C&W UK head insists revamp on track

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The head of Cable and Wireless’ UK business has reassured investors that its turnround is on track by insisting there will be no profit warning in the run up to the telecommunications group’s interim results in November.

John Pluthero, executive chairman of C&W’s UK business, told the Financial Times it was winning more than 50 per cent of the contracts sought with big companies that were supposed to form the basis of the turnround.

He expressed confidence the UK business would hit its targets of generating £2bn ($3.76bn) of revenue and £400m of core profit sometime between 2008 and 2010.

However, Mr Pluthero admitted the UK business, which reported an operating loss of £225m in 2005-06, could not be free-standing on Thursday.

Some analysts said the C&W group, which reported a pre-tax profit of £112m for 2005-06, was preparing itself for a demerger of its UK and international businesses if Mr Pluthero could show significant progress on the turnround next year.

The UK and international operations have different profiles. The UK business is focusing on the telecoms needs of big companies and public bodies.

The international operations, which reported an operating profit of £315m in 2005-06, are in small offshore financial centres and tourist destinations and supply broadband, fixed and mobile phone services to consumers as well as companies.

Mr Pluthero said demerger was “an option”, but added he was concentrating on the turnround.

He declined to say when the UK business would be cash flow-positive. It had a net cash outflow before financing and acquisitions of £304m in 2005-06.

The C&W group’s international operations, by contrast, had a net cash inflow before financing of £363m.

C&W’s shares fell 14 per cent on October 7 last year after warning in the run up to its 2005-06 interim results of deteriorating profit margins in the UK business.

Mr Pluthero, asked about the run-up to the 2006-07 interim results due on November 8, said: “If the question is ‘Are we going to issue a profits warning?’, the answer is ‘No’.”

He signalled the UK business was set to meet or exceed key performance targets due to be hit by the end of last month and reported on at the interim results by saying C&W was “comfortably in line” with its previous guidance.

Among other measures, the company is reducing its client base to 18,000 by ditching unprofitable customers; cutting operating costs by £5m per month, by paring back its staff to 5,200; and taking control of landlines running from 800 BT phone exchanges to homes and offices.

C&W’s shares closed down 1p at 141.75p.

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