mmC Group

C&W sticks to full-year guidance

July 17, 2009

Cable & Wireless said on Friday revenues were under pressure in the Caribbean as fewer tourists visited the region, but it would make further cost cuts to protect its full-year profits guidance.

The statement came ahead of a controversial vote at the UK telecommunications company’s annual meeting later on Friday over a shake-up of its executive pay policy, which could increase rewards for its management.

Shares in the group opened up 1 per cent at 132p.

“The downturn in the Carribean is intensifying in several of the local economies,” said Richard Lapthorne, chairman. “In the first quarter we have seen domestic fixed line minutes fall by 9 per cent compared to the same quarter last year, which is putting pressure on fixed line revenue,” he said.

Mobile market share and customer numbers were holding up, although average revenue per customer was down 8 per cent compared with a year ago on lower usage and competitive pricing, he added.

However, C&W reiterated its guidance for the full year of earnings before interest, tax, depreciation and amortisation of £1.025bn, with its international division up 6 per cent to about $935m and its worldwide division, which provides telecoms services to large companies and organisations, rising 32 per cent to £430m.

Planned cost-cutting measures include sharing mobile towers in Jamaica.

C&W is proposing to extend the pay-out period for its long-term incentive plan, which could increase the cash going to its managers, led by John Pluthero, head of the company’s UK business.

However, some shareholders are against the move. The Association of British Insurers, whose members account for almost 20 per cent of investments in the UK stock market, has made its strongest possible objection by issuing a “red top” alert.

C&W is not expected to provide concessions to investors and said the proposals had secured “widespread support from major shareholders” following consultation. Newton, C&W’s biggest shareholder, is backing the changes.

The private equity-style scheme has attracted controversy since its creation in 2006, because of the potentially large rewards. It is based on total shareholder return, and C&W said in 2006 the scheme might provide managers with £216m.

The cash-based scheme was supposed to pay out in full next year. But in May C&W said it wanted to extend the pay-out period to 2011 because of “unprec­edented turmoil in the credit and equity markets”, which was causing a delay “in our value realisation timetable”.

C&W said the sales at its worldwide division were ahead of expectations while guidance for capital expenditure of about £477m also remained unchanged.