C&W Raises Outlook, Dumps Exec
Cable and Wireless plc (NYSE: CWP) is reaping the benefits of its decision to revamp its corporate structure and focus on high end enterprise customers as it announced vastly improved net income for the first half of the year. (See C&W Reports First Half.)
Early in 2006 C&W decided to split the company in two separate operating units, ditch its CEO, cut costs and jobs, and refocus its U.K. business (now known as the Europe, Asia & US business) to target only large corporate customers. (See C&W Stuns With Job & Customer Cuts and C&W Says Ciao to Caio.)
Those moves hit the carrier's stock hard, and in February 2006 its share price stood at 106.75 pence.
Today, C&W's share price is up 4 pence, more than 2 percent, to 184 pence after it announced first half net income of £104 million ($215 million), compared with £31 million ($64 million) in the same period a year ago -- even though revenue fell to £1.56 billion ($3.2 billion) from £1.72 billion ($3.6 billion).
The carrier said the lower revenues are the direct result of "the strategy of Europe, Asia & US to focus on serving larger customers with higher margin IP services, while actively shedding lower margin customers."
That strategy, though, has led to much lower costs, and a resulting higher profit.
It has also allowed C&W to raise its full year EBITDA (earnings before interest, tax, depreciation and amortization) target to between £585 million ($1.21 billion) and £610 million ($1.26 billion), from the previous range of £573 million ($1.19 billion) to £608 million ($1.26 billion).
But many of C&W's main restructuring gains have come from the Europe, Asia & US business that's headed by John Pluthero, and now the C&W board wants him to wield his axe in the operator's International operating unit, that comprises a number of local operators in markets such as Jamaica, Macau, and the Channel Islands.
That means International's CEO, Harris Jones -- known in Light Reading circles as 'The Man With Two Surnames' -- has been dumped, with Pluthero taking control of both business units as chairman, while a new International CEO is sought. (See C&W Dumps International Chief.)
Jones doesn't leave empty-handed, though. While he doesn't get the chance to reap the full benefits of C&W's long-term incentive plan, Jones gets a farewell package that includes a £4.3 million ($8.9 million) payment he has already earned as part of that plan. (See Greed Culture.)
Analysts at Dresdner Kleinwort believe Jones's departure is "a step towards the demerger" of the International unit. (See C&W Soars on Sell-Off Speculation.)
— Ray Le Maistre, International News Editor, Light Reading