CABLE AND WIRELESS PLC
RESULTS FOR THE YEAR ENDED 31 MARCH 2004
This announcement contains forward-looking statements that involve inherent
risks and uncertainties. We have identified certain important factors that may
cause actual results to differ materially from those contained in such
forward-looking statements. See those that appear, or are referred to, in the
cautionary statements section of the company's most recent Annual Report filed
on Form 20-F.
CABLE AND WIRELESS PLC
RESULTS FOR THE YEAR ENDED 31 MARCH 2004
CABLE & WIRELESS ANNOUNCES A YEAR OF PROGRESS
Announcing the full year results for Cable and Wireless plc for the year ended
31 March 2004 Group Chief Executive Officer Francesco Caio said:
'A year ago we announced a three year programme to bring the Group under tight
financial control, exploiting our core skills and focusing on key customers in
order to lay the foundations to rebuild Cable & Wireless as a profitable
telecoms operator. The Group had a better year producing £317 million of PBT
before exceptionals from our continuing business, equal to 8 pence per share
and we have been able to recommend a full year dividend of 3.15 pence per
share. Revenues of £1,661 million from our businesses in the UK represented a
halt in the decline in sales in the UK business for the first time in three
years. Over sixty-five per cent of our National Telco revenues are now earned
in fully or partly liberalised markets. In constant currency terms the
National Telcos have maintained their revenue levels.
'Highlights include:
Portfolio restructuring ahead of plan: and below expected cost; US exit the key
component
UK operational restructuring on plan: £93 million reduction in underlying cost
base in the full year; revenue decline halted for first time in three years
National Telco capital expenditure refocused: accelerated GSM roll-out in
Caribbean
Bulldog acquisition accelerates implementation of UK strategy
Dividend reinstated: backdated to six months earlier than expected
Balance Sheet risk managed out
Strategic framework defined: to be clear number two in the UK market and a
world leader in the provision of telecom services in small and medium-sized
countries.
Cable & Wireless Chairman Richard Lapthorne said:
'Whether in the restructuring of our portfolio of businesses or of our
operations, the past year has seen a remarkable determination to succeed from
our staff worldwide. Eighteen months ago Cable & Wireless was regarded as down
and out. Today, that is not the case and the resumption of dividends, whereby
we are recommending a total dividend for the year of 3.15 pence per share, is
evidence of our belief that we can build a prosperous future.'
Chief Executive's Review of Operations
Last year I set out three priorities aimed at creating a stable platform from
which to launch our reconstruction of the Group. I am encouraged by the
progress that the Group has made so far and I am pleased to report genuine
progress in each area.
Exit the US
Following the completion of its sale in March, we have now exited our US
domestic business. The cash cost of withdrawing from this market will be
within our original estimate of £300 million and, most importantly, we have
exited this business with minimal disruption to our US and international
customers.
Restructure the UK and drive performance
In the UK we have reduced capital expenditure and operating costs, introduced
new skills and redesigned our systems and processes. Our initiatives in all
these areas are reflected in the financial performance of the UK business this
year.
We held revenues level year on year, halting the decline of approximately 6% in
each half year over the last three years and we achieved an operating profit,
before exceptional items and amortisation, of £33 million. This resulted from
cost reduction and the positive impact of the reduced depreciation charge as a
consequence of the impairments in the prior year. We reduced the underlying
cost base in the UK by £93 million in the full year. This improvement is the
result of our headcount reduction proceeding ahead of plan and significant
savings achieved on property costs.
The UK business achieved break even free cash flow, a significant improvement
against the cash outflow of £225 million in the prior year. This was achieved
by reducing capital expenditure for the year to £101 million and by introducing
tighter control on working capital. This restriction on capital expenditure was
always a limited term measure. For the next 12 months we intend to move to a
level of capital expenditure in the region of 9-10% of revenues, which will be
shared fairly evenly across customer related, transformation and maintenance
spending. The success of these actions demonstrates, however, the greatly
improved financial control we have achieved.
We have now established a platform on which to reconstruct our position in the
UK. The next phase in this transformation will be driven by our success in
addressing customer needs and in capitalising on the opportunities offered by
the shift in technology and, potentially, the regulatory review now in
progress. Our recent acquisition of Bulldog is part of this positioning
process, accelerating our ability to offer Broadband and IP based solutions to
the Business segment and providing the means to leverage our existing
infrastructure and reduce outpayments.
National Telcos
Despite ongoing liberalisation and increasing competitive pressure in most
markets, our National Telco revenues have held steady in constant currency
terms. The initiatives we have taken to reduce our cost base during the year
have meant that, although underlying operating profit margins, excluding one
off impacts, have declined year on year, the decline has slowed half on half.
Free cash flow as a percentage of operating profit has remained stable.
In the Caribbean, where more than 70% of our revenue was exposed to competition
by year-end, our increased involvement in these businesses has ensured better
coordination and accountability. We have de-layered the regional management
structure, upgraded management skills, appointed a local Head of Operations for
the Caribbean and are looking to further strengthen management with Caribbean
talent from outside the region. We have accelerated our GSM network roll out,
introducing GSM services in ten Caribbean markets and recruited an experienced
Head of Caribbean Mobile to drive performance through coordinated sales and
marketing programmes. We have reduced headcount by more than 820 in areas that
do not impact customer service and exited surplus properties.
Across all our National Telcos we recognise the importance of a constructive
dialogue with local governments and regulators. We intend to work with host
governments to ensure that our investment in new services will not only benefit
customers and businesses but generate returns capable of balancing, over time,
the decline in margins of more mature and increasingly competitive offerings.
Learning from our experience across increasingly liberalised markets we have
been able to develop clear operating priorities to protect and stabilise
margins over time and create businesses capable of delivering sustainable cash
flow.
While we recognise that the progress of liberalisation means that the returns
typically associated with exclusive licences will not be recaptured we believe
that, through our operating priorities, these businesses will deliver
sustainable cash flow and that we can leverage Cable & Wireless' core skills in
this area to selectively expand our footprint, strengthen our position and grow
cash generation.
These priorities provide a framework against which to assess opportunities to
selectively expand our footprint to strengthen our position and generate
sustainable returns. Our criteria for expansion will focus on profitable
integrated incumbents or mobile licences in small to medium-sized countries.
Proximity to existing businesses and the opportunity to create hubs will also
be considerations. All opportunities will continue to be screened against a
strict financial framework to evaluate sustainable returns.
As we enter the reconstruction phase of our transformation plan we are
realistic about the challenges we face. Our progress this year has enabled us
to identify the framework that will drive our actions in developing our core
business. In the UK our aim is to build a sustainable competitor position as
the number two in the UK - helping customers migrate from legacy to new
telecoms services, while efficiently managing current services. In National
Telcos we intend to be an efficient, high skilled operator, to sustain profits
and cash flow and to be the first choice provider of telco services for small
to medium countries. In all markets the strength in our balance sheet and our
focus on tight cash management will assist us in achieving our objectives.
I remain confident that our business has great potential and that we will
continue to build on the improvements we have made this year.
CABLE AND WIRELESS PLC - 2 JUNE 2004
SUMMARY RESULTS
CONTINUING OPERATIONS - YEAR ENDED 31 MARCH*
2004 2003
Group Revenue £3,384m £3,677m
Operating profit before exceptional items and amortisation £226m £(42)m
Profit before tax and exceptional items £317m £79m
Earnings/(loss) per share before exceptional items and 8.0p (2.3)p
amortisation
Net cash balance at 31 March £1,448m £1,619m
Recommended dividend 3.15p 1.6p
* Continuing operations exclude the results for the US domestic business and
TeleYemen.
TOTAL GROUP RESULT
INCLUDING CONTINUING AND DISCONTINUED OPERATIONS AND EXCEPTIONAL ITEMS
2004 2003
Loss for the financial year £(237)m £(6,533)m
Basic and diluted loss per ordinary share (10.2)p (280.4)p
The full profit and loss account, cash flow statement and balance sheet, drawn
up in accordance with UK generally accepted accounting principles, from which
this information is extracted, is set out in the attachments.
EXECUTIVE SUMMARY
Trading overview
Revenue from continuing operations for the year ended 31 March 2004 was £3,384
million, an 8% decline from the prior year at reported rates. At constant
currency, revenue from continuing operations for the full year fell by 4%.
This decline reflects the impact of the disposal of domestic operations in
continental Europe, and the termination of the provision of local services in
Hong Kong, neither of which qualify as discontinued activities. Discontinued
operations comprise the US domestic business and TeleYemen.
For the full year, operating profit from continuing operations before
exceptional items and amortisation was £226 million, an improvement of £268
million compared to the prior year. This result reflects the reduction in
operating costs due to the ongoing restructuring throughout the Group and the
significantly reduced depreciation charge resulting from the impairment of
assets in the prior year. The adverse impact of exchange rate movements, the
continuing impact of liberalisation and competition in the National Telco
markets, the write-off of GSM customer acquisition costs and other one-off
costs in the National Telcos.
On a constant currency basis, operating profit from continuing operations
before exceptional items fell by 5% in the second half due to the one-off costs
in the National Telcos, offseting the improved performance in the UK. Further
detail on these items is provided in the geographic performance sections on
pages 13 to 22.
Income from joint ventures and associates fell to £41 million from £75 million
in the prior year due to the reduction of the Group's stake in MobileOne and
the consequent reclassification of that stake as a trade investment, and
adverse exchange rate movements. Operations in Trinidad & Tobago and Bahrain
now account for 86% of operating profit earned from joint ventures and
associates.
Profit before tax and exceptional items from continuing operations was £317
million for the year ended 31 March 2004 compared to £79 million in the prior
year. Including TeleYemen, profit before tax and exceptional items from
continuing operations was £329 million (2002/3: £98 million).
Cash and funding
Tight cash management was a key focus in the year. At 31 March 2004 the Group's
gross cash balance was £2,367 million. Total borrowings were £919 million, of
which long term debt was £875 million. The net cash balance at 31 March 2004
was £1,448 million (including £12m of treasury instruments).
The Group issued £258 million convertible unsecured bonds due 2010 on 16 July
2003.
On 16 December 2003 the US$400 million Cable and Wireless plc bonds, totalling
£239 million, were repaid in line with the redemption terms.
Dividend
In June 2003 the Board decided to suspend dividends for 12 months to give the
Group greater financial flexibility during a transitional period. At that time
the Board stated its intention to pay a final dividend for the year ending 31
March 2004.
The Board has recommended a full dividend for the year of 3.15 pence per share
made up of 1.05 pence per share for the interim and 2.1 pence per share for the
final, effectively reinstating the dividend six months early. The recommended
dividend is subject to approval of the shareholders at the Company's Annual
General Meeting to be held on 22 July 2004. If approved, the full dividend
will be paid on 13 August 2004 to ordinary shareholders on the register at 23
July 2004 and to American Depositary Receipt holders on 23 August 2004.
The Board is proposing to introduce a scrip dividend scheme to operate for the
full year dividend for the year ended 31 March 2004 and for any future
dividends, subject to the approval of the Company's shareholders at the 2004
Annual General Meeting. All details will be posted to shareholders with the
Annual Report and Accounts to be issued on 22 June 2004. The Company's
existing Dividend Reinvestment Plan is suspended and will not operate for the
full dividend for the year ended 31 March 2004. The Dividend Reinvestment Plan
will be terminated subject to shareholder approval of the scrip dividend
scheme. In this event, cash residues in the plan will be repaid to
participants.
Discontinued operations
In the year to 31 March 2004 discontinued operations comprise the US domestic
business and TeleYemen.
In December 2003, Cable & Wireless USA Inc and Cable & Wireless Internet
Services Inc and certain of its affiliates (together CWA) compromising the
domestic US business filed for Chapter 11 bankruptcy protection under the U.S
bankruptcy code. Following a court supervised auction process, substantially
all of the assets of CWA were sold to SAVVIS Communications Corporation and the
completion of the sale was announced on 8 March 2004. In order to provide US
connectivity for data and IP services to Cable & Wireless' multinational
customers based in the United Kingdom and other regions, Cable & Wireless
continues to provide certain services in the United States through Cable &
Wireless Americas Operations, Inc ('CWAO').TeleYemen ceased operating upon the expiry of its licence on 31 December 2003
and its results for the year have accordingly been reclassified within
discontinued operations.
Exceptional items
In the year to 31 March 2004, the Group recognised a net £502 million of
exceptional charges. Exceptional items in continuing operations totalled £744
million, the principal component being impairment charges of £536 million. A
net gain of £242 million was recognised in relation to discontinued operations
which principally represents the exit from the US domestic business.
Exceptional items are analysed in detail on pages 10 and 11.
FINANCIAL RESULTS
The results and commentary that follow focus on the continuing activities of
the Group and the geographic businesses within the Group.
The Group results presented below should be read in conjunction with the
Group's consolidated profit and loss, balance sheet and cash flow statements
and related notes on pages 25 to 30.
Group Profit and Loss
H1 H2 FY FY Constant
2003/ 2003/ 2003/4 2002/3 Currency
Continuing Operations 4 4 Growth
£m £m £m £m %
Revenue 1,733 1,651 3,384 3,677 (4)
Outpayments & network costs (965) (918) (1,883) (1,966) 2
Staff costs (293) (269) (562) (635) 9
Other costs (228) (235) (463) (453) (7)
Depreciation before exceptional items (124) (126) (250) (665) 61
Operating profit/(loss) before
exceptional items and amortisation 123 103 226 (42)
Amortisation of goodwill 1 2 3 (65)
Operating profit/(loss) before
exceptional items 124 105 229 (107)
Exceptional items
- depreciation - (526) (526) (1,709)
- amortisation - (10) (10) (2,257)
- other operating costs (131) (91) (222) (160)
Joint ventures and associates 21 20 41 75
Total operating profit/(loss) 14 (502) (488) (4,158)
Profits less (losses) on sale and
termination of operations 6 (6) - -
Exceptional profits on sale and
termination of operations - 2 2 -
Profits on disposal of fixed assets
before exceptional items 16 10 26 -
Exceptional profits on disposal of
fixed assets - 12 12 62
Exceptional write-down of investments - - - (390)
Net interest income 10 16 26 120
Other similar income/(charges) 8 (13) (5) (9)
Profit/(loss) before tax 54 (481) (427) (4,375)
Profit before tax and exceptional
items 185 132 317 79
The trading overview section on page 6 provides additional commentary on the
Group's performance.
The Group recorded a total operating loss from continuing operations of £488
million for the year ended 31 March 2004. This is after taking account of
exceptional operating costs of £758 million comprising impairment charges
totalling £536 million and costs associated with restructuring activities
totalling £222 million.
Net interest income decreased significantly due to the reduction in gross cash
invested, the decline in interest rates, the repayment of the PCCW zero-coupon
exchangeable bonds and the issue in July 2003 of Cable and Wireless plc's
convertible bonds due 2010.
There are various other non-trading items, totalling £35 million, included in
the loss before tax from continuing operations of £427 million in the year.
These principally relate to the disposal of properties and a number of small
trade investments around the Group.
Attributable profit/(loss)
2003/4 2002/3
Underlying Underlying Exceptional Reported Reported
continuing Group Items
operations* result*
£m £m £m £m £m
Continuing 317 317 (744) (427) (4,375)
Discontinued - (39) 242 203 (1,998)
Profit/(loss) before 317 278 (502) (224) (6,373)
tax
Tax (57) (61) 73 12 (36)
Profit /(loss) after 260 217 (429) (212) (6,409)
tax
Minority interests (72) (75) 50 (25) (124)
Attributable profit/ 188 142 (379) (237) (6,533)
(loss)
Earnings/(loss) per 8.1 (10.2) (280.4)
share (pence)
* Including amortisation of negative goodwill of £3 million.
Exceptional items
In the year ended 31 March 2004 the Group recognised £502 million of
exceptional items, of which a £744 million charge related to continuing
operations and a £242 million credit related to discontinued operations.
The analysis of the continuing exceptional charge of £744 million is set out in
the table below.
Continuing operations 2003/4 2002/3
£m £m
Operating items
Depreciation (526) (1,709)
Amortisation of goodwill (10) (2,257)
Restructuring items
CW Global restructuring - (125)
UK business restructuring (147) -
Restructuring in National Telcos (46) (35)
Corporate restructuring (15) -
Japan & Asia restructuring (7) -
Europe restructuring (7) -
Total restructuring (222) (160)
Total operating items (758) (4,126)
Non-operating items
Write-down of investments - (390)
Profits on sale and termination of operations 2 -
Profits on disposal of fixed assets 12 62
Total non-operating items 14 (328)
Total exceptional items from continuing operations (744) (4,454)
The Group wide impairment review resulted in an exceptional charge of £526
million and £10 million against the carrying value of fixed assets and goodwill
respectively. The impairment of fixed assets principally relates to TDMA
mobile network assets in the National Telcos, switched voice assets in Japan &
Asia and under-utilised cabling in the UK, some of which dates back to the
Mercury business.
Restructuring in the UK has resulted in a charge of £147 million comprising
property disposal costs of £91 million, employee costs of £48 million, and
other costs of £8 million.
Restructuring in the National Telcos resulted in a charge of £46 million
relating principally to staff costs. Corporate restructuring charges relate to
employee redundancy costs and other cost reduction initiatives. Restructuring
in Japan & Asia and Europe relates primarily to staff and property exit costs.
Non-operating items relate to the disposal of certain European businesses and
property disposals in the UK, Europe and the Caribbean.
The analysis of the discontinued exceptional credit of £242 million is set out
in the table below.
Discontinued operations 2003/4 2002/3
£m £m
Operating items
Depreciation - (672)
Amortisation of goodwill - (468)
US business restructuring (22) (182)
Integration of US businesses - (31)
Onerous property and network contracts provisions - (69)
Total operating items (22) (1,422)
Non-operating items
Profits less (losses) on sale and termination of operations 248 (147)
Profits on disposal of fixed assets 16 -
Total non-operating items 264 (147)
Total exceptional items from discontinued operations 242 (1,569)
Exceptional items within discontinued operations relate predominately to CWA
prior to November 2003 and its filing for Chapter 11 bankruptcy protection
under the U.S bankruptcy code on 8 December 2003. The restructuring the US,
resulted in charges of £22 million, principally relating to staff costs, and a
net gain of £16 million on the disposal of properties.
An exceptional gain of £191 million arose on de-consolidation of CWA. In
addition, £57 million of accruals previously set up on disposal of former Group
businesses for anticipated costs have been released as they are no longer
required.
Group cash flow
H1 H2 FY FY
2003/ 2003/ 2003/ 2002/
4 4 4 3
£m £m £m £m
Group operating profit/(loss) before exceptional
items 80 119 199 (527)
Depreciation and amortisation 125 124 249 861
Non-cash items 3 (29) (26) 58
Working capital (42) (4) (46) 22
Net cash outflow in respect of provisions (173) (130) (303) (319)
Cash (outflow)/inflow from operating activities (7) 80 73 95
Dividends received, returns on investments and
servicing of finance (39) 7 (32) 65
Taxation paid (21) (22) (43) (438)
Capital expenditure (172) (170) (342) (810)
Sale of current asset investments 229 - 229 600
Other financial investment 19 53 72 (5)
Acquisitions and disposals (2) (116) (118) 110
Equity dividends paid - - - (119)
Net cash flow before financing and management of
liquid resources 7 (168) (161) (502)
Gross cash 2,891 2,367 2,367 3,165
Net cash 1,623 1,448 1,448 1,619
Operating activities produced £73 million of cash in the year to 31 March 2004
which is broadly in line with the prior year.
Tax paid of £43 million in the year to 31 March 2004 relates to operations in
the Caribbean, Panama, Macau and the Rest of the World.
Capital expenditure at £342 million in the year showed a significant decline on
2002/3 reflecting the focus on tightly controlling expenditure in the year. The
largest single element of capital expenditure in the year was the accelerated
roll out of GSM networks in the National Telcos.
The Group realised £229 million of cash in disposing of its stake in Pacific
Century CyberWorks (PCCW) and further amounts in respect of the disposal of
other investments.
The net cash outflow of £118 million from acquisitions and disposals includes
cash spent in connection with exiting the US domestic business.
Cable & Wireless Group Performance Analysis
Continuing UK CWAO Europe Japan Caribbean Panama Macau Rest of Other FY 2003
Operations & ² the /4
Asia World3
£m £m £m £m £m £m £m £m £m £m
Revenue 1,661 11 262 286 633 265 128 161 (23) 3,384
Outpayments (1,158) (23) (198) (159) (203) (74) (51) (40) 23 (1,883)
& network
costs
Staff costs (254) (4) (40) (46) (97) (27) (12) (27) (55) (562)
Other costs (148) - (30) (59) (142) (55) (7) (22) - (463)
Total (1,560) (27) (268) (264) (442) (156) (70) (89) (32) (2,908)
operating
costs1
Depreciation (68) - (1) (26) (76) (39) (18) (20) (2) (250)
before
exceptional
items
Operating
profit/
(loss)
before
amortisation
and
exceptional
items 33 (16) (7) (4) 115 70 40 52 (57) 226
Amortisation - - - - - - - 3 - 3
of goodwill
Joint (1) - - - 30 - - 12 - 41
ventures and
associates
Total
operating
profit/
(loss)
before
exceptional
items 32 (16) (7) (4) 145 70 40 67 (57) 270
(Please refer to Appendix A on page 33 for comparative data for the prior
period)
1 Excluding depreciation, amortisation and exceptional items
2 Results for Bermuda, previously included in the Caribbean, are for now
included in RoW to reflect a change in management structure
3 'Rest of the World' comprises the results of the Group's operations in the
Atlantic, Pacific and Indian Oceans, the Middle East and Guernsey
The geographical financial information in the above table reflects the
management structure of the organisation
United Kingdom
H1 H2 reported reported
2003/ 2003/ FY FY change** change**
4 4 2003/4 2002/3 H2 v H1 FY v FY
£m £m £m £m % %
Enterprise 225 228 453 436 1 4
Business 224 221 445 524 (1) (15)
Carrier Services 376 387 763 724 3 5
Total revenue 825 836 1,661 1,684 1 (1)
Outpayments & network costs (583) (575) (1,158) (1,110) 1 (4)
Staff costs (134) (120) (254) (292) 10 13
Other costs (81) (67) (148) (166) 17 11
Total operating costs* (798) (762) (1,560) (1,568) 5 1
Depreciation (34) (34) (68) (413) - 84
Operating (loss)/profit
before exceptional
items and amortisation (7) 40 33 (297) 100+ 100+
Amortisation - - - (62) - 100
Joint ventures and
associates (2) 1 (1) - 100+ -
Total operating (loss)/
profit before
exceptional items (9) 41 32 (359) 100+ 100+
Headcount (number) 5,047 4,398 4,398 5,682 13 23
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
Revenue for the six months to 31 March 2004 was £836 million, broadly flat
compared to H1 following the downward trend experienced over the last five
years. This result in the second half of the year reflects improved
performance across enterprise and carrier services. Revenue for the year was £
1,661 million, a decline of 1% compared to the prior year as growth in
Enterprise and Carrier Services revenue was offset by the decline in Business
revenue.
Enterprise revenue rose by 4% from the prior year as a result of increased
focus on key customers which reduced customer churn and led to a number of
incremental orders. Carrier Services revenue rose by 5% from the prior year
reflecting increased voice traffic from mobile transit and operator services.
Business revenue declined by 15% from the prior year but by only 1% in H2 2003/
4 from H1, reflecting the successful strengthening of the sales acquisition
teams and the streamlining of product offerings.
Total operating costs before depreciation, amortisation and exceptional items
were £1,560 million, in line with the prior year. Reduced staff and other
costs offset increased outpayments and network costs arising from increased
voice traffic and increased equipment and operations maintenance costs to
support enhancements made to the network during the year. Capitalised costs
have reduced by £85 million in 2003/4 compared to the prior year reflecting the
termination of the IBM contract and lower capital expenditure.
The fall in total operating costs in H2 2003/4 from H1 reflects the benefits of
the restructuring initiatives launched in the first half of the year, which
lead to a £41 million reduction in the underlying operating costs of the UK
business through lower staff numbers, property cost savings, lower costs of
purchased services and reduced bad debt expense. Headcount at 31 March 2004
was 4,398 compared to 5,682 at 31 March 2003, a 23% year on year reduction.
This reflects a gross reduction of 1,887 partially offset by recruitment of 603
sales and support staff.
Total operating profit before exceptional items was £32 million, compared to a
loss of £359 million in the prior year. This improvement in profitability
resulted from the cost reductions outlined above and the significantly reduced
depreciation and amortisation charge following the impairments of assets in the
prior year.
CWAO (US network)
FY
2003/4**
£m
Total revenue 11
Outpayments & network costs (23)
Staff costs (4)
Other costs -
Total operating costs* (27)
Depreciation & amortisation before exceptional items -
Total operating loss before exceptional items (16)
Headcount (number) 60
* Excluding depreciation, amortisation and exceptional items
** Commenced operations on 1 October 2003
In line with its strategy to withdraw from its former US domestic operations,
Cable & Wireless formalised the ongoing commercial dealings between its US
business ('CWA') and the rest of the Group in September 2003. Under thesearrangements, each party agreed to provide certain services to the other,
including network capacity, for an interim period.
To facilitate the separation of CWA from the Group, Cable & Wireless
incorporated a wholly owned subsidiary, Cable & Wireless Americas Operations,
Inc. ('CWAO') to provide ongoing US connectivity for data and IP services toCable & Wireless' multinational customers based in other regions, primarily
those served by the UK and Japan & Asia. In addition, CWAO built a core
network in the US comprising seven nodes in five cities and entered into access
arrangements with third party carriers in order provide end-to-end services.
CWAO revenue of £11 million was derived from the provision of services to CWA
from October 2003 together with the provision of services to other Cable &
Wireless Group customers. Outpayments and network costs of £23 million
represent the costs of operating CWAO's core network plus amounts paid to CWA
in accordance with the interim service arrangements described above.
Europe
H1 H2 FY FY reported reported cc cc
2003/ 2003/ 2003/ 2002/3 change** H2 change** FY growth growth
4 4 4 vH1 v FY
H2 v FY v
H1 FY
£m £m £m £m % % % %
Enterprise 20 20 40 19 - 100+ 1 93
Business 10 4 14 62 (60) (77) (59) (79)
Carrier
Services 121 87 208 223 (28) (7) (27) (14)
Total revenue 151 111 262 304 (26) (14) (26) (21)
Outpayments &
network costs (114) (84) (198) (242) 26 18
Staff costs (22) (18) (40) (55) 18 27
Other costs (22) (8) (30) (50) 64 40
Total
operating
costs* (158) (110) (268) (347) 30 23 30 29
Depreciation 2 (3) (1) (28) (100)+ 96
Total
operating loss
before
exceptional
items (5) (2) (7) (71) 60 90 59 91
Headcount
(number) 593 519 519 1,136 12 54
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
Revenue for the six months to 31 March 2004 was £111 million, a decline of 26%
from H1 at constant currency. Revenue for the full year was £262 million, a
decline of 21% at constant currency compared to the prior year. This reflects
the decline in Carrier Services and Business revenues that were only partially
offset by the material improvement in Enterprise revenue.
Enterprise revenue rose by 93% at constant currency from the prior year
following the roll out of major contracts. Carrier Services revenue fell by
14% at constant currency from the prior year as a result of increased
competition and the termination of unprofitable contracts. The decline in
Carrier Services revenue in H2 compared to H1 also reflects the seasonal
reduction in demand for mobile roaming traffic. Business revenue declined by
79% at constant currency as a result of the disposal of domestic operations in
Sweden, Belgium, the Netherlands, Italy, Switzerland, France, Germany and the
domestic data business in Russia.
Total operating costs before depreciation, amortisation and exceptional items
were £268 million, a decline of 29% at constant currency from the prior year.
Cost savings were achieved as a result of the exit of domestic operations
described above as well as a reduction in headcount, property disposals and
network rationalisation. Headcount at year-end was 519 compared to 1,136 at 31
March 2003, a 54% year on year reduction.
Total operating loss before exceptional items was £7 million, a £64 million
reduction from the prior year, reflecting the reduction in operating costs and
a reduction in the depreciation charge following the impairments of fixed
assets in the prior year.
Japan & Asia (excl. Macau)
reported reported cc cc
H1 H2 FY FY change** change** growth growth
2003/4 2003/ 2003/ 2002/3 H2 vH1 FY v FY H2 v FY v
4 4 H1 FY
£m £m £m £m % % % %
Enterprise 31 21 52 96 (32) (46) (32) (45)
Business 94 80 174 191 (15) (9) (15) (8)
Carrier Services 33 27 60 92 (18) (35) (18) (34)
Total revenue 158 128 286 379 (19) (25) (19) (23)
Outpayments &
network costs (96) (63) (159) (240) 34 34
Staff costs (26) (20) (46) (54) 23 15
Other costs (27) (32) (59) (64) (19) 8
Total operating
costs* (149) (115) (264) (358) 23 26 23 25
Depreciation (14) (12) (26) (62) 14 58
Operating (loss)/
profit before
exceptional
items and
amortisation (5) 1 (4) (41) 100+ 90 100 90
Amortisation - - - (4) - 100
Total operating
(loss)/profit
before
exceptional items (5) 1 (4) (45) 100+ 91 100 91
Headcount
(number) 1,039 862 862 1,157 17 25
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
Revenue for the six months to 31 March 2004 was £128 million, a decline of 19%
from H1 at constant currency. Revenue for the full year was £286 million, a
decline of 23% at constant currency compared to the prior year as a result of a
fall in revenue across all three customer segments.
Enterprise revenue fell by 45% at constant currency from the prior year
reflecting the termination of the provision of local services in Hong Kong,
pricing pressure on globally managed contracts and the termination of a major
contract. Carrier Services revenue fell by 34% at constant currency from the
prior year due to pricing pressures, increased competition, migration of
customers to their own networks and the decline in international information
services. Business revenues fell by 8% at constant currency from the prior
year and by 15% in H2 2003/4 compared to H1 as a result of increased
competition.
Total operating costs before depreciation, amortisation and exceptional items
were £264 million, a decline of 25% at constant currency compared to the prior
year. Cost savings were achieved as a result of a 25% reduction in headcount,
reduced outpayments associated with the decline in revenue, lower property
costs and reduced bad debt expense.
Total operating loss before exceptional items for the period was £4 million, a
£41 million decline from the prior year reflecting a reduction in operating
costs and a reduction in the depreciation charge following the impairments of
assets in the prior year.
Caribbean
reported reported cc cc
H1 H2 FY FY change** change** growth growth
2003/4 2003/4 2003/4 2002/3 H2 vH1 FY v FY H2 v FY v
H1 FY
£m £m £m £m % % % %
International
voice 86 74 160 250 (14) (36) (4) (26)
Domestic voice 104 100 204 236 (4) (14) 7 5
Mobile 76 67 143 143 (12) - - 19
Data & IP 33 37 70 69 12 1 23 17
Other 29 27 56 58 (7) (3) 3 10
Total revenue 328 305 633 756 (7) (16) 3 (1)
Outpayments &
network costs (104) (99) (203) (240) 5 15
Staff costs (54) (43) (97) (120) 20 19
Other costs (61) (81) (142) (107) (33) (33)
Total operating
costs* (219) (223) (442) (467) (2) 5 (13) (12)
Depreciation (39) (37) (76) (74) 5 (3)
Operating
profit before
exceptional
items and
amortisation 70 45 115 215 (36) (47) (27) (37)
Amortisation - - - (1) - 100
Joint ventures
& associates 15 15 30 33 - (9) 9 (1)
Total operating
profit before
exceptional
items 85 60 145 247 (29) (41) (21) (32)
Headcount
(number) 4,690 4,254 4,254 5,073 9 16
Results for Bermuda, previously included in the Caribbean, are now included in
RoW to reflect a change in management structure
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
Revenue for the six months to 31 March 2004 was £305 million, an increase of 3%
at constant currency compared to H1. Revenue for the full year was £633
million, a decline of 1% at constant currency compared to the prior year. This
result reflects the decline in International revenue, offset by significant
increases in Mobile and Data & IP revenue.
International revenue declined by 26% and domestic revenue increased at 5% at
constant currency compared to the prior year. This reflects the ongoing
pressure on international settlement rates across all Caribbean markets and in
particular the impact of rebalancing between international and domestic revenue
as a result of the liberalisation of the international fixed line market in
Jamaica in March 2003. Domestic revenue also benefited from increased volumes
of interconnect traffic driven by increasing numbers of competitors in the
market.
Mobile revenue increased by 19% at constant currency from the prior year due to
increased customer numbers, supported by the launch of GSM services in the
seven largest markets. The Mobile customer base at 31 March 2004 was 1,141,000
compared to 1,122,000 at 30 September 2003 and 943,000 at 31 March 2003.
Increased competitive pressure in the Jamaican mobile market in H2 offset
growth in other regions, leaving overall Mobile revenue in H2 flat at constant
currency compared to H1. Data & IP continued to deliver strong growth with
revenue rising by 17% at constant currency from the prior year.
Total operating costs before depreciation, amortisation and exceptional items
were £442 million, an increase of 12% at constant currency from the prior
year. Outpayments and network costs increased by 2% at constant currency
principally due to increased mobile handset subsidies as a result of
intensified competition and the launch of GSM services in major regions. In
light of increased competition in the mobile market, previously capitalised GSM
handset subsidies of £6 million were written off to outpayments and network
costs at the year end.
Other costs rose by 56% at constant currency from the prior year as a result of
a £10 million write off of receivables and a £13 million credit in the prior
year relating to the release of accruals that were no longer required. Staff
costs were reduced by 6% at constant currency from the prior year reflecting a
reduction in headcount of 819 from the prior year. Allowing for one off items,
underlying operating profit margins were stable in H2 compared to H1.
Total operating profit before exceptional items was £145 million, a decline of
32% at constant currency from the prior year, reflecting the factors noted
above.
Panama
H1 H2 FY FY reported reported cc cc
2003/4 2003/4 2003/4 2002/3 change** H2 change** FY growth growth
vH1 v FY H2 v FY v
H1 FY
£m £m £m £m % % % %
International
voice 13 10 23 42 (23) (45) (15) (40)
Domestic
voice 74 65 139 162 (12) (14) (4) (6)
Mobile 27 30 57 38 11 50 21 64
Data & IP 14 15 29 22 7 32 17 44
Other 7 10 17 15 43 13 54 24
Total revenue 135 130 265 279 (4) (5) 5 4
Outpayments &
network costs (34) (40) (74) (69) (18) (7)
Staff costs (15) (12) (27) (33) 20 18
Other costs (23) (32) (55) (41) (39) (34)
Total
operating
costs* (72) (84) (156) (143) (17) (9) (27) (19)
Depreciation (19) (20) (39) (45) (5) 13
Total
operating
profit before
exceptional
items 44 26 70 91 (41) (23) (34) (16)
Headcount
(number) 1,873 1,881 1,881 2,218 - 15
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
Revenue for the six months to 31 March 2004 was £130 million, an increase of 5%
from H1 at constant currency. Revenue for the full year was £265 million, an
increase of 4% at constant currency compared to the prior year as growth in
Mobile and Data & IP offset the decline in International and Domestic revenue.
International revenues fell by 40% and domestic revenues fell by 6% at constant
currency from the prior year due to increased competition following the
liberalisation of international and domestic voice services from 2 January
2003. The decline in international and domestic revenue was partially offset
by continued strong growth in Mobile revenue which increased by 64% at constant
currency from the prior year reflecting increased market share in prepaid and
strong growth in post paid, driven by the introduction of GSM.
Data & IP revenue rose by 44% at constant currency compared to the prior year
due to the completion of a number of major projects now generating revenue and
continued strong growth in internet revenues. At 31 March 2004 the number of
Mobile and ADSL subscribers stood at approximately 509,000 and 17,000
respectively. Mobile and Data & IP revenue now represents 32% of total revenue
compared to 22% in the prior year.
Total operating costs before depreciation, amortisation and exceptional items
were £156 million, a 19% increase at constant currency compared to the prior
year, £9 million of which is attributable to the settlement of legal
proceedings brought against C&W Panama in 1999. Outpayments and network costs
increased by 17% at constant currency from the prior year reflecting changes to
the sales mix, which have led to an increase in mobile subscriber acquisition
costs, and the introduction of competition, which has led to higher outpayments
as more traffic terminates on third party networks. Outpayments and network
costs also include a £2.5 million charge to write-off previously capitalised
handset subsidies. Other costs increased by 47% at constant currency compared
to the prior year reflecting a 53% increase in marketing spend following
liberalisation of the domestic and international markets. Headcount was stable
in the second half of the year following a 16% reduction in H1.
Total operating profit before exceptional items was £70 million, a decline of
16% at constant currency from the prior year due to the legal settlement noted
above.
Macau
H1 H2 FY FY reported reported cc cc
2003/ 2003/ 2003/ 2002/ change** H2 change** FY v growth growth1
4 4 4 3 vH1 FY H2 v FY v FY
H1
£m £m £m £m % % % %
International
voice 19 15 34 35 (21) (3) (13) 6
Domestic voice 9 9 18 20 - (10) 9 (2)
Mobile 24 23 47 58 (4) (19) 4 (11)
Data & IP 16 8 24 27 (50) (11) (44) (3)
Other 3 2 5 6 (33) (17) (26) (9)
Total revenue 71 57 128 146 (20) (12) (12) (4)
Outpayments &
network costs (31) (20) (51) (57) 35 11
Staff costs (6) (6) (12) (15) - 20
Other costs (4) (3) (7) (14) 25 50
Total operating
costs* (41) (29) (70) (86) 29 19 22 11
Depreciation (9) (9) (18) (18) - -
Total operating
profit before
exceptional
items 21 19 40 42 (10) (5) (1) 4
Headcount
(number) 919 881 881 947 4 7
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
Revenue for the six months to 31 March 2004 was £57 million, a decline of 12%
at constant currency compared to H1. Revenue for the full year was £128
million, a decline of 4% at constant currency compared to the prior year. This
reflects the decline in Mobile and Data & IP which was not fully offset by the
growth in International revenue.
International revenue for the full year rose by 6% at constant currency from
the prior year, but H2 2003/4 revenue fell by 13% at constant currency from H1
due to rate reductions in international transit traffic and lower outbound
traffic as a result of increased competition. Mobile revenue declined by 11%
at constant currency from the prior year due to lower handset sales and price
reductions resulting from competitive pressures. Data & IP revenue for the
full year declined by 3% at constant currency from the prior year with the
decline of 44% at constant currency in H2 2003/4 from H1 reflecting the
transfer of the Asia Cities business to Japan & Asia from 1 October 2003.
Total operating costs before depreciation, amortisation and exceptional items
were £70 million, an 11% reduction at constant currency from the prior year.
Outpayments and network costs fell by 2% at constant currency due to reduced
mobile handset sales and lower government royalty payments. Staff costs were
reduced by 12% at constant currency due to lower headcount and the transfer of
staff associated with the Asia Cities business. Other costs were reduced by
45% at constant currency from the prior year due to lower marketing costs,
repairs and maintenance and tight control of other operating expenses.
Total operating profit before exceptional items was £40 million, an increase of
4% at constant currency from the prior year.
Rest of the World***
reported reported cc cc
H1 H2 FY FY change** change** growth growth
2003/4 2003/4 2003/4 2002/3 H2 vH1 FY v FY H2 v FY v
H1 FY
£m £m £m £m % % % %
International
voice 24 20 44 48 (17) (8) (16) (6)
Domestic voice 16 15 31 32 (6) (3) 3 6
Mobile 23 29 52 45 26 16 36 26
Data & IP 13 14 27 25 8 8 17 18
Other 5 2 7 9 (60) (22) (54) (15)
Total revenue 81 80 161 159 (1) 1 5 9
Outpayments &
network costs (19) (21) (40) (35) (11) (14)
Staff costs (12) (15) (27) (28) (25) 4
Other costs (12) (10) (22) (16) 17 (38)
Total operating
costs* (43) (46) (89) (79) (7) (13) (13) (21)
Depreciation (10) (10) (20) (22) - 9
Operating
profit before
exceptional
items and
amortisation 28 24 52 58 (14) (10) (7) (4)
Amortisation 1 2 3 2 100 50
Joint ventures
& associates 8 4 12 29 (50) (59) (43) (55)
Total operating
profit before
exceptional
items 37 30 67 89 (19) (25) (12) (19)
Headcount
(number) 1,435 1,414 1,414 1,449 1 2
Results for Bermuda, previously included in the Caribbean, are now included in
RoW to reflect a change in management structure
* Excluding depreciation, amortisation and exceptional items
** Positive percentage represents improvement
*** Current and prior year results from TeleYemen are included in discontinued
operations
Revenue for the six months to 31 March 2004 was £80 million, an increase of 5%
at constant currency from H1. Revenue for the full year was £161 million, an
increase of 9% at constant currency from the prior year.
International revenue fell by 6% at constant currency from the prior year due
to continuing price pressure in all markets as a result of increased
competition. Mobile revenue rose by 26% at constant currency compared to the
prior year due to continued growth in subscribers in Sakhalin, the Maldives and
Guernsey.
Total operating costs before depreciation, amortisation and exceptional items
were £89 million, a 21% increase at constant currency compared to the prior
year due to increased licence fee payments, bad debt expense and property costs
and an increase in staff costs in the second half of the year.
Income from Joint ventures & associates declined by 43% at constant currency in
H2 from H1 due to an impairment in the carrying value of an associate.
Total operating profit before exceptional items was £67 million, a decline of
19% at constant currency compared to the prior year, due to the impairment in
the carrying value of an associate.
ADDITIONAL INFORMATION
Exchange rate movements
Year on year average exchange rates show a 9% devaluation of the US dollar
against sterling and a 31% devaluation of the Jamaica dollar against sterling.
This has had a significant impact on the Group as a large proportion of the
businesses report in Jamaican dollars or currencies which are linked or pegged
to the US dollar. The 17% relative decline of the Jamaican dollar against the
US dollar had an adverse impact on outpayments denominated in US dollars.
Average and period end US and Jamaican dollar exchange rates used in the
current and prior year are shown below.
2003/4 2002/3
H1 Full year Full year
US$
-Average 1.6071 1.6809 1.5367
-Period end 1.6596 1.8109 1.5679
Jamaican$
-Average 92.4226 98.7064 75.3319
-Period end 97.9135 109.4480 85.8425
Insurance
Prior to 1 April 2003 Pender Insurance Limited ('Pender'), the Group's Isle ofMan insurance subsidiary, wrote policies in favour of the Group and third
parties. In June 2003 the Group disclosed that potentially significant claims
had been made against Pender under certain of these third party policies. One
such insurance claim was paid during the year at a cost to Pender of
approximately £19 million following recoveries from reinsurers. This figure is
expected to be reduced further by reinsurance contributions that are still
under negotiation. Cable & Wireless continues to review and monitor the status
of Pender and the claims it receives.
As previously disclosed, Cable & Wireless and Pender commenced legal action
against five companies and six individuals (five of whom are ex-employees of
Cable & Wireless) on 30 March 2004. This litigation is ongoing and
developments will be disclosed as appropriate.
Pensions
At 31 March 2004, the pension deficit calculated using FRS17 principles for the
funded defined benefit pension schemes was £336 million in respect of the
principal UK scheme (31 March 2003: £476 million) and £21 million in respect of
the rest of the Group (31 March 2003: £54 million). The deficit in unfunded
defined benefit schemes at 31 March 2004 was £46 million in respect of the
Group (31 March 2003: £48 million) including £20 million in respect of the UK
(31 March 2003: £18 million).
The Group continues to account for pensions in accordance with UK GAAP on the
basis of SSAP24.
IFRS
The Group prepares its consolidated accounts in accordance with generally
accepted accounting principles (GAAP) in the United Kingdom. A reconciliation
of net income and shareholders equity between UK GAAP and US GAAP is provided
on pages 31 and 32.
Cable & Wireless will report under International Financial Reporting Standards
(IFRS) from 30 June 2005 (First Quarter Trading statement 2005/6). Detailed
analysis of the impact of IFRS is ongoing.
Quarterly Trading Statement
The First Quarter Trading Statement for the financial year ending 31 March 2005
will be issued on 21 July 2004 and will include details of first quarter
revenue and the net cash position of the Group.
Annual General Meeting
The Annual General Meeting will be held at 11.00am on 22 July 2004 at the
London Hilton on Park Lane, 22 Park Lane, London.
If you have any enquiries as a UK shareholder, please call the Company
Secretary's Office on +44 20 7315 4000. With effect from 4 June, ADR holders
should call JP Morgan Chase Bank on +1 800 440 1135.
Contacts
Investor
Relations:
Virginia Porter Acting Director, Investor Relations +44 20 7315 4460
Craig Thornton Manager, Investor Relations +44 20 7315 6225
Glenn Wight Manager, Investor Relations +44 20 7315 4468
Media:
Lesley Smith Group Director of Corporate & Public +44 20 7315 4410
Affairs
Peter Eustace Head of Media Relations +44 20 7315 4495
Interviews with Francesco Caio, CEO and Charles Herlinger, CFO in video/audio
and text will be available from 07.00am.on Wednesday 2 June 2004 on:
and on
Consolidated profit and loss account
for the year ended 31 March
Continuing Discontinued Continuing Discontinued
operations operations 2004 operations operations 2003
£m £m £m £m £m £m
Turnover of
the Group
including its
share of joint
ventures and
associates 3,581 287 3,868 3,937 714 4,651
Share of
turnover of -
joint ventures (136) - (136) (195) - (195)
-
associates (61) - (61) (65) - (65)
Group turnover 3,384 287 3,671 3,677 714 4,391
Operating
costs before
depreciation,
amortisation
and
exceptional
items (2,908) (315) (3,223) (3,054) (1,003) (4,057)
Exceptional
operating
costs (222) (22) (244) (160) (282) (442)
Depreciation
before
exceptional
items (250) (2) (252) (665) (70) (735)
Exceptional
depreciation (526) - (526) (1,709) (672) (2,381)
Amortisation
of goodwill
before
exceptional
items 3 - 3 (65) (61) (126)
Exceptional
amortisation (10) - (10) (2,257) (468) (2,725)
Total
operating
costs (3,913) (339) (4,252) (7,910) (2,556) (10,466)
Group
operating loss (529) (52) (581) (4,233) (1,842) (6,075)
Share of
operating
profits in
joint ventures 23 - 23 53 - 53
Share of
operating
profits in
associates 18 - 18 22 - 22
Total
operating loss (488) (52) (540) (4,158) (1,842) (6,000)
Exceptional
profits less
(losses) on
sale and
termination of
operations 2 248 250 - (147) (147)
Profits less
(losses) on
disposal of
fixed assets
before
exceptional
items 26 (1) 25 - - -
Exceptional
items 12 16 28 62 - 62
Profits on
disposal of
fixed assets 38 15 53 62 - 62
Exceptional
write down of
investments - - - (390) - (390)
Profit/(Loss)
on ordinary
activities
before
interest (448) 211 (237) (4,486) (1,989) (6,475)
Net interest
and other
similar income
/(charges)
- Group 13 103
- Joint
ventures and
associates - (1)
Total net
interest and
other similar
income 13 102
Loss on
ordinary
activities
before
taxation (224) (6,373)
Tax credit/
(charge) on
loss on
ordinary
activities 12 (36)
Loss on
ordinary
activities
after taxation (212) (6,409)
Equity
minority
interests (25) (124)
Loss for the
financial year (237) (6,533)
Dividends (73) (37)
Loss for the
year retained (310) (6,570)
Basic and
diluted loss
per Ordinary
Share (10.2)p (280.4)p
Dividends per
Ordinary Share 3.15p 1.6p
Group balance sheet
at 31 March
2004 2003
£m £m
Fixed assets
Intangible assets (9) (2)
Tangible assets 1,214 1,937
Loans to joint ventures and associates 1 1
Interest in net assets of joint ventures 132 148
Investments in associates 75 83
Other investments 99 123
Total fixed asset investments 307 355
1,512 2,290
Current assets
Stocks 38 51
Current asset investments 12 246
Debtors - due within one year 875 1,455
- due after more than one year 175 166
Short term deposits 2,217 2,958
Cash at bank and in hand 138 196
3,455 5,072
Creditors: amounts falling due within one year (1,668) (3,275)
Net current assets 1,787 1,797
Total assets less current liabilities 3,299 4,087
Convertible debt (252) -
Other creditors (623) (807)
Creditors: amounts falling due after more than one year (875) (807)
Provisions for liabilities and charges (431) (760)
(1,306) (1,567)
Net assets 1,993 2,520
Capital and reserves
Called up share capital 596 596
Share premium account 2 1,745
Special reserve 1,745 -
Capital redemption reserve 105 105
Profit and loss account (704) (297)
Equity shareholders' funds 1,744 2,149
Equity minority interests 249 371
Capital employed 1,993 2,520
Group cash flow statement
for the year ended 31 March
2004 2003
£m £m
Net cash inflow from operating activities 73 95
Dividends from joint ventures 12 13
Dividends from associates 13 15
25 28
Returns on investments and servicing of finance
Interest and similar income received 103 197
Interest paid (89) (88)
Net interest element of finance lease rentals paid (1) (2)
Dividends paid to minorities (75) (70)
Income received from other investments 5 -
(57) 37
Taxation (43) (438)
Capital expenditure and financial investment
Purchase of tangible fixed assets (342) (810)
Sale of tangible fixed assets 38 15
Purchase of current asset investments (1) (3)
Purchase of investments (4) (38)
Sale of current asset investments 229 600
Sale of investments 39 11
Loans to joint ventures and associates - 10
(41) (215)
Acquisitions and disposals
Disposal of subsidiary undertakings (net of cash disposed and (120) 14
disposal costs)
Purchase of shareholdings in subsidiary undertakings (net of (5) 2
cash received)
Receipts from sale of associates 7 94
(118) 110
Equity dividends paid to shareholders - (119)
Management of liquid resources
Movement in short term investments and fixed deposits (net) 932 (1,040)
Financing
Issue of ordinary share capital 2 1
Capital element of finance lease rental repayments (1) (18)
Other long term debt issued 280 88
Long term debt repaid (863) (649)
(582) (578)
Increase/(Decrease) in cash in the year 189 (2,120)
Consolidated statement of total recognised gains and losses
for the year ended 31 March
2004 2003
£m £m
Loss for the financial year (237) (6,533)
Currency translation differences on foreign currency net (97) (240)
investments and related borrowings
Total losses relating to the financial year (334) (6,773)
Reconciliation of movements in consolidated equity shareholders' funds
for the year ended 31 March
2004 2003
£m £m
Loss for the financial year (237) (6,533)
Dividends - interim - (37)
- full (73) -
Loss for the year carried forward (310) (6,570)
Other recognised gains and losses relating to the year (97) (240)
New share capital issued 2 1
Net decrease in equity shareholders' funds (405) (6,809)
Opening equity shareholders' funds 2,149 8,958
Closing equity shareholders' funds 1,744 2,149
Segmental analysis of Group turnover
for the year ended 31 March
2004 2003
£m £m
UK 1,661 1,684
CWAO (US network) 11 -
Europe 262 304
Japan & Asia 286 379
Caribbean 633 756
Panama 265 279
Macau 128 146
Rest of the World 161 159
Inter-regional turnover (23) (30)
Continuing operations 3,384 3,677
Discontinued operations 287 714
Group turnover 3,671 4,391
Segmental analysis of Group operating (loss)/profit before interest and
taxation
for the year ended 31 March
(Loss)/proft
Profit/(loss) on ordinary
before activities
exceptional Exceptional before
items, interest items interest
and and
taxation taxation
2004 2003
£m £m £m £m
United Kingdom 33 (256) (223) (3,929)
CWAO (US network) (16) - (16) -
Europe (4) (2) (6) (369)
Japan & Asia 2 (133) (131) (266)
Caribbean 115 (243) (128) 195
Panama 70 (73) (3) 77
Macau 40 (2) 38 42
Rest of World 55 (1) 54 59
Other (40) (34) (74) (424)
Joint ventures and 41 129
associates 41 -
Continuing operations 296 (744) (448) (4,486)
Discontinued operations (31) 242 211 (1,989)
265 (502) (237) (6,475)
Segmental analysis of Group share of turnover and operating profits/(losses) of
joint ventures
and associates for the year ended 31 March
Turnover Operating profit/(loss)
2004 2003 2004 2003
£m £m £m £m
UK 6 6 (1) -
Caribbean 108 111 30 33
Other - 52 - 13
Rest of World 83 91 12 29
Total 197 260 41 75
Reconciliation of Group operating loss to net cash inflow from operating
activities
for the year ended 31 March
2004 2003
£m £m
Operating loss (581) (6,075)
Add back non-cash items:
Depreciation and amortisation (before exceptional items) 249 861
Exceptional non-cash items 574 5,446
Other non-cash items - 27
Decrease in stocks 11 33
Decrease in debtors 508 882
(Decrease) in creditors (565) (893)
Fundamental reorganisation costs - (89)
Net cash outflow in respect of provisions (123) (97)
Net cash inflow from operating activities 73 95
Reconciliation of net cash flow to movement in net funds
for the year ended 31 March
2004 2003
£m £m
Increase/(decrease) in cash in the year 189 (2,120)
Cash outflow resulting from decrease in debt and lease 582 581
financing
Cash (inflow)/outflow resulting from (decrease)/increase in (932) 1,040
liquid resources
Decrease in net funds resulting from cash flows (161) (499)
Liquid resources of businesses acquired and disposed (19) -
Translation and other differences 8 87
Movement in net funds in the year (172) (412)
Net funds at 1 April 1,608 2,020
Net funds at 31 March 1,436 1,608
Analysis of changes in net funds
At 1 Cash Acquisitions and
April disposals Exchange At 31
2003 flow movements March 2004
£m £m £m £m £m
Cash at bank and in -
hand 196 (42) (16) 138
Short term deposits -
repayable on demand 140 230 (9) 361
Bank overdrafts (2) 1 - - (1)
334 189 - (25) 498
Liquid resources 2,818 (932) (19) (11) 1,856
Debt due within 1 year (823) 764 - 16 (43)
Debt due after 1 year (721) (182) - 28 (875)
Total debt (1,544) 582 - 44 (918)
Total net funds 1,608 (161) (19) 8 1,436
US GAAP
The Group prepares its consolidated accounts in accordance with generally
accepted accounting principles (GAAP) in the United Kingdom which differ in
certain material respects from US GAAP. The significant differences relate
principally to the following items and the adjustments necessary to present net
income and shareholders' equity in accordance with US GAAP are shown below.
Reconciliation of UK/US GAAP - net income
for the year ended 31 March
2004 2003
£m £m
Net loss as reported under UK GAAP (237) (6,533)
US GAAP adjustments:
US discontinued operations (156) -
Amortisation and impairment of goodwill and other intangible (1) 53
assets
Customer acquisition costs 11 (5)
Restructuring costs and onerous contracts (2) 149
Derivative and hedge accounting (2) (59)
Capitalisation of interest 10 (6)
Marketable securities (31) 4
Pension costs (39) 18
Capacity sales 2 2
Stock based compensation 7 (4)
ESOP Shares - 120
Impairment 131 -
Other (10) 10
Deferred tax - tax effect of US GAAP reconciling items (25) 58
Minority interest on reconciling items 6 (21)
Net loss under US GAAP (336) (6,214)
Comprising:
- Continuing operations (307) (4,732)
- Discontinued operations (29) (1,482)
Loss per share under US GAAP
(266.7)
- Basic and diluted (14.4)p p
Loss per ADR under US GAAP*
(800.1)
- Basic and diluted (43.2)p p
* Computed on the basis that one ADR represents three Ordinary Shares.
Reconciliation of UK/US GAAP - shareholders' equity
for the year ended 31 March
2004 2003
£m £m
Shareholders' equity as reported under UK GAAP 1,744 2,149
US GAAP adjustments:
Reconsolidation of US operations (29) -
Goodwill and other intangible assets 264 307
Customer acquisition costs - (11)
Restructuring costs and onerous contracts 70 146
Derivative and hedge accounting - (1)
Capitalisation of interest 26 16
Gain on marketable securities 54 42
Pension costs (392) (454)
ESOP shares (41) (38)
Proposed final dividend 73 -
Capacity sales (25) (27)
Impairment 131 -
Deferred tax - tax effect of US GAAP reconciling items (25) -
Other (10) (5)
Minority interest on reconciling items 7 1
Shareholders' equity under US GAAP 1,847 2,125
Additional information for US investors
Additional information and specific enquiries concerning Cable & Wireless ADRs
should be addressed to JP Morgan Chase Bank, 270 Park Avenue, New York, NY10017
USA, (Telephone: Shareholder Services: +1 800 440 1135).
Nature of Financial Statements
These financial statements are not the full financial statements for the
Group. The abridged profit and loss account and balance sheet for the year to
31 March 2003 is an extract from the full accounts for that year which have
been delivered to the Registrar of Companies; the report of the auditors on
those accounts was unqualified. The full financial statements for this year,
on which the Auditors have reported without qualification, have not yet been
delivered to the Registrar of Companies. A full copy of the financial
statements or the Annual Review will be mailed to shareholders on 22 June 2004
and can be obtained thereafter from A. Garard, Company Secretary, at 124
Theobalds Road, London WC1X 8RX.
APPENDIX A
Cable & Wireless Group Performance Analysis
Comparative Data FY 2002/3
Continuing UK CWAO Europe Japan Caribbean Panama Macau Rest of Other FY 2002
Operations & ² the World /3
Asia ³
£m £m £m £m £m £m £m £m £m £m
Revenue 1,684 - 304 379 756 279 146 159 (30) 3,677
Outpayments (1,110) - (242) (240) (240) (69) (57) (35) 27 (1,966)
& network
costs
Staff costs (292) - (55) (54) (120) (33) (15) (28) (38) (635)
Other costs (166) - (50) (64) (107) (41) (14) (16) 5 (453)
Total (1,568) - (347) (358) (467) (143) (86) (79) (6) (3,054)
operating
costs¹
Depreciation (413) - (28) (62) (74) (45) (18) (22) (3) (665)
before
exceptional
items
Operating
profit/ (297) - (71) (41) 215 91 42 58 (39) (42)
(loss)
before
exceptional
items and
amortisation
Amortisation (62) - - (4) (1) - - 2 - (65)
Joint - - - - 33 - - 29 13 75
ventures and
associates
Total
operating (359) - (71) (45) 247 91 42 89 (26) (32)
profit/
(loss)
before
exceptional
items
¹ Excluding depreciation, amortisation and exceptional items
² Results for Bermuda, previously included in the Caribbean, are for now
included in RoW to reflect a change in management structure
³ 'Rest of the World' comprises the results of the Group's operations in the
Atlantic, Pacific and Indian Oceans, the Middle East and Guernsey
The geographical financial information in the above table reflects the
management structure of the organisation.
APPENDIX A (CONT'D)
Cable & Wireless Group Performance Analysis
Comparative Data H2 2003/4
Continuing UK CWAO Europe Japan Caribbean Panama Macau Rest of Other H2 2003
Operations & ² the World /4
Asia ³
£m £m £m £m £m £m £m £m £m £m
Revenue 836 11 111 128 305 130 57 80 (7) 1,651
Outpayments (575) (23) (84) (63) (99) (40) (20) (21) 7 (918)
& network
costs
Staff costs (120) (4) (18) (20) (43) (12) (6) (15) (31) (269)
Other costs (67) - (8) (32) (81) (32) (3) (10) (2) (235)
Total (762) (27) (110) (115) (223) (84) (29) (46) (26) (1,422)
operating
costs¹
Depreciation (34) - (3) (12) (37) (20) (9) (10) (1) (126)
before
exceptional
items
Operating
profit/ 40 (16) (2) 1 45 26 19 24 (34) 103
(loss)
before
exceptional
items and
amortisation
Amortisation - - - - - - - 2 - 2
Joint 1 - - - 15 - - 4 - 20
ventures and
associates
Total
operating 41 (16) (2) 1 60 26 19 30 (34) 125
profit/
(loss)
before
exceptional
items
¹ Excluding depreciation, amortisation and exceptional items
² Results for Bermuda, previously included in the Caribbean, are for now
included in RoW to reflect a change in management structure
³'Rest of the World' comprises the results of the Group's operations in the
Atlantic, Pacific and Indian Oceans, the Middle East and Guernsey
The geographical financial information in the above table reflects the
management structure of the organisation.
APPENDIX A (CONT'D)
Cable & Wireless Group Performance Analysis
Comparative Data H1 2003/4
Continuing UK CWAO Europe Japan Caribbean Panama Macau Rest of Other H1 2003
Operations & ² the World /4
Asia ³
£m £m £m £m £m £m £m £m £m £m
Revenue 825 - 151 158 328 135 71 81 (16) 1,733
Outpayments (583) - (114) (96) (104) (34) (31) (19) 16 (965)
& network
costs
Staff costs (134) - (22) (26) (54) (15) (6) (12) (24) (293)
Other costs (81) - (22) (27) (61) (23) (4) (12) 2 (228)
Total (798) - (158) (149) (219) (72) (41) (43) (6) (1,486)
operating
costs¹
Depreciation (34) - 2 (14) (39) (19) (9) (10) (1) (124)
before
exceptional
items
Operating
profit/ (7) - (5) (5) 70 44 21 28 (23) 123
(loss)
before
exceptional
items and
amortisation
Amortisation - - - - - - - 1 - 1
Joint (2) - - - 15 - - 8 - 21
ventures and
associates
Total
operating (9) - (5) (5) 85 44 21 37 (23) 145
profit/
(loss)
before
exceptional
items
¹ Excluding depreciation, amortisation and exceptional items
²Results for Bermuda, previously included in the Caribbean, are for now
included in RoW to reflect a change in management structure
³'Rest of the World' comprises the results of the Group's operations in the
Atlantic, Pacific and Indian Oceans, the Middle East and Guernsey
The geographical financial information in the above table reflects the
management structure of the organisation.