C&W’s core profits rise 20%

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Cable and Wireless on Thursday declared the turnround of its UK business was running ahead of schedule as the telecommunications group’s core profits rose by 20 per cent.

However, John Pluthero, chairman of C&W’s UK business, insisted it was too soon to say whether the changes could deliver early on the £400m earnings target.

C&W underlined its confidence in the group’s prospects by increasing its full-year dividend by 30 per cent to 5.85p.

The group’s shares closed up almost 3 per cent at 191.9p as its 2006-07 results came in ahead of the stock market’s expectations.

C&W reported group revenue of £3.3bn for the year to March 31, up 4 per cent. Adjusted earnings before interest, tax, depreciation and amortisation were £492m, up 20 per cent.

Pre-tax profits after exceptionals were £249m, up 149 per cent, partly owing to the sale of a stake in a Bahrain telecommunications company.

C&W’s UK business is seeking to overcome years of decline by focusing on the telecoms needs of large companies. The business reported revenue of £2.1bn, up 4 per cent, and adjusted ebitda of £159m, up 7 per cent. The ebitda margin was almost flat at 7.5 per cent.

Tony Rice, C&W’s finance director, said the turnround was “well ahead of schedule”. He said the group’s long-term incentive plan, under which Mr Pluthero and another senior manager could get £20m each, was helping to drive performance.

The plan could pay out if C&W is bought, but Mr Rice said the group was not looking for a merger.

He also warned that any demerger of its UK and international businesses was some way off.

The changes to the UK business began in November 2005, and Mr Pluthero highlighted some progress in securing higher-margin voice and data contracts with companies. The business was last year set a target of generating £400m of ebitda some time between November 2008 and November 2010.

On Thursday Mr Pluthero insisted it was too early to say whether the goal could be reached at the near end of that timeframe.

Mr Pluthero added that the business should have ebitda of between £165m and £185m in 2007-08, excluding its lossmaking local network operations.

Those operations could be adversely affected if Pipex, a company that uses the local network, decided to sell its broadband business.

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