Cable&Wireless Comms (CWC) - Half Yearly Report RNS Number : 6065Q Cable & Wireless Communications PLC 08 November 2012 ANNOUNCEMENT 8 November 2012 CABLE & WIRELESS COMMUNICATIONS PLC HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 Trading in line, full year outlook maintained Key Highlights § Mobile revenue up 9%, including mobile data revenue growth of 36% § Strong mobile subscriber growth in Jamaica reflecting new competitive environment § Mobile leadership in Panama extended § Good performance in Macau and operational progress in The Bahamas § Caribbean restructuring programme underway; operating costs down 7% § Discussions on portfolio reshaping § Interim dividend of US1.33 cents per share Six months ended US$m 30 September 2012 Change Revenue 1,431 1%^1 EBITDA 445 2%^1 Net income 120 11% Earnings per share (adjusted) 3.4c (0.4)c Earnings per share 1.7c (0.4)c ^1 At constant currency Note: EBITDA and adjusted earnings per share are defined in the footnotes on the following pages, reconciliations of EBITDA and adjusted earnings per share are provided on page 27 Outlook We maintain the guidance given at the full year, and expect: § Group EBITDA to be similar to 2011/12 § Capital expenditure approximately US$350 million in 2012/13 § Cash exceptional costs in 2012/13 between US$30 million and US$35 million § Dividend guidance for FY 2012/13 at US4 cents per share Commenting on the Group results, Tony Rice, Chief Executive of Cable & Wireless Communications Plc, said: "We have delivered a respectable performance in the first half. Despite a challenging period for the telecoms industry as a whole, our Group has posted a balanced performance, with EBITDA rising 2%. "We have seen momentum continuing to build for our mobile data services, and this is driving our mobile service revenue. Significant investments in high speed, mobile data capable networks across the Group last year are already delivering returns, and we expect the growth to continue. Voice revenue, however, continues to decline and we are delivering on our plan to reduce costs to mitigate this. "Private sector and government enterprise pipelines retain a healthy potential although governments continue to be hesitant before launching the new programmes which we are there to support. "We saw improving results in Jamaica, where our 'fightback' campaign is gathering momentum following regulatory changes made by the Government. We have seen good traction in the key market of prepaid mobile and the business is re-energised. We are also delivering on our potential in The Bahamas, where we have been investing in new networks and introducing new services, particularly mobile data. "We have also made progress on our strategy to reshape the business. During the first half we exited our West African enterprise business, and confirmed discussions regarding possible transactions involving our Monaco & Islands and Macau business units. These steps are in line with our stated plan to focus our management capability and future investment on the Pan-American region where we have scale, synergy and strong market positions as well as several growth economies. "Despite continuing competitive and economic pressures in many markets, we are well placed to achieve the outlook indicated at the 2011/12 results." Analysis of Group results Six months Six months ended ended 30 September 30 September US$m 2012 2011 % change Revenue 1,431 1,442 (1)% Gross margin 933 966 (3)% Operating costs (488) (523) 7% EBITDA^1 445 443 0% Depreciation and amortisation (170) (175) 3% Net other operating expense (5) (7) 29% Joint ventures and associates 12 13 (8)% Total operating profit before exceptional items 282 274 3% Exceptional items (26) (58) 55% Total operating profit 256 216 19% Finance income 14 5 nm Finance expense (91) (78) (17)% Other non-operating (expense)/income (15) 2 nm Profit before tax 164 145 13% Income tax expense (44) (37) (19)% Net profit 120 108 11% Net profit before exceptional items 144 163 (12)% Net profit attributable to: Owners of the Parent Company 43 52 (17)% Non-controlling interests 77 56 38% Capital expenditure^2 (177) (153) (16)% Operating cash flow^3 268 290 (8)% EPS 1.7c 2.1c Adjusted EPS^4 3.4c 3.8c Customers in subsidiaries (000s) Mobile 4,391 4,907 Broadband 552 553 Fixed 1,391 1,425 ^1 EBITDA is defined as earnings before interest, tax, depreciation and amortisation, net other operating and non-operating income/(expense) and exceptional items ^2 Cash capital expenditure ^3 Operating cash flow is defined as EBITDA less capital expenditure ^4 Adjusted EPS is before exceptional items, gains/(losses) on disposals, amortisation of acquired intangibles and transaction costs Revenue was in line with the prior year at US$1,431 million. Across the Group, mobile revenues increased by 9%, boosted by growth in mobile data services. Macau, our most developed mobile data business, posted a 20% rise in total revenue, driven by mobile services and smartphone sales. Group EBITDA was similar to the prior year at US$445 million following an improved performance in the Caribbean and continued strength in Macau. The Caribbean performance was driven by mobile customer growth in Jamaica, further operating performance gains in The Bahamas and a region-wide cost reduction programme. Adjusting for currency, revenue for the Group was 1% higher and EBITDA 2% higher than last year. Total operating profit increased by 19% to US$256 million. There was an exceptional charge of US$26 million related to the Caribbean restructuring programme we commenced at the start of the year and where we have made good progress in the first half. Net profit for the period was up 11% to US$120 million and adjusted earnings per share were US3.4 cents. The Board has declared an interim dividend of US1.33 cents per share, in line with our intentions outlined at the full year results in May. The Group made good progress in its strategic growth businesses, particularly mobile data. Non-voice revenue rose by 36% and now accounts for 26% of Group mobile service revenue. Our Panama business saw a 63% increase in mobile data revenue during the first half as smartphone penetration rose to 26%. Macau, the Caribbean and Monaco also delivered strong mobile data revenue growth. We expect further growth from this segment across the portfolio. We continued to roll out triple-play services, with pay TV as a key component, launching a service in Barbados during the period, and in the Channel Islands and Isle of Man in October. Contacts Cable & Wireless Communications Investors Kunal Patel +44 (0) 20 7315 4083 Mike Gittins +44 (0) 20 7315 4184 Media Lachlan Johnston +44 (0) 20 7315 4006 / +44 (0) 7800 021 405 Steve Smith +44 (0) 20 7315 4070 Neil Bennett (Maitland) +44 (0) 20 7379 5151 REVIEW OF CWC OPERATIONS Income statement Panama Caribbean^1 Macau Monaco & Islands^2 Other^3 Total H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 12/13 11/12 Change 12/13 11/12 Change 12/13 11/12 Change 12/13 11/12 Change 12/13 11/12 Change 12/13 11/12 Change US$m US$m % US$m US$m % US$m US$m % US$m US$m % US$m US$m % US$m US$m % Mobile 159 156 2% 262 266 (2)% 213 151 41% 118 120 (2)% - - - 752 693 9% Broadband & TV 30 30 - 60 62 (3)% 29 28 4% 25 24 4% - - - 144 144 - Fixed voice 61 72 (15)% 149 169 (12)% 35 38 (8)% 36 41 (12)% 1 - nm 282 320 (12)% Enterprise, data and other 36 50 (28)% 82 79 4% 33 41 (20)% 101 115 (12)% 1 - nm 253 285 (11)% Revenue 286 308 (7)% 553 576 (4)% 310 258 20% 280 300 (7)% 2 - nm 1,431 1,442 (1)% Cost of sales (93) (106) 12% (126) (131) 4% (192) (144) (33)% (86) (95) 9% (1) - nm (498) (476) (5)% Gross margin 193 202 (4)% 427 445 (4)% 118 114 4% 194 205 (5)% 1 - nm 933 966 (3)% Operating costs (78) (75) (4)% (290) (313) 7% (31) (30) (3)% (100) (108) 7% 11 3 nm (488) (523) 7% EBITDA^4 115 127 (9)% 137 132 4% 87 84 4% 94 97 (3)% 12 3 nm 445 443 0% Depreciation and amortisation (38) (37) (3)% (76) (80) 5% (16) (16) - (34) (38) 11% (6) (4) (50)% (170) (175) 3% Net other operating (expense)/income - - - (1) (10) nm - - - (1) 1 nm (3) 2 nm (5) (7) 29% Operating profit before joint ventures and exceptional items 77 90 (14)% 60 42 43% 71 68 4% 59 60 (2)% 3 1 nm 270 261 3% Capital expenditure (58) (49) (18)% (61) (50) (22)% (19) (17) (12)% (35) (33) (6)% (4) (4) - (177) (153) (16)% Operating cash flow^5 57 78 (27)% 76 82 (7)% 68 67 1% 59 64 (8)% 8 (1) nm 268 290 (8)% Cash exceptional items - (6) nm (9) (29) 69% - - - - - - (2) (2) - (11) (37) 70% Net cash interest (5) (3) (67)% (1) (1) - - - - 1 (2) nm (69) (56) (23)% (74) (62) (19)% Cash tax (52) (27) (93)% (19) (19) - (8) (7) (14)% (6) (5) (20)% (4) (6) 33% (89) (64) (39)% Headcount^6 1,478 1,578 (6)% 3,677 3,971 (7)% 954 882 8% 1,523 1,642 (7)% 129 152 (15)% 7,761 8,225 (6)% nm represents % change not meaningful ^1 Caribbean includes The Bahamas business from 6 April 2011 ^2 Monaco & Islands comprises operations in Monaco, Maldives, the Channel Islands, Isle of Man, the Indian and Atlantic Oceans and Africa (Afinis disposed 3 August 2012) ^3 Other includes management, royalty and branding fees, the costs of the corporate centre, net UK defined benefit pension charge or credit and intercompany eliminations ^4 Earnings before interest, tax, depreciation and amortisation, net other operating and non-operating income/(expense) and exceptional items ^5 EBITDA less capital expenditure ^6 Full time equivalents as at 30 September Panama · Maintained market leadership in mobile, broadband and domestic fixed voice · Mobile revenue growth of 2% in a highly competitive market · 63% growth in mobile non-voice revenue following launch of high speed data network · Private sector and government enterprise pipelines retain healthy potential, continued delays 6 months 6 months ended 3 months 3 months ended 3 months 3 months 30 Sep ended 30 Sep ended 30 30 Sep ended 30 ended 30 2012 2012 Jun 2012 2011 Sep 2011 Jun 2011 Subscribers (000s) Mobile^1 1,785 1,785 1,656 2,454 2,454 2,038 Broadband 127 127 129 140 140 141 Fixed 381 381 386 396 396 395 ARPU (US$)^2 Mobile 15.1 15.9 14.4 13.2 12.4 14.0 Broadband 28.1 29.0 27.2 27.2 27.2 27.3 Fixed 26.3 26.5 26.2 30.3 30.6 30.0 Revenue (US$m) 286 308 EBITDA (US$m) 115 127 Margin% 40% 41% Active subscribers are defined as those having performed a ^1 revenue-generating event in the previous 60 days ^2 ARPU is average revenue per user per month, excluding equipment sales Revenue at US$286 million was 7% lower than the same period last year due to lower enterprise and fixed voice revenue. Mobile revenue at US$159 million rose 2% despite the competitive four player market and introduction of mobile number portability in November 2011. An increase in data penetration from 14% to 26% fuelled strong growth in non-voice revenue, particularly in the prepaid segment. This growth more than offset the decline in mobile voice revenue as the rate per minute remained under pressure due to competition. Following the deactivation of low value, promotion driven customers in the first quarter, total mobile subscribers were 27% lower than last year. Broadband & TV revenue of US$30 million was in line with the prior period. Subscribers declined, but ARPU increased as the business focussed on greater value customers, taking higher speed broadband and premium TV packages. The number of pay TV subscribers taking more than one service was over 70%. Fixed voice revenue declined by 15% to US$61 million following a reduction in the volume of international transit traffic and lower national calling rates. The rate of decline in subscriber numbers has slowed as households value retaining a fixed line to complement other fixed services. Enterprise, data and other revenue at US$36 million was lower than last year as a result of delayed government programmes in Panama. This half we announced both a government project to supply, install and support new systems to share documents electronically and a two year contract to introduce a Hospital Information System to improve the administration and patient care in all of Panama's state funded hospitals. We continue to explore opportunities outside Panama. Gross margin decreased by 4% to US$193 million principally due to lower fixed voice revenue. As a percentage of revenue, gross margin improved by two percentage points. Operating costs increased by 4% to US$78 million reflecting higher network and property costs following expansion of our mobile network. Due to reduced fixed voice and enterprise revenue and higher operating costs, EBITDA reduced by 9% to US$115 million. Our proportionate ownership of Panama EBITDA for the six months ended 30 September 2012 was 49%. Caribbean · Mobile non-voice revenue up 32%, continued roll out of high speed mobile data networks · Mobile subscriber growth of 20% in Jamaica · 4G/HSPA+ mobile network established and NGN fixed network launched in The Bahamas · Cost reduction programme progressing - headcount down 7% across the region 6 months 6 months ended 3 months 3 months ended 3 months 3 months 30 Sep ended 30 Sep ended 30 30 Sep ended 30 ended 30 2012 2012 Jun 2012 2011 Sep 2011 Jun 2011 Subscribers (000s) Mobile^1 1,594 1,594 1,491 1,505 1,505 1,529 Broadband 222 222 221 222 222 223 Fixed 713 713 714 728 728 735 ARPU (US$)^2 Mobile 28.0 27.7 28.3 28.7 29.1 28.4 Broadband 42.1 42.6 41.7 42.6 42.7 42.5 Fixed 34.9 34.3 35.4 38.5 38.8 38.3 Revenue (US$m) 553 576 EBITDA (US$m) 137 132 Margin% 25% 23% Active subscribers are defined as those having performed a ^1 revenue-generating event in the previous 60 days ^2 ARPU is average revenue per user per month, excluding equipment sales Caribbean revenue was 4% down on the prior year leading to a similar decline in gross margin. EBITDA improved by 4% following progress in reducing the cost base. Mobile revenue was 2% lower in the first half at US$262 million. Handset sales increased as the business introduced several successful promotions, although service revenues were weaker mainly as a result of lower postpaid traffic volumes. In Jamaica we received an excellent customer response to the launch of our new reduced rate mobile packages ahead of long awaited changes to the regulatory environment in July. To date we have increased our Jamaican subscriber base by 20% compared to the first half of last year and mobile service revenue also rose as call volumes and data usage have grown. Across the rest of the Caribbean there was continued growth in the postpaid customer base although prepaid voice revenue was lower as usage decreased. Mobile data has seen strong growth with non-voice revenue for the region growing by 32%. LIME TV was launched in Barbados during the first half of this year and we have added almost 1,300 customers. Broadband subscribers increased by 3% excluding Jamaica, where we saw increased competition. There was a small reduction in ARPU as rate reductions were introduced to drive customer adoption resulting in Broadband & TV revenue falling slightly to US$60 million. Fixed line revenue at US$149 million declined by 12%. There was a 2% decline in the subscriber base and a fall in ARPU as usage continued to reduce in favour of alternatives such as mobile and VoIP solutions. Revenue in Jamaica was further impacted late in the first half by regulatory changes which resulted in reduced fixed to mobile retail rates and interconnect revenue. Enterprise, data and other revenue rose by 4% to US$82 million as we saw growth in corporate data solutions and increased capacity lease revenue generated from our regional cable investments. Gross margin at US$427 million tracked the revenue performance and was 4% down compared to last year. Operating costs reduced by 7% compared to the prior period as we realised efficiencies particularly in our Bahamas business. In our other businesses we have commenced a restructuring programme which was announced at our full year results in May. EBITDA increased by 4% to US$137 million driven principally by operational progress in The Bahamas and the early benefits from the wider Caribbean programme. Our proportionate ownership of Caribbean EBITDA for the six months ended 30 September 2012 was 74%. Macau · Mobile service revenue up 14%, continued data growth with non-voice now 35% of service revenue · Economic growth continues, gaming revenue up 15% · EBITDA up 4% on prior year driven by strong mobile performance 6 months 6 months ended 3 months 3 months ended 3 months 3 months 30 Sep ended 30 Sep ended 30 30 Sep ended 30 ended 30 2012 2012 Jun 2012 2011 Sep 2011 Jun 2011 Subscribers (000s) Mobile^1 460 460 434 417 417 402 Broadband 142 142 140 136 136 134 Fixed 173 173 174 176 176 177 ARPU (US$)^2 Mobile 21.8 24.4 19.3 20.9 20.9 21.0 Broadband 33.6 34.0 33.1 33.3 33.0 33.6 Fixed 33.4 33.1 33.6 36.0 36.9 35.0 Revenue (US$m) 310 258 EBITDA (US$m) 87 84 Margin% 28% 33% Active subscribers are defined as those having performed a ^1 revenue-generating event in the previous 60 days ^2 ARPU is average revenue per user per month, excluding equipment sales Revenue increased by 20% on last year largely due to strong mobile handset sales. Mobile revenue of US$213 million was 41% higher driven by the sale of smartphones, particularly the iPhone. Excluding handset sales, revenue was up 14% driven by subscriber growth of 10% whilst data penetration within our customer base remained above 46%. Data usage grew by over 50% driving non-voice revenue higher and supporting the ARPU. Roaming revenue was in line with last year as lower settlement rates with a major international roaming counterparty were offset by higher traffic volumes. Broadband revenue of US$29 million was 4% higher than the same period last year due to a 4% increase in subscribers. The broadband ARPU also improved as subscribers upgraded to higher speed packages including our 250Mbps fibre offering. We anticipate the introduction of a new fixed line data competitor in the market and an application is currently under review by the regulator. Fixed voice revenue of US$35 million was 8% lower than last year largely due to reduced international revenue. Enterprise, data and other revenue of US$33 million was 20% lower principally due to the higher volume of contracts last year. Gross margin at US$118 million was up 4% compared to the same period last year reflecting the strong growth in mobile non-voice service revenue. Operating costs of US$31 million were 3% higher than last year largely due to higher marketing spend and inflationary pressure on property and staff costs. EBITDA of US$87 million was 4% higher than in the same period last year. Adjusting for handset sales the underlying EBITDA margin was 44%. Our proportionate ownership of Macau EBITDA for the six months ended 30 September 2012 was 51%. Monaco & Islands (M&I) · EBITDA 2% higher at constant currency · Afinis disposal in August 2012 · Roll out of fibre to the curb in the Seychelles 6 months 6 months ended 3 months 3 months ended 3 months 3 months 30 Sep ended 30 Sep ended 30 30 Sep ended 30 ended 30 2012 2012 Jun 2012 2011 Sep 2011 Jun 2011 Subscribers (000s) Mobile^1 552 552 549 531 531 534 Broadband 61 61 58 55 55 53 Fixed 124 124 125 125 125 128 ARPU (US$)^2 Mobile 33.1 33.3 32.9 34.3 34.5 34.2 Broadband 60.9 61.2 60.6 62.7 63.3 62.1 Fixed 48.7 47.7 49.6 53.5 52.9 54.2 Revenue (US$m) 280 300 EBITDA (US$m) 94 97 Margin% 34% 32% Active subscribers are defined as those having performed a ^1 revenue-generating event in the previous 60 days ^2 ARPU is average revenue per user per month, excluding equipment sales Revenue at US$280 million was in line with the same period last year at constant currency. On a reported basis, revenue was 7% lower reflecting the weakness in the Euro and Seychelles Rupee compared to the prior year. Monaco revenue remained in line with the prior year at constant currency. Mobile service revenue was driven by non-voice services which increased by 29%, higher roaming revenues and a 7% growth in subscribers. There was also growth in Broadband & TV revenue boosted by additional subscribers. This was balanced by a fall in enterprise revenue as transit traffic rates reduced. Revenue in the Maldives was 3% lower. In April 2012, damage caused to a submarine cable by a third party resulted in lower mobile roaming revenue and fixed international traffic after customers were compensated for the service outage. In Guernsey, revenue decreased by 4% at constant currency mainly due to the loss of an enterprise contract. We continue to seek new opportunities and are looking to grow our market leading data centre business. In Guernsey, we grew our mobile subscriber base and service revenue increased by 4% compared to prior year. Both Jersey and the Isle of Man exhibited double digit revenue growth following improved performance in mobile. In the Seychelles we completed the rollout of a nationwide fibre network supported by the country's first subsea cable network, the Seychelles East Africa System. We also saw a good performance in broadband and mobile revenue with double digit growth on last year on a constant currency basis. Gross margin at US$194 million increased by 1% at constant currency compared to the same period last year, reflecting the revenue trend. On a reported basis it was 5% lower. Operating costs were US$100 million, in line with last year at constant currency and 7% better on a reported basis. Lower Monaco staff costs following headcount reductions in the Afinis business were offset by additional cable repair costs incurred in the Maldives. EBITDA at US$94 million was 2% higher than the prior period at constant currency and 3% lower on a reported basis. Operations in the Maldives, Monaco and Guernsey represented approximately 82% of M&I revenue and approximately 87% of EBITDA in the first half. Our proportionate ownership of Monaco & Islands EBITDA for the six months ended 30 September 2012 was 65%. Afinis disposal Our subsidiary Monaco Telecom SAM completed the sale of its West African-based enterprise business Afinis Communications to SkyVision Global Networks Limited on 3 August 2012 for a total cash consideration of US$3 million. Other Other includes management, royalty and branding fees, the costs of the corporate centre, net UK defined benefit pension credit or charge and intercompany eliminations. EBITDA was US$12 million, US$9 million higher than last year, following a pension credit related to the CWSF scheme and reduced costs in the corporate centre. Joint ventures and associates Our share of profit after tax from joint ventures was US$12 million, US$1 million lower than the prior period. CWC share of profit CWC share of revenue after tax Effective Six months Six months ended 30 ownership as Six months Six months ended 30 at ended 30 ended 30 September September 30 September September September 2012 2012 2011 2012 2011 % US$m US$m US$m US$m Trinidad & Tobago (TSTT) 49% 110 111 6 6 Afghanistan (Roshan) 37% 57 59 3 6 Solomon Telekom 33% 4 7 3 2 Others^1 - 7 - (1) Total 171 184 12 13 ^1 Includes results of Fintel and Telecom Vanuatu disposed of in the prior period and the new Seychelles cable associate Fixed line '000s Mobile subscribers^1 Broadband subscribers subscribers As at 30 As at 30 As at 30 As at 30 As at 30 As at 30 September September September September September September 2012 2011 2012 2011 2012 2011 Trinidad & Tobago (TSTT) 848 883 114 88 267 274 Afghanistan (Roshan) 5,935 5,347 - - - - Solomon Telekom 174 147 1 1 8 8 Telecom Vanuatu - 51 - 2 - 6 Total 6,957 6,428 115 91 275 288 Active subscribers which are defined as those having performed a ^1 revenue-generating event in the previous 60 days Roshan grew mobile subscribers by 11%, however ARPU came under pressure due to the introduction of 3G services by competitors. This resulted in a US$3 million reduction in profit after tax attributable to CWC. Capital expenditure Capital expenditure was US$177 million, 16% higher than the same period last year, representing 12% of revenue. Our principal customer facing investments continue to be in 4G/HSPA+ mobile data networks supporting smartphone sales in Panama, Macau, The Bahamas, Barbados, BVI and Cayman, selective pay TV investments, and improvements to our fixed broadband network. The fixed broadband investment has included continuing our fibre roll outs in Macau and the Caribbean and completing the Next Generation Network in The Bahamas. We have also continued with strategic investments in transmission capacity and cable systems to support both retail and carrier sales. Finally, we continue to advance our billing and customer relationship management systems. This is the second year of our investment in The Bahamas. We continue to focus on providing an improved service to our customers and preparing for future market competition. In the Maldives we have entered the final year of investment in a domestic cable network that will allow us to provide data services to the population and tourist resorts. Depreciation and amortisation Depreciation and amortisation at US$170 million was US$5 million lower than H1 2011/12 following the accelerated depreciation of legacy mobile assets in the prior year. Other Group items Net other operating expense The US$5 million net other operating expense incurred in the first half of the year included losses on the sale of fixed assets. In the prior period, the US$7 million expense comprised stamp duty in connection with the purchase of a 51% stake in BTC in The Bahamas and US$3 million hurricane restoration costs also in The Bahamas, partially offset by a gain on the retranslation of sterling based pension funds. Exceptional items Exceptional items in the period comprised charges for the Caribbean cost initiative of US$26 million. Our expectation that this programme will result in between US$30 million and US$35 million of cash exceptional costs in 2012/13 remains unchanged. The prior period charge was associated with redundancy and restructuring programmes in The Bahamas and Panama. Net finance expense The US$77 million net finance expense for the Group consists of finance income of US$14 million (US$5 million in H1 2011/12) and finance expense of US$91 million (US$78 million in H1 2011/12). Compared to the prior period the net interest expense is higher primarily due to increased debt. Other non-operating expense The US$15 million other non-operating expense charge reflected the loss on the disposal of Afinis. Income tax expense The income tax charge of US$44 million (US$37 million for H1 2011/12) is in respect of overseas taxes. This charge represents an effective tax rate of 24%. Group cash flow ^ 2012/13 2011/12 US$m H1 H2 H1 EBITDA^1 445 458 443 Capital expenditure^2 (177) (230) (153) Operating cash flow before exceptionals 268 228 290 Movement in working capital and other provisions (50) 38 (44) Net investment income^3 6 7 6 Underlying free cash flow 224 273 252 Fixed charges Income taxes paid^4 (77) (26) (64) Interest paid^5 (50) (59) (66) Dividends and shareholder loans to non-controlling interests^6 (104) (63) (120) Underlying equity free cash flow (7) 125 2 Dividends paid to shareholders (133) (68) (136) Net cash flow before non-recurring items and exceptionals (140) 57 (134) Non-recurring items and exceptionals Cash exceptionals (11) (32) (37) Coupon for sterling unsecured bond redeemed August 2012 (27) n/a n/a Panama tax brought forward (12) n/a n/a Share buyback - - (70) LTIP - (3) (6) Acquisitions and disposals^6 (1) 22 (144) Pension funding - (2) - Net cash flow after non-recurring items and exceptionals (191) 42 (391) Net proceeds from borrowings 147 (44) 343 Net cash flow (44) (2) (48) ^1 Earnings before interest, tax, depreciation and amortisation, net other operating and non-operating income/(expense) and exceptional items ^2 Balance sheet capital expenditure, excluding movement of capex accruals, was US$135 million and US$160 million in H1 2012/13 and H1 2011/12 respectively ^3 Includes dividends received from joint ventures of US$1 million in H1 2012/13 (US$2 million in H1 2011/12) ^4 Excludes US$12 million impact on timing of payments following change in Panama tax legislation ^5 Excludes US$27 million coupon in H1 2012/13 on sterling unsecured bond of £200 million redeemed in August 2012 ^6 Monaco Telecom dividend paid to minority interest of US$7 million in H1 2012/13 (US$8 million in H1 2011/12) has been reallocated to dividends paid to non controlling interests, but for IFRS purposes is included in acquisitions and disposals The Group generated operating cash flow before exceptional items of US$268 million in the six months ended 30 September 2012, 8% lower than the same period last year following the Group's decision to invest heavily in its mobile data networks. As a result US$177 million was invested in capital expenditure compared to $153 million in the same period last year in part reflecting the timing differences between commitment and expenditure. The outflow from movements in working capital and provisions largely reflects the cyclical nature of our payments profile. Investment income of US$6 million included dividends received from joint ventures of US$1 million, US$3 million of interest received on cash balances and the proceeds on disposal of Cable & Wireless Worldwide plc shares. Fixed charges As in the prior period our fixed charges are more weighted to the first half of the year. We paid US$77 million relating to income tax in the first half of 2012/13, excluding US$12 million of tax brought forward due to a change in Panama tax legislation (see non-recurring items and exceptionals below). Interest of US$50 million was paid on our external borrowings, excluding US$27 million of increased borrowing costs arising from the timing of refinancing our 2012 sterling unsecured bond. We paid dividends and loans to non-controlling interests of US$104 million in the period. This was US$16 million lower than last year due to timing differences in upstream dividend payments. Dividends to our shareholders were in line with the prior year as the final dividend which was paid in this period was based on US8 cents per share for the financial year 2011/12. Non-recurring items and exceptionals The net cash outflow included US$11 million for exceptional items which related to restructuring costs in the Caribbean, where our cost initiative has progressed faster than anticipated. We also incurred additional borrowing costs of US$27 million due to the timing of refinancing our 2012 sterling unsecured bond.A recent tax legislation change in Panama has led to the timing of payments being brought forward. As a result there were US$12 million of additional tax payments in the first half and we anticipate this change will also result in an increased outflow in the second half. Group cash and debt As at 30 September 2012 As at 31 March 2012 Subsidiaries Central Group Subsidiaries Central Group US$m US$m US$m US$m US$m US$m Cash and cash equivalents 253 13 266 265 47 312 Sterling unsecured bonds repayable in 2012 - - - - (317) (317) Sterling unsecured bonds repayable in 2019 - (238) (238) - (234) (234) US$500 million secured bonds due 2017 - (493) (493) - (492) (492) US$400 million secured bonds due 2020 - (390) (390) - (390) (390) US$600 million Revolving Credit Facility (RCF) - (330) (330) - - - Other central - (48) (48) - - - Other regional debt facilities (355) - (355) (274) - (274) Total debt (355) (1,499) (1,854) (274) (1,433) (1,707) Total net debt (102) (1,486) (1,588) (9) (1,386) (1,395) Net debt reconciliation Coupon Dividends for As at Underlying to sterling Panama 31 equity CWC bond tax As at 30 March free cash share Cash due brought September US$m 2012 flow^1 holders exceptionals 2012 forward Other^2 2012 Total net (1,395) (7) (133) (11) (27) (12) (3) (1,588) debt ^1 Before one-offs, exceptionals and financing ^2 Other includes: acquisitions and disposals outflow of US$1 million, positive exchange movements of US$3 million, and amortised borrowing costs of US$5 million During the period the sterling unsecured bonds repayable in August 2012 were redeemed at par using cash balances and drawings on the US$600 million revolving credit facility. The revolving credit facility has a margin of 2.50% over LIBOR and a maturity date of October 2016. As at 30 September 2012, US$330 million of this facility was drawn. Pensions As at 30 September 2012, the defined benefit section of the Cable & Wireless Superannuation Fund (CWSF) had an IAS 19 deficit of £84 million, compared to a deficit of £81 million as at 31 March 2012. Cash contributions have been agreed with the trustees from 2014 to 2016 in order to eliminate the actuarial deficit. These payments are subject to the outcome of the next actuarial valuation as at March 2013. This future deficit funding constitutes a minimum funding agreement and, in accordance with accounting standards, we are required to account for this within our IAS 19 deficit. The increase in the IAS 19 deficit in the period is mainly due to a fall in index-linked gilt yields resulting in an increase to this minimum funding commitment. The IAS 19 deficit recorded at 30 September 2012 represents the present value of the maximum amount committed under the minimum funding agreement. The fund assets at 30 September 2012 were approximately invested 74% in the bulk annuity policy, 19% in equities, and 7% in bonds, property, swaps and cash. There are other unfunded pension liabilities in the UK of £27 million (£26 million at 31 March 2012). The Group holds investments in gilts of £22m to partially back the UK unfunded pension liabilities. Other schemes in Cable & Wireless Communications have a net IAS 19 surplus of US$14 million (US$22 million surplus at 31 March 2012). Dividend We are declaring an interim dividend of US1.33 cents per share. The interim dividend of US1.33 cents per share will be paid on 11 January 2013 to ordinary shareholders on the register at the close of business on 16 November 2012. Subject to financial and trading performance in the second half of 2012/13, we expect to recommend a final dividend of US2.67 cents per share, resulting in a full year dividend of US4 cents per share. A currency option and the dividend reinvestment plan will be offered in respect of the interim dividend. The default currency for payment is GBP sterling. Shareholders wishing to receive their dividend in US dollars or wishing to participate in the dividend reinvestment plan should make an election using CREST Input Message or return a completed Currency Mandate Form or Dividend Reinvestment Plan Mandate Form to: Equiniti Ltd, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA by 11 December 2012. Copies of the mandate forms are available from Equiniti Ltd. UK callers: 0871 384 2104; overseas callers: +44 (0)121 415 7052 or from our website www.cwc.com. The sterling dividend payment amount per share will be announced on 17 December 2012, and will be based on the prevailing GBP sterling to US dollar exchange rate at 2pm GMT onthatdate. The story has been truncated, [TRUNCATED]
Cable&Wireless Comms CWC Half Yearly Report
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