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By Lilly Vitorovich
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- U.K. telecom carrier Cable & Wireless PLC (CW.LN) said Thursday it will push ahead with plans to demerge amid early signs of improving conditions in financial markets, but cut its full year earnings guidance due to tough trading conditions in the Caribbean.
"The board believes that a demerger is the right structure to drive further growth and value for shareholders by enabling both businesses to pursue their strategies independently, and it is keen to push ahead as quickly as possible," Chairman Richard Lapthorne said in a statement.
Cable & Wireless will publish further information about the demerger before the end of the month, which will include indicative timing, the company said, without elaborating.
Cable & Wireless operates two distinct businesses, which it has split operationally ahead of a planned demerger.
The Worldwide business specializes in offering communications services such as Internet Protocol, data, voice and hosting to large enterprise, reseller and carrier customers. It operates globally, with core markets in the U.K, Asia and Europe, Middle East and Africa, and provides connectivity in 153 countries.
CWI, meanwhile, operates fixed-line and mobile operations in former colonial countries such as Panama, Macau, some Caribbean Islands and the Channel Islands.
Cable & Wireless, which counts BT Group PLC (BT) as its biggest rival in the U.K., cut its full-year guidance for earnings before interest, tax, depreciation and amortization before exceptional items to a range of between GBP989 million and GBP1.00 billion from its forecast in May of GBP1.03 billion, due to weaker trading in its Caribbean operations. The company booked Ebitda before exceptional items of GBP822 million in fiscal 2009.
As a result, the company also cut its Ebitda before exceptional items guidance for CWI to a range of $880 million to $900 million for fiscal 2010, down from previous guidance for pre-items Ebitda of $935 million and compared with $921 million a year earlier.
The group reiterated its full year earnings guidance for Worldwide of GBP430 million, up from GBP326 million a year earlier.
The group's full year earnings downgrade triggered a sell off on the London Stock Exchange, and overshadowed the group's strong first half performance. At 0917 GMT, Cable & Wireless shares were down 10 pence, or 6.8%, at 138 pence, making it the second biggest faller on the bellwether FTSE 100 index.
Ebitda before exceptional items--the key figure tracked by U.K. investors--rose 30% to GBP463 million for the six months ended Sept. 30, driven by its Worldwide operations, including its acquisition of U.K. business communications firm Thus Group PLC in Oct. 2008 and associated synergies as well as favorable currency movements, just beating market expectations of GBP460 million.
The result includes a GBP45 million net benefit from foreign currency translation of CWI’s Ebitda, chiefly the 20% depreciation of the sterling to U.S. dollar exchange rate for the first half from a year ago as approximately three quarters of CWI’s Ebitda comes from dollar or dollar linked economies.
A year earlier, Cable & Wireless posted Ebitda before exceptional items of GBP357 million.
Worldwide booked a 44% jump in pre-items Ebitda, while CWI's was flat on a constant-currency basis.
First-half revenue rose 13% to GBP1.86 billion from GBP1.65 billion a year ago, below market expectations of GBP1.95 billion as the figure was also hurt by CWI's performance.
Cable & Wireless declared an interim dividend of 3.16 pence a share, up 12% from 2.83 pence a year earlier, and said it expects to pay a full-year dividend of 9.50 pence a share.
First half net profit jumped 45% to GBP120 million from GBP83 million a year ago, reflecting good progress in Worldwide, the acquisition of Thus and the associated integration synergies as well as favourable currency movements.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com