Cable & Wireless Worldwide could be a focus for M&A activity,
analysts believe, following its third profit warning in a year
yesterday.
The group yesterday saw its shares beat a retreat after it warned slower than expected sales orders means its full year profits will come in below expectations. It plans to slash the full year dividend by half.
The company also announced the resignation of its chief executive Jim Marsh and revealed chairman John Pluthero will be taking over at helm of the telecom group.
Its problems on the sales front, coupled with an intention to accelerate the investments in the hosting and cloud arena, is expected to lead to earnings before interest, tax, depreciation, and amortisation (EBITDA) for its current year coming in “some 5 to 10 percent below current market expectations”, with an attendant impact on trading cash flow.
As a consequence of the reduced cash flow forecast, the Cable & Wireless board has decided to cut the intended dividend for the current 2011/2012 year by half to 2.25 pence per share.
In the wake of the warning, Goldman Sachs analysts cut their EBITDA estimates for the group by 12 percent for its 2012 year and 13 per cent for the 2013 year.
The lower forecasts mean its 12-month target price has reduced 22% to 49p from 63p. The Goldman analysts warn: “Visibility on growth is deteriorating and pricing pressure accelerating - operations could get worse near term.”
The analysts believe there is potential upside from a new cost cutting programme flagged by the new chief executive John Pluthero but, equally, there is now the prospect of M&A activity involving the company.
Broker JP Morgan also points to potential M&A activity, saying the prospects for a break-up or takeover of the company is likely to limit downside for the shares. It notes that Cable & Wireless Worldwide management have already stated they have an open mind about the group’s appropriate asset base going forward, which may further fuel expectations of M&A going forwards.
JP Morgan, which has a ‘neutral’ stance on the shares with a price target of 48p. It wants the company to reaffirm forecasts and indicate that the downgrade cycle has ended.
Broker Citi, meanwhile, points out that the appointment of Pluthero as chief executive of Cable & Wireless Worldwide risks being seen as an interim measure as he had stepped back from executive role to become the group chairman. He will be under pressure to show how he intends to turn around operations.
Read more - http://www.proactiveinvestors.co.uk/companies/news/29981/cable-wireless-ma-activity-eyed-by-analysts-29981.html
The group yesterday saw its shares beat a retreat after it warned slower than expected sales orders means its full year profits will come in below expectations. It plans to slash the full year dividend by half.
The company also announced the resignation of its chief executive Jim Marsh and revealed chairman John Pluthero will be taking over at helm of the telecom group.
Its problems on the sales front, coupled with an intention to accelerate the investments in the hosting and cloud arena, is expected to lead to earnings before interest, tax, depreciation, and amortisation (EBITDA) for its current year coming in “some 5 to 10 percent below current market expectations”, with an attendant impact on trading cash flow.
As a consequence of the reduced cash flow forecast, the Cable & Wireless board has decided to cut the intended dividend for the current 2011/2012 year by half to 2.25 pence per share.
In the wake of the warning, Goldman Sachs analysts cut their EBITDA estimates for the group by 12 percent for its 2012 year and 13 per cent for the 2013 year.
The lower forecasts mean its 12-month target price has reduced 22% to 49p from 63p. The Goldman analysts warn: “Visibility on growth is deteriorating and pricing pressure accelerating - operations could get worse near term.”
The analysts believe there is potential upside from a new cost cutting programme flagged by the new chief executive John Pluthero but, equally, there is now the prospect of M&A activity involving the company.
Broker JP Morgan also points to potential M&A activity, saying the prospects for a break-up or takeover of the company is likely to limit downside for the shares. It notes that Cable & Wireless Worldwide management have already stated they have an open mind about the group’s appropriate asset base going forward, which may further fuel expectations of M&A going forwards.
JP Morgan, which has a ‘neutral’ stance on the shares with a price target of 48p. It wants the company to reaffirm forecasts and indicate that the downgrade cycle has ended.
Broker Citi, meanwhile, points out that the appointment of Pluthero as chief executive of Cable & Wireless Worldwide risks being seen as an interim measure as he had stepped back from executive role to become the group chairman. He will be under pressure to show how he intends to turn around operations.
Read more - http://www.proactiveinvestors.co.uk/companies/news/29981/cable-wireless-ma-activity-eyed-by-analysts-29981.html
