C&W shares hit by forecast after earnings

By Kate Holton

LONDON (Reuters) - Telecoms group Cable & Wireless posted a 36 percent rise in full-year earnings following an operational overhaul and acquisition synergies, and said it would target further strong growth in 2010.

Its shares, however, were down 9 percent in early trading on Thursday following a rally ahead of the results, and due to disappointment from some analysts who said the forecast growth for 2010 was weaker than hoped.

Traders said news that shares would be sold on behalf of company directors also put pressure on the stock.

Two directors would sell enough to cover taxes owed on a performance-related share award, but Tony Rice, chief executive of the International unit, planned to sell all of the shares he received as part of the award, for personal tax reasons, the company said.

The country's second-biggest corporate telecoms provider after BT Group said earnings before interest, tax, depreciation and amortisation for the full-year to March 31 was 822 million pounds, in line with forecasts.

The group, which operates in markets including the Caribbean and Panama, said it had seen some decline in the high-end tourism market which affected voice revenues, but said the markets had generally held up well.

It raised the full-year dividend for the year just ended by 13 percent, demonstrating "confidence in the group's prospects" and set a group core earnings forecast of approximately 1.03 billion pounds for the 2009-10 year, up 25 percent.

WORLDWIDE OUTLOOK

"We're well aware that the recession provides a degree of uncertainty but our current view is that we have a robust set of plans that will allow us to progress further in 2009-10," Chairman Richard Lapthorne said in a statement.

"Consequently, we're guiding to an increase in EBITDA to over 1 billion pounds and we expect a substantial increase in cash generation."

Investec analyst Jonathan Groocock said the outlook was weaker than expected, mostly from the Worldwide division.

Liberum Capital said in a note the outlook was also slightly below their target of 1.04 billion pounds but noted that the company advised the forecast was in line with consensus.

The shares were down 9 percent at 142.9 pence by 1006 GMT having earlier fallen as much as 11.7 percent to a one-month low of 138.6 pence. The stock had rallied strongly ahead of the results, gaining 15 percent since early April.

C&W, which has a history that dates back to the 1860s when telegraph cables were first laid overseas from Britain, has enjoyed a strong year after turning its worldwide unit around and overhauling the International division.

It also benefited from the acquisition and subsequent synergies from smaller rival Thus and from the effect of foreign currency translations on the CWI division.

It also took out jobs and operating costs as it made the business more efficient.

C&W worldwide, which used to be called Europe, Asia and U.S., showed EBITDA growth of 49 percent on last year and the CWI, which covers markets in the Caribbean, Panama and others, rose by 11 percent.

C&W said in November it had postponed its demerger plans due to the turmoil in the financial markets. It split itself into two separate units in 2006, prompting speculation this would lead to a full demerger.

The group repeated this stance on Thursday and said it would wait until it saw a sustained period of normality in the credit and equity markets.

(Reporting by Kate Holton; Editing by Rupert Winchester)

Article Published: 21/05/2009