In November 2002, Cable & Wireless disclosed estimated gross property and other lease commitments in the region of £2.2 billion as at 30 September 2002. The Company has continued to review its property portfolio and at 31 March 2003 estimated gross property and other lease commitments reduced to £1.6 billion.
The reduction is due to £162 million lease payments made, £102 million payments avoided by exiting leases, £235 million due to identification of break clauses and the exclusion of property rates taxes of £128 million previously included in the UK analysis.
In September 2002, Cable & Wireless announced the disposal of its US retail voice and data customer bases. In November 2002, Cable & Wireless announced the conclusions of its review of Cable & Wireless Global’s activities: to refocus its US and Continental European operations on multinational Service Provider and Enterprise customers. Key milestones in the US and Continental Europe since November have been:
The results and commentary below focus on continuing activities on a geographic basis, reflecting the unwinding of the Cable & Wireless Regional and Cable & Wireless Global structures.
EBITDA and operating profit/(loss) described below have been adjusted to exclude exceptional items and goodwill amortisation (Adjusted).
In presenting financial information for the year ended 31 March 2003 regarding the businesses that formed part of Cable & Wireless Global, certain assumptions have been made regarding revenue and cost allocation based on unaudited management information. This is necessary, as the businesses have not been managed separately throughout the year. As announced today, these businesses will now be managed separately, with individual balance sheets, profit and loss accounts and cashflows, and formal intragroup pricing. The information provided today should therefore be used as a guide to the relative performance of the businesses. It may not be directly comparable with future analysis.
The following discussion should be read in conjunction with the Group Profit and Loss account, Balance Sheet and Cash Flow Statement set out on pages 15 to 17.
Exchange rate movements have had a significant impact on the results of the Group, especially in those geographies with US dollar denominated transactions. During the year there has been an 8% devaluation in the US dollar against sterling and a 14% devaluation in the Jamaican dollar against
sterling. At constant currency, Group continuing revenue decreased by 5% and continuing EBITDA decreased by 38%.
Financial analysis on a geographic basis is given in Appendix A.
United Kingdom - Revenue £1,728m, Adjusted EBITDA £110m, Adjusted operating loss £(303)m
Revenue declined by 16% in the year, resulting from a decline in the performance of the Service Provider channel and a refocusing of the Business channel on a smaller and more targeted customer base.
Service Provider revenue declined by 22% as some carriers migrated traffic onto their own infrastructure, price competition became more aggressive and the proportion of international voice traffic with lower revenue per minute than mobile traffic increased. In the second half of the year, Cable & Wireless began to see increased customer demand for Carrier Preselect Services (CPS).
The decision to exit low margin business, announced at the end of 2002, combined with pricing pressure, led to a 25% decline in Business revenue. Business accounts have now stabilised, with the result that revenue increased by 2% since 30 September 2002.
Enterprise revenue continued to rise, up 14% in the year. Growth was driven by new customer wins and contract expansion, particularly as customers migrate more of their services into managed solutions. Major new contract wins that will benefit revenue in future years include Yorkshire Building Society, NHS Information Authority and mmO2 plc. Marks & Spencer plc and CGNU plc also expanded contracts with Cable & Wireless during the year.
Total operating costs declined by 7%. Outpayments and network costs declined by 15% reflecting revenue decline, network efficiency measures and lower tail circuit costs following OFTEL’s determination on pricing of partial private circuits.
Staff costs were reduced by 2% and headcount at 31 March 2003 was 5,682.
Caribbean - Revenue £783m, Adjusted EBITDA £298m, Adjusted operating profit £255m
The phased telecommunications liberalisation process in Jamaica concluded in March 2003, in accordance with the agreement established in 1999 between Cable & Wireless and the Jamaican Government.
A key regulatory focus is the need for ‘rebalancing’ - the removal of cross-subsidies between international services and domestic services by increasing domestic charges and reducing international rates.
Within the Caribbean operations revenue increased by 1% at constant currency (a 9% decline at actual rates), driven predominantly by a 26% increase in mobile revenue. Despite competition for subscribers, the mobile subscriber base increased by 65% to 943,000 subscribers. Domestic voice revenue also increased, up 6%, reflecting successful rebalancing in the year and continued growth, particularly in fixed to mobile traffic. As part of the liberalisation process and with continuing pressure on settlement rates, international revenue fell 9%. Fixed lines declined by 2% in the year to 857,000 lines. IP revenue also grew substantially, up 19% reflecting customer demand, supported by the continued roll out of ADSL services. IP subscribers in the region increased by 9% to 77,000 subscribers.
6
Total operating costs increased by 7% at constant currency (a 4% decrease at actual rates). This increase was driven principally by increases in outpayments and network costs from increasing traffic volume and terminations on third party networks.
Staff costs were 16% of revenue and headcount at 31 March 2003 was 5,073.
Operating profit includes a £34 million contribution from the associate Telecommunications Services of Trinidad and Tobago, up 6% year on year at constant currency.
United States - Revenue £512m, Adjusted EBITDA £(211)m, Adjusted operating loss £(255)m
Revenue for the continuing businesses increased by 4% at constant currency (a 3% decline at actual rates) and include a full year’s results for Exodus Communications, Inc. (Exodus) and Digital Island, Inc. (Digital Island). Second half revenue declined 31% at actual rates compared to revenue in the first half. The decline in the continuing businesses was primarily due to Cable & Wireless’ decision (announced 13 November 2002) to refocus its US and European operations on multinational Service Provider and Enterprise customers. This led to increased levels of churn by domestic hosting customers as data centres were rationalised. Factors also contributing to the half on half decline were the withdrawal from international voice and e-messaging services in January 2003.
In September 2002, Cable & Wireless announced the disposal of the retail voice and data customer bases, which have been treated as discontinued. The discontinued business generated revenue of £144 million in 2002/03.
Operating costs for the continuing business increased by 13% at constant currency (an increase of 6% at actual rates) and include a full year’s cost for the Exodus and Digital Island businesses. Costs in the second half declined over the first half as data centres were rationalised and headcount was reduced.
During the year £567 million was provided for restructuring the business and £145 million of cash was spent. The restructuring relates to the closure of the US domestic voice business (£288 million), the closure of five data centres and redundancy costs of (£248 million) and other costs (£31 million).
Japan - Revenue £323m, Adjusted EBITDA £22m, Adjusted operating loss £(40)m
Revenue in Japan declined by 4% at constant currency (down 11% at actual rates). This reflected a 40% decline at actual rates in Service Provider revenue following migration of traffic onto customers’ own networks. Business revenue increased by 6% at actual rates following the acquisition in the prior year of PSINet Japan and Exodus KK. Enterprise revenue increased by 5% at actual rates due to the continuing development of the sales capability in this channel.
Total operating costs increased by 3% at constant currency (down 2% at actual rates) due to an 11% decline in outpayments and certain network costs at actual rates. Other operating costs increased by 8% at actual rates. This increase was due to property and administrative costs following the hosting acquisitions. Staff costs increased 26% at constant currency for the same reason.
Headcount at 31 March 2003 was 1,157.
7
Europe - Revenue £304m, Adjusted EBITDA £(41)m, Adjusted operating loss £(69)m
Revenue increased by 2% at constant currency (flat at actual rates), driven primarily by Service Provider performance and Business customer premise equipment sales during the year.
Total operating costs increased by 1% at constant currency (an increase of 4% at actual rates). Network costs and outpayments increased by 1% at actual rates due to revenue growth and the costs of migrating customers off the networks of distressed operators on to Cable & Wireless’ infrastructure. Headcount reduced to 1,136 at the year-end, with staff costs declining 14%.
Following the announcement of 13 November 2002 that Cable & Wireless would refocus its European business on multinational Enterprise and Service Providers, the Group has now completed the disposal of its domestic business in Belgium, the Netherlands and Sweden in Northern Europe and Switzerland. The Northern European business is being sold to IP-Eye and the Swiss business to Smart Telecom. The value of net assets sold to IP-Eye was approximately Euro 2 million. The value of the net assets of the business sold to Smart Telecom was approximately Euro 300,000. The sale of the Italian business, announced today, was executed in two parts with assets in Bologna and Modena sold to Iset and assets in Rome sold to Unidata.
Cable & Wireless Panama - Revenue £279m, Adjusted EBITDA £136m, Adjusted operating profit £91m
Despite adverse economic conditions and the full liberalisation of the market in January 2003, Cable & Wireless Panama delivered revenue growth of 1% at constant currency (a decline of 6% at actual rates). This increase was due to strong growth in the mobile subscriber base, up 72% in the year to 300,000 subscribers. IP revenue also performed well, growing by 68%. Domestic fixed line revenue increased by 2%. Panama’s poor economic conditions impacted international revenue which declined 19% as traffic volumes failed to compensate for the continuing reductions in tariffs and settlement rates.
Total operating costs declined by 5% at constant currency, a decline of 12% at actual rates. Higher customer acquisition costs, driven by growth in the mobile subscriber base, were more than offset by lower international outpayments. The launch of the GSM mobile network during the year, and the continued provision of TDMA services, resulted in higher network costs.
Staff costs declined 17% at constant currency. Headcount at 31 March 2003 was 2,218.
Rest of World - Revenue £199m, Adjusted EBITDA £96m, Adjusted operating profit £116m
“Rest of World” comprises the results of what were Cable & Wireless Regional’s businesses in the Atlantic, Pacific and Indian Oceans, the Middle East and Guernsey.
The acquisition of Cable & Wireless Guernsey in May 2002 contributed £32m to revenue. This contribution, together with strong tourist seasons in the Maldives and the Seychelles boosting international roaming revenue, was the key driver of 37% constant currency revenue growth for the countries (an increase of 25% at actual rates).
Total operating costs increased by 49% at constant currency, reflecting the impact of the addition of Cable & Wireless Guernsey.
Headcount at 31 March 2003 was 1,955.
8
Operating profit includes a contribution of £23m from Batelco, based in Bahrain, up 15% (at constant currency) as a result of growth in mobile and IP.
Macau - Revenue £150m, Adjusted EBITDA £60m, Adjusted operating profit £42m
Revenue increased 11% at constant currency (a 3% increase at actual rates) reflecting a strong performance in data and IP, driven by growing demand for ADSL, value added internet offerings and the successful launch of the Asia Cities Project (a project to provide end-to-end data and IP services to business customers using Cable & Wireless Regional’s local licences, local market knowledge and existing resources of the Group).
Total operating costs increased by 11% at constant currency, in line with revenue growth. Headcount at 31 March 2003 was 947.
2003/04 Quarterly Trading Statements
On 10 March 2003 Cable & Wireless announced its intention to issue quarterly trading statements after the end of each quarter. The first quarter trading statement will include details of first quarter revenue and net cash and will be issued on 24 July 2003.
9
CABLE & WIRELESS GROUP
The following financial and operations review analysis and discussion should be read in conjunction with the Group’s consolidated profit and loss, balance sheet and cash flow statement on pages 15 to 17.
| Profit and loss | | | | | | |
| Revenue | Adjusted** | | 2003 | | Growth | |
| | 2002 | | | | | |
| | £m | | £m | | % | |
| Cable & Wireless Global - Capacity sales | 7 | | — | | (100 | ) |
| Cable & Wireless Global – Excluding capacity sales | 3,264 | | 2,867 | | (12 | ) |
| |
| |
| Cable & Wireless Global | 3,271 | | 2,867 | | (12 | ) |
| Cable & Wireless Regional | 1,459 | | 1,411 | | (3 | ) |
| Intra group eliminations | (34 | ) | (31 | ) | 9 | |
| |
| |
| Continuing businesses | 4,696 | | 4,247 | | (10 | ) |
| Discontinued business and other disposals * | 1,052 | | 144 | | (86 | ) |
| |
| |
| Group Revenue | 5,748 | | 4,391 | | (24 | ) |
| |
| |
| EBITDA & loss before tax | 2002 | | 2003 | | Growth | |
| | £m | | £m | | % | |
| Cable & Wireless Global | 199 | | (120 | ) | (160 | ) |
| Cable & Wireless Regional | 627 | | 590 | | (6 | ) |
| Corporate charges | (50 | ) | (41 | ) | 18 | |
| |
| |
| Continuing businesses | 776 | | 429 | | (45 | ) |
| Discontinued business and other disposals * | (41 | ) | (95 | ) | (132 | ) |
| |
| |
| EBITDA before exceptionals | 735 | | 334 | | (55 | ) |
| Depreciation before exceptionals | (1,072 | ) | (735 | ) | 31 | |
| Associates and joint ventures | 115 | | 75 | | (35 | ) |
| |
| |
Total operating loss before exceptionals and amortisation | (222 | ) | (326 | ) | (47 | ) |
| Interest and other non-operating items | 208 | | 102 | | (51 | ) |
| |
| |
Loss before tax, exceptionals and goodwill amortisation | (14 | ) | (224 | ) | | |
| Exceptional items | (3,973 | ) | (6,023 | ) | (52 | ) |
| Goodwill amortisation before exceptionals | (562 | ) | (126 | ) | 78 | |
| |
| |
| Loss before tax | (4,549 | ) | (6,373 | ) | (40 | ) |
| |
| |
| | | | | | | |
| * | Operations disclosed in 2003 as discontinued relate to the US retail voice and data business. Discontinued business and other disposals in 2002 relate to the US retail voice and data business, Cable & Wireless Optus and Mitratel. Under FRS 3 the disposal of Mitratel is not classified as discontinued. Mitratel contributed £7 million to revenue, £2 million to EBITDA and £1 million to operating profit in 2002. | |
| ** | Results presented following the adoption of UITF Abstract 36, Contracts for sales of capacity. | |
| Attributable Loss | 2002 | | | 2003 | |
| |
| | |
| |
| | Reported** | | | Underlying | | Goodwill | | Exceptional | | Reported** | |
| | | | | result | | amortisation | | Items | | | |
| | | | | | | before | | | | | |
| | | | | | | exceptionals | | | | | |
| | £m | | | £m | | £m | | £m | | £m | |
| Loss before tax | (4,549 | ) | | (224 | ) | (126 | ) | (6,023 | ) | (6,373 | ) |
| Tax | (311 | ) | | (94 | ) | — | | 58 | | (36 | ) |
| |
| | |
| |
| Loss after tax | (4,860 | ) | | (318 | ) | (126 | ) | (5,965 | ) | (6,409 | ) |
| Minority interest | (94 | ) | | (102 | ) | — | | (22 | ) | (124 | ) |
| |
| | |
| |
| Attributable Loss | (4,954 | ) | | (420 | ) | (126 | ) | (5,987 | ) | (6,533 | ) |
| |
| | |
| |
| Loss per share (pence) | (181.2 | ) | | (18.0 | ) | (5.4 | ) | (257.0 | ) | (280.4 | ) |
| |
| | |
| |
| | | | | | | | | | | | |
10
| Exceptional Items | 2002
£m | | 2003
£m | |
| |
|
| Asset impairment — Cable & Wireless Global | (1,718 | ) | (2,266 | ) |
| Asset impairment — Cable & Wireless Regional | (191 | ) | — | |
| Goodwill impairment — Cable & Wireless Global | (2,007 | ) | (2,723 | ) |
| Goodwill impairment — Other operations | — | | (2 | ) |
| |
|
| Asset and goodwill impairment — total | (3,916 | ) | (4,991 | ) |
| Disposals of operations | 1,057 | | (85 | ) |
| Investment write-down | (904 | ) | (390 | ) |
| Other net exceptional items | (210 | ) | (557 | ) |
| |
|
| Total | (3,973 | ) | (6,023 | ) |
| |
|
In light of the further decline in the performance of Cable & Wireless Global during the second half of the year, the balance sheet values of Cable & Wireless Global’s tangible assets have been reviewed. This has resulted in a further fixed asset impairment of £1,479 million and an increase of goodwill impairment of £12 million. This is in addition to the write down of fixed assets and goodwill of £787 million and £2,713 million respectively at the half year.
The write down has been determined in accordance with the requirements of FRS 11 which involve, amongst other factors, assuming a growth rate after five years that is restricted to the long term average growth rates of the countries in which the Group operates, of approximately 2.5%. This requirement places a limit on the value that can be attributed to the business which should not therefore be taken as a reflection of its long-term value.
Disposal of operations include £200 million of exit costs, and a £31 million write down of redundant assets for the restructuring of the US retail voice and data business, and profits on disposals of £62 million including £54 million on the disposal of MobileOne (Asia) Pte Ltd. £84 million has also been released relating to accrued costs of disposals no longer required.
Current asset investments have been written down by £274 million to market value. ESOP shares have been written down to market value resulting in a write off of £116 million.
Other exceptional items include a charge of £248 million for the restructuring of Cable & Wireless Global. This includes property, redundancy and other costs, of £182 million, £52 million and £14 million respectively. In addition, costs of integrating the business activities of Digital Island and Exodus of £31 million, redundancy costs principally within Cable & Wireless Regional of £38 million, provisions in respect of rentals on vacant properties of £44 million, £81 million for onerous network contracts and distressed carrier asset write-offs, and a write-off of redundant fixed assets totalling £115 million have also been incurred.
11
| Cash flow | 2002/03 | 2002 | |
| |
| | |
| | H1
£m | | H2
£m | | Full Year
£m | | £m | |
| | | | | | | | | |
| EBITDA before exceptional items | 172 | | 162 | | 334 | | 735 | |
| Exceptional cash items | (92 | ) | (227 | ) | (319 | ) | (338 | ) |
| Working Capital | 23 | | 57 | | 80 | | 35 | |
| Capital additions | (450 | ) | (360 | ) | (810 | ) | (1,868 | ) |
| |
|
| Operating Cashflow | (347 | ) | (368 | ) | (715 | ) | (1,436 | ) |
| Tax, interest & other | 19 | | (302 | ) | (283 | ) | (341 | ) |
| Acquisitions/Disposals | | | 110 | | 107 | | 3,084 | |
| Share buy-back & dividends | (82 | ) | (37 | ) | (119 | ) | (1,774 | ) |
| |
|
| Movement in cash balances | (413 | ) | (597 | ) | (1,010 | ) | (467 | ) |
| Cash brought forward | 2,629 | | 2,216 | | 2,629 | | 3,096 | |
| |
|
| Total net cash | 2,216 | | 1,619 | | 1,619 | | 2,629 | |
| |
|
Operating cash flow in the period has improved significantly compared to the previous year reflecting the benefit of a £1,058 million reduction in capital expenditure and the adverse impacts of reduced EBITDA (£401 million).
Capital expenditure for the year to 31 March 2003 at £810 million fell 57% compared to the prior year (balance sheet additions totalled £752 million for 2003 including £21 million for the Cable & Wireless Guernsey acquisition).
The final dividend for the year ended 31 March 2002 of £82 million was paid during the year as was the interim dividend of £37 million for the year ended 31 March 2003.
At 31 March 2003 the Group net cash balance was £1,619 million, compared to £2,629 million at 31 March 2002 and £2,216 million at 30 September 2002. The net cash balance at 31 March 2003 comprised £3,165 million of cash (including treasury instruments held as current investments of £11 million) and £1,546 million of debt.
Pensions
The triennial actuarial valuation of the principal United Kingdom defined benefit pension scheme was prepared at 31 March 2002. The valuation of the Scheme disclosed a shortfall in the market value of the Scheme assets compared with the accrued liabilities. This was principally due to the fall in the Scheme’s asset values following the fall in global equity markets between 1 April 1999 and 31 March 2002. Thus, with agreement from the actuary, the Company increased its contributions to the Scheme to 20% of salary with effect from 1 April 2002, and made a one-off contribution to the Scheme of £47 million in December 2002 in respect of the shortfall. It should be noted that this scheme was closed to new members in 1999.
At 31 March 2002, the Group disclosed a deficit calculated using FRS 17 principles of £47 million in respect of funded defined benefit schemes, £33 million of which related to the principal UK scheme. At 30 September 2002, a preliminary estimate indicated a potential deficit under FRS 17 of the principal UK scheme in the region of £375 million to £400 million. At 31 March 2003, the deficit calculated for the funded benefit schemes increased to £476 million in respect of the principal UK scheme and £54 million in respect of the rest of the Group. The deficit in unfunded defined benefit schemes at 31 March 2003 was £48 million (31 March 2002: £29 million), £18 million in respect of the UK (31 March 2002: £15 million).
12
The latest estimate using FRS 17 principles at 28 May 2003 indicates an FRS 17 deficit of £430 million on the principal UK scheme.
Insurance
Pender Insurance Limited (Pender), the Group’s Isle of Man insurance subsidiary, has written policies in favour of the Group and third parties. Significant claims have been made against Pender under certain of these third party policies. Pender is currently taking legal advice and it intends to defend vigorously these claims, and has notified its reinsurers where appropriate. The Board of Pender, in accordance with FRS 12 determined that no provision was required in its financial statements for these claims for the year ended 31 March 2003. Since 31 March 2003, Pender has ceased to write third party insurance.
Leases
The Group has entered into property and other operating leases in the ordinary course of business with minimum lease terms ranging from 1 year to 50 years. The effect such obligations are expected to have on liquidity and cash flow in future periods is summarised below.
| Payments due by period | Total
£m | | Less than
1 year
£m | | 1-2
years
£m | | 2-3
years
£m | | 3-4
years
£m | | 4-5
years
£m | | After 5
years
£m | |
| | | | | | | | | | | | | | | |
| Operating lease payments | 1,612 | | 245 | | 182 | | 160 | | 140 | | 132 | | 753 | |
| (undiscounted) | | | | | | | | | | | | | | |
In addition, under certain property operating leases Cable & Wireless could be required to make payments to lessors at the end of the lease to restore the condition of the properties. These amounts will not be known until the leases expire. The actual amounts paid may be reduced in the event that Cable & Wireless is able to exit the contracts prior to the minimum lease term expiring.
In November 2002, Cable & Wireless disclosed estimated gross property and other lease costs in the region of £2.2 billion as at 30 September 2002. Since announcing this amount, the Group has continued to review its property portfolio. The outcome of that review, together with the impact of lease exits achieved and payments made by 31 March 2003 reduce this figure to £1.6 billion. This is analysed in the table below.
13
| Property and other lease costs | US
£m | | Continental
Europe
£m | | UK
£m | | Japan
£m | | Regional
£m | | Total
£m | |
| Total estimated full term payments at 30 | | | | | | | | | | | | |
| September 2002 | 937 | | 130 | | 950 | | 135 | | 87 | | 2,239 | |
| Reclassification1 | 34 | | (34 | ) | — | | — | | — | | — | |
| Property rates taxes2 | — | | — | | (128 | ) | — | | — | | (128 | ) |
| Impact of minimum break clause3 | — | | — | | (203 | ) | (32 | ) | — | | (235 | ) |
| Lease payments extinguished in period4 | (61 | ) | (7 | ) | (33 | ) | (1 | ) | — | | (102 | ) |
| Lease payments made in period | (60 | ) | (28 | ) | (39 | ) | (23 | ) | (12 | ) | (162 | ) |
|
| Total at 31 March 2003 | 850 | | 61 | | 547 | | 79 | | 75 | | 1,612 | |
|
| Of which: | | | | | | | | | | | | |
| Provided in balance sheet at 31 March 2003 | 348 | | 19 | | 36 | | 2 | | — | | 405 | |
| Notes to table above |
| 1 | A property located in Europe but managed by the US business has been reclassified from Continental Europe to US in the table. |
| 2 | Certain property rates taxes were included in the estimated property lease commitments for the UK at 30 September 2002. |
| 3 | Estimated minimum lease commitments in respect of UK and Japan leases have been reduced significantly following a detailed review of break clauses within the lease agreements entered into by the Group. |
| 4 | Payments extinguished in the period represent ongoing lease commitments that have been avoided by exiting the leases. |
Contacts
| David Prince | Group Finance Director | 020 7315 4905 |
| | | |
| Investor Relations: | | |
| Louise Breen | Director, Investor Relations, London | 020 7315 4460 |
| Caroline Stewart | Manager, Investor Relations, London | 020 7315 6225 |
| Virginia Porter | Vice President, Investor Relations, New York | 001 646 735 4211 |
| | | |
| Media: | | |
| Susan Cottam | Director, Corporate Communications | 020 7315 4410 |
| Peter Eustace | Head of Media Relations | 020 7315 4495 |
Interviews with Richard Lapthorne, Chairman and Francesco Caio, CEO in video/audio and text will be available from 07:00 on Wednesday 4 June on: www.cw.com and on www.cantos.com.
14
Consolidated Profit And Loss Account
for the year ended 31 March
| | | Continuing
operations
(including
acquisitions)
£m | |
Discontinued
operations
£m | | 2003
£m | | | Continuing
operations
£m | | Discontinued
operations
£m | | 2002
£m | | |
Turnover of the Group including its share of joint ventures and associates | | 4,507 | | 144 | | 4,651 | | | 4,984 | | 1,114 | | 6,098 | | |
| Share of turnover of - joint ventures | | (195 | ) | — | | (195 | ) | | (216 | ) | (69 | ) | (285 | ) | |
| - associates | | (65 | ) | — | | (65 | ) | | (65 | ) | — | | (65 | ) | |
| | |
| |
| |
| | |
| |
| |
| | |
| | | | | | | | | | | | | | | | |
| Group turnover | | 4,247 | | 144 | | 4,391 | | | 4,703 | | 1,045 | | 5,748 | | |
| Operating costs before depreciation, amortisation and exceptional items | | (3,818 | ) | (239 | ) | (4,057 | ) | | (3,925 | ) | (1,088 | ) | (5,013 | ) | |
| Exceptional operating costs | | (442 | ) | — | | (442 | ) | | (204 | ) | (6 | ) | (210 | ) | |
| | |
| |
| |
| |
| EBITDA | (13 | ) | (95 | ) | (108 | ) | | 574 | | (49 | ) | 525 | |
| |
|
| Depreciation before exceptional items | | (711 | ) | (24 | ) | (735 | ) | | (912 | ) | (160 | ) | (1,072 | ) | |
| Exceptional depreciation | | (2,324 | ) | (57 | ) | (2,381 | ) | | (1,822 | ) | (87 | ) | (1,909 | ) | |
| Amortisation of goodwill before exceptional items | | (126 | ) | — | | (126 | ) | | (561 | ) | (1 | ) | (562 | ) | |
| Exceptional amortisation | | (2,725 | ) | — | | (2,725 | ) | | (1,794 | ) | (213 | ) | (2,007 | ) | |
| | |
| |
| |
| | |
| |
| |
| | |
| | | | | | | | | | | | | | | | |
| Total operating costs | | (10,146 | ) | (320 | ) | (10,466 | ) | | (9,218 | ) | (1,555 | ) | (10,773 | ) | |
| | |
| |
| |
| | |
| |
| |
| | |
| | | | | | | | | | | | | | | | |
| Group operating loss | | (5,899 | ) | (176 | ) | (6,075 | ) | | (4,515 | ) | (510 | ) | (5,025 | ) | |
| Share of operating profits in joint ventures | | 53 | | — | | 53 | | | 51 | | 44 | | 95 | | |
| Share of operating profits in associates | | 22 | | — | | 22 | | | 20 | | — | | 20 | | |
| | |
| |
| |
| | |
| |
| |
| | |
| | | | | | | | | | | | | | | | |
| Total operating loss | | (5,824 | ) | (176 | ) | (6,000 | ) | | (4,444 | ) | (466 | ) | (4,910 | ) | |
| Exceptional profits less (losses) on sale and termination of operations | | | | | | | | | | | | | | | |
| | — | | (147 | ) | (147 | ) | | — | | 1,057 | | 1,057 | | |
| | |
|
|
| |
| |
|
|
| |
| Profits less (losses) on disposal of fixed assets before exceptional items | — | | — | | — | | | (10 | ) | 3 | | (7 | ) |
| Exceptional items | 62 | | — | | 62 | | | — | | — | | — | |
| |
|
| Profits less (losses) on disposal of fixed assets | | 62 | | — | | 62 | | | (10 | ) | 3 | | (7 | ) | |
| Exceptional write down of investments | | (390 | ) | — | | (390 | ) | | (904 | ) | — | | (904 | ) | |
| | |
| |
| |
| | |
| |
| |
| | |
| | | | | | | | | | | | | | | | |
| Loss on ordinary activities before interest | | (6,152 | ) | (323 | ) | (6,475 | ) | | (5,358 | ) | 594 | | (4,764 | ) | |
| Net interest and other similar income/(charges) | | | | | |
|
|
|
| |
|
|
| | | | |
|
|
|
| |
|
|
|
| - Group | | | | | 103 | | | | | 227 | |
| - Joint ventures and associates | | | | | (1 | ) | | | | (12 | ) |
| | | | | |
| | | |
|
| Total net interest and other similar income | | | | | | 102 | | | | | | | 215 | | |
| | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Loss on ordinary activities before taxation | | | | | | (6,373 | ) | | | | | | (4,549 | ) | |
| Tax on loss on ordinary activities | | | | | | (36 | ) | | | | | | (311 | ) | |
| | | | | | |
| | | | | | |
| | |
| | | | | | | | | | | | | | | | |
| Loss on ordinary activities after taxation | | | | | | (6,409 | ) | | | | | | (4,860 | ) | |
| Equity minority interests | | | | | | (124 | ) | | | | | | (94 | ) | |
| | | | | | |
| | | | | | |
| | |
| | | | | | | | | | | | | | | | |
| Loss for the financial year | | | | | | (6,533 | ) | | | | | | (4,954 | ) | |
| Dividends | | | | | | (37 | ) | | | | | | (427 | ) | |
| | | | | | |
| | | | | | |
| | |
| | | | | | | | | | | | | | | | |
Loss for the year retained | | | | | | (6,570 | ) | | | | | | (5,381 | ) | |
| | | | | | |
| | | | | | |
| | |
| | | | | | | | | | | | | | | | |
Basic loss per Ordinary Share | | | | | | (280.4 | )p | | | | | | (181.2 | )p | |
| Basic loss per Ordinary Share before exceptional items andgoodwill amortisation | | | | | | (18.0 | )p | | | | | | (8.4 | )p | |
| Diluted loss per Ordinary Share | | | | | | (280.4 | )p | | | | | | (181.2 | )p | |
Dividends per Ordinary Share | | | | | | 1.6 | p | | | | | | 16.5 | p | |
| | | | | | |
| | | | | | |
| | |
The Group has adopted early the new accounting standard UITF Abstract 36 ‘Contracts for sales of capacity’ which is mandatory for accounting periods ending on or after 22 June 2003. Accordingly, the comparative figures have been adjusted to take account of the effect of this new accounting standard.
15
Group balance sheet
at 31 March
| | 2003 | | 2002 | |
| | £m | | £m | |
| Fixed assets | | | | |
| Intangible assets | (2 | ) | 2,900 | |
| Tangible assets | 1,937 | | 4,617 | |
| |
| |
| |
| | | | | |
| Loans to joint ventures and associates | 1 | | 9 | |
| Interest in net assets of joint ventures | 148 | | 330 | |
| Investments in associates | 83 | | 78 | |
| Other investments | 123 | | 209 | |
| |
| |
| |
| | | | | |
| Total fixed asset investments | 355 | | 626 | |
| |
| |
| |
| | 2,290 | | 8,143 | |
| |
| |
| |
| Current assets | | | | |
| Stocks | 51 | | 82 | |
| Current asset investments | 246 | | 1,155 | |
| Debtors | - due within one year | 1,455 | | 2,374 | |
| | - due after more than one year | 166 | | 164 | |
| Short term deposits | 2,958 | | 4,063 | |
| Cash at bank and in hand | 196 | | 216 | |
| |
| |
| |
| | 5,072 | | 8,054 | |
| |
| |
| |
| | | | | |
| Creditors: amounts falling due within one year | (3,275 | ) | (3,971 | ) |
| |
| |
| |
| Net current assets | 1,797 | | 4,083 | |
| |
| |
| |
| Total assets less current liabilities | 4,087 | | 12,226 | |
| |
| |
| |
| | | | | |
| Creditors: amounts falling due after more than one year | (807 | ) | (2,031 | ) |
| Provisions for liabilities and charges | (760 | ) | (838 | ) |
| |
| |
| |
| | (1,567 | ) | (2,869 | ) |
| |
| |
| |
| | | | | |
| Net assets | 2,520 | | 9,357 | |
| |
| |
| |
| | | | | |
| Capital and reserves | | | | |
| Called up share capital | 596 | | 595 | |
| Share premium account | 1,745 | | 1,745 | |
| Capital redemption reserve | 105 | | 105 | |
| Profit and loss account | (297 | ) | 6,513 | |
| |
| |
| |
| Equity shareholders' funds | 2,149 | | 8,958 | |
| Equity minority interests | 371 | | 399 | |
| |
| |
| |
| | 2,520 | | 9,357 | |
| |
| |
| |
| | | | | |
16
Group cash flow statement
for the year ended 31 March
| | 2003 | | 2002 | |
| | £m | | £m | |
| Net cash inflow from operating activities | 95 | | 94 | |
| |
| |
| |
| | | | | |
| Dividends from joint ventures | 13 | | 11 | |
| Dividends from associates | 15 | | 15 | |
| |
| |
| |
| | | | | |
| | 28 | | 26 | |
| |
| |
| |
| | | | | |
| Returns on investments and servicing of finance | | | | |
| Interest and similar income received | 197 | | 383 | |
| Interest paid | (88 | ) | (238 | ) |
| Net interest element of finance lease rentals paid | (2 | ) | (5 | ) |
| Dividends paid to minorities | (70 | ) | (61 | ) |
| Dividends received from preference shares | — | | 54 | |
| |
| |
| |
| | | | | |
| | 37 | | 133 | |
| |
| |
| |
| | | | | |
| Taxation | (438 | ) | (139 | ) |
| |
| |
| |
| | | | | |
| | | | | |
| Capital expenditure and financial investment | | | | |
| Purchase of tangible fixed assets | (810 | ) | (1,868 | ) |
| Sale of tangible fixed assets | 15 | | 21 | |
| Purchase of current asset investments | (3 | ) | (608 | ) |
| Purchase of investments | (38 | ) | (121 | ) |
| Sale of current asset investments | 600 | | — | |
| Sale of investments | 11 | | 900 | |
| Loans to joint ventures and associates | 10 | | 2 | |
| |
| |
| |
| | (215 | ) | (1,674 | ) |
| |
| |
| |
| | | | | |
| Acquisitions and disposals | | | | |
| Receipts from sales of subsidiary undertakings | 14 | | 2,372 | |
| Purchase of selected assets and business activities of Exodus | — | | (478 | ) |
| Purchase of shareholdings in subsidiary undertakings (net of cash received) | 2 | | (49 | ) |
| Receipts from sale of associates | 94 | | — | |
| |
| |
| |
| | 110 | | 1,845 | |
| |
| |
| |
| Equity dividends paid to shareholders | (119 | ) | (669 | ) |
| |
| |
| |
| Management of liquid resources | | | | |
| Movement in short term investments and fixed deposits (net) | (1,040 | ) | 2,586 | |
| |
| |
| |
| Financing | | | | |
| Purchase of own shares | — | | (1,107 | ) |
| Issue of ordinary share capital | 1 | | 2 | |
| Capital element of finance lease rental repayments | (18 | ) | (15 | ) |
| Other long term debt issued | 88 | | 1,338 | |
| Long term debt repaid | (649 | ) | (785 | ) |
| |
| |
| |
| | (578 | ) | (567 | ) |
| |
| |
| |
| (Decrease)/increase in cash in the year | (2,120 | ) | 1,635 | |
| |
| |
| |
17
Group statement of total recognised gains and losses
for the year ended 31 March
| | 2003 | | 2002 | |
| | £m | | £m | |
| | | | | |
| Loss for the financial year | (6,533 | ) | (4,954 | ) |
| Currency translation differences on foreign currency net investments and related borrowings | | | | |
| | (240 | ) | 20 | |
| Tax charge on translation differences taken to reserves | — | | (3 | ) |
| |
| |
| |
| | | | | |
| Total loss relating to the financial year | (6,773 | ) | (4,937 | ) |
| | | |
| |
| Prior year adjustment - change in accounting policy for capacity sales | (66 | ) | | |
| |
| | | |
| | | | | |
| Total losses recognised since last annual report | (6,839 | ) | | |
| |
| | | |
Reconciliation of movements in equity shareholders' funds
for the year ended 31 March
| | 2003 | | 2002 | |
| | £m | | £m | |
| | | | | |
| Loss for the financial year | (6,533 | ) | (4,954 | ) |
| Dividends | - interim | (37 | ) | (40 | ) |
| | - special interim | — | | (304 | ) |
| | - final | — | | (83 | ) |
| |
| |
| |
| | | | | |
| Loss for the year carried forward | (6,570 | ) | (5,381 | ) |
| Other recognised gains and losses relating to the year | (240 | ) | 17 | |
| Purchase of own shares | — | | (1,107 | ) |
| New share capital issued | 1 | | 2 | |
| Goodwill written back | — | | 410 | |
| |
| |
| |
| | | | | |
| Net decrease in equity shareholders’ funds | (6,809 | ) | (6,059 | ) |
| Opening equity shareholders’ funds | 8,958 | | 15,017 | |
| |
| |
| |
| | | | | |
| Closing equity shareholders ’ funds | 2,149 | | 8,958 | |
| |
| |
| |
Opening equity shareholders funds were originally £9,024 million before deducting a prior year adjustment of £66 million (2002 - £15,252 million before deducting a prior year adjustment of £235 million) relating to a change in accounting policy for capacity sales.
18
Segmental analysis of Group turnover
for the year ended 31 March
| | | 2003 | | | | | 2002 | | |
| | | £m | | | | | £m | | |
| C&W Global |
| |
|
| US | | | 512 | | | | | | | 530 | | | |
| UK | | | 1,728 | | | | | | | 2,075 | | | |
| Europe | | | 304 | | | | | | | 305 | | | |
| Japan | | | 323 | | | | | | | 361 | | | |
| |
| |
|
| | | 2,867 | | | | | 3,271 | | |
| | | | | | | | | | |
| C&W Regional | | | | | | | | | |
| Caribbean (including Panama) | | 1,062 | | | | | 1,150 | | |
| Asia (including Sakhalin) | | 154 | | | | | 156 | | |
| Rest of World | | 195 | | | | | 160 | | |
| | | 1,411 | | | | | 1,466 | | |
| | | | | | | | | | |
| Inter-regional turnover | | (31 | ) | | | | (34 | ) | |
| | |
| | | | |
| | |
| | | | | | | | | | |
| Continuing operations | | 4,247 | | | | | 4,703 | | |
| Discontinued operations | | 144 | | | | | 1,045 | | |
| | |
| | | | |
| | |
| | | | | | | | | | |
| Group turnover | | 4,391 | | | | | 5,748 | | |
| | |
| | | | |
| | |
Segmental analysis of Group operating (loss)/profit before interest and taxation
for the year ended 31 March
| | Operating (loss)/
profit before
exceptional items | | Exceptional
items | | (Loss)/profit on ordinary
activities before interest and
taxation | |
| |
| 2003 | | 2002 | |
| | £m | | £m | | £m | | £m | |
| C&W Global | (794 | ) | (5,460 | ) | (6,254 | ) | (4,741 | ) |
| C&W Regional | 430 | | (35 | ) | 395 | | 257 | |
| Other | (44 | ) | (378 | ) | (422 | ) | (945 | ) |
| Discontinued operations | (119 | ) | (204 | ) | (323 | ) | 594 | |
| Joint ventures and associates | 75 | | 54 | | 129 | | 71 | |
| |
| |
| |
| |
| |
| | (452 | ) | (6,023 | ) | (6,475 | ) | (4,764 | ) |
| |
| |
| |
| |
| |
19
Segmental analysis of Group share of turnover and operating profit/(loss) of
joint ventures and associates
for the year ended 31 March
| | Turnover | | Operating profit/(loss) | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
| | £m | | £m | | £m | | £m | |
| C&W Global | | | | | | | | |
| Global Services | 6 | | — | | — | | (6 | ) |
| | | | | | | | | |
| C&W Regional | | | | | | | | |
| Caribbean | 111 | | 109 | | 35 | | 35 | |
| Asia | 52 | | 75 | | 13 | | 17 | |
| Rest of World | 91 | | 97 | | 27 | | 25 | |
| |
| |
| |
| |
| |
| | | | | | | | | |
| Continuing operations | 260 | | 281 | | 75 | | 71 | |
| Discontinued operations | — | | 69 | | — | | 44 | |
| |
| |
| |
| |
| |
| | | | | | | | | |
| | 260 | | 350 | | 75 | | 115 | |
| |
| |
| |
| |
| |
The Global Services category comprises businesses which provide services to multi-national customers and consequently supply these services from many geographic locations.
20
Exceptional items
for the year ended 31 March
| | Note | | Exceptional
items
£m | | Taxation
£m | | Minority
interest£m | | 2003
£m | | Exceptional
items
£m | | Taxation
£m | | Minority
interest £m | | 2002
£m | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Operating items | | | | | | | | | | | | | | | | | | |
| Operating costs | (i),(vi) | | (442 | ) | 10 | | 11 | | (421 | ) | (210 | ) | — | | 3 | | (207 | ) |
| Exceptional depreciation | (ii), | | | | | | | | | | | | | | | | | |
| charge | (iii),(vii) | | (2,381 | ) | 48 | | — | | (2,333 | ) | (1,909 | ) | — | | 28 | | (1,881 | ) |
| Goodwill impairment charge | (ii),(vii) | | (2,725 | ) | — | | — | | (2,725 | ) | (2,007 | ) | — | | — | | (2,007 | ) |
| | | |
| |
| |
| |
| |
| |
| |
| |
| |
| | | | (5,548 | ) | 58 | | 11 | | (5,479 | ) | (4,126 | ) | — | | 31 | | (4,095 | ) |
| | | | | | | | | | | | | | | | | | | |
| Non-operating items | | | | | | | | | | | | | | | | | |
| Profits less (losses) on sale and termination of operations | (iii),(viii) | | (147 | ) | — | | — | | (147 | ) | 1,057 | | (228 | ) | 7 | | 836 | |
| Profits less (losses) on disposal of fixed assets | (iv) | | 62 | | — | | (33 | ) | 29 | | — | | — | | — | | — | |
| Write down of investments | (v),(ix) | | (390 | ) | — | | — | | (390 | ) | (904 | ) | — | | — | | (904 | ) |
| | | |
| |
| |
| |
| |
| |
| |
| |
| |
| | | | (6,023 | ) | 58 | | (22 | ) | (5,987 | ) | (3,973 | ) | (228 | ) | 38 | | (4,163 | ) |
| | | |
| |
| |
| |
| |
| |
| |
| |
| |
Year ended 31 March 2003
| (i) | The Group announced a restructuring of the Cable & Wireless Global business on 13 November 2002. Exceptional costs in the period of £248 million associated with this restructuring include £182 million in respect of property costs, £52 million in respect of redundancy costs and £14 million of other costs. Other exceptional costs relate to integration costs of Digital Island and the business activities of Exodus of £31 million, redundancy costs of £38 million principally in Cable & Wireless Regional, £44 million of provisions in respect of rentals on vacant properties and £81 million in respect of onerous network contracts and distressed carrier asset write-offs. |
| | |
| (ii) | The Group has carried out a review to determine whether there has been an impairment of its fixed assets and goodwill. The carrying values of fixed assets and goodwill of each of the Group’s income generating units have been compared to their recoverable amounts, represented by their value in use to the Group. The charge has been determined in accordance with FRS11 which involves amongst other factors using a growth rate of 2.5% after five years (based on a nominal increase in GDP for the countries in which the Group operates), and a discount rate of 14%. The resulting charge in Cable & Wireless Global is £10 million and in other operations £2 million in respect of goodwill and £1,479 million in respect of fixed assets. This charge is in addition to the charge of £2,713 million in respect of goodwill and £787 million in respect of fixed assets recognised at the half year. Exceptional depreciation also includes the write-off of redundant fixed assets of £58 million. Tax credits of £48 million are available on the Cable & Wireless Regional impairment charges of £191 million which was disclosed in the 2002 Group financial statements. |
| | |
| (iii) | The Group has exited its US retail voice business as announced on 15 May 2002. The exceptional costs associated with this amount to £288 million and include exit costs of £200 million, redundant fixed asset write downs of £57 million included in the exceptional depreciation charge and other write downs of £31m. In addition, £84 million of accrued costs relating to disposals in previous years, principally the disposal of the consumer operations of Cable & Wireless Communications plc on 30 May 2000, have been released. (Discontinued - £204 million). |
21
| (iv) | Profit of £62 million on disposal of fixed assets principally comprises a £54 million gain on the sale of part of the Group’s interest in MobileOne (Asia) Pte Ltd (Joint ventures and associates £54 million, Other £8 million). |
| | |
| (v) | The current asset investments principally relating to Pacific Century CyberWorks Ltd (PCCW) have been written down to market value at 31 March 2003 (£274 million). The shares held by the ESOP trust have been written down by £116 million to market value at 31 March 2003. (Cable & Wireless Global £7 million, Other £383 million). |
Year ended 31 March 2002
| (vi) | Exceptional items included in other operating costs relate principally to provisions in respect of ongoing obligations associated with businesses withdrawn from and redundant assets (Cable & Wireless Global £112 million, discontinued operations £6 million), costs associated with the integration of the Web hosting businesses (Cable & Wireless Global £44 million) and redundancy and reorganisation costs incurred (Cable & Wireless Global £48 million). |
| | |
| (vii) | The Group carried out a review as at 31 March 2002 to determine whether there had been an impairment of its fixed assets and goodwill. The carrying values of fixed assets and goodwill of each of the Group’s income generating units were compared to their recoverable amounts, represented by their value in use to the Group. In accordance with FRS11, the value in use of each of the Group’s income generating units was determined with reference to the Group’s five year plan, which had been approved by the Board, using a growth rate of 2.5% in the period beyond the Group’s five year plan (based on a nominal increase in GDP for the countries in which the Group operates), and an average discount rate of 11%. The resulting charge in Cable & Wireless Global is £2,007 million in respect of goodwill and £1,502 million in respect of fixed assets and in Cable & Wireless Regional £191 million in respect of fixed assets and £87 million in respect of fixed assets in discontinued operations. In addition, £129 million of fixed assets relating to Cable & Wireless Global businesses withdrawn from service were written off at 30 September 2001. |
| | |
| (viii) | The Group disposed of its interest in Cable & Wireless Optus Limited to Singapore Telecommunications Limited (SingTel) on 6 September 2001 resulting in a gain of £1,057 million and was included as part of discontinued operations. The consideration received included shares and bonds issued by SingTel which were converted into cash. |
| | |
| (ix) | Current asset investments held in ntl Incorporated (ntl) and CMGI Inc. were written down to nil value and the investment in PCCW written down to estimated realisable value (Other £904 million). |
22
Reconciliation of operating loss to net cash inflow from operating activities
for the year ended 31 March
| | 2003
£m | | 2002
£m | |
| |
| |
| |
| Operating loss | (6,075 | ) | (5,025 | ) |
| Add back non-cash items: | | | | |
| Depreciation and amortisation (before exceptional items) | 861 | | 1,634 | |
| Exceptional non-cash items | 5,446 | | 3,916 | |
| Other non-cash items | 27 | | 197 | |
| Decrease/(increase) in stocks | 33 | | (90 | ) |
| Decrease/(increase) in debtors | 882 | | (182 | ) |
| Decrease in creditors | (893 | ) | (156 | ) |
| Fundamental reorganisation costs | (89 | ) | (133 | ) |
| Net cash outflow in respect of provisions | (97 | ) | (67 | ) |
| |
| |
| |
| Net cash inflow from operating activities | 95 | | 94 | |
| |
| |
| |
Reconciliation of net cash flow to movement in net funds/(debt)
for the year ended 31 March
| | 2003
£m | | 2002
£m | |
| |
| |
| |
| (Decrease)/increase in cash in the year | (2,120 | ) | 1,635 | |
| Cash outflow/(inflow) resulting from (increase)/decrease in debt and lease financing | 581 | | (538 | ) |
| Cash outflow/(inflow) resulting from increase/(decrease) in liquid resources | 1,040 | | (2,586 | ) |
| |
| |
| |
| Decrease in net debt resulting from cash flows | (499 | ) | (1,489 | ) |
| Borrowings of businesses acquired and disposed | — | | 1,239 | |
| Translation and other differences | 87 | | (22 | ) |
| |
| |
| |
| Movement in net debt in the year | (412 | ) | (272 | ) |
| Net funds at 1 April | 2,020 | | 2,292 | |
| |
| |
| |
| Net funds at 31 March | 1,608 | | 2,020 | |
| |
| |
| |
Analysis of changes in net funds
| | At 1 April
2002
£m | | Cash
Flow
£m | | Exchange
movements
£m | | At 31
March 2003
£m | |
| |
| |
| |
| |
| |
| Cash at bank and in hand | 216 | | (7 | ) | (13 | ) | 196 | |
| Short term deposits repayable on demand | 2,240 | | (2,121 | ) | 21 | | 140 | |
| Bank overdrafts | (11 | ) | 8 | | 1 | | (2 | ) |
| |
| |
| |
| |
| |
| | 2,445 | | (2,120 | ) | 9 | | 334 | |
| |
| |
| |
| |
| |
| Liquid resources | 1,823 | | 1,040 | | (45 | ) | 2,818 | |
| |
| |
| |
| |
| |
| Debt due within 1 year | (226 | ) | (707 | ) | 110 | | (823 | ) |
| Debt due after 1 year | (2,022 | ) | 1,288 | | 13 | | (721 | ) |
| |
| |
| |
| |
| |
| Total debt | (2,248 | ) | 581 | | 123 | | (1,544 | ) |
| |
| |
| |
| |
| |
| Total net funds | 2,020 | | (499 | ) | 87 | | 1,608 | |
| |
| |
| |
| |
| |
23
US GAAP
The Group prepares its consolidated accounts in accordance with generally accepted accounting principles (GAAP) in the United Kingdom which differ in certain material respects from US GAAP. The significant differences relate principally to the following items and the adjustments necessary to present net income and shareholders’ equity in accordance with US GAAP are shown below.
Reconciliation of UK/US GAAP - net income
for the year ended 31 March
| | | 2003
£m | | 2002*
£m | |
| | |
| |
| |
| Net loss as reported under UK GAAP | (6,533 | ) | (4,954 | ) |
| | | | | | |
| US GAAP adjustments: | | | | | |
| Amortisation and impairment of goodwill and other intangible assets | 53 | | (242 | ) |
| Customer acquisition costs | (5 | ) | 16 | |
| Restructuring costs and onerous contracts | 149 | | (69 | ) |
| Derivative and hedge accounting | (59 | ) | 64 | |
| Partial depreciation | | — | | (3 | ) |
| Capitalisation of interest | | (6 | ) | (28 | ) |
| Deferred tax-differences in accounting for income tax standards | 58 | | (27 | ) |
| Marketable securities | | 4 | | (126 | ) |
| Pension costs | | 18 | | (15 | ) |
| Gain on sale of subsidiary | — | | 33 | |
| Capacity sales | | 2 | | (13 | ) |
| Stock based compensation | (4 | ) | (26 | ) |
| ESOP Shares | | 120 | | — | |
| Other | | 10 | | (10 | ) |
| Minority interest on reconciling items | (21 | ) | 21 | |
| |
| |
| |
| Net loss under US GAAP before cumulative effect of change in accounting principle | (6,214 | ) | (5,379 | ) |
| Cumulative effect of change in US accounting principle for derivatives in 2002 | — | | 8 | |
| |
| |
| |
| Net loss under US GAAP | (6,214 | ) | (5,371 | ) |
| |
| |
| |
| | | | | | |
| Loss per share under USGAAP | | | | | |
| — Basic | | (266.7 | )p | (196.5 | )p |
| — Diluted | | (266.7 | )p | (196.5 | )p |
| Loss per ADR under US GAAP** | | | | |
| — Basic | | (800.1 | )p | (589.5 | )p |
| — Diluted | | (800.1 | )p | (589.5 | )p |
| | |
| |
| |
| * | The results for 2002 have been adjusted to reflect the change in accounting policy for capacity sales in light of the adoption ofUITF Abstract 36 ‘Contracts for sales of capacity’ and related consequential effects. |
| |
| ** | Computed on the basis that one ADR represents three Ordinary Shares. |
24
Reconciliation of UK/US GAAP - shareholders’ equity
for the year ended 31 March
| | 2003
£m | | 2002*
£m | |
| |
| |
| |
| Shareholders’ equity as reported under UK GAAP | 2,149 | | 8,958 | |
| US GAAP adjustments: | | | | |
| Goodwill and other intangible assets | 307 | | 284 | |
| Customer acquisition costs | (11 | ) | (8 | ) |
| Restructuring costs | 146 | | — | |
| Derivative and hedge accounting | (1 | ) | 60 | |
| Capitalisation of interest | 16 | | 22 | |
| Deferred tax - difference in accounting for income tax standards | — | | (58 | ) |
| Gain/(loss) on marketable securities | 42 | | (2 | ) |
| Pension costs | (454 | ) | (36 | ) |
| ESOP shares | (38 | ) | (123 | ) |
| Proposed final dividend | — | | 83 | |
| Capacity sales | (27 | ) | (29 | ) |
| Other | (5 | ) | (15 | ) |
| Minority interest on reconciling items | 1 | | 22 | |
| |
| |
| |
| Shareholders' equity under US GAAP | 2,125 | | 9,158 | |
| |
| |
| |
| * | The shareholders’ equity reconciliation for 2002 has been adjusted to reflect the change in accounting policy for capacity sales in light of the adoption of UITF Abstract 36 ‘Contracts for sales of capacity’ and related consequential effects. |
25
Additional information for US investors
Additional information and specific enquiries concerning Cable & Wireless ADRs should be addressed to Citibank, N.A., American Depositary Receipts, 111 Wall Street, New York, NY 10043, USA, (Telephone: Shareholder Services - 001-800-422-2066).
Nature of Financial Statements
These financial statements are not the full financial statements for the Group. The abridged profit and loss account and balance sheet for the year to 31 March 2002 is an extract from the full accounts for that year which have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified. The full financial statements for this year, on which the Auditors have reported without qualification, have not yet been delivered to the Registrar of Companies. A full copy of the financial statements or the Annual Review will be mailed to shareholders on 25 June 2003 and can be obtained thereafter from K.K. Claydon, Company Secretary, at 124 Theobalds Road, London WC1X 8RX.
Annual General Meeting
The Annual General Meeting will be held at 11.30am on 25 July 2003.
If you have any enquiries as a UK shareholder, please call the Company Secretary’s Office on 020 7315 4000. US shareholders should call Citibank, N.A. on 001-800-422-2066.
26
APPENDIX A
In presenting financial information for the year ended 31 March 2003 regarding the businesses that formed part of Global, certain assumptions have been made regarding revenue and cost allocation based on unaudited management information. This is necessary as the businesses have not been managed separately throughout the year. As announced today, these businesses will now be managed separately, with individual balance sheets, profit and loss accounts and cashflows, and formal intragroup pricing. The information provided today should therefore be used as a guide to the relative performance of the businesses. It may not be directly comparable with future analysis.
Cable & Wireless Group Performance Analysis
| Continuing Operations | Global | | | Regional | | Corporate | | | Other | | | 2003 | | | 2002 | | | Reported | | | Constant | |
| | | | | | | | | | | | | | | | | | | Growth | | | Currency | |
| | | | | | | | | | | | | | | | | | | | | | Growth | |
| | £m | | | £m | | £m | | | £m | | | £m | | | £m | | | % | | | % | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Revenue | 2,867 | | | 1,411 | | — | | | (31) | | | 4,247 | | | 4,703 | | | (10 | ) | | (5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Outpayments & network costs | 1,862 | | | 443 | | — | | | (31 | ) | | 2,274 | | | 2,611 | | | | | | | |
| Staff costs | 630 | | | 206 | | 32 | | | | | | 868 | | | 819 | | | | | | | |
| Other Costs | 495 | | | 172 | | 9 | | | | | | 676 | | | 490 | | | | | | | |
| |
|
| Total Operating costs | 2,987 | | | 821 | | 41 | | | (31 | ) | | 3,818 | | | 3,920 | | | (3 | ) | | (1 | ) |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| |
|
| Adjusted EBITDA | (120 | ) | | 590 | | (41 | ) | | — | | | 429 | | | 776 | | | (45 | ) | | (38 | ) |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted operating profit/(loss)* | (667 | ) | | 504 | | (44 | ) | | — | | | (207 | ) | | (65 | ) | | (218 | ) | | | |
| |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| * Stated before exceptionals and goodwill amortisation |
| Reconciliation to Consolidated Operating Loss | 2003 | | | 2002 | | |
| | | | | | | |
| | £m | | | £m | | |
| | | | | | | |
| Group operating loss before exceptionals and goodwill amortisation | (207 | ) | | (65 | ) | |
| |
| | |
| | |
| Operating exceptional items | (5,548 | ) | | (4,126 | ) | |
| Amortisation before exceptionals | (126 | ) | | (562 | ) | |
| Discontinued items before exceptionals | (119 | ) | | (159 | ) | |
| |
| | |
| | |
| Total operating loss | (6,000 | ) | | (4,910 | ) | |
| |
| | |
| | |
| |
|
27
Cable & Wireless Regional Performance Analysis
| Continuing | Caribbean | | Panama | | Macau | | Rest of | | 2003 | | 2002 | | Growth | | Constant | |
| Operations | | | | | | | the World | | Total | | Total | | | | currency | |
| | | | | | | | | | | | | | | | Growth | |
| | £m | | £m | | £m | | £m | | £m | | £m | | % | | % | |
| | | | | | | | | | | | | | | | | |
| International Voice | 268 | | 42 | | 35 | | 92 | | 437 | | 506 | | -14 | | -5 | |
| | | | | | | | | | | | | | | | | |
| Domestic Voice | 236 | | 162 | | 20 | | 33 | | 451 | | 471 | | -4 | | 5 | |
| Mobile | 143 | | 38 | | 58 | | 50 | | 289 | | 250 | | 16 | | 26 | |
| IP & Data | 84 | | 22 | | 27 | | 20 | | 153 | | 143 | | 7 | | 17 | |
| Other | 52 | | 15 | | 10 | | 4 | | 81 | | 89 | | -9 | | -1 | |
| |
|
| Total Revenue | 783 | | 279 | | 150 | | 199 | | 1,411 | | 1,459 | | -3 | | 6 | |
| |
|
| Growth | -9 | % | -6 | % | 3 | % | 25 | % | -3 | % | | | | | | |
| Constant currency growth | 1 | % | 1 | % | 11 | % | 37 | % | 6 | % | | | | | | |
| | | | | | | | | | | | | | | | | |
| Outpayments & network costs | 242 | | 69 | | 61 | | 71 | | 443 | | 439 | | | | | |
| Staff costs | 127 | | 33 | | 15 | | 31 | | 206 | | 217 | | | | | |
| Other Costs | 116 | | 41 | | 14 | | 1 | | 172 | | 176 | | | | | |
| |
|
| Total Op co | 485 | | 143 | | 90 | | 103 | | 821 | | 832 | | -1 | | 9 | |
| |
|
| Adjusted EBITDA | 298 | | 136 | | 60 | | 96 | | 590 | | 627 | | -6 | | 2 | |
| |
|
| | | | | | | | | | | | | | | | | |
| EBITA | 220 | | 91 | | 42 | | 76 | | 429 | | 443 | | -3 | | 5 | |
| |
|
| JVs & Assocs | 35 | | — | | — | | 40 | | 75 | | 77 | | -3 | | | |
| |
|
| Adjusted operating profit* | 255 | | 91 | | 42 | | 116 | | 504 | | 520 | | -3 | | | |
| |
|
‘Rest of the World’ comprises the results of C&W Regional’s businesses in the Atlantic, Pacific and Indian Oceans, the Middle East and C&W Guernsey.
In FY 2001/02 Cable & Wireless disposed of its interest in Mitratel. The results for Mitratel have been excluded from the table above. Mitratel contributed £7m to revenues, £2m to EBITDA and £1m to operating profit in the prior year.
| * Operating profit is stated before exceptionals and goodwill amortisation. |
28
Cable & Wireless Global Performance Analysis
| | US | | | UK | | | Europe | | | Japan | | | 2003 | | | 2002 | | | Growth | |
| | £m | | | £m | | | £m | | | £m | | | £m | | | £m | | | % | |
| | | | | | | | | | | | | | | | | | | | | |
| Revenues | | | | | | | | | | | | | | | | | | | | |
| Enterprise | 256 | | | 449 | | | 19 | | | 40 | | | 764 | | | 631 | | | 21 | |
| Service Provider | 108 | | | 725 | | | 223 | | | 75 | | | 1,131 | | | 1,472 | | | -22 | |
| Business | 148 | | | 554 | | | 62 | | | 208 | | | 972 | | | 1,161 | | | -16 | |
| |
|
| Continuing Revenue | 512 | | | 1,728 | | | 304 | | | 323 | | | 2,867 | | | 3,264 | | | -12 | |
| |
|
| Growth | -3 | % | | -16 | % | | 0 | % | | -11 | % | | -11 | % | | | | | | |
| Constant currency growth | 4 | % | | -16 | % | | 2 | % | | -4 | % | | -5 | % | | | | | | |
| Discontinued | 144 | | | - | | | - | | | - | | | 144 | | | 281 | | | -49 | |
| |
|
| Total Revenue | 656 | | | 1,728 | | | 304 | | | 323 | | | 3,011 | | | 3,545 | | | -15 | |
| |
|
| Growth | -19 | % | | -16 | % | | 0 | % | | -11 | % | | -15 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Outpayments & network costs | 279 | | | 1,160 | | | 240 | | | 183 | | | 1,862 | | | 2,202 | | | -15 | |
| Staff costs | 257 | | | 292 | | | 55 | | | 54 | | | 658 | | | 569 | | | 10 | |
| Other operating costs | 187 | | | 166 | | | 50 | | | 64 | | | 467 | | | 296 | | | 68 | |
| |
|
| Total Operating costs | 723 | | | 1,618 | | | 345 | | | 301 | | | 2,987 | | | 3,067 | | | -3 | |
| |
|
| | | | | | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | | | | | | | | | | | | | | | | | | | |
| Continuing operations | (211 | ) | | 110 | | | (41 | ) | | 22 | | | (120 | ) | | 197 | | | | |
| Discontinued | (95 | ) | | — | | | — | | | — | | | (95 | ) | | (241 | ) | | | |
| |
| | | |
| Total EBITDA | (306 | ) | | 110 | | | (41 | ) | | 22 | | | (215 | ) | | (44 | ) | | | |
| |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| Adjusted Continuing Operating (loss) | (255 | ) | | (303 | ) | | (69 | ) | | (40 | ) | | (667 | ) | | (534 | ) | | | |
All figures are based on Cable & Wireless management information and are unaudited. The figures above reflect the impact of UITF Abstract 36 ‘Contracts for sales of capacity’ and exclude the impact of capacity sales as defined by that statement.
Operating loss is stated before goodwill amortisation but includes joint ventures and associates.
29
