Demerged from Cable & Wireless at the end of March, maiden first-half results from Cable & Wireless Communications (CWC) marginally missed analysts' estimates, with the group reporting $1.16bn and $424m of revenue and cash profits, respectively, against the $1.18bn and $431m market forecasts.
The Panama business was particularly disappointing. A 15 per cent decline in fixed voice revenues and slower conversion of government contracts meant cash profits of $127m were around 7 per cent below expectations, according to broker Evolution Securities. The group's Caribbean business also performed poorly mainly due to a weak economic backdrop, characterised by high unemployment, weak tourist spend and lack of development projects. The shortfall was partly offset by single-digit increases in cash profits from operations in Macau, Monaco, Guernsey and the Maldives.
The group's cash flow remains a major concern as it looks too weak to cover the $210m cost of the full-year 8c a share proposed dividend. The group highlights $296m of operating cash flow, but this translates into a net outflow of $57m after tax, interest and dividends and loans to minorities and leaves CWC nursing a larger-than-expected $900m debt pile.
Evolution predicts full-year EPS of 5.3c, falling to 4.6c in 2012, and is mulling a cut to its current 38p share price target.
CABLE & WIRELESS COMMUNICATIONS (CWC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 48.3p | MARKET VALUE: | £1.28bn | |
| TOUCH: | 48.24-48.38p | 12-MONTH HIGH: | 66p | 47p |
| DIVIDEND YIELD: | 10.4% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 32¢* | NET DEBT: | 105% | |
| Half-year to 30 Sep | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.13 | 219 | 3.70 | Na |
| 2010 | 1.16 | 210 | 3.30 | 1.65 |
| % change | +2 | -4 | -11 | - |
Ex-div:10 Nov Payment:13 Jan *Includes intangible assets of $430m, or 16¢ a share **Interim dividend based on exchange rate of £1:$1.617 | ||||
