C&W to return £1.75bn with buy-back and dividend
By Ben Hunt in London
Published: November 14 2001 07:58 | Last Updated: November 14 2001 11:26
Cable and Wireless, the UK telecoms group, on Wednesday bowed to pressure from shareholders and agreed to return about £1.75bn of its £4.7bn cash pile in the form of a special dividend and a buy-back of as much as 15 per cent of its outstanding shares.
Graham Wallace, C&W's chief executive, said the return of funds to shareholders would not affect the group's ability to fund continuing investment in the group's businesses.
"The strength of our balance sheet is a real competitive advantage in these turbulent times. It is important to our customers and allows us to invest selectively for future growth," he said.
C&W is to pay a special dividend of 11.5p per share, on top of its interim dividend of 1.5p.
Based on C&W's closing share price of 346p on Tuesday, a buy back of the full 15 per cent of its equity would cost the group about £1.45bn, while the special dividend of 11.5p is set to cost it a further £300m.
Shares in C&W rose almost 7 per cent to 370p in early London trading on Wednesday.
The group reiterated the guidance it gave in a trading update in September, warning that market conditions remained volatile, and that there was "an unusual degree of uncertainty in sector demand forecasts in the short term".
It said that would result in a fall of about 5 per cent in second-half sales in its global data networking business about from the same period in 2001, with gross margins of about 40 per cent.
However, C&W said the benefits of its restructuring, which had resulted in a 34 per cent reduction in headcount to 12,000 by the end of September, would be felt in the second half.
In the six months to September 30, C&W recorded a pre-tax loss of £291,000, against a profit of £4.8bn a year ago, which was boosted by sales of operating units worth £4.75bn, and a loss per share of 20.3p, against earnings of 153.9p last time.
Stripping out exceptional items and goodwill amortisation C&W recorded a loss per share of 1.1p, against earnings of 9.5p a year ago.
Sales from continuing operations rose fractionally to £2.67bn, against £2.65bn a year ago, while total sales fell from £4.5bn to £3.5bn.
Sales at C&W's core global business fell 5 per cent on the same period last year, while sales at its regional consumer business grew 11 per cent.
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