C&W pleases investors with pick-up in UK performance

Cable & Wireless raised hopes of a rapid turnaround of its troubled UK division yesterday by forecasting increased profits and pledging to more than triple its margins.

C&W surprised investors by lifting its earnings forecast in the UK this year to between £145m and £150m. It also lifted its first-half dividend by 21 per cent. Shares in the company rose 3.6 per cent to 156.5p.

It also beat expectations for its first-half earnings, reporting a 10 per cent rise to £220m although C&W did not include £5m of non-cash charges related to the company's long-term incentive plan.

The telecoms company has radically overhauled its UK division since it purchased rival operator Energis last year and appointed John Pluthero as head of the merged business. It has pulled out of the consumer broadband market, cut thousands of staff and massively reduced the number of customers it services by terminating low-value contracts with thousands of small corporate clients.

Mr Pluthero reiterated that C&W aimed to build a £2bn-revenue business in the UK with double-digit operating margins over the next three to five years depending on regulation and customer migration to new services.

He said: "Where we have got to so far suggests [this can be achieved] early but there is still a lot of road ahead of us." He said that the operating margin had improved to 6 per cent from 1 per cent a year ago but needs to grow to 20 per cent over the coming years.

C&W missed its target for installing its own equipment into BT's local exchanges through a process called local loop unbundling. It had expected to fully unbundle 800 exchanges by the end of September but has been hampered by late deliveries of network equipment. It has unbundled 685 exchanges thus far and expects to complete its program by the end of the year.

The telecoms watchdog has revealed that over one million lines have been unbundled in the UK with BT's network division Openreach handling 30,000 orders a week from companies like C&W, Sky and Carphone Warehouse.