Cable and Wireless earnings beat expectations as cost cuts planned

Cable & Wireless Communications (CWC) reported earnings slightly ahead of expectations and has identified major ongoing cost-cutting measures.

The consumer telecoms group, which is now focused on the pan-America region after two disposals during the period, saw revenues fall 3.0% from continuing operations to $1.9bn but earnings before interest, tax, depreciation and amortisation (EBITDA) rose 1.0% to $589m.

CWC said revenues fell due to strong mobile data growth of 34% being offset by declining voice revenue, while fixed voice and enterprise, data and other revenues were trampled by declining voice traffic, lower activity levels and a difficult macroeconomic environment.

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After the disposal of the Islands business garnered $680m and the Macau business a further $750m, net debt was razed from $1.5bn to $140m.

Cash generated from operations grew 11% to $540m, but as forewarned the final dividend was cut to 2.67 cents (c) and Chief Executive Tony Rice said the full year payout of 4.0c, half the 8.0c of the year before, was sustainable and would likely be repeated in the current financial year.

Rice declared that the 12 months to March 31st had been a "milestone year" for the company: "The agreements to sell our Monaco & Islands and Macau businesses have reshaped the group and we have achieved the goal of structural coherence that we set ourselves at the demerger of Cable & Wireless in 2010."

He added that the company began new financial year "with a strong foundation and a clear direction" as it was now focused on a single region that had low penetration for data services and "strong growth potential where we have scale and market leadership".

Rice said CWC had set a new target to drive $100m of savings, 13% of existing operating expenditure, to improve margins and cash flow.

The cost reduction across the group is targeted via a lower run rate within two years, which has been anticipated to deliver a cash cost between $150m and $200m, while the group planned increased investment in high speed networks that is expected to lead to capital expenditure of approximately $300m in the current year.

Shares in Cable & Wireless were down 0.9% at 44.59p at 09:17 on Wednesday.

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