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Solid start for C&W Worldwide

RESULTS: Telecoms group is targeting growth markets but the dividend yield is key attraction in the short-term
May 26, 2010

Maiden results from Cable & Wireless Worldwide (CWW) since demerging from the C&W mothership provide shareholders with plenty to absorb, especially given the deluge of exceptional charges.

IC TIP: Hold at 78.5p

Total revenue was virtually flat at £2.27bn in the 12 month trading period, though the mix changed towards data, IP and hosting, and UK mid-market and public sectors. IP and data revenues grew 20 per cent to £978m and hosting revenues rose 7 per cent to £240m, but the traditional voice segment was weak and sales here slumped 15 per cent to £1.05bn.

The UK mid-market segment put in an impressive performance with revenues up 14 per cent to £242m and gross margins 10 percentage points higher helped by a full year contribution from its acquisition of THUS. The business is now 60 per cent data traffic and is focuseed on the higher end of the SME market. The UK Public Sector side also did well - revenues were up 6 per cent to £285m - but with public sector spending cutbacks on the agenda, this sort of performance could prove tricky to repeat. And investors will have noted that UK Enterprise, one of the predicted key growth drivers in future, only saw revenues rise £10m to £837m.

Overall cash profits rose a third to £431m, but the accounts are littered with exceptional charges of £210m, thanks to the demerger, integrating Thus and Energis and management incentives. Adjusting for these one-off items, pre-tax profits jumped from £11m to £116m and underlying EPS rose from 1.8p to 8.3p. For the current financial year to March 2011, Deutsche Bank expects adjusted pre-tax profits of £140m and EPS of 8p and the board is aiming to pay a 4.5p a share dividend. The results were roundly cheered by analysts, especially with cash exceptional charges predicted to almost halve to about £38m this year.

ORD PRICE:78.5pMARKET VALUE:£ 2.06bn
TOUCH:78.4-78.6p12-MONTH HIGH:99p69p
DIVIDEND YIELD:3.8%PE RATIO:NA
NET ASSET VALUE:52p*NET DEBT:2%

Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20092.27-65-1.3nil
20102.27-94NIL3.0
% change----

Ex-div:09 Jun

Payment:12 Aug

*Includes intangible assets of £932m, or 36p per share

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