24 March 2011: Today Cable & Wireless Worldwide plc confirms that the business continues to trade in the current year in line with expectations.
As noted in the Interim Management Statement issued on 17 February 2011, the company has made good progress through the second half in delivering its objectives for the current year, with further contract wins in the UK enterprise and UK public sector and the renewal of important contracts in the Global business.
Over the last few months we have continued to review developments in the markets in which the company operates and to consider how the business can best position itself strategically to take full advantage of the opportunities which are presented and address any challenges. Whilst this review is ongoing, its initial findings have now informed the budget process for the 2011/12 year and have provided us with sufficient information to describe how we expect the business to develop beyond the current financial year. Along with today’s statement, we will be providing further detail at the time of our full year results announcement in May 2011.
Customer appetite for hosting space continues to grow and we believe the potential from the movement to hosted service-based offerings, i.e. Cloud solutions, is substantial. We consider that this trend will continue and believe this represents a significant growth opportunity for Cable&Wireless Worldwide. In early March we launched our Flexible Computing offering and enabled over 100 of our top customers to access it through our next generation network. To strengthen our position here further, we plan incremental capital and operating expenditure investment totalling in the order of £10 million in 2011/12 to ensure we remain in the vanguard in satisfying customer demand.
Although forecasting the precise year-on-year decline in legacy voice absolute gross margins in 2011/12 is difficult, we now expect this to be in excess of the previous guidance of 10%. There is also competitive pressure in the market for pure data connectivity and we are seeing price erosion on a number of contract re-signs. Despite this revenue pressure, cash generated from the renewing contract base is expected to increase due to the lower investment requirements of the mature contract portfolio.
Overall we expect absolute gross margin in 2011/12 to be around £30 million ahead of the current year.
As we highlighted at the half year results in November, in 2010/11 operating expenditure in our business has been beneficially impacted by a one-off network rates rebate of £13 million. This is not expected to recur in 2011/12. In addition we are seeing inflationary cost pressures in a number of specific areas such as power and property rents where costs are expected to increase by around £10 million in 2011/12. Whilst we continue to drive for operating expenditure efficiency, given the anticipated non-recurrence of the one-off network rates rebate and the cost inflation we are experiencing combined with the operating expenditure investment we intend to make to exploit the Cloud opportunities, we currently expect operating expenditure in 2011/12 to show a year-on-year increase in the order of £30 million.
As a result, at this early stage, we expect EBITDA in 2011/12 to be at the same level as 2010/11.
We remain particularly focused on cash flow growth and we expect trading cash flow in 2011/12 to be around £50 million higher than the current year due to continued tight control of capital expenditure, the previously highlighted year-on-year decrease in cash exceptional items and substantially reduced working capital outflow.
The company will release its full year results for the 2010/11 year on 24 May 2011.
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About Cable&Wireless Worldwide
Cable&Wireless Worldwide is a leading global telecoms company providing a wide range of high-quality managed voice, data, hosting and IP-based services and applications to large multinational companies, governments, carrier customers and resellers across the UK, Asia Pacific, India, Middle East & Africa, Continental Europe and North America. Established in the 1860s, Cable&Wireless Worldwide helps more than 6,000 organisations deliver their goals. The Group’s vision is to be the first choice for mission critical communications.
Reaching 20,500km in length, Cable&Wireless Worldwide owns the UK’s largest fibre network dedicated to business users of telecoms, and provides ubiquitous nationwide access through a combination of fibre, digital, microwave, radio and leased circuits. The network has presence in over 400 towns and cities in the UK, with more than 850 unbundled exchanges covering 55% of the population.
Internationally, Cable&Wireless Worldwide’s global next-generation network (NGN) stretches to more than 500,000km, including interests in 69 global cable systems, enabling connectivity to 153 countries. The Group’s IP-based Multi-Service Platform operates across the NGN, offering a single environment on which voice and data applications can be converged to drive business efficiencies. Cable&Wireless Worldwide’s network is uniquely designed with inbuilt resilience.
With more than 6,200 colleagues globally, Cable&Wireless Worldwide is committed to delivering exceptional customer service and developing long term partnerships with its customers.
To find out more, visit www.cw.com.