor the Group has remained relatively flat compared to the equivalent periodlast year (£801 million). As a percentage of revenue, gross margin for theGroup has improved by four percentage points from 47% to 51% mainly due to animproving product mix and initiatives to reduce cost of sales within Europe,Asia & US. Operating costs The decrease in operating costs of £67 million to £513 million principallyreflects the progress made in the turnaround of Europe, Asia & US. In additionto the savings achieved in the main enterprise business, our decision to exitthe UK residential broadband market in June 2006 has enabled us to reduce salesand marketing costs and headcount following the successful integration of C&WAccess into Europe, Asia & US. The 7% increase in International's operatingcosts in US dollar terms has been more than offset by the translation impact ofthe weaker US$:£ exchange rate. EBITDA The trends in gross margin and operating costs described above resulted in a 29%(40% at constant currency) improvement in EBITDA of £63 million to £284 million,compared to the first half of 2006/07. Long term incentive plan (LTIP) charge The £30 million charge for the period was split between International andEurope, Asia & US as £9 million and £21 million respectively. At 30 September2007, the LTIP accrual in the balance sheet, calculated in accordance with IAS19, was £54 million. This accrual reflects 18 months of service out of the 48month LTIP plan period and the £1,754 million increase in market capitalisationfrom 1 April 2006 to 30 September 2007, of which 10% goes into the LTIP rewardpool after taking into account the equity hurdle rate, the notional interestcharge and the cash flows in and out. The LTIP accrual does not represent a committed amount to participants in theplan as the eventual payout is dependent on performance over the life of theplan and in accordance with the rules of the plan. Depreciation and amortisation The depreciation and amortisation (including the amortisation of acquiredintangibles) charge increased by £7 million to £137 million compared to thefirst half of 2006/07. This increase reflects the recent level of capitalexpenditure. Net other operating income Net other operating income of £3 million relates primarily to hurricane-relatedinsurance proceeds and costs. Share of post-tax profit of joint ventures and associates Excluding Batelco, our Bahraini associate disposed of in January 2007, whichcontributed £12 million post-tax profit in the first half of 2006/07, our shareof post-tax profits of joint ventures and associates increased from £9 millionto £18 million. This result reflects a better performance by TSTT, our jointventure in Trinidad, which contributed £9 million (nil in the first half of 2006/07). Further analysis of the performance of these businesses can be found onpage 16. Net finance expense The £12 million net finance expense for the six months to 30 September 2007comprises finance income of £32 million and finance expense of £44 million andcompares with a net finance expense of £16 million for the same period lastyear. Finance expense has increased by £4 million as a result of adverse foreignexchange movements on our US dollar cash balances and increased debt in ourInternational business partially offset by reduced interest expense as a resultof repurchasing and converting our convertible bond in the period. Financeincome increased by £8 million due to higher interest rates on cash balancescompared with the first half of last year. Income tax expense The total tax charge of £29 million for continuing operations (£24 million forthe six months to 30 September 2006) comprises a credit of £7 million (£10million for 30 September 2006) in respect of UK tax and a charge of £36 million(£34 million for 30 September 2006) for overseas taxes. The above charges are in line with percentage tax rate guidance provided forcontinuing operations of the business; effectively nil in Europe, Asia & US andmid to low twenties for International. Pensions The IAS 19 surplus for the main UK scheme at 30 September 2007 is £211 millioncompared with a surplus of £43 million at 31 March 2007 (and a £77 milliondeficit as at 30 September 2006). The increase in the main UK scheme's surplussince 31 March 2007 reflects the impact of a reduction in scheme liabilities of£112 million driven by an increase in the discount rate from 5.3% to 5.8% and anincrease in the scheme's assets of £56 million. We have unfunded pensionliabilities in the UK of £21 million (£22 million at 31 March 2007). Definedbenefit schemes operated in certain of our overseas businesses have a net IAS 19surplus of £5 million (£7 million surplus at 31 March 2007). Operating costs have also benefited from an IAS 19 net pension credit of £10million in relation to the main UK defined benefit scheme (£3 million for thesix months to 30 September 2006); £7 million in Europe, Asia & US and £3 millionin International. The main UK scheme's asset portfolio was recently rebalanced towards bonds andcash, locking in value following strong equity performance. We also implementeda swap programme of some £900 million of assets to match the fund's assetreturns better to its liabilities. Fund assets are now 25% bonds, 46% equities,7% property and 22% cash. The triennial valuation scheduled to commence at 31 March 2008 has been broughtforward to 31 March 2007 in order to provide up to date information for furtherrisk management decisions. Results of the valuation should be available when wereport our preliminary results (planned for 22 May 2008). Discontinued operations During the period, we recognised a £2 million credit from the release ofprovisions relating to the exit from our former US businesses. Group exceptional items In the first half of 2007/08, we recognised net exceptional income of £30million from continuing operations comprising: Exceptional items within operating profit: Profit on sale and leaseback of properties £53m (Europe, Asia & US)Gain on Seychelles cash repatriation £14m (International)EAU restructuring charges £(11)m (Europe, Asia & US)Charge for legal fees £(11)m (International) Exceptional items below operating profit: Loss on repurchasing convertible bonds £(10)m (Central)Tax on Seychelles cash repatriation £(5)m (International)Total exceptional items £30m A sale and leaseback transaction was completed for nine freehold properties inEurope, Asia & US in April 2007. The disposal of the properties for £88 millionresulted in a profit of £53 million. We successfully concluded a transaction enabling us to repatriate £24 millionthat had previously been blocked in the Seychelles due to exchange controls. Asa result, International recorded a net gain before taxation of £14 million afteraccounting for the release of provisions held against these funds. As aconsequence of this transaction, there was a £5 million exceptional tax charge. Restructuring costs of £11 million were recognised during the period as part ofthe Europe, Asia & US turnaround programme. In July 2007, we received a claim from our Caribbean competitor, Digicel, whichwe believe is without foundation and will be vigorously defended. The claimalleges that Cable & Wireless delayed Digicel's entry into seven Caribbeanmarkets by not providing interconnection between its networks and ours on atimely basis. We strongly reject this allegation. Based on legal advice, weare making no provision for the claim itself, but have recorded a charge of £11million for the legal fees for our defence. During the period, convertible bonds with a par value of £138 million wererepurchased for cash of £190 million. This resulted in an accounting loss of£10 million being the difference between the carrying and fair value of theunderlying debt component of the repurchased bonds. The transaction will resultin total interest charge savings of £13 million and reduces dilution for ourshareholders. For further information, refer to page 35. Dividend We are declaring an interim dividend of 2.5 pence per share, which represents anincrease of 47% over the prior year's interim dividend and reflects the Board'sconfident outlook - as well as progress made in the first six months of 2007/08. We are moving the structure of the dividend to an approximate split of 1/3 forthe interim and 2/3 for the final dividend. Subject to our trading performancein the second half of 2007/08, we expect to recommend a final dividend for 2007/08 of approximately 5.0 pence, resulting in a full year dividend ofapproximately 7.5 pence, a year on year increase of 28%. The interim dividend of 2.5 pence per share will be paid on 25 January 2008 toordinary shareholders on the register as at 23 November 2007. Dividend per share (pence) 2007/08 2006/07 2005/06 Interim 2.50 1.70 1.40Final 5.00(1) 4.15 3.10Full year 7.50(1) 5.85 4.50 (1) Subject to trading performance in the second half of 2007/08, we will be recommending a 5.0p final dividend The scrip dividend scheme will be offered in respect of the interim dividend.Those shareholders who have already elected to join the scheme need do nothingsince the interim dividend will be automatically applied to the scheme.Shareholders wishing to join the scheme for the interim dividend (and all futuredividends) should return a completed mandate form to: Equiniti Ltd., TheCauseway, Worthing, West Sussex, BN99 2DZ by 27 December 2007. Copies of themandate form, and the scrip dividend brochure, can be obtained from EquinitiLtd. (formerly Lloyds TSB Registrars) (UK callers: 0870 600 3975, overseascallers: +44 (0)121 415 7047) or from our website www.cw.com. Reconciliation of Group EBITDA to net cash flow before financing For the six months ended 30 September 2007(1) £m EBITDA(2) 284Exceptional items (8) EBITDA less exceptionals 276Movement in exceptional provisions (16)Movement in working capital and other provisions (79)Income taxes paid (15)Investment income 32Purchase of property, plant, equipment and intangible assets (189)Acquisitions and disposals 81Other income 3 Net cash inflow before financing activities 93 (1) Based on internal management accounts (2) Earnings before interest, tax, depreciation and amortisation, LTIP charge, net other operating income and exceptionals The Group net cash inflow before financing activities of £93 million representsinflows of £108 million (US$215 million) in International and £3 million inCentral and an outflow of £18 million in Europe, Asia & US including the £88million proceeds from the sale and leaseback transaction. Further details inrespect of International and Europe, Asia & US are included on pages 17 and 22respectively. The net cash inflow before financing in Central of £3 million representsinvestment and other income of £21 million and a working capital inflow of £3million partially offset by an EBITDA loss of £15 million. In addition,acquisitions and disposals include £6 million of dividends paid to minorityshareholders in Monaco. Group cash and debt Cash and cash equivalents As at 30 September As at 31 March As at 30 September 2007 2007 2006 £m £m £m Europe, Asia & US 33 20 16International 145 143 146Central 579 885 650 Group cash and short term investments 757 1,048 812Less: credit-linked notes - - (38) Group cash and cash equivalents 757 1,048 774 Group cash and cash equivalents is £757 million, a decrease of £291 million from31 March 2007 and of £17 million from 30 September 2006. In the six month period ended 30 September 2007, the repurchase of theconvertible bonds due in 2010 resulted in a cash outflow of £190 million. Inaddition, we paid £34 million repurchasing bonds due in 2019 with a nominalvalue of £32 million and paid £95 million in respect of the final dividend forthe 2006/07 year. These outflows were partially offset by £88 million cashreceived from the property sale and leaseback transaction in Europe, Asia & US. The remaining outflow of £60 million relates to operational outflow in Europe,Asia & US partially offset by cash generated by International and Central.During the period, Central has provided funding of £109 million to Europe, Asia& US whilst receiving £56 million from International. The increase in the group cash position during the six months ended 31 March2007 was primarily due to the net proceeds from the disposal of our associate inBahrain, Batelco, in January 2007 (£256 million). Debt Due in less Due in more than Due in more Due in more Total than 1 year 1 but less than 2 than 2 but than 5 years years not more than 5 years £m £m £m £m £m Europe, Asia & US 12 6 - - 18International 34 23 59 16 132Central - - 161 147 308Group debt as at 30 September 2007 46 29 220 163 458 Group debt as at 30 September 2006 73 34 222 369 698Group debt as at 31 March 2007 77 21 265 353 716 During the period, the Group repurchased and converted all of the convertiblebonds in issue at 31 March 2007 (carrying value of £213 million). These bondshad a par value of £258 million and were repayable in 2010. Of these,convertible bonds with a par value of £138 million were repurchased for cash of£190 million. The remaining convertible bonds, with a par value of £120million, were converted into 83 million ordinary shares (including 29 million oftreasury shares). We also repurchased bonds due in 2019 with a carrying valueof £32 million, reducing the total 2019 bonds outstanding to £147 million. The improvement in the Group's cash flows and the progress of the Europe, Asia &US restructuring to date have led both Standard and Poor's and Moody's toimprove our credit ratings outlook in the period. Exchange rate movements Compared with the same period last year, both the US and the Jamaican dollarhave weakened against sterling by 9% and 13% respectively. A one US cent change in the US$:£ exchange rate has approximately a £1.5 millionimpact on a full year's EBITDA of the International business, as approximately79% of International EBITDA is earned in US$ denominated or related economies. A one dollar change in the Jamaican$:£ exchange rate has approximately a £0.2million impact on a full year's EBITDA of the International business. We have hedged the bulk of our projected current year net surplus US$ cash flowarising from International repatriation, after deducting anticipated Europe,Asia & US requirements, by way of forward contracts at US$1.9988. For 6 months ended 30 For 6 months ended For 6 months ended September 2007 31 March 2007 30 September 2006US$ : £Average 1.9921 1.9342 1.8272Period end 2.0206 1.9631 1.9024Jamaican$ : £Average 136.00 129.27 120.17Period end 140.98 132.74 125.43 MANAGEMENT CHANGE Today, we have separately announced changes to the management of ourInternational business. In brief, Harris Jones is to step down as ChiefExecutive of International from today, and leave the business towards the end of2007 once handover is complete. A search will be initiated to find a new ChiefExecutive of International. John Pluthero is to become Executive Chairman ofInternational with immediate effect, while continuing a similar role for Europe,Asia & US. Lord Robertson of Port Ellen will act as Senior InternationalAdvisor to Cable & Wireless and step down as Non-Executive Chairman ofInternational. All other aspects of the Group operating structure remain thesame. Harris Jones will receive his contractual entitlement on leaving, including £4.3million for his pro-rated share in the Long Term Incentive Plan (LTIP) havingdelivered value creation on behalf of shareholders from International of over £1billion since he joined in November 2004, of which three quarters of a billionhas been created since the commencement of the LTIP on 1 April 2006. There willbe no additional charge to shareholders for the LTIP regarding this managementchange as there is a finite pool of units in the plan. John Pluthero willreceive 50% of Harris Jones' LTIP units for the remaining life of the LTIP afterdeduction of the LTIP payment above to Harris Jones. GROUP OUTLOOK For Europe, Asia & US (including C&W Access), due to our improving tradingperformance and a £15 million full year estimated net pension credit for 2007/08, we now anticipate that our EBITDA for the full year 2007/08 will be between£205 million and £215 million - a £35 million improvement from our previousEBITDA guidance. We have reduced our International dollar guidance by US$20million to between US$820 million and US$840 million, primarily due to the poorperformance in Jamaica. We have also updated our forecast US$:£ exchange ratefrom 1.95 to 2.00. As a result of all of the above, sterling Group EBITDAguidance is essentially unchanged. We therefore now expect the following outcomes: For the Group: • EBITDA for 2007/08 in the range of £585 million to £610 million. Range: Low High US$m US$mInternational 820 840 £m £mInternational 410 420Europe, Asia & US(1) 205 215Central (30) (25) Group EBITDA 585 610 Previously 573 608 (1) Includes C&W Access For International: • 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; • Annual 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 (including C&W Access) • Total net cash outflow before financing for 2007/08 to be about £140 million (excluding the receipt of £88 million from 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; • For main enterprise business only (i.e. excluding C&W Access): • Future revenue of about £2 billion and double digit operating margin; • Cash flow positive for the second half of 2007/08; • From 1 April 2006, total cash outflow before the business becomes cash generative to be no more than £280 million (excluding the £88 million sale and leaseback transaction announced on 2 April 2007).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. For Central: • EBITDA cost for 2007/08 in the range of £25 million to £30 million. INTERNATIONAL Cable & Wireless International is the world's leading full service telecomsprovider for small to medium markets, offering mobile, broadband, internationaland domestic fixed line services to residential and business customers. Weoperate in 33 countries, through 25 subsidiaries and eight joint ventures. Ourprincipal businesses are in the Caribbean, Panama, Macau, Monaco and Islands(Islands comprises operations in the Channel Islands, Isle of Man, Indian,Atlantic and Pacific Oceans). We aim to be the telecoms provider of choice in all our markets by offering ourcustomers simple to use, innovative, value for money services. Commenting on the results for the six months ended 30 September 2007, JohnPluthero, Executive Chairman of International, said: "The business has delivered continued growth in mobile and broadband - both interms of revenue and customers - which provides us with a solid platform toaccelerate the transformation of service and brand reputation. International iswell positioned for the future, particularly with the recovery plan for Jamaicaalready underway." International key performance indicatorsAs at: 30 September 2007 31 March 2007 30 September 2006 ('000) ('000) ('000)(1) Total active(2) GSM mobile customers 5,749 5,033 4,290Subsidiaries 2,989 2,611 2,085Joint ventures 2,760 2,422 2,205Total broadband customers 439 401 338Subsidiaries 414 378 321Joint ventures 25 23 17Total fixed line connections 1,909 1,902 1,876Subsidiaries 1,551 1,531 1,505Joint ventures 358 371 371 (1) For ease of comparison, September 2006 numbers have been restated to exclude Batelco (Bahrain), disposed of in January 2007(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 5.7 million customers at 30 September 2007 across 26 markets, anincrease of 34% compared with 30 September 2006. We are the market leader inall but seven of these markets, three of which were launched in the past 13months. Our subsidiaries' mobile customers increased by over 900,000 (43%) in 12 monthsfrom 30 September 2006, to almost three million. All our subsidiary businessesgrew their customer numbers. Panama now has over 1.3 million customers, up 65% from a year ago. Theinstallation of new GSM cell sites increased our network coverage and capacity,contributing to a substantial increase in market penetration. In North Caribbean, growth was largely driven by the launch of services in theBritish Virgin Islands (BVI) where we have already won 41% market share withinfour months of launch. Jamaica's growth of 37% to 600,000 customers resulted from a six percentagepoint increase in market penetration and a five percentage point increase inmarket share to 28%, primarily due to the construction of 212 cell sites in theperiod which has increased our network coverage and improved performance. Customer numbers in our joint ventures increased 25% to 2.8 million primarilydriven by a 67% increase in the customer base in our joint venture inAfghanistan, Roshan. TSTT, our joint venture in Trinidad and Tobago, reported a15% decline in active customers to 900,000 following a reassessment of ourcustomer base in a market with a population of 1.3 million. Broadband customers Our total broadband customers increased by 30% to 439,000 compared with 30September 2006. We are the retail market leader in all 26 of our broadbandmarkets. Our subsidiaries' broadband customers increased 29% compared to 30 September2006 to 414,000. This increase reflects our improving service quality andnetwork coverage, particularly in the Caribbean where customer numbers increased43% to 180,000. Broadband customer numbers in our joint ventures increased 47% to 25,000 drivenby a strong performance in TSTT where customer numbers increased 31% in theyear. Penetration remains low across our markets, with the average being 23% at 30September 2007. Fixed line connections The total number of fixed line customers increased 2% to 1.9 million at 30September 2007. We are the market leader in all but one of our 26 fixed linemarkets (Jersey). International income statementFor the six months ended: 30 September 2007 30 September 2006 Change as reported(1) US$m US$m %Mobile 436 364 20%Broadband 88 66 33%Domestic voice 272 291 (7)%International voice 142 161 (12)%Enterprise, data and other(2) 273 251 9% Total revenue 1,211 1,133 7%Cost of sales (416) (385) (8)% Gross margin 795 748 6%Operating costs (excluding LTIP charge) (397) (371) (7)% EBITDA(3) 398 377 6%LTIP charge (18) (2) NmDepreciation and amortisation (135) (132) (2)%Net other operating income 6 - Nm Operating profit before joint ventures and associates 251 243 3%Share of post-tax profit of joint ventures and associates 38 41 (7)% Operating profit 289 284 2%Exceptional items 6 - Nm Total operating profit 295 284 4% Capital expenditure (161) (141) (14)%Headcount (full time equivalents at 30 September) 7,860 8,089 3% nm represents % change not meaningful (1) Positive percentages represent improvement(2) Includes corporate solutions, international management contracts, internet hosting, leased circuits, legacy data services, directory services, equipment rentals, television services and dial up internet(3) Earnings before interest, tax, depreciation and amortisation, LTIP charge, net other operating income and exceptionals Revenue Our revenue grew 7% to US$1,211 million in the first half of 2007/08 comparedwith the same period of 2006/07, our third consecutive half of solid revenuegrowth. Mobile and broadband contributed an additional US$94 million, nowrepresenting 43% of our revenue (up from 38% at the same point last year). Mobile revenue Mobile revenue increased 20% to US$436 million and now represents 36% of ourtotal revenue. Mobile revenue grew in all our businesses. Panama's mobile revenue grew 22% to US$132 million as a result of thesubstantial increase in the customer numbers to 1.3 million. The increase was aresult of improvements to our network coverage, distribution channels and newpromotions, ahead of the grant of two additional mobile licences in 2008. In the North Caribbean, mobile revenue increased 21% to US$51 million largelydue to the successful launch of services in the British Virgin Islands (BVI) inJune 2007. Almost one quarter of the revenue growth in the region came fromnon-voice services, such as Blackberry which is now utilised by 14% of ourcontract customer base. Islands' mobile revenue grew 34% to US$39 million as a result of the launch ofservice in Jersey in September 2006 and the Isle of Man in July 2007 and furthergrowth in the Seychelles following our network investment there last year. We also benefited from the US$5 million reversal of a centrally held accrualrelating to prepaid cards. Broadband revenue Broadband revenue grew 33% to US$88 million compared with the first half of 2006/07 with growth in all our businesses. In Panama, revenue increased 31% to US$17 million as a result of expanding ournetwork coverage and implementing a number of promotions including working witha third party to offer subsidised computer packages. Jamaica's revenue grew 36% to US$15 million primarily as a result of a 48%increase in the customer base due to increased network coverage. Macau's revenue increased 31% to US$17 million as a result of the launch of aminimum 10 Mbps residential service and 100 Mbps service to businesses whichdrove a 19% increase in customers. Domestic and international voice revenue Domestic voice revenue decreased US$19 million to US$272 million in the firsthalf of 2007/08 compared with the same period of 2006/07. This was largely dueto the US$14 million decline in Jamaica's revenue to US$61 million following thepoor performance of the domestic voice business, in particular the prepaid fixedline product which we withdrew from the market in July, and a reassessment ofthe recoverability of certain fixed line revenue. International voice revenue declined 12% to US$142 million compared to the sameperiod in 2006/07, primarily the result of pressure on internationalinterconnect pricing in Jamaica and the rest of the Caribbean and migration toother products. On the upside, Panama's international voice revenue increased19% to US$19 million driven by traffic increases as a result of theinterconnection of three new voice carriers. Enterprise, data and other revenue Enterprise, data and other revenue increased 9% to US$273 million. Thisincrease was a result of continued growth in Monaco's international trafficmanagement contracts, such as those with PTK in Kosovo and Roshan inAfghanistan. Panama's enterprise services benefited from large one-offgovernment contracts worth US$15 million. Growth was partially offset by a US$9 million decrease in Jamaica due to areduction in PBX sales and the outsourcing of the directory services business inthe second half of 2006/07. Gross margin Gross margin increased 6% to US$795 million from US$748 million in the firsthalf of 2006/07 and the gross margin percentage was unchanged at 66%. Jamaica's gross margin fell by US$27 million due to the adverse revenuemovements described previously and subsidies on increased mobile handset sales. Operating costs Our operating costs increased 7% in the first half of 2007/08 to US$397 million.Jamaica's operating costs increased by US$5 million, primarily as a result ofmarketing costs from increased promotional activity and higher call centre andadministration costs. Other increases were primarily due to the launch of our 1 Mbps broadband servicein Panama and across the Caribbean. Following the launch of mobile service inJersey and Isle of Man, Islands' operating costs increased by US$8 millioncompared to the first half of 2006/07. EBITDA As a result of the factors set out above, EBITDA increased 6% to US$398 millionin the first half of 2007/08 compared with the same period of 2006/07 withstrong results in all our businesses except Jamaica. The result in Jamaica reflects poor management of promotions and operating costsin an increasingly competitive market. On the positive side, our focus onmobile and broadband has continued to deliver increased customer numbers andrevenue. A new CEO for Jamaica has been appointed and we expect EBITDAimprovement in the second half compared to the first half of 2007/08. Our EBITDA margin for the period was 32.9% of revenue, similar to 33.3% EBITDAmargin in the first half of 2006/07, but down from the underlying EBITDA marginfor the full 2006/07 year of 34.7%, primarily due to Jamaica. Excluding thedecline in Jamaica, our EBITDA margin would have been 34.8% and EBITDA wouldhave increased 14%. Although we expect a better performance from Jamaica in the second half of 2007/08, we have reduced our dollar guidance from US$840 million and US$860 millionto between US$820 million and US$840 million. Taken at its mid-point, we nowexpect EBITDA growth of 9% in the second half over the first half of 2007/08.We continue to expect our EBITDA margin to be between 35% and 37% of revenue by2008/09. Exceptional items Net exceptional income of US$6 million in the first half of 2007/08 consists ofa net gain before taxation of US$27 million resulting from the repatriation ofcash from the Seychelles, offset by a US$21 million charge for legal fees. Capital expenditure and depreciation and amortisation Capital expenditure increased 14% to US$161 million in the first half of 2007/08. This represents 13% of revenue. We invested over 70% of our capital expenditure in mobile and broadbandexpansion - we launched 3G services in Macau and expanded our mobile andbroadband networks in Panama, Monaco and the Caribbean. We extended oursubmarine cable network laying a cable into Bermuda from the US, and increasedour network capacity and resilience across the Caribbean. Depreciation and amortisation increased 2% to US$135 million as a result of theincreased capital expenditure. Joint ventures and associates - our share Effective ownership Revenue Post-tax profit As at 30 For 6 months For 6 months For 6 months For 6 months September 2007 ended 30 ended 30 ended 30 ended 30 September 2007 September 2006 September September 2007 2006 % US$m US$m US$m US$m Trinidad & Tobago (TSTT) 49 102 118 19 0Afghanistan (Roshan) 37 40 38 4 3The Maldives (Dhiraagu) 45 25 22 11 12Fiji (Fintel) 49 7 8 2 2Others 7 6 2 1 Total excluding Bahrain 181 192 38 18Bahrain (Batelco)(1) - - 62 - 23 Total 181 254 38 41 (1) Disposed of in January 2007 Our share of post tax profit from our joint ventures and associates decreasedfrom US$41 million to US$38 million in the six months to 30 September 2007driven by the disposal of our associate in Bahrain (Batelco) in January 2007.Excluding Batelco, our share of post-tax profits more than doubled, principallydriven by improved performance in Trinidad & Tobago (TSTT). Our share of post-tax profit in TSTT was US$19 million in the first half of 2007/08 compared with nil in the same period of the prior year. Reconciliation of International EBITDA to net cash flow before financing For the six months ended 30 September 2007(1) US$m EBITDA(2) 398Exceptional items 6 EBITDA less exceptionals 404Movement in exceptional provisions 15Movement in working capital and other provisions (21)Income taxes paid (29)Purchase of property, plant, equipment and intangible assets (169)Investment income 19Acquisitions and disposals (10)Other income 6 Net cash inflow before financing activities 215 (1) Based on internal management accounts(2) Earnings before interest, tax, depreciation and amortisation, LTIP charge and net other operating income We generated net cash flow of US$215 million before financing activities in thefirst half of 2007/08. Movement in working capital and other provisions of US$21 million was primarilya result of our strong revenue growth, particularly in Panama. In Barbados,timing differences resulted in an outflow which will reverse in the second half.We maintain our guidance of flat movement in working capital by 2008/09. Investment income of US$19 million consists mainly of US$12 million of dividendsfrom our joint ventures and US$6 million of interest income. Acquisitions and disposals of US$10 million largely consists of US$13 millionoutflow relating to the acquisition of an additional 17% equity stake in ourEast Caribbean St Kitts business. Other income of US$6 million is made up of insurance receipts relating toHurricane Ivan, offset by costs associated with Hurricane Dean. We remitted US$106 million to Central, including the repatriation of cash fromthe Seychelles, US$12 million of dividends from our joint ventures and theprovision of US$22 million funding to Jamaica. This represents 88% of our shareof net cash flow after external financing costs, but we expect to reach thetarget of 100% repatriation of our share of net cash flow after externalfinancing costs for the full year. EUROPE, ASIA & US Cable & Wireless Europe, Asia & US provides high quality IP-based services tothe largest users of telecoms services across the UK, the rest of Europe, Asiaand the USA. Our strategy is to provide services tailored to customers'specific business needs and with a superior level of service. Following the successful integration of C&W Access into the main enterprisebusiness, the following analysis of the Europe, Asia & US key performanceindicators, income statement and cash flow reconciliation includes C&W Access,and historic comparatives have been restated accordingly. Commenting on the results for the six months ended 30 September 2007, JohnPluthero, Executive Chairman of Europe, Asia & US said: "Our business continues to improve. Better sales, better service and a reducingcost base are all good symptoms at this stage, especially as there is more tocome in all those areas. We remain focused on the task at hand but excitedabout the future." Europe, Asia & US key performance indicators As at: 30 September 2007 31 March 2007 30 September 2006 Number of customers 6,902 9,993 14,567% IP, data and hosting revenue (excluding Allnet and WTG) (1) 37% 34% 28%Gross margin % (1) 41% 38% 35% Operating costs as a percentage of revenue (1) 31% 33% 33% EBITDA margin % 1 10% 6% 2% (1) Calculated on the basis of six months ended We are continuing with our programme to reduce customer numbers towards ourtarget of around 3,000 customers, and now have fewer than 7,000, comprisinglarge corporates, resellers, carriers and public institutions. IP, data and hosting proportion of revenue has increased to 37% from 30% in thesame period last year. This is driven by growth from new and existing customersand from customers migrating from legacy products to IP, data and hostingservices. In February 2007, we disposed of our web design business (WTG) and inApril 2007, we disposed of our non-core structured cabling business (Allnet).Excluding these from the comparatives would mean that IP, data and hostingrevenue as a proportion of total revenue has increased to 37% from 28%. Gross margin as a percentage of revenue has increased to 41% for the first halfof 2007/08 from 35% in the first half of 2006/07. For further details, refer tothe gross margin section on page 20. Operating costs as a percentage of revenue have decreased to 31% for the firsthalf of 2007/08 from 33% in the equivalent period in 2006/07. For furtherdetails, refer to the operating costs section on pages 20 and 21. EBITDA margin has increased to 10% in the six months ended 30 September 2007,compared to 2% in the equivalent period in 2006. For further details, refer tothe EBITDA section on page 21. Europe, Asia & US income statementFor the six months ended: 30 September 2007 30 September 2006 Change as reported(1) £m £m % IP, data and hosting 351 334 5%Legacy products 48 104 (54)%Traditional voice 549 640 (14)%LLU 13 29 (55)% Total revenue 961 1,107 (13)%Cost of sales (563) (715) 21% Gross margin 398 392 2%Operating costs (excluding LTIP charge) (299) (368) 19% EBITDA(2) 99 24 nmLTIP charge (21) (4) nmDepreciation and amortisation (69) (57) (21)%Net other operating income - 9 nm Operating profit before joint ventures and associates 9 (28) nmShare of post-tax loss of joint ventures and associates (1) (1) 0% Operating profit 8 (29) nmExceptional items 42 (30) nm Total operating profit 50 (59) nmCapital expenditure (93) (97) 4%Headcount (full time equivalents at 30 September) 5,343 5,557 4% nm represents % change not meaningful(1) Positive percentages represent improvement(2) Earnings before interest, tax, depreciation and amortisation, LTIP charge, net other operating income and exceptionals Revenue Revenue in the first half of 2007/08 is £961 million compared with £1,107million in the equivalent period of 2006/07. The result reflects the strategy ofEurope, Asia & US to focus on serving larger customers with higher margin IPservices, whilst actively removing lower margin customers. We expect thatrevenue will increase in the six months to 31 March 2008 to approximately £1billion, as large contracts are provisioned. IP, data and hosting IP, data and 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 and hosting revenue of £351 million in the first half of 2007/08 hasincreased by 5%, despite the disposal of our web design business in February2007 and our structured cabling business in April 2007, which togethercontributed £31 million of revenue in the first half of 2006/07. The underlyingrevenue growth of this product set is therefore 16%. IP, data & hosting nowcontributes 37% of total revenue compared with 30% in the first half of 2006/07. Legacy products Revenue from our legacy products has reduced from £104 million to £48 millionover the last 12 months and now represents only 5% of revenue. Around half ofthe decline was driven by a fall in dial-up internet services. This reduction,and the decline in ATM and frame relay, was expected as customers choose tomigrate to more advanced propositions, such as IP-VPN. Traditional voice Traditional voice revenue has declined by 14%, from £640 million in the firsthalf of 2006/07 to £549 million in the first half of 2007/08. This resultreflects our move away from unprofitable routes and low margin traffic during2006/07. Voice revenue stabilised in the first half of 2007/08 compared to thesecond half of 2006/07 and will grow modestly as we complete our networkoptimisation programme. LLU LLU revenue has more than halved compared with the first half of 2006/07, from£29 million to £13 million. This is due to the change in our C&W Accessstrategy from retail to wholesale, executed from the second half of 2006/07. Wehave received our first corporate SDSL orders in the first half of 2007/08. Gross margin Gross margin has increased £6 million to £398 million. The gross marginpercentage of revenue has increased from 35% to 41%, which reflects the gradualchange in our product mix towards IP, data and hosting, and activities to reducecost of sales. We are reducing cost of sales through ongoing programmes relating to supplierrenegotiations, route optimisation and a review of our circuit inventory. Todate, these savings have been small relative to the gross margin improvementdriven by the more favourable product mix. Gross margin represents revenue minus the costs directly attributed to thegeneration of that revenue. Cost of sales includes circuit rentals, theprocurement of hardware and software, and outpayments to other operators. Operating costs Operating costs have reduced by £69 million compared with the first half of 2006/07 to £299 million. This reduction represents an improvement of 19% comparedwith the same period last year, and represents 31% of revenue, an improvement oftwo percentage points. The reduced operating costs reflect the success of our recovery programme. Wedelivered cost savings through renegotiating network maintenance contracts,driving efficiencies in support functions, and, to a lesser extent, off-shoringnon customer-facing roles. These savings enabled us to reinvest in colleaguesand our network to improve service further still. Further reductions resulted from the move to a wholesale strategy in the C&WAccess business in 2006/07, the subsequent integration of C&W Access into themain enterprise business, and the disposal of our structured cabling (Allnet)and web design (WTG) businesses. Operating costs in the first half of 2007/08 include a £7 million net creditrelating to our defined benefit pension scheme, compared with a £2 million netcharge for the same period last year. EBITDA EBITDA before exceptionals has quadrupled from £24 million to £99 million - andas a percentage of revenue EBITDA has improved from 2% to 10%. In the light of our improving trading performance and a £15 million full yearestimated net pension credit for 2007/08, we now anticipate that our EBITDA forthe full year 2007/08 will be between £205 million and £215 million. At the midpoint of the range, this represents a £35 million improvement from our previousEBITDA guidance (between £165 million and £185 million) for the full year 2007/08. Capital expenditure and depreciation and amortisation Capital expenditure of £93 million is £4 million lower than the first half of2006/07 and represents 10% of revenue. The mix of investment has changed with 44% of the total capital expenditurebeing customer-specific, compared with 30% for the same period last year. Theincrease relates to the investment in equipment to deliver recently wonlong-term IP, data and hosting contracts. With the LLU roll-out complete, we areinvesting in the development of our access proposition to enable us to exploitour unbundled network. Depreciation and amortisation is £69 million for the first half of 2007/08compared with £57 million for the same period last year. This increase reflectsthe recent level of capital expenditure. Exceptional items Net exceptional income for the first half of 2007/08 was £42 million, whichrepresents £53 million profit on the sale and leaseback of nine properties, and£11 million expense relating to restructuring costs including staff redundanciesand property costs. Reconciliation of Europe, Asia & US EBITDA to net cash flow before financing For the six months ended 30 September 2007(1) £m EBITDA(2) 99Exceptional items (11) EBITDA less exceptionals 88Movement in exceptional provisions (21)Movement in working capital and other provisions (68)Income taxes paid 0Purchase of property, plant, equipment and intangible assets (104)Other income (5) Net cash outflow before financing activities and acquisitions and disposals (110)Acquisitions and disposals 92 Net cash outflow before financing activities (18) (1) Based on internal management accounts(2) Earnings before interest, tax, depreciation and amortisation, LTIP charge and net other operating income Cash outflow of £18 million for the first half of the year includes £88 millioninflow from the sale and leaseback transaction of nine properties. Exceptional items of £11 million and movement in provisions of £21 million arelargely attributable to restructuring costs including redundancies and propertycosts. The working capital movement of £68 million for the first half of 2007/08 ishigh as a result of the usual in-year timing of receipts and payments, whichhave an adverse impact in the first half of the year and correct during thesecond half. This includes the timing of the full year bonus payments tocolleagues, paying down some legacy liabilities, and the short-term impact ofoutsourcing transactional roles. Cash capital expenditure of £104 million reflects a mix of investments in bothcustomer and infrastructure projects. The £110 million net cash flow before financing and acquisitions and disposalsrepresents the cash flow for the combined business following the integration ofC&W Access into the main Europe, Asia & US business. As far as the two elementsare separately identifiable, the amount relating to the Europe, Asia & USenterprise business was approximately £80 million and the remaining £30 millionrelates to C&W Access. Acquisitions and disposals predominantly relate to the sale and leasebacktransaction completed on 2 April 2007 for £88 million. Based on our performance year to date, we expect a net cash outflow of about£140 million for the full year 2007/08, excluding the £88 million cash from thesale and leaseback transaction. This is a £10 million improvement on previousguidance for 2007/08 and we now expect the Europe, Asia & US business (excludingC&W Access) will be cash flow positive in the second half of 2007/08. We still expect total cash outflow from 1 April 2006 for the Europe, Asia & USbusiness (excluding C&W Access) before it becomes cash generative to be no morethan £280 million (excluding the £88 million from the sale and leasebacktransaction). GROUP RESULTS DETAILSix months ended 30 September 2007 compared with six months ended 30 September 2006 £m For 6 months ended 30 September 2007 For 6 months ended 30 September 2006 CC change(1) (%) (H1 07/08) (H1 06/07) International Europe, Central Group International Europe, Central Group International Europe, Central Group Asia & (2) Total Asia & Total Asia & Total US US US Revenue 608 961 (6) 1,563 620 1,107 (9) 1,718 7% (13)% 33% (6)%Cost of sales (209) (563) 6 (766) (211) (715) 9 (917) (8) 21% (33)% 15% Gross margin 399 398 - 797 409 392 - 801 6% 2% nm 4%Operating costs (199) (299) (15) (513) (203) (368) (9) (580) (7)% 18% nm 9% EBITDA(3) 200 99 (15) 284 206 24 (9) 221 6% nm (67)% 40%LTIP charge (9) (21) - (30) (1) (4) - (5) nm nm nm nmDepreciation & amortisation (68) (69) - (137) (73) (57) - (130) (1)% (21)% nm (10)%Net other operatingincome 3 - - 3 - 9 - 9 nm nm nm (44)% Operating profit/(loss)before JVs &associates(4) 126 9 (15) 120 132 (28) (9) 95 5% nm (67)% 45%Joint ventures &associates 19 (1) - 18 22 (1) - 21 (14)% 0% nm (14)% Total operatingprofit/(loss)(4) 145 8 (15) 138 154 (29) (9) 116 2% nm (67)% 33%Exceptional items 3 42 - 45 - (30) (1) (31) nm nm nm nm Total operatingprofit/(loss) 148 50 (15) 183 154 (59) (10) 85 4% nm (50)% nm Capital expenditure (80) (93) - (173) (77) (97) - (174) (14)% 4% nm (4)%Headcount(5) 7,860 5,343 86 13,289 8,089 5,557 90 13,736 3% 4% 4% 3% nm represents % change not meaningful(1) Constant currency growth rate based on the restatement of prior period comparatives at current period's reported average exchange rates. Positive percentages represent improvement(2) "Central" comprises the corporate centre and intra-group eliminations between the businesses(3) Earnings before interest, tax, depreciation and amortisation, LTIP charge and net other operating income(4) Excluding exceptionals(5) Full time equivalents as at 30 September INTERNATIONAL RESULTS DETAILSix months ended 30 September 2007 compared with six months ended 30 September 2006 US$m Jamaica Barbados North Caribbean East Caribbean Panama H1 07 H1 06 Change H1 H1 Change H1 07 H1 06 Change as H1 H1 06 Change H1 07 H1 06 Change /08 /07 as 07/ 06/ as /08 /07 reported 07/ /07 as /08 /07 as reported 08 07 reported 08 reported reported Mobile 46 42 10% 35 29 21% 51 42 21% 50 43 16% 132 108 22%Broadband 15 11 36% 8 5 60% 10 8 25% 11 9 22% 17 13 31%Domestic voice 61 75 (19)% 23 22 5% 26 28 (7)% 29 31 (6)% 89 93 (4)%International voice 26 35 (26)% 15 18 (17)% 13 18 (28)% 23 29 (21)% 19 16 19%Enterprise, data & other 16 25 (36)% 16 17 (6)% 16 18 (11)% 20 22 (9)% 53 36 47% Revenue 164 188 (13)% 97 91 7% 116 114 2% 133 134 (1)% 310 266 17%Cost of sales (72) (69) (4)% (21) (23) 9% (29) (28) (4)% (38) (39) 3% (110) (98) (12)% Gross margin 92 119 (23)% 76 68 12% 87 86 1% 95 95 0% 200 168 19%Operating costs (72) (67) (7)% (36) (30) (20)% (46) (45) (2)% (59) (62) 5% (72) (66) (9)% EBITDA(1) 20 52 (62)% 40 38 5% 41 41 0% 36 33 9% 128 102 25%LTIP charges - - - - - - - - - - - - - - -Depreciation & amortisation (17) (19) 11% (10) (8) (25)% (11) (10) (10)% (13) (16) 19% (38) (37) (3)%Net other operatingincome (1) - nm - - - 5 - nm - - - 1 - nm Op profit before JVs &associates(2) 2 33 (94)% 30 30 0% 35 31 13% 23 17 35% 91 65 40%Joint ventures & associates - - - - - - 19 - nm - - - - - - Total operatingprofit(2) 2 33 (94)% 30 30 0% 54 31 74% 23 17 35% 91 65 40%Exceptional items - - - - - - - 2 nm - - - - - - Total operatingprofit 2 33 (94)% 30 30 0% 54 33 64% 23 17 35% 91 65 40% Capital expenditure (42) (25) (68)% (9) (8) (13)% (11) (9) (22)% (13) (14) 7% (31) (40) 23%Headcount(3) 1,302 1,484 12% 817 821 0% 548 566 3% 995 1,048 5% 1,893 1,852 (2)% nm represents % change not meaningful(1) Earnings before interest, tax, depreciation and amortisation, LTIP charge and net other operating income(2) Excluding exceptionals(3) Full time equivalents as at 30 September INTERNATIONAL RESULTS DETAIL (CONTINUED)Six months ended 30 September 2007 compared with six months ended 30 September 2006 US$m Macau Monaco Islands(1) Elims/ head office Total H1 H1 Change H1 H1 Change H1 H1 Change H1 H1 Change H1 07/ H1 06/ Change as 07/ 06/ as 07/ 06/ as 07/ 06/ as 07/ 06/ as 08 07 reported 08 07 reported 08 07 reported 08 07 reported 08 07 reported Mobile 51 49 4% 27 22 23% 39 29 34% 5 - nm 436 364 20%Broadband 17 13 31% 4 3 33% 6 4 50% - - - 88 66 33%Domestic voice 17 16 6% 10 9 11% 17 17 0% - - - 272 291 (7)%International voice 28 28 0% 8 8 0% 19 19 0% (9) (10) 10% 142 161 (12)%Enterprise, data & other 24 24 0% 94 81 16% 35 29 21% (1) (1) 0% 273 251 9% Revenue 137 130 5% 143 123 16% 116 98 18% (5) (11) 55% 1,211 1,133 7%Cost of sales (52) (57) 9% (78) (64) (22)% (25) (18) (39)% 9 11 (18)% (416) (385) (8)% Gross margin 85 73 16% 65 59 10% 91 80 14% 4 - nm 795 748 6%Operating costs (27) (24) (13)% (36) (32) (13)% (53) (45) (18)% 4 - nm (397) (371) (7)% EBITDA(2) 58 49 18% 29 27 7% 38 35 9% 8 - nm 398 377 6%LTIP charges - - - - - - - - - (18) (2) nm (18) (2) nmDepreciation & amortisation (17) (14) (21)% (14) (12) (17)% (12) (15) 20% (3) (1) nm (135) (132) (2)%Net other operatingincome - - - - - - - - - 1 - nm 6 - nm Op profit/ (loss) beforeJVs &associates(3) 41 35 17% 15 15 0% 26 20 30% (12) (3) nm 251 243 3%Joint ventures & associates - - - 4 3 33% 15 38 (61)% - - - 38 41 (7)% Total operatingprofit/(loss) (3) 41 35 17% 19 18 6% 41 58 (29)% (12) (3) - 289 284 2%Exceptional items - - - - - - - - - 6 (2) nm 6 - nm Total operatingprofit/(loss) 41 35 17% 19 18 6% 41 58 (29)% (6) (5) (20)% 295 284 4% Capital expenditure (21) (10) nm (7) (4) (75)% (20) (12) (67)% (7) (19) 63% (161) (141) (14)%Headcount(4) 927 933 1% 502 501 (0)% 673 685 2% 203 199 (2)% 7,860 8,089 3% nm represents % change not meaningful(1) Islands comprises operations in the Channel Islands, Isle of Man, the Middle East and the Atlantic, Pacific and Indian Oceans(2) Earnings before interest, tax, depreciation and amortisation, LTIP charge and net other operating income(3) Excluding exceptionals(4) Full time equivalents as at 30 September INTERNATIONAL RESULTS DETAIL (CONTINUED) GSM ACTIVE MOBILE CUSTOMERS BROADBAND CUSTOMERS ('000s) FIXED LINE CUSTOMERS ('000s) ('000s) As at 30 As at 30 % As at 30 As at 30 % Change As at 30 As at 30 % September September Change September September September September Change 2007 2006 2007 2006 2007 2006 Jamaica 600 439 37% 86 58 48% 371 327 13%Barbados 165 137 20% 32 22 45% 134 134 0%North Caribbean 138 96 44% 20 17 18% 60 60 0%East Caribbean 345 263 31% 42 29 45% 170 169 1% Caribbean 1,248 935 33% 180 126 43% 735 690 7%Panama 1,304 789 65% 95 78 22% 427 432 (1)%Macau 281 236 19% 112 94 19% 179 176 2%Monaco 38 35 9% 12 10 20% 34 34 0%Islands 118 90 31% 15 13 15% 176 173 2% Cable & Wireless subsidiaries 2,989 2,085 43% 414 321 29% 1,551 1,505 3%TSTT 900 1,055 (15)% 17 13 31% 310 325 (5)%Roshan 1,617 966 67% - - nm - - nmDhiraagu 206 160 29% 6 3 100% 32 31 3%Solomon Telekom 13 7 86% 1 1 0% 9 8 13%Telekom Vanuatu 24 17 41% 1 - nm 7 7 0% Cable & Wireless joint ventures &associates 2,760 2,205 25% 25 17 47% 358 371 (4)% Total Cable & WirelessInternational 5,749 4,290 34% 439 338 30% 1,909 1,876 2% nm represents % change not meaningful For ease of comparison joint ventures & associates numbers for 30 September 2006have been restated to exclude Batelco (Bahrain) following its disposal inJanuary 2007 HALF YEAR FINANCIAL REPORTCondensed consolidated interim income statement For the six months ended 30 September For the six months ended 2007 30 September 2006 Pre- Exceptional Total Pre- Exceptional Total exceptional items exceptional items items items £m £m £m £m £m £m Continuing operationsRevenue 1,563 - 1,563 1,718 - 1,718Operating costs before depreciation and amortisation (1,309) (8) (1,317) (1,502) (22) (1,524)Depreciation (116) - (116) (109) - (109)Amortisation (21) - (21) (21) - (21)Other operating income 5 53 58 9 1 10Other operating expenses (2) - (2) - (10) (10) Group operating profit/(loss) 120 45 165 95 (31) 64Share of post-tax profit of associates and joint ventures 18 - 18 21 - 21 Total operating profit/(loss) 138 45 183 116 (31) 85Gains and losses on sale of non-current assets 2 - 2 - - -Gain on termination of operations 3 - 3 - 10 10Finance income 32 - 32 24 - 24Finance expense (44) (10) (54) (40) - (40) Profit/(loss) before income tax 131 35 166 100 (21) 79Income tax expense (29) (5) (34) (24) - (24) Profit/(loss) for the period from continuing operations 102 30 132 76 (21) 55 Discontinued operationsProfit for the period from 2 - 2 3 3discontinued operations -Profit/(loss) for the period 104 30 134 76 (18) 58 Attributable to:Equity holders of the Company 74 30 104 49 (18) 31Minority interest 30 - 30 27 - 27 104 30 134 76 (18) 58 Earnings per share attributable to the equityholders of the Company during the period (penceper share)- basic 4.3p 1.3p- diluted 4.2p 1.3pEarnings per share from continuingoperations attributable to the equityholders of the Company during theperiod (pence per share)- basic 4.2p 1.2p- diluted 4.1p 1.2pEarnings per share from discontinuedoperations attributable to the equityholders of the Company during theperiod (pence per share)- basic 0.1p 0.1p- diluted 0.1p 0.1p The notes on pages 32 to 37 are an integral part of these financial statementsFurther detail on exceptional items is set out in note 7 Condensed consolidated interim balance sheet 30 September 31 March 2007 30 September 2007 2006 £m £m £mASSETSNon-current assetsIntangible assets 805 745 708Property, plant and equipment 1,463 1,465 1,439Investments in associates and joint ventures 129 117 163Available for sale financial assets 16 15 15Deferred tax asset 30 28 19Retirement benefit asset 242 75 35Other receivables 56 62 47Other non-current assets - 11 10 2,741 2,518 2,436Current assetsInventories 19 23 32Financial assets at fair value through the income statement - - 38Trade and other receivables 971 855 928Cash and cash equivalents 757 1,043 774 1,747 1,921 1,772Assets held for sale 6 52 101 1,753 1,973 1,873Total assets 4,494 4,491 4,309LIABILITIESCurrent liabilitiesTrade and other payables 1,285 1,221 1,277Financial liabilities at fair value through the income statement 74 60 -Current tax liabilities 140 122 133Loans and obligations under finance leases 46 77 73Provisions 51 72 59 1,596 1,552 1,542Liabilities associated with assets held for sale - 10 - 1,596 1,562 1,542Net current assets 157 411 331Non-current liabilitiesTrade and other payables 75 65 6Financial liabilities at fair value through the income statement 93 75 102Loans and obligations under finance leases 412 639 625Deferred tax liabilities 47 59 43Provisions 164 154 170Retirement benefit obligations 47 47 133 838 1,039 1,079Net assets 2,060 1,890 1,688EQUITYCapital and reserves attributable to the Company's equityholdersShare capital 630 615 612Share premium 139 56 44Reserves 1,092 1,010 825 1,861 1,681 1,481Minority interest 199 209 207Total equity 2,060 1,890 1,688 The notes on pages 32 to 37 are an integral part of these financial statements Condensed consolidated interim statement of recognised income and expense For the six months For the six ended 30 September 2007 months ended 30 September 2006 £m £m Fair value loss on available for sale financial assets - (1)Actuarial gains/(losses) in the value of defined benefit retirement plans 150 (5)Exchange differences on translation of foreign operations (36) (119) Net income and expense recognised directly in equity 114 (125)Profit for the period 134 58 Total recognised income and expense for the period 248 (67) Attributable to:Equity holders of the Company 225 (71)Minority interests 23 4 248 (67) The notes on pages 32 to 37 are an integral part of these financial statements Condensed consolidated interim cash flow statement For the six For the six months ended 30 months ended 30 September 2007 September 2006 £m £mCash flows from operating activitiesCash generated from continuing operations 184 57Cash generated from discontinued operations - -Income taxes paid (15) (22) Net cash from operating activities 169 35 Cash flows from investing activitiesFinance income 26 24Other income - 10Dividends received 6 20Proceeds on disposal of assets held for sale 92 -Proceeds on disposal of property, plant and equipment 2 15Purchase of property, plant and equipment (173) (157)Purchase of intangible assets (16) (30)Acquisition of associates and joint ventures - (1)Acquisition of subsidiaries (net of cash received) (13) (8) Net cash from investing activities - continuing operations (76) (127)Discontinued operations - - Net cash flow before financing activities 93 (92) Cash flows from financing activitiesContinuing operationsDividends paid to minority interests (30) (74)Dividends paid to shareholders (95) (50)Repayments of borrowings (247) (133)Interest paid (25) (30)Proceeds from borrowings 12 37Proceeds on issue of treasury shares 5 -Purchase of treasury shares (2) -Proceeds on issue of ordinary share capital 5 5 Net cash used in financing activities - continuing operations (377) (245) Discontinued operations - - Net cash used in financing activities (377) (245) Net decrease in cash and cash equivalents (284) (337)Cash and cash equivalents at the beginning of the period 1,043 1,127Exchange gains and losses on cash and cash equivalents (2) (16) Cash and cash equivalents at the end of the period 757 774 The notes on pages 32 to 37 are an integral part of these financial statements Reconciliation of net profit to net cash flow from operating activities For the six months For the six months ended 30 September 2007 ended 30 September 2006 £m £mContinuing operationsProfit for the year 132 55Adjustments for:Tax expense 34 24Depreciation 116 109Amortisation 21 21Other income - (1)Gain on disposal of property, plant and equipment (53) (9)Gain on termination of operations - (10)Gain on sale of non-current assets (1) -Net loss on sale of Bulldog brand and retail broadband customer base - 10Finance income (32) (24)Finance expense 54 40Decrease in provisions (10) (50)Share-based payments 10 11Defined benefit pension scheme credit (11) (3)LTIP charge 30 5Defined benefit pension scheme other contributions (6) (6)Share of results after tax of associates and joint ventures (18) (21) Operating cash flows before working capital changes 266 151Changes in working capital (excluding the effects ofacquisitions and disposals of subsidiaries)Decrease/(increase) in inventories 4 (1)(Increase)/decrease in trade and other receivables (110) 3Increase/(decrease) in payables 19 (96)Decrease in other assets 5 - Cash generated from continuing operations 184 57 Discontinued operationsNet profit 2 3Adjustments for:Decrease in provisions (2) (3) Cash generated from discontinued operations - - Cash generated from operations 184 57 Notes to the condensed financial statements 1. Reporting entity Cable and Wireless plc (the Company) is a company domiciled in the UK. Thecondensed consolidated interim financial statements of the Group as at and forthe six months ended 30 September 2007 comprise the Company and its subsidiaries(together referred to as the Group) and the Group's interests in associates andjoint venture entities. The consolidated financial statements of the Group as at and for the year ended31 March 2007 are available upon request from the Company's registered office at7th Floor, The Point, 37 North Wharf Road, London, W2 1LA or at www.cw.com. 2. Statement of compliance These condensed consolidated interim financial statements have been prepared inaccordance with IAS 34 Interim Financial Reporting as adopted by the EU. Theydo not include all of the information required for full annual financialstatements, and should be read in conjunction with the consolidated financialstatements of the Group as at and for the year ended 31 March 2007. The comparative figures for the financial year ended 31 March 2007 are not theGroup's statutory accounts for that financial year. Those accounts have beenreported on by the Group's auditors and delivered to the registrar of companies.The report of the auditors was (i) unqualified, (ii) did not include a referenceto any matters to which the auditors drew attention by way of emphasis withoutqualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The condensed consolidated interim financial statements were approved by theBoard of Directors on 12 November 2007. 3. Significant accounting policies The accounting policies applied by the Group in these condensed consolidatedinterim financial statements are the same as those applied by the Group in itsconsolidated financial statements as at and for the year ended 31 March 2007. Income tax expense in the interim period is based on our best estimate of theweighted-average annual income tax rate expected for the full financial year. 4. Seasonality and cyclicality Working capital in the Europe, Asia & US business is historically better in thesecond half of the financial year than the first. Other than this, there is nosignificant seasonality or cyclicality affecting the interim result of theoperations. 5. Estimates The preparation of the condensed consolidated interim financial statementsrequires management to make judgements, estimates and assumptions that affectthe application of accounting policies and the reported amounts of assets andliabilities, income and expense. Actual results may differ from theseestimates. In preparing these condensed consolidated interim financial statements, thesignificant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial statements as at and for the yearended 31 March 2007. 6. Segment information Cable & Wireless is one of the world's leading communications companies. Duringthe six months ended 30 September 2007, Cable & Wireless operated two primarybusiness segments; International and Europe, Asia & US. During the period, theoperations of C&W Access were integrated into the Europe, Asia & US businesssegment. As a result, these two businesses are now reported as a singlesegment. The International business operates full service telecommunications companies in33 countries offering mobile, broadband, domestic and international fixed lineservices to residential and business customers. It has principal operations inthe Caribbean, Panama, Macau, Monaco and the Channel Islands. The Europe, Asia & US business provides high quality IP-based services to thelargest users of telecoms services across the UK, the rest of Europe, Asia andthe USA. This business includes C&W Access which provides wholesale broadbandand telephony services to commercial and residential end users through wholesaleagreements in the UK. Continuing operations The business segment results for the six months ended 30 September 2007 arepresented below: £m International Europe, Asia & Other and Total US eliminations Revenue 608 961 (6) 1,563Pre-exceptional operating costs (482) (952) (9) (1,443)Exceptional operating items 3 42 - 45 Operating profit 129 51 (15) 165Share of post-tax profit of associates and joint ventures 19 (1) - 18 Total operating profit 148 50 (15) 183Other income 5Net finance expense (22) Profit before income tax 166 Tax (34) Profit for the period from continuing operations 132 The business segment results for the six months ended 30 September 2006 arepresented below: £m International Europe, Asia & Other and Total US eliminations Revenue 620 1,107 (9) 1,718Pre-exceptional operating costs (488) (1,135) - (1,623)Exceptional operating costs - (30) (1) (31) Operating profit 132 (58) (10) 64Share of post-tax profit of associates and joint ventures 22 (1) - 21 Total operating profit 154 (59) (10) 85Other income 10Net finance expense (16) Profit before income tax 79 Tax (24) Profit for the period from continuing operations 55 7. Exceptional items The following exceptional items were recognised in the period: Description Note Amount £m SegmentExceptional items within operating profitProfit on sale and leaseback of properties (i) 53 Europe, Asia & USGain on Seychelles cash repatriation (ii) 14 InternationalRestructuring charges (iii) (11) Europe, Asia & USCharge for legal fees (iv) (11) International Exceptional items below operating profitLoss on repurchasing convertible bond (v) (10) Other and eliminationsTax charge on Seychelles cash repatriation (ii) (5) InternationalTotal exceptional items 30 (i) A sale and leaseback transaction was completed for nine freehold propertiesin Europe, Asia & US in April 2007. The disposal of the properties for £88million resulted in a profit of £53 million. (ii) We successfully concluded a transaction enabling us to repatriate £24million that had previously been blocked in the Seychelles due to exchangecontrols. As a result, International recorded a net gain before taxation of £14million after accounting for the release of provisions held against these funds.As a consequence of this transaction, there was a £5 million exceptional taxcharge. (iii) Restructuring costs of £11 million were recognised during the period aspart of the Europe, Asia & US turnaround programme. (iv) In July 2007, we received a claim from our Caribbean competitor, Digicel,which we believe is without foundation and will be vigorously defended. Theclaim alleges that Cable & Wireless delayed Digicel's entry into seven Caribbeanmarkets by not providing interconnection between its networks and ours on atimely basis. We strongly reject this allegation. Based on legal advice, weare making no provision for the claim itself, but have recorded a charge of £11million for legal fees for our defence. (v) During the period, convertible bonds with a par value of £138 million wererepurchased for cash of £190 million. This resulted in an accounting loss of£10 million being the difference between the carrying and fair value of theunderlying debt component of the repurchased bonds. For further information,refer to note 12. 8. Provisions for liabilities and charges The table below represents the movements in significant classes of provisionsduring the six month period ended 30 September 2007: Property Redundancy Network & asset Legal and Total retirement other(1) obligations £m £m £m £m £mAt 31 March 2007 82 7 77 60 226 Current portion 25 7 12 28 72Non-current portion 57 - 65 32 154 Charged to income statementAdditional provision - 8 2 16 26Amounts used (14) (11) (2) (5) (32)Unused amounts reversed (1) - (1) (2) (4)Exchange - - - (1) (1) At 30 September 2007 67 4 76 68 215 Current portion 15 4 15 17 51Non-current portion 52 - 61 51 164 Analysed between:Current portionInternational - 2 9 15 26Europe, Asia & US 15 2 6 - 23Central - - - 2 2 Non-current portionInternational - - 6 29 35Europe, Asia & US 48 - 55 1 104Central 4 - - 21 25 TotalInternational - 2 15 44 61Europe, Asia & US 63 2 61 1 127Central 4 - - 23 27 1 Other comprises provisions relating to acquisitions, disposals anddiscontinued operations of the Group. 9. Intangible assets During the period, a further £36 million of goodwill was recognised in relationto Monaco Telecom. This increase related to a change in the fair value of theput option held by the Principality of Monaco. The Group's accounting policy inrespect of these transactions is to treat the adjustment as contingentconsideration. Additionally, the Group recognised a further £20 million of goodwill in relationto the acquisition of Energis in November 2005. This increase related tocontingent consideration that is indexed to Cable & Wireless's share price untilDecember 2007. The maximum payment in respect of the deferred consideration is£80 million of which £61 million has been recognised based on the period endshare price. 10. Purchase of further interests in St. Kitts and Nevis During the period, the Group purchased a further 5,649,230 shares in asubsidiary, Cable & Wireless (St Kitts and Nevis) Limited, for £7 million cash.This purchase increased the Group shareholding from 65.20% to 82.25%. Theexcess of consideration over the carrying value of the minority interestsacquired has been recognised as a component of equity. The Group will offer tosell 5% of Cable & Wireless (St Kitts and Nevis) Limited via a public offeringto the residents of St Kitts and Nevis within 12 months of completion. 11. Property, plant and equipment Other than the sale and leaseback transaction (refer to note 7), there have beenno other significant acquisitions or disposals of property, plant and equipmentduring the period. The Group's capital commitments at 30 September 2007 were£118 million (30 September 2006: £147 million). 12. Convertible bonds In July 2003, the Company issued 4% unsecured convertible bonds with a nominalvalue of £258 million. The movements in these bonds during the period were: Nominal amount Carrying amount Loss on £m £m transaction £m Carrying amount of the liability as at 1 April 2007 258 213 -Interest accrued on bonds - 7 -Bonds repurchased for cash (£190m) (138) (117) 10Bonds converted (120) (103) -Balance at 30 September 2007 - - 10 During the period, the Group repurchased and converted all of the convertiblebonds in issue at 31 March 2007 (carrying value of £213 million). These bonds,repayable in 2010, had a par value of £258 million. Convertible bonds with a par value of £138 million were repurchased for cash of£190 million. At the time of repurchase, the debt component of theseconvertible bonds had a carrying value of £117 million. The fair value of thedebt component of these bonds at the date of repurchase was £127 million. Thistransaction resulted in a loss of £10 million. The difference between the fairvalue of the debt and the cash consideration (£63 million) was allocated to therepurchase of the equity component of the convertible bond. The remaining convertible bonds, with a par value of £120 million, wereconverted into 83 million ordinary shares (including 29 million of treasuryshares). The debt component of these convertible bonds had a carrying amount of£103 million. In April 2005, a cash settlement feature within the convertible bonds wasremoved. The liability relating to this cash settlement feature wasreclassified to equity at its fair value on that date (£47 million). As aresult of repurchasing and converting the convertible bonds, this amount wasreclassified to retained earnings. 13. Bonds We paid £34 million repurchasing bonds due in 2019 with a nominal value of £32million. 14. Weighted average number of ordinary shares The weighted average number of ordinary shares (WANOS) used in the calculationof basic and diluted earnings per share was as follows: Amounts are in thousands Period ended Period ended 30 September 2007 30 September 2006Basic WANOS 2,399,002 2,307,405Diluted WANOS 2,447,079 2,345,367 The number of ordinary shares in issue as at 30 September 2007 (excluding45,665,878 of treasury shares) was 2,475,157,342. 15. Reserves The movements in share capital, share premium, treasury shares and otherreserves during the period were: Share Share Treasury Other Retained Total capital premium shares earnings £m £m £m £m £m £mBalance at 1 April 2007 615 56 (228) 1,697 (459) 1,681Reclassification of treasury shares - - 36 - (36) -Shares allotted under share options scheme 1 4 - (5) 5 5Shares allotted under scrip dividends 1 4 - (5) 5 5Own shares purchased - - (2) - - (2)Cash received in respect of employees shares schemes - - - - 2 2Conversion of convertible bonds 13 75 36 (88) 88 124Repurchase and conversion of convertible bonds - - - (47) (38) (85)ESOP trust shares issued to satisfy awards - - 14 - (14) -Foreign currency translation reserves - - - (29) - (29)Purchase of minority interest - - - (4) - (4)Actuarial gains recognised - - - - 150 150Share based payment costs - - - - 10 10Dividends - - - - (100) (100)Profit for the period - - - - 104 104 Balance at 30 September 2007 630 139 (144) 1,519 (283) 1,861 16. Dividends paid and proposed The interim dividend proposed for the six month period ended 30 September 2007was £61 million (2.5p per ordinary share). The proposed dividend was approvedby the sub-committee to the Board on 12 November 2007. The interim dividendpaid for the corresponding six month period ended 30 September 2006 was £40million (1.70p per share). The final dividend paid on 10 August 2007 for the full year ended 31 March 2007was £100 million (4.15p per ordinary share). The final dividend paid on 11August 2006 for the corresponding full year ended 31 March 2006 was £71 million(3.10p per share). 17. Pensions The IAS 19 surplus for the main UK scheme at 30 September 2007 is £211 millioncompared with a surplus of £43 million at 31 March 2007 (and a £77 milliondeficit as at 30 September 2006). The increase in the main UK scheme's surplussince 31 March 2007 reflects the impact of a reduction in scheme liabilities of£112 million driven by an increase in the discount rate from 5.3% to 5.8% and anincrease in the scheme's assets of £56 million. We have unfunded pensionliabilities in the UK of £21 million (£22 million at 31 March 2007). Definedbenefit schemes operated in certain of our overseas businesses have a net IAS 19surplus of £5 million (£7 million surplus at 31 March 2007). 18. Contingent liabilities In July 2007, we received a claim from our Caribbean competitor, Digicel, whichwe believe is without foundation and will be vigorously defended. The claimalleges that Cable & Wireless delayed Digicel's entry into seven Caribbeanmarkets by not providing interconnection between its networks and ours on atimely basis. We strongly reject this allegation. Based on legal advice, weare making no provision for the claim itself, but have recorded a charge of £11million for the legal fees for our defence. 19. Related parties The nature of related parties as disclosed in the consolidated financialstatements for the Group as at and for the year ended 31 March 2007 has notchanged. Further, there have been no significant related party transactions inthe six month period ended 30 September 2007. 20. Risks to our future success Other than as highlighted within this interim management report, there has beenno change to the principal risks for Cable & Wireless during the six monthperiod ended 30 September 2007. These risks are outlined in the Annual Reportfor the Group for the year ended 31 March 2007. 21. Discontinued operations Discontinued operations represent those businesses discontinued or disposed of.During the period, there were further releases in provisions held with respectto the exit from US businesses. 22. Subsequent events There have been no material subsequent events between 30 September 2007 and theapproval of these statements by the Board. Independent review report to Cable and Wireless plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises condensed consolidated income statement,condensed consolidated balance sheet, condensed consolidated statement ofrecognised income and expense, condensed consolidated cash flow statement andthe related explanatory notes. We have read the other information contained inthe half-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the Disclosureand Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to thecompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the DTR of the UK FSA. The annual financial statements of the group are prepared in accordance withIFRS as adopted by the EU. The condensed set of financial statements includedin this half-yearly financial report has been prepared in accordance with IAS 34Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by the AuditingPractices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the EU and the DTR ofthe UK FSA. KPMG Audit PlcChartered Accountants 12 November 2007Registered Auditor, London Responsibility statement This interim management report is the responsibility of, and has been approvedby, the directors of Cable and Wireless plc. Accordingly, the directors confirmthat to the best of their knowledge: the condensed set of financial statements has been prepared in accordance withIAS 34 Interim Financial Reporting as adopted by the EU; the interim management report includes a fair review of the information requiredby: DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication ofimportant events that have occurred during the first six months of the financialyear and their impact on the condensed set of financial statements; and adescription of the principal risks and uncertainties for the remaining sixmonths of the year; and DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. The Directors of Cable and Wireless plc are listed in the Cable and Wireless plcAnnual Report of 23 May 2007. A list of current Directors is also maintained onthe Cable and Wireless plc website: www.cw.com By order of the Board Richard Lapthorne Tony RiceChairman Joint Group Managing Directorand Finance Director 12 November 2007 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. Forward-looking statements speak only as of the date they are made and Cable &Wireless undertakes no obligation to revise or update any forward-lookingstatement or any other forward-looking statements it may make, contained withinthis announcement, regardless of whether those statements are affected as aresult of new information, future events or otherwise (except as required by theUK Listing Authority, the London Stock Exchange, the City Code on Takeovers andMergers or by law). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CWC.L