The surprise move came with a broad financial tidying-up exercise, which resulted in £624m of exceptional items in the first half - comprising goodwill impairments of £436m, a reduction in deferred tax assets of £146m and a £42m obsolete assets write-off. The half-year dividend was also halved - there will be no further dividends until cash flow comfortably covers any proposed future payments. There will also be a second-half £100m payment into the pension scheme, freeing up previously ringfenced funds of £125m.
Trading in the first half held up fairly well given the tough backdrop, although cash profits were still down 6 per cent in the period to £190m. However, the group has managed to retain existing customers while winning new ones. But management conceded that underlying growth was constrained by a lack of capacity and work is now in place to expand the data centre by early next year.
Investec Securities expects full-year adjusted pre-tax profit of £72.9m, giving EPS of 4.8p (£143m and 7.4p in 2011).
|CABLE & WIRELESS WORLDWIDE (CW.)|
|ORD PRICE:||27p||MARKET VALUE:||£729m|
|TOUCH:||26-27p||12-MONTH HIGH:||79p||LOW: 26p|
|DIVIDEND YIELD:||13.9%||PE RATIO:||na|
|NET ASSET VALUE:||33p*||NET DEBT:||11%|
|Half-year to 30 Sep||Turnover (£bn)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 23 Nov
Payment: 26 Jan
*Includes intangible assets of £476m, or 18p a share
The share price slipped 11 per cent on the back of theses figures and, while a forward PE of just six looks cheap, management still has plenty to prove. For now, then, the shares are up with events. Fairly priced.
Last IC view: Fairly priced, 52p 24 May 2011.