For the six months ended September 30, C&W reported net income of 204 million pounds ($377 million), compared with a net loss of 80 million pounds ($148 million) in the year-ago period. Sales declined to 1.62 billion pounds ($2.99 billion), from 1.73 billion pounds ($3.20 billion) in the first half of 2003.
The company continues to burn cash, with its net cash balance standing at 1.38 billion pounds ($2.56 billion), down from 1.62 billion pounds ($2.99 billion) this time last year. It hopes to save 50 million pounds ($92 million) in annual costs by March 2006 as it in a restructuring program that will involve further job cuts in the UK and continental Europe.
C&W also announced the closure of its London head office where it employs 300 people. It said it plans to relocate staff to its operational base in Bracknell, Berkshire.
As well as London and Bracknell, the group has UK operations in Manchester, Milton Keynes, and Birmingham. C&W has not disclosed the exact locations of the planned job losses, but it has already axed 1,500 jobs since June 2003 when it embarked on a cost-cutting drive in the UK as a result of overcapacity and falling prices in the corporate telecoms market.
Chief executive Francesco Caio joined Cable & Wireless 18 months ago, and is now half way through a three-year restructuring program. Under his leadership, C&W has pulled out of the US and Japan markets to focus on the UK and Caribbean-based national telecoms operations.
Caio is reorganizing the UK business into four different segments: Enterprise, Business, Bulldog, and Carrier Services. The group hopes to capitalize on growth areas such as broadband where Caio is looking to invest up to 85 million pounds ($156 million) in Bulldog, the broadband Internet service C&W bought in May for 18.6 million pounds ($34 million). C&W predicts that voice and data services opportunities will help Bulldog achieve sales of 250 million pounds ($461 million) within four years.
Caio also announced that he will now take direct operational control of the UK business after COO Kevin Loosemore and UK business chief Royston Hoggarth announced their decisions to leave the company by March 2005.
These execution priorities are centered on three key elements: reducing the cost base of our operations; taking full advantage of local loop unbundling; and pursuing profitable margins by targeting the rapid growth in the broadband market, said Caio.
The group has long been viewed as poorly run, overly bureaucratic, and cost-heavy, but the news that its new CEO has undertaken some much-needed cost-cutting at its UK operations has been viewed as a positive move by the market.
Looking forward however, the UK’s number-two corporate telecoms company warned that there would be no respite from tough market conditions, particularly in Great Britain, where several smaller rivals have issued profit warnings in recent weeks. C&W said it expects market conditions to remain difficult in the second half of 2004, and said that in mature markets, future profit growth will come from cost cuts and improving the sales mix.
