Telecoms slump takes toll on C&W

CABLE & Wireless today warned that the continuing fall in telecommunications spending in Europe is taking a heavy toll on its sales.

It said revenues at its flagship Global division would be 10% lower in the year to 31 March compared with the previous 12 months as demand for network capacity from other operators is sliding.

Network capacity sales were expected to be no higher than £70m in the second half of this year compared with £180m in the same period last year. This would generate a gross profit of £30m, down from £102m previously.

Chief executive Graham Wallace said Global's margins had risen from 3% to 6% in the second half, though this is still well short of its 8% target.

Wallace also said C&W did not plan to return any more of its £4.6bn cash kitty to shareholders as it provided a buffer.

He said C&W will have spent £1.1bn on share buybacks by the end of the year and another£300m on a special dividend.

'The view among investors six months ago that we should give more back has gone because they have seen what happens to companies without cash,' Wallace said.