Cable & Wireless signals survival
Friday 26 May 1995
Attention as usual focused on Mercury, whose well-rehearsed problems seem to be reacting more quickly than feared to new boss Duncan Lewis's radical surgery. The speed of improvement suggests that the division was run a lot less well than the market realised. Getting Mercury back on a growth tack will take time, however, and without healthy underlying demand, the fall in profits to pounds 203m could have been a lot worse.
But Mercury is only one part of C&W's federation of businesses and its importance should not be overestimated. In Hong Kong, Cable's share of profits jumped 10 per cent to pounds 810m, two thirds of the total, and the Caribbean rose by a similar margin to pounds 171m.
The market remains reluctant, however, to accept the company's view that there are tangible benefits to be had from a collection of stakes in second- line telecoms companies around the world.
It still refuses to value the company at much more than the implied value of C&W's Hongkong Telecom stake, sometimes at nothing at all.
You do not have to be a brilliant arbitrageur to realise that when the constituent parts of the company are worth maybe 500p a share, there ought to be a good chance that either a third party will take advantage of the discrepancy and launch a takeover bid or management will attempt to unlock some of that value themselves.
Unfortunately, neither option is looking that likely, despite persistent chatter in the markets about interest from all the usual suspects - AT&T, BT, Bell Canada.
Analysts now think that a recent clutch of deals may have created a sufficiently complex structure to scare off potential predators and, although prepared to trim capital expenditure to boost short-term profits, Lord Young still seems reluctant to countenance anything more radical.
That being the case, the only sensible way to value C&W is on its profits, which according to NatWest Securities should bounce to pounds 1,245m in the year to next March and pounds 1,400m the following year. On that basis, the shares stand on a p/e of 16 falling to 14.5, roughly a 25 per cent premium to the rest of the market. That is hard to justify, and a yield of under 3 per cent provides no support.
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 3 Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations
- 4 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
- 5 AirAsia flight QZ8501 missing: Search for plane carrying 162 passengers from Indonesia to Singapore suspended overnight
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
UK weather: Warning for more snow and ice as freezing temperatures and gales hit Britain
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations
AirAsia flight QZ8501 missing: Search for plane carrying 162 passengers from Indonesia to Singapore suspended overnight
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Millions of Britons struggling to feed themselves and facing malnourishment
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Immigrants make UK racist, says Ukip councillor Trevor Shonk
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...