Investment: Full power from CWC boosts sales and profits

HALF-YEAR PROFITS from Cable & Wireless Communications (CWC), the cable operator which is 53 per cent owned by Cable & Wireless, grew by 12 per cent to pounds 73m before exceptional items in the six months to the end of September - right in the middle of analysts' expectations.

All four divisions - consumer, business, corporate, and international and partner services - generated greater revenues, and all four made profits, although exactly how much is commercially-sensitive information.

The consumer markets division increased revenues by 20 per cent and boosted its market share in both cable television and telephony, while the contribution from business markets is no longer declining. Corporate markets account for another quarter of revenues, and growth has been resumed.

But international and partner services is both the biggest and fastest- growing part of the business. The increasing number of telecoms providers, the growth of the Internet and the exceptional increase in traffic by mobile operators has led to a 22 per cent rise in revenues. CWC now carries the majority of international traffic for Vodafone and is the market leader in the Internet and premium-rate sectors.

Group revenues rose by 14 per cent and operating expenses were virtually flat, which augurs well for the future. Interest charges rose by more than 50 per cent to pounds 92m after shouldering reorganisation costs, and bank debt has been largely refinanced by a series of bond issues. The average cost of the issues is around 7 per cent, which looks expensive, but the company's future cash requirements are now fully funded.

Analysts claim CWC is still on course to make pounds 183m in the full year and earnings of 9.9p. CWC looks certain to be a good long-term investment but the shares, which rose 15p to 476p, look fully valued in the short to medium term.