C&W guidance cut overshadows demerger plans

By Kate Holton

LONDON (Reuters) - Cable & Wireless (C&W) (CW.L) cut full-year earnings guidance on Thursday due to a poor performance in the Caribbean, overshadowing a fresh bid to demerge the British cable group and hammering its shares.

C&W said it cut the earnings guidance for the International division (CWI) because falling tourist numbers in the Caribbean had resulted in less overall demand for its services in the region.

It also reported first half results which missed revenue targets but beat earnings forecasts due to cost cuts and improved margins.

"While the market has seemingly been keen for a demerger, the uncertainty surrounding the timing and the performance of one of the two components could temper enthusiasm in the short term," RBS analyst Chris Alliott said in a note.

The group said it would give further details on the demerger, such as timing, by the end of this month.

Other analysts were unimpressed with the update, with several disappointed at the cut in earnings guidance and others noting that the demerger comments did not add much.

The group said it would now relaunch the demerging process, put on hold a year ago due to poor market conditions. It will split into Worldwide (CWW), which offers business communications across Europe, Asia and the United States, and International, which provides fixed-line and mobile services in the Caribbean, Macau, Panama and others.

"As a result of the emerging signs of more settled conditions in financial markets, we are now moving forward to list the two businesses as independent, publicly-quoted companies," Chairman Richard Lapthorne said.