Cable & Wireless slashes jobs but rewards investors

Cable & Wireless drew a line under 50 years of corporate history yesterday by announcing it was relocating its London head office to Bracknell while unveiling a new organisational structure among a raft of initiatives to try to boost the telecoms group's fortunes.

Cable & Wireless drew a line under 50 years of corporate history yesterday by announcing it was relocating its London head office to Bracknell while unveiling a new organisational structure among a raft of initiatives to try to boost the telecoms group's fortunes.

Along with interim results reflecting the company's focus on cost cutting rather than sales growth, it announced a new management line-up and the resignations of Kevin Loosemore, as group chief operating officer, and Royston Hoggarth as UK chief executive.

Francesco Caio, the group chief executive, said he was taking direct control of C&W's UK operations as part of a transformation programme that will focus the group on broadband internet connections and network services for other telecoms groups. The group also announced 600 redundancies, half in the UK and half in Germany and France, resulting in annual savings of £50m. In the past 18 months it has cut its headcount from 20,000 to 14,500 through redundancies and disposals. Richard Lapthorne, the C&W chairman, said: "Salvation for a telecoms company won't come through top-line growth. Far more of our profit growth will come from cost savings."

The company said it would return £250m to shareholders through a share buy-back programme, although this leaves net cash on its balance sheet of more than £1bn, some of which will be used for acquisitions.

C&W's operations generated cash of £179m and the company said it would increase its dividend by 10 per cent. It is also paying £100m into its pension fund which has a deficit of about £400m. Mr Lapthorne also took the opportunity at yesterday's interims to clarify the value of a number of the company's assets which he described as "hidden gems". These, he said, had been ascribed little or no value by the City. The Guernsey, Maldives, Seychelles and Bermuda national telephone companies were worth £340m, according to Mr Lapthorne, while its 20 per cent stake in Bahrain's Batelco business was worth £290m.

For the six months to the end of September, C&W said revenue was down 2 per cent to £1.6bn while profit before tax was up 8 per cent at £199m. Working capital in the business fell from £42m to £27m, while capital expenditure was down to £124m from £172m. Staff costs over the period were £278m compared with £293m the year before.

Mr Caio remained unapologetic for C&W's aggressive pricing policy in its UK business, which has been attacked by rivals for being "predatory".

The results plus the company's transformation plan helped the shares rise 6.6 per cent to 177p. But it was the comings and goings on C&W's senior management roster that created most interest. Mr Loosemore will leave C&W in March and has a one-year rolling contract worth £490,000 in basic salary. Mr Hoggarth has been ousted as a result of Mr Caio's more streamlined structure for the UK business. Final pay-offs for both directors have yet to be agreed.