C&W to demerge as it warns on profits

Cable & Wireless confirmed on Thursday it will demerge its UK and international businesses as the UK telecoms group cut earnings guidance for the full-year.

The UK's second-largest fixed line telecoms group blamed the continuing slowdown at its Caribbean operations, because fewer tourists visited the region, but said it was sufficiently confident in the business to predict its full-year dividend would increase 12 per cent to 9.50p.

C&W also cut guidance for earnings before interest, tax, depreciation and amortisation for the year to March 31 in its International division from $935m to between $880m-$900m.

However the newly-revised figure was boosted by the consolidation of Dhiraagu, the operation in the Maldives in which C&W took majority control last month. On a like-for-like basis, the group expected ebitda for its international business to be about $840m to $860m.

"At the moment we don't see any signs of improvement in the [Caribbean] economy and have cut guidance," said Tim Pennington, group finance director.

C&W retained guidance of ebitda of £430m for its Worldwide business, which serves the needs of large corporate customers, often based in the UK.

Shares in the group were down 6.4 per cent at 138½p in late London trading.

Richard Lapthorne, chairman, said the long-awaited decision to split the business into its UK and international operations was the result of emerging signs of more settled conditions in financial markets.

"The board believes that a demerger is the right structure to drive further growth and value for shareholders by enabling both business to purse their strategies independently, and it is keen to push ahead as quickly as possible," it said in a statement.

C&W put its demerger plans on hold in November last year, at the height of the financial crisis, partly because of the difficulty in arranging credit facilities for C&W's UK business.

The move to resurrect the demerger plans follows a weak performance by the company's shares this year. Since March 31, the shares have risen by 4 per cent, while the FTSE 100 index has advanced 29 per cent.

Further details on the demerger, including the likely timetable, will be published before the end of the month.

Interim results for the period to September 30 showed revenue rose 13 per cent to £1.86bn, below analysts' consensus of £1.95bn. However, cost reductions and controls meant ebitda rose 30 per cent to £463m, marginally ahead of expectations of £460m.

Pre-tax profit rose 42 per cent to £163m while C&W increased the interim dividend by 12 per cent to 3.16p.