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Overseas arm deals blow to C&W split plan
Nov 06, 2009 (Daily Mail - McClatchy-Tribune Information Services via COMTEX) --
A money-spinning plan to carve Cable & Wireless in two has been dealt a blow after the telecoms giant sounded the alarm on its Caribbean business.
A slump in tourists ringing home from their sun loungers will see underlying profits at C&W's overseas arm plunge by as much as one tenth this year, the group warned.
The growing "trouble in paradise" sparked a 6pc drop -- down 9.1p to 138.9p -- in the C&W share price, overshadowing the revival of a plan to split apart its UK and international divisions.
The demerger proposal, which could trigger meaty payouts for executives, was put on ice at the height of the financial panic last year.
But the renaissance in stock and money markets has encouraged chairman Richard Lapthorne to dust down the demerger blueprint.
This would see C&W spin off its international wing -- a consumer business operating mainly in ex-British colonies in the Caribbean and Asia -- from the UK business.
The carve-up could potentially flush out bidders for the two disparate businesses. This in turn could release massive rewards for C&W bosses under the group's highly controversial private equity-style pay scheme.
The pay plan was extended by 12 months to give bosses more time to hit their targets -- sparking an embarrassing revolt at this summer's shareholder meeting.
But analysts warned that there are many obstacles to overcome before the split can be achieved, including a GBP305m pension deficit and the modest cash flows generated by the UK arm.
"In the absence of a trade buyer, we fail to see the value created by such a (demerger) move," said Jonathan Groocock at stockbroker Investec.
C&W has already paid out GBP32m to execs under its contentious pay plan and yesterday set aside a further GBP9m for the bonus pot after C&W delivered a 42pc rise in pretax profit to GBP163m between April and September.
Analysts at Morgan Stanley described the half-time numbers, which included a 12pc hike in the interim dividend to 3.16p, as "poor."
Uncertainty is likely to continue to dog the Caribbean business.
Despite signs that visitor numbers are stabilising, finance chief Tim Pennington admitted: "We just don't know what the winter season will produce."
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