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Annual financial
report Announcement
22 June 2015
CABLE & WIRELESS COMMUNICATIONS PLC
Annual financial report Announcement
FOR THE year ENDED 31 march 2015
Cable & Wireless Communications Plc (the Company) has submitted copies of the following documents to the UK Listing Authority:
- Letter from the Chairman and Notice of Annual General Meeting (AGM);
- Proxy Form;
- Letter of Availability; and
- Annual Report and Accounts for the year ended 31 March 2015.
These documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM
The Annual Report and Accounts together with the letter from the Chairman and Notice of AGM or the Letter of Availability, together with a Proxy Form were posted to shareholders on 18 June 2015. Copies of these documents (with the exception of the Proxy Form and Letter of Availability) and links to the relevant services are available on the Company's website (www.cwc.com) and from the Company Secretary, 2nd Floor, 62-65 Chandos Place, London, WC2N 4HG.
In accordance with FCA's Disclosure and Transparency Rule 6.3.5, the Appendix to this announcement contains a description of the principal risks and uncertainties affecting the Group, related party transactions and a responsibility statement.
A condensed set of Cable & Wireless Communications Plc's financial statements and information on important events that have occurred during the financial year ended 31 March 2015 and their impact on the financial statements were included in Cable & Wireless' preliminary results announcement released on 20 May 2015. That information, together with the information set out below, which is extracted from the 2014/15 Annual Report, constitute the material required by Disclosure and Transparency Rule 6.3.5 which is required to be communicated to the media in full unedited text through a Regulatory Information Service. This announcement is not a substitute for reading the full 2014/15 Annual Report. Page and note references in the text below refer to page numbers in the 2014/15 Annual Report and notes to the financial statements.
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Cable & Wireless Communications |
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Investors |
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Kunal Patel +44 (0) 20 7315 4083 |
Grace Silvera +1 786 353 8156 |
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Mike Gittins +44 (0) 20 7315 4184 |
Neil Bennett (Maitland) +44 (0) 20 7379 5151 |
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APPENDIX
Principal risks and uncertainties
We recognise that there are risks in operating our businesses, influenced by both internal and external factors, some of which are outside our control. The Group has a risk management framework which our business units and corporate functions utilise to ensure risks are understood and mitigated as appropriate.
We set out a description of the principal risks and uncertainties that could have a material adverse effect on the Group and how they are managed. These risks have the potential to impact our business, its reputation, cash flow, profits and/or assets. However, there may be other risks that are currently unknown or regarded as not material. We update the Group risk register on a rolling 12-month basis. Actions to manage and monitor risks are considered on a quarterly basis by the Group's Executive Team. Our refresh of the Group risk register has resulted in some changes from the risks disclosed last year. We have summarised these changes herein. Investors should consider the changes in risk, the risks reported, and other information provided in this Annual Report.
New risks
The acquisition of Columbus and integration have introduced new regulatory risks, risks around integration of team members, risks related to integration of business activities, and other risks around integration costs and synergies.
Risks removed
The refresh of our risk register resulted in the removal of risks related to business change, joint ventures and associates and investment risk. We previously reported business risk related to our revised operating model and transition to the Miami operational hub to better exploit available opportunities and realise synergies. At 31 March 2015, the transition to the Miami operational hub was complete and the integration between the Group and Columbus was under way. Our risk related to joint ventures and associates has been removed as a result of the acquisition of Columbus. Based on conditions attached to the regulatory approval from the Telecommunications Authority of Trinidad and Tobago, we have reclassified our 49% shareholding in TSTT to be held for sale. Additionally, the joint venture with Columbus (a 27.5% economic interest) has been unwound as a result of the acquisition. Finally, we have removed our previously reported investment risk as we have completed the acquisition of Columbus and completed the disposals of Macau, Monaco & Islands sub-group.
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Risk and impact |
Trend Strategy impacted |
Mitigation |
Acquisition and integration of ColumbusThe acquisition of Columbus raises two key risks: Regulatory Risk - While completion of the acquisition was not conditional upon obtaining regulatory approvals in jurisdictions outside of Barbados, Jamaica, Trinidad and Tobago and the USA, there are a number of jurisdictions in respect of which regulatory notifications and/or approvals are required. The relevant authorities in these jurisdictions may impose conditions or decline to give approval or may seek to otherwise intervene in the acquisition. This might result in delays, financial penalties, suspension or removal of the relevant operating licence, or the imposition of unfavourable conditions in respect of these jurisdictions. Additionally, competitors, customers and other third parties may seek to intervene, potentially exacerbating any difficulties in the clearance process. It is also possible that following closing of the acquisition, the combined group may be subject to more intensive regulatory scrutiny which may adversely impact the business. Moreover, it is possible that we will not realise a maximised value from our divestiture of TSTT due to the forced nature of the sale (which is a condition to the approval from the Telecommunications Authority of Trinidad and Tobago). We also risk creating a new competitor in Trinidad and Tobago.
Integration and Synergy Risk - The integration process may be complex and difficult to complete and will raise risks relating to colleague retention, integrating employee groups, and disruption or failures of networks and services, among others. Additionally, integration may take longer than is expected, difficulties relating to integration may arise, or we may not achieve anticipated cost reductions and efficiencies which may affect the profitability of the combined business. |
Risk trend increasing Make the integration a success Fixed-mobile convergence Grow our B2B and B2G business Video and content leadership Build leading wholesale network |
We have worked carefully with local counsel in each market to ensure that the applicable laws and licence conditions are complied with We have consulted with relevant local stakeholders to address their concerns, including by offering commercially sound consumer protection measures where appropriate
We have established an Integration Management Office (IMO) and appointed a Cable & Wireless Executive Team member to lead the integration project The IMO is overseen by an Integration Steering Committee and Governing Board Under the oversight of the IMO, we have created several integration teams including Organisation & Operating Model, Human Resources, Procurement and Supply Chain, Network Operations and Technology, Customer Support and Finance. Each of the integration teams are led by senior management, who are responsible for ensuring the achievement of predefined objectives We have implemented retention plans to ensure continuity of key team members We have ongoing programmes of communications and events to keep team members abreast of our integration plans |
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Service disruption Our networks form part of a country's critical national infrastructure, and therefore, we are relied upon on a daily basis to deliver a high quality, resilient service. Disruption to our network and IT systems from events such as hurricanes and other natural disasters, fire, security breaches or human error could damage our reputation and also result in a loss of customers or financial claims. |
Risk trend decreasing Drive to mobile leadership Fixed-mobile convergence |
We have increased our capital investment under Project Marlin, our three-year plan to invest in our networks and improve the reliability and resilience of our networks We completed our acquisition of Columbus, which has accelerated the execution of our strategy and will support our ability to deliver greater network resilience and capacity to improve the overall customer experience All our businesses have business continuity policies and major incident management plans in place which we continue to review to ensure that they remain up to date We also have insurance coverage where commercially suitable to do so in order to mitigate the effects of these risks |
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Competitive activity We continue to operate in a fiercely competitive environment. Competitor activity and new market entrants could, through a combination of aggressive pricing and promotional activity, reduce our market share and margins. Our mobile monopoly in The Bahamas has expired, as such some loss of market share and increased price pressure is inevitable. The strength of our ability to provide triple and quad play offerings are being challenged by our competitors' attempts to expand their capability in our markets. Failure by the combined Group to compete effectively could have a significant adverse effect on revenues, profitability and cash flow. |
Risk trend stable Drive to mobile leadership Grow our B2B and B2G business Video and content leadership Build leading wholesale network |
We are increasing our capital investment to improve customer experience Our commercial capability is being strengthened through our Miami operational hub We have been preparing for the liberalisation of the Bahamian mobile market since we acquired BTC to ensure we are well placed to compete We engineer our customer propositions based on our strengths relative to competitors - in particular our ability to deliver triple and quad play in many markets |
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Regulatory risk We need to comply with a large range of regulations and licence terms which govern our operations across the multiple legal jurisdictions in which we operate. In particular we are reliant on Governments and Regulators for access, on mutually beneficial terms, to spectrum both for existing and for next generation mobile services. We are also impacted by key regulatory decisions relating to pricing such as the determination of termination rates. Failure to comply with regulations or adverse regulatory decisions could impact the value of our investments, result in fines or restrict the ability to operate or provide new services to our customers. |
Risk trend increasing Fixed-mobile convergence Grow our B2B and B2G business Build leading wholesale network |
We actively liaise with regulators to encourage a positive working relationship based upon open dialogue We continuously monitor developments in the regulatory environment for all our businesses Regular reports are made to the Executive Team on regulatory risks We employ local team members who are experienced in local laws and regulations In connection with securing regulatory approval for the acquisition of Columbus, we agreed to dispose our 49% stake in TSTT |
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Business development The development of mobile data, pay TV and our B2B/B2G capabilities together with other sources of revenue growth fail to perform as anticipated. This could result in the Group failing to mobilise into new business lines in sufficient time to offset the structural decline in traditional voice revenues experienced across the telecoms industry. Failure to achieve profitable revenue growth will lead to a reduction in future profitability and cash flow. |
Risk trend decreasing Grow our B2B and B2G business Video and content leadership |
Our commercial capability is being strengthened through our Miami operational hub and the acquisition of Columbus provides us with new opportunities to develop innovative products that appeal to our combined customer base We ensure focused attention on marketing and product development activities and are increasing our work to cross share initiatives We focus closely on the pricing of new services to ensure the Group achieves the required return |
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Economic conditions The challenging economic environment in some of our major territories and the importance of overseas tourism to the economies of some countries could continue to suppress government and consumer spending impacting our profitability and cash flow. |
Risk trend decreasing
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We continue to monitor key economic indicators (which have improved over the past year) and remain prepared to take action to address any indicators of deteriorating economic conditions in our markets We continuously seek to improve efficiency and reduce costs in order to best meet customer price expectations |
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Political risk A change in the political environment could lead to changes in law, government policy or attitudes towards foreign investment. This could have an adverse impact on our business operations, investment decisions and profitability. |
Risk trend stable
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We have a unique position in key markets such as Panama and The Bahamas in that local Governments are significant investors in our businesses We monitor political developments in both existing and potential markets closely We actively liaise with governments and opposition parties to encourage a positive working relationship with open communication at senior levels We aim to contribute positively to the social and economic development of the communities where we operate |
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Network and data security We carry and store large volumes of confidential personal and corporate data. Unauthorised access to sensitive data by third parties or employees could have an adverse effect on the Group's business, its reputation and expose the business to litigation. |
Risk trend stable
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The Group has information security procedures and controls in place which are regularly reviewed Remedial action plans are implemented where necessary We conduct third party data security reviews as required |
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Technology New technology developments may render our existing products, services and supporting infrastructure obsolete or non-competitive. As a result this may require the Group to increase its rate and level of investment in new technologies which affect cash flow and profit. Concerns are occasionally expressed that mobile phones and transmitters may pose long-term health risks which, if proven, may result in the Group being exposed to litigation. |
Risk trend stable Drive to mobile leadership Fixed-mobile convergence Video and content leadership |
New technology developments are under constant review and new technologies are introduced when appropriate We continue to keep abreast of the latest research on the potential health risks of mobile phones and transmitters |
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Key supplier risk The Group is reliant on a relatively small number of key suppliers. A number of key operational functions are outsourced to third parties. There is a risk that such contracts fail to deliver the required operational improvements and/or financial savings exposing us to financial or reputational risk. Business continuity could be impacted in the event that one of our key suppliers fail. |
Risk trend stable Drive to mobile leadership Fixed-mobile convergence Video and content leadership |
We conduct due diligence procedures on suppliers to ensure they meet our requirements We have comprehensive contracts in place with suppliers to define the services supplied and the standards expected Governance processes are in place to review the performance of our suppliers |
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Health and safety The Group operates equipment across many geographically dispersed network and cell sites in the countries in which we operate. We are currently rationalising and decommissioning certain of our sites and equipment as part of our network upgrades and integration projects. Due to the age of the sites and equipment, there is an inherent risk in this project that may cause harm to our employees, contractors and members of the public. In the absence of proper operational and access safeguards, this equipment could cause harm or even death to our employees, contractors and members of the public. We could also suffer consequential criminal prosecutions, fines and reputational damage. |
Risk trend increasing
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Periodic reporting to the Executive Team and the Board on health and safety standards across the Group and any incidents experienced Incident reports performed for significant health and safety events Increased focus on managing health and safety risks, particularly in the Caribbean Investment to upgrade our network in the Caribbean, retire legacy equipment and rationalise property locations Maintenance of insurance cover for employer's liability |
Related party transactions
The related parties identified by the Directors include joint ventures, associated undertakings, investments and key management personnel. To enable users of our financial statements to form a view about the effects of related party relationships on the Group we disclose the related party relationship when control exists, irrespective of whether there have been transactions between the related parties.
Transactions with joint ventures and associates
All trade transactions with joint ventures and associates arise in the normal course of business and primarily relate to fees for use of the Group's products and services, network and access charges. Group subsidiaries had transactions with Telecommunications Services of Trinidad and Tobago Ltd and Seychelles Cable System Limited during the year. The transactions were in relation to the sale and purchase of telecommunication services. In respect of these transactions, US$3 million has been reported within revenue and US$2 million in cost of sales (2013/14 - US$3 million and US$2 million respectively).
The Group received dividends of US$nil from joint ventures and associates (2013/14 - US$4 million). At 31 March 2015, joint ventures and associates owed US$nil (31 March 2014 - US$2 million) in respect of trading balances.
There were no other material trade transactions with joint ventures and associates during the year.
Transactions with key management personnel
There have been no transactions with key management personnel of the Group other than the Director and key management remuneration.
Director and key management remuneration is disclosed in note 2.3.3.
Transactions with other related parties
There are no controlling shareholders of the Group as defined by IFRS. There have been no material transactions with the shareholders of the Group.
Pensions contributions to Group schemes are disclosed in note 3.10.
The Group has US$56 million of loans receivable and US$20 million of other receivables with legal entities controlled by Brendan Paddick, CVBI Holdings (Barbados) Inc. and Clearwater Holdings (Barbados) Limited as of 31 March 2015.
The loan receivable of US$56 million relates to the two year term facility agreement for US$74 million that was entered into on 27 March 2015. The interest rate on the term loan facility is based on the Group's cost of borrowing and payable in arrears.
Other than the parties disclosed above, the Group has no other material related parties.
Directors' Responsibility Statement
The 2014/15 Annual Report contains the following statements regarding responsibility for the financial statements in compliance with DTR 4.1.12. Responsibility is for the full Annual report and financial statements 2014/15 and not the condensed statements required to be set out in the Annual Financial Report announcement.
The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the directors, whose names and functions are listed on pages 45 to 47 of the Annual Report, confirm that, to the best of their knowledge:
- The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group;
- The Strategic Report and the Directors' Report contained in this report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and
- The Annual Report, taken as a whole, is fair, balanced and understandable, and provides the necessary information for shareholders to assess the Group's performance, business model and strategy.
The Directors of Cable & Wireless Communications Plc are listed in the Group's 2014/15 Annual report, and on the Group's website: www.cwc.com
For further information, please contact:
Clare Underwood, Company Secretary
0207 315 4000
This information is provided by RNS
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