Cable & Wireless Worldwide, the troubled telecoms group being stalked by Vodafone, has said under-investment in the past had left it with an inefficient cost base and insufficient capacity to participate in its key data-hosting market.
Gavin Darby, chief executive, sought to distance himself from the previous managements of C&W Worldwide in his first public statement on Thursday, saying the business had previously been “focused on the wrong measure”.
Mr Darby said an “undue” concentration on gross margins would be replaced by cash generation as the primary goal, with cost-cutting and a simplification of the business already under way.
He said the business would be run in a “fundamentally different” way and would address investor concerns over disclosure and its bonus scheme. C&W Worldwide, which provides voice and data services to companies and government offices, will aim to capitalise on the growth in demand to host more customer data.
Mr Darby has promised a medium-term “strategic agenda” in May, six months after having replaced John Pluthero, who stood down as chief executive on the back of a series of profit warnings last summer.
Shares in C&W Worldwide had fallen by about three-quarters over the past year until a declared interest from Vodafone on Monday pushed the stock higher this week.
Shares edged down 0.2 per cent to 27.3p on Thursday, valuing the group at more than £750.4m.
The company reiterated its full-year outlook, saying that trading in the three months to December 2011 was in line with management expectations, although challenging market conditions had continued.
Mr Darby pointed to a pile of things “too difficult to do” that remained from past management and that he would now seek to address.
He said that acquired businesses such as Energis and Thus had never been fully integrated.
Even so, he said the “broad direction of travel remains substantially unchanged” and added that a good start had been made.
He highlighted work already done to increase capacity for hosting, with a new data centre in the UK and an overseas partnership with Equinix.
Mr Darby also announced progress on the refinancing of a £260m revolving credit facility.
● FT Comment
While not quite as blunt as Mr Pluthero’s famous description of an “underperforming business in a crappy industry”, Mr Darby laid out a frank assessment of a struggling company likely to need greater short-term operating expenditure to achieve its goal of improved cash flow. He also makes plain the costly and complex structures that any potential bidder would need to digest in a business where voice and data growth has stalled, with the faint hope for a substantial offer still the easiest way to justify a reason to buy shares at this early point in its turnround strategy.
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