C&W shares dip to 1980s level after warning

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The Independent Online

Shares in Cable & Wireless fell to their lowest level since the mid-1980s yesterday after the company warned revenues at its key telecoms unit would slump in the first half of the year and not rise as it had previously forecast. The alert, the company's fourth in a year and a half, was accompanied by a widely expected plan to cut capital expenditure and costs.

Shares in Cable & Wireless fell to their lowest level since the mid-1980s yesterday after the company warned revenues at its key telecoms unit would slump in the first half of the year and not rise as it had previously forecast. The alert, the company's fourth in a year and a half, was accompanied by a widely expected plan to cut capital expenditure and costs.

While no fresh job losses were announced yesterday, more redundancies are expected among the division's 11,000-strong workforce later in the year.

"Shareholders are saying very clearly to us that they wanted to see action and we, the board of directors, have got the message," said David Prince, the company's recently appointed finance director. "The attitude here is we need to change, we will change and we will move now to do it."

Shares in Cable & Wireless fell 5.5p to close at 132.5p yesterday after the company said revenues at its Global division were expected to fall 6 per cent in the six months to 30 September compared with the previous six-month period.

The company, which had been looking for a rise of up to 10 per cent, blamed the shortfall mainly on weaker revenues from its US retail voice business, which it is exiting, and weaker sales from other telecoms carriers. "When that forecast was made, no one anticipated that WorldCom would go into Chapter 11 and that Global Crossing would have gone bankrupt," Mr Prince said.

In the face of speculation that the latest alert could put pressure on Graham Wallace, the chief executive, to quit, Mr Prince said the current management team was doing everything in its power to address the situation.

"What's important is that continuity [of management] is allowed to see that [action plan] through," he said, adding: "It'd be more of an issue if management stuck their feet in the ground and said we're not shifting and that's definitely not the attitude here."

The company also said yesterday that its Global division would post an underlying, or Ebitda, loss of about £120m for the half-year – right at the bottom of its previously stated range of a £130m loss to a £20m profit.

To stem the losses at Global, the company said it was slashing £200m from that division's capital expenditure budget to £450m, bringing the group total back to £750m from £950m. It also reiterated its target that that business would be cash flow positive by the fourth quarter of next financial year, or 15 months from now.

Cable & Wireless, which predicts its cash pile will have dwindled to £2.2bn at the end of September, said yesterday that its Regional division continued to perform "well" and "in line with expectations".

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