Slide1 : "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 statement included at the beginning of the company's most recent Annual Report filed on Form 20-F."
Cable and Wireless plc Interim Results 8 November 2005 : Richard Lapthorne
Chairman Cable and Wireless plc Interim Results 8 November 2005
Cable and Wireless plc Interim Results 8 November 2005 : Cable and Wireless plc Interim Results 8 November 2005 Charles Herlinger
Chief Financial Officer
Financial overview Group H1 2005/6 : Financial overview Group H1 2005/6 Group operating profit, PBT and EPS increased year on year, before investment in Bulldog
Increased National Telco profitability driven by mobile and broadband
UK profitability adversely impacted by revenue mix and delay in cost reduction plans as previously reported
Increased half year dividend to 1.4 pence per share
Share repurchase programme resumed
Financial highlights Continuing businesses1 : Financial highlights Continuing businesses1 (£ million) 1 2005/6 excludes Sakhalin and C&W Spain; 2004/5 additionally excludes C&W Japan
2 Excludes JVs & associates and amortisation of acquired intangibles
All figures shown are before exceptional items 4% Operating profit Revenue 5% (31)% 1% 1% 2 Reported change Constant currency change (30)% Reported change Constant currency change 139 1,469 130 90 1,481 H1 2005/6 H1 2004/5 H1 2005/6 H1 2005/6 excluding Bulldog 134 H1 2004/5 H1 2004/5 excluding Bulldog
Financial highlights Continuing businesses1 : Cash capex Free cash flow Financial highlights Continuing businesses1 (42)% (42)% (100)+% 81% 83% (100)+% 1 2005/6 excludes Sakhalin and C&W Spain; 2004/5 additionally excludes C&W Japan
2 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
All figures shown are before exceptional items (£ million) Reported change Constant currency change Reported change Constant currency change 2 116 108 67 210 (9) 116 H1 2005/6 H1 2004/5 H1 2005/6 H1 2005/6 excluding Bulldog H1 2004/5 H1 2004/5 excluding Bulldog
Summary profit & loss Continuing businesses1 : Summary profit & loss Continuing businesses1 Revenue
Operating costs
Depreciation and amortisation
Operating profit 2
Excluding Bulldog
Amortisation of acquired intangibles
JVs and Associates
Net finance income
Non trading income
Profit before tax 3
Excluding Bulldog H2
£m 1,469 (1,245) 1 2005/6 excludes Sakhalin and C&W Spain; 2004/5 additionally excludes C&W Japan
2 Excludes exceptional items, JVs & associates and amortisation of acquired intangibles
3 Excludes exceptional items 2005/6
H1
£m H1
£m 2004/5 (94) 17 175 5 130 25 (2) 1,479 (1,279) (91) 17 151 5 109 23 (3) 1,481 (1,280) (111) 14 134 6 90 27 (3) 134 135 139 179 178 185
Summary profit & loss Continuing businesses1 : Summary profit & loss Continuing businesses1 Profit before tax 2
Exceptional items (net of tax)
Tax 2
Profit after tax
Attributable to minorities
Attributable to equity holders
Underlying EPS 3
Underlying EPS 3 (excluding Bulldog)
Dividend per share 175 (32) 3 146 1.16p 4.9p 151 (32) 46 2.64p 3.9p 134 (20) (8) 106 1.40p 3.7p 33 31 32 73 15 114 (73) 5.9p 5.1p 5.0p H2
£m 2005/6
H1
£m H1
£m 2004/5 1 2005/6 excludes Sakhalin and C&W Spain; 2004/5 additionally excludes C&W Japan
2 Excludes exceptional items
3 Excludes exceptional items and amortisation of acquired intangibles
Cash capex Continuing businesses1 : Cash capex Continuing businesses1 By type By division £m £210m £205m £116m £210m £205m £116m 29 76 67 32 46 51 29 41 29 26 42 63 0 40 80 120 160 180 240 H1 2004/5 H2 2004/5 H1 2005/6 IT/Other Mobile Service delivery/product portfolio Network build 49 95 100 42 44 44 21 43 34 Other National Telcos 2 Caribbean UK, Europe, CWAO, Asia, Other H1 2004/5 H2 2004/5 H1 2005/6 Bulldog 4 23 32 1 2005/6 excludes Sakhalin and C&W Spain; 2004/5 additionally excludes C&W Japan
2 Macau, Panama, Monaco and Rest of World £m 0 40 80 120 160 180 240
Net cash flow before financing Group : Net cash flow before financing Group Group operating profit 1
Free cash flow 2
Excluding Bulldog
Working capital
Exceptionals
Other
Sub total
Dividends
(Acquisitions)/disposals
Group net cash flow before financing
Excluding Bulldog
Gross cash 3
Net cash 3
Net cash excluding minority share 3 (64) (24) (88) (70) 128 30 78 49 11 (125) 1 Excludes exceptional items, JVs & associates and amortisation of acquired intangibles
2 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
3 Includes short-term investments 1,277 1,208 2,101 1,980 (54) (48) (45) 59 (66) 1,332 2,183 109 90 130 (5) (9) 108 (38) (101) (86) (79) (54) 65 1,235 1,185 1,313 58 (49) (58) H2
£m 2005/6
H1
£m H1
£m 2004/5 42 67 116
Total National Telcos Continuing businesses1 : 1 2005/6 excludes Sakhalin
2 Excludes exceptional items, JVs & associates and amortisation of acquired intangibles
3 H2 2004/5 includes impact of hurricane Ivan
4 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
All figures shown are before exceptional items
Total National Telcos Continuing businesses1 3 (2) (26) Caribbean
Panama
Macau
Monaco
RoW
Revenue
Operating profit 2
Operating margin % 3
Capex
Free cash flow 4 279 129 (78) 274 104 (87) 276 133 (63) - 21 12 11 595 582 542 - 5 134 128 129 2 15 65 60 57 6 100+ 65 70 30 (7) 5 52 50 50 3 9 145 131 135 9 24.4 22.5 24.9 H2
£m 2005/6
H1
£m H1
£m 2004/5 National Telcos1 H2
% H1
% Constant currency change vs.
2004/5
Caribbean Review of performance : 1 Excludes exceptional items and JVs & associates
2 2004/5 includes Hurricane Ivan impact
3 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
All figures shown are before exceptional items Caribbean Review of performance 3 (1) 2 10 6 (7) (33) Revenue
Operating costs
Depreciation & amort'n
Operating profit 1
Operating margin % 2
JVs & Associates
Capex
Free cash flow 3 279 (184) (30) 65 51 (44) 6 23.3 274 (199) (27) 48 31 (44) 5 17.5 276 (185) (31) 60 49 (42) 9 21.7 Caribbean - 9 (8) 32 59 2 16 H2
£m 2005/6
H1
£m H1
£m 2004/5 H2
% H1
% Constant currency change vs.
2004/5
National Telcos (excl Caribbean) Review of performance : National Telcos (excl Caribbean) Review of performance 1 Macau, Panama, Rest of World and Monaco Telecom
2 Excludes exceptional items, JVs & associates and amortisation of acquired intangibles
3 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
All figures shown are before exceptional items
25.3 78 316 80 (32) 26.9 73 308 83 (33) 28.2 84 266 75 (30) National Telcos1
(excl Caribbean) 5 1 (5) 5 20 (7) 7 (8) (204) (192) (161) (5) (28) 23 24 18 (6) 29 (34) (43) (21) 22 (64) Revenue
Operating costs
Depreciation & amort'n
Operating profit 2
Operating margin % 3
JVs & Associates
Capex
Free cash flow 4 H2
£m 2005/6
H1
£m H1
£m 2004/5 H2
% H1
% Constant currency change vs.
2004/5
UK Review of performance : 1 Excludes exceptional items and JVs & associates
2 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
All figures shown are before exceptional items
Retail
Carrier Services
Total revenue
Operating costs
Depreciation & amort'n
Operating profit 1
Operating profit margin %
Capex
Free cash flow 2 792 (716) (30) 46 (91) UK Review of performance (5) 4 (37) (54) (98) 768 (708) (41) 19 (93) (15) (100)+ (33) 810 (739) (30) 41 (47) 24 (3) 1 (37) (59) (2) (100)+ 5.8 2.5 5.1 439 (13) 376 430 (14) 353 3 392 380 11 UK H2
£m 2005/6
H1
£m H1
£m 2004/5 H2
% H1
% Change vs.
2004/5
Bulldog Review of performance : 1 Includes only three months of consolidated results
2 Excludes amortisation of acquired intangibles
3 Free cash flow is operating profit plus “depreciation and amortisation” less cash capital expenditure
All figures shown are before exceptional items
Revenue
Operating costs
Depreciation
Operating (loss) 2
Capex
Free cash flow 3 7 (31) (2) (26) (23) Bulldog Review of performance 12 (56) (5) (49) (32) (47) (76) 4 (8) - (4) (4) (8) - Bulldog H2
£m 2005/6
H1
£m H1
£m 2004/5 1
Reorganisation (ex-Energis) Cost benefits and headcount reductions : Reorganisation (ex-Energis) Cost benefits and headcount reductions Headcount reduction Target Mar. 2006 UK & Corporate Nov.’04
UK Mar.’05
UK & Corporate 1
Europe Nov.’04 780 Achieved by Sept. 2005 578 300 256 1 Initial target £50m March ’06 run rate. £15 million delayed pending integration of Energis as announced on 16 August 2005 300 480 n/a n/a
Financial priorities H2 2005/6 : UK Consolidate Energis from November 2005 and drive integration programme
Deliver announced headcount plans
Manage cost base whilst migrating to IP Continue to invest in customer service
Further strengthen finance and back office support functions Continue to invest in mobile and broadband
Manage cash returns by control of cost base
Continue focus on cash remittances to plc Bulldog National
Telcos Financial priorities H2 2005/6 Manage US de-registration process
Resume share repurchase programme Group
Cable and Wireless plc Interim Results 8 November 2005 : Cable and Wireless plc Interim Results 8 November 2005 Francesco Caio
Chief Executive Officer
C&W’s strategic priorities guiding the last 18 months : C&W’s strategic priorities guiding the last 18 months Mobile and broadband focus in National Telcos
Broadband access network through Bulldog investment and rollout
Next Generation Network (NGN) investment
Relevant UK scale
H1: executing our strategy : H1: executing our strategy Note: Numbers quoted are on a year on year basis
National Telcos : National Telcos
National Telcos: mobile performance : 8% 9% 12% National Telcos: mobile performance Subscribers ‘000s Caribbean Panama Macau RoW Monaco Revenue £m Total revenue 138 164 174 Revenue Subscriber growth Number of new subscribers 595K 0 500 1000 1500 2000 2500 3000 H2 2003/4 H1 2004/5 H2 2004/5 H1 2005/6 0 20 40 60 80 100 120 140 160 180 200 H2 2003/4 H1 2004/5 H2 2004/5 H1 2005/6 137 Data presented relates to subsidiary and branch operations and reflects Monaco acquisition in H1 2004/5
National Telcos: mobile initiatives 2005/6 Network build and operations : National Telcos: mobile initiatives 2005/6 Network build and operations
National Telcos: mobile Service offering and marketing : National Telcos: mobile Service offering and marketing Initiatives eTop-up
Extended roaming
agreements
“Closed user groups” for business subscribers
New data services (Blackberry) Caribbean Panama Macau Guernsey Launched in H1 Existing services
National Telcos: broadband performance : 43% Subscribers ‘000s Caribbean Panama Macau RoW Monaco 56% 24% Revenue CAGR 64% 0 50 100 150 200 H2 2003/4 H1 2004/5 H2 2004/5 H1 2005/6 National Telcos: broadband performance
National Telcos: broadband Service offering and marketing : National Telcos: broadband Service offering and marketing Launched in Cayman & Jamaica
Rollout across Caribbean by Mar. ‘06 Bandwidth upgrades to sustain ARPU
Launched ADSL 2+ service in Macau 34 in Macau – to be expanded
To be launched in 9 Caribbean markets by Mar. ’06 Extending offer range:
Speed
VoIP
WiFi hotspots
National Telcos: cost initiatives 2005/6 Adoption of best practice : National Telcos: cost initiatives 2005/6 Adoption of best practice Supply chain Centralised KPIs IT and network standardisation Extending eTop-Up – automated prepaid process
Rolling out product self-provisioning
Leveraging Group purchasing for mobile equipment
Outsourcing mobile outlet supply chain Standardised definition and approach
Regular monitoring Standardising architecture
Centralising billing platforms
Renegotiating network maintenance contracts
National Telcos: summary : National Telcos: summary Execution of strategy delivering results
Growing broadband and mobile revenue
Controlling cost base to drive operating and cash margins *Including Monaco Telecom due to French market activities impacting local mobile market
Building the new C&W in the UK : Building the new C&W in the UK
Industry context : Industry context Source: Ovum and C&W analysis - CAGRs for period from 2004/5 to 2007/8 Switched voice (6)%
Legacy data (11)% Legacy services
68% of market New services
32% of market IP 13%
Broadband 23% Demand
Technology
Regulation
UK: revenue mix Still exposed to legacy : UK: revenue mix Still exposed to legacy H1 2004/5 H1 2005/6 Voice 68% Data 22% IP 10% Voice 70% Data 24% IP 6%
UK: H1 Retail revenue drivers : UK: H1 Retail revenue drivers Revenue Contract renewal/
pricing pressure Phasing of large contracts revenue H1 2005/6 Migration from FR to IP-VPN/ churn £(29)m £(16)m £(45)m £27m New
business/ other £439m £376m H2 2004/5 300 340 380 420 460
UK: H1 Retail : UK: H1 Retail Gross margin H2 2004/5 H2 2004/5 H1 2005/6 57% 55% Lower prices
Acceleration of contract renewal
Frame relay to IP-VPN migration Higher costs
New services over legacy platform
Parallel circuits at start of IP contracts
UK: H1 Carrier Services : UK: H1 Carrier Services Revenue mix stable: Voice 88%; Data/IP 12%
Underlying revenue growth of 9% over H1 2004/5
Volumes driven by mobile transit and international voice
Supported absolute gross margin through tactical network utilisation/low margin data traffic
In the future will focus selectively on higher margin traffic
UK: sales activity : UK: sales activity Large retail accounts retained through accelerated contract renewal cycle
Trend to IP continues - 19% of Retail revenue mix (11% H1 2004/5)
Frame relay now represents only 9% of Retail revenue base
Multi-year contracts represent 41% of H1 Retail orders
H1 Retail contract wins:
Marks & Spencer – IP-VPN
BASF – IP-VPN
Ventura – offshore managed call centre
Learndirect – learning advice service
Accelerating IP provisioning
UK: headcount reductions : UK: headcount reductions Opex in H2 will benefit from September ‘05 headcount reduction (29)% Mar.’03 Mar.’05 Sep.’05 Sep.’05 Headcount 4,499 4,036 (1,183) (463) 5,682
C&W’s strategic moves to compete in UK : C&W’s strategic moves to compete in UK
Energis transaction: rationale : Energis transaction: rationale Accelerates strategic transformation of UK
Exploits timing opportunities:
technology - NGN, broadband
customers - demand evolution
regulation - Ofcom strategic review, LLU economics
Financial and strategic drivers:
acceptable return on investment in second full financial year following completion
stronger entity to tackle competitive UK market conditions
Energis transaction: update : Energis transaction: update H1 Energis:*
Retail revenue growth of 18%
EBITDA of £55 million
Process update:
OFT approval 25 Oct.
Scheme of arrangement approval 02 Nov.
Integration launch 14 Nov.
* Source: Energis announcement released 8 Nov. 2005
NGN: benefits and update : NGN: benefits and update Lower opex
One network with faster provisioning processes, lower cost/higher quality services NGN update
Contracts awarded for metro ethernet and IP core
H2 2005/6 tender according to plan Reduced Complexity & Cost SDH/DWDM 1000+
nodes PUBLIC IP IP / MPLS
Core ATM/FR MPLS VPN VOICE
Unbundling: benefits for UK Retail : Unbundling: benefits for UK Retail
Bulldog : Bulldog
Bulldog: customer care : Bulldog: customer care Delivered improved performance:
42 permanent/183 outsourced customer service staff recruited
opened 3 new call centres
implemented new billing software
enhanced customer communications
improved processes and systems
Ofcom investigation closed on 19 October 2005
Bulldog: provisioning & net adds Largest LLU operator in UK : Bulldog: provisioning & net adds Largest LLU operator in UK Office of Telecoms Adjudicator
Industry – Right First Time KPI LLU net adds Connections (000’s) 0 5 10 15 20 25 30 35 Q4 2004/5 Q1 2005/6 Q2 2005/6 % 0 20 40 60 80 100 Oct.'04 Nov.'04 Dec.'04 Jan.'05 Feb.'05 Mar.'05 Apr.'05 May.'05 Jun.'05 Jul.'05 Aug.'05 Sept.'05 Actual Target Connections held back by poor provisioning Net adds accelerated - 55,000 customers now connected
Bulldog: network progress Largest UK LLU broadband access footprint : Bulldog: network progress Largest UK LLU broadband access footprint
Bulldog: marketing : Bulldog: marketing
Additional features
PC security suite: antivirus, personal firewall, anti-spam, parental control
Bulldog Lounge (entertainment portal) – music downloads, video streaming, games
New technologies
ADSL 2+ technical trial launched
Advertising campaign Launched “Open the Gate” campaign on 1 Nov ’05
Build brand awareness
Promote 8meg and Double Play
Bulldog: key metrics : Bulldog: key metrics 0 40 80 120 160 200 0-100 101-200 201-300 301-400 401-500 > 500 Number of customers Number of exchanges *Source: Internal C&W management
**Excluding middle mile costs which are a part of C&Ws network shared with other revenue streams
C&W UK: transforming the business Charter for the UK business : C&W UK: transforming the business Charter for the UK business Full commercial launch of broadband offering Selective focus on higher value Carrier Services traffic Focus on larger accounts to reduce complexity Realise synergy of integration with Energis Migrate BT access circuits to LLU Further develop SME proposition on
SDSL/broadband Migrate processes &
services to NGN
C&W UK: drivers of P&L evolution : C&W UK: drivers of P&L evolution Revenue
Gross
margin
Opex Capex Retail SME/SoHo/ Consumer
Grow market share Focus on top accounts
Migrate to IP/broadband
Bulldog Carrier Services Selective focus on higher value traffic
Tactical use of NGN
Streamlined provisioning processes
Standardised software based service offerings
Competitive front end office/call centre features
More efficient deployment of capex
Driven by retail customers Growing use of LLU to reduce outpayments
Long term shift of mix to Retail and broadband
Summary : Summary Satisfactory National Telco performance as mobile and broadband gain traction
Now equipped to compete in the UK
Cable and Wireless plc Interim Results 8 November 2005 : Richard Lapthorne
Chairman Cable and Wireless plc Interim Results 8 November 2005
Performance commitment – phase 1 : Performance commitment – phase 1 Initial target Revenue
Operating loss Revenue
Operating profit margin £3.5 bn
c.10%
2002/3 £4.2 bn
£(6.0)bn
National Telcos : National Telcos Satisfactory performance
DCF illustrative values shared in Nov. ’04 have edged up and overall picture remains valid
UK: next step in performance : UK: next step in performance 2002/3:
revenue £1.7 billion
operating loss £(303) million
2005/6:
UK is now ready for the next step in performance improvement
managing the “late stages” of switched voice while participating in the “early stages” of IP
UK performance: managing the late stages of switched voice : UK performance: managing the late stages of switched voice Retain profitable revenue share
Win and retain customers as they migrate to IP
Cut costs to match revenue declines and re-shape organisation for the future:
announced a number of C&W UK initiatives to date
in addition further Energis synergies
UK performance: managing the early stages of IP : UK performance: managing the early stages of IP Scale
IP
Access
Acquisition of Energis
NGN initiated
Unbundling 800 BT exchanges
Financial performance: the next step : Financial performance: the next step Energis transaction reduces risk in UK strategy
share repurchase resumed
National Telcos satisfactory performance
underpins dividend during UK transition
Post NGN implementation - UK new business model:
revenue above £2 billion
double digit operating profit margin
Dividends will continue to signal progress