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Caribbean sunshine for CWC

Cable & Wireless cut costs, invested heavily and made a bold acquisition to drive growth last year
May 20, 2015

Higher mobile and broadband sales, along with cost reductions, fuelled a 7 per cent rise in adjusted cash profits to $585m (£377m) at Cable & Wireless Communications (CWC). But investors sent the Caribbean and Central American telco's shares down 1 per cent on news that recently acquired Columbus International posted cash profits of $255m, about 7 per cent behind expectations. That led management to forecast an earnings decline this year.

IC TIP: Hold at 66p

Management expect the Columbus deal to broaden CWC's product range, reduce churn and open up cross-selling opportunities. It is also expected to generate an annualised $85m in ongoing cost savings, and $145m in one-off capital expenditure savings. However, management predicts realising those synergies will cost $110m.

CWC continued to offset falling landline revenues by selling bundles of mobile, broadband and fixed-line services. It also upgraded its networks and rolled out high-speed LTE data services, which attracted mobile subscribers and drove up data usage. The strategy fuelled a 41 per cent rise in constant-currency cash profits to $238m at its Caribbean-focused Lime business.

Capital spending soared by more than three-quarters to $442m as CWC pushed on with Project Marlin, its $1bn network investment plan. But substantial layoffs, the sale of peripheral properties and reduced power consumption meant full-year operating costs fell 2 per cent to $710m.

Deutsche Bank analysts cut their forecast cash profits by about 6 per cent to $925m, giving EPS of 3¢ (from $585m and 5¢ in 2015).

CABLE & WIRELESS COMMUNICATIONS (CWC)
ORD PRICE:66pMARKET VALUE:£2.9bn
TOUCH:65-66p12-MONTH HIGH:71pLOW: 43p
DIVIDEND YIELD:3.9%PE RATIO:na
NET ASSET VALUE:26¢*NET DEBT:160%

Year to 31 MarTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20112.444627.68.0
20122.03-117-7.88.0
20131.9427-3.84.0
2014 (restated)†1.69-98-8.44.0
20151.75-1-3.84.0
% change+4---

Ex-div: 28 May

Payment: 7 Aug

*Includes intangible assets of $2.95bn, or 68¢ a share

†Restated to reflect disposal of Monaco Telecom and the cancellation of plans to sell the Seychelles business

£1=$1.55