Things are going from bad to worse at troubled Cable & Wireless Worldwide (C&WW). Chairman John Pluthero has stepped in to replace Jim Marsh as CEO with immediate effect, after warning that gross profit (EBITDA) in FY11/12 will be 5% to 10% below expectations due to sluggish sales in the first 10 weeks of the year. Following the change at the top, senior independent director John Barton now becomes C&WW’s chairman, and non-exec Penny Hughes becomes its new senior independent director.
The profit warning, and C&WW's planned investments in hosting and cloud services, will also have a knock on effect on the company's cash flow in the year. Consequently, C&WW is now halving its year dividend to 2.25 pence. Investors weren't best pleased by the news, and slashed 16% off C&WW's share price - its shares are down 52% year to date.
This is really disappointing news from C&WW, which issued a profits warning only in March, and also one last July (see CWW warns on public sector profits – sign of things to come?) – so three in total since the demerger from Cable & Wireless in January 2010. Pluthero said he now plans to take a “more radical approach to building [C&WW’s] hosting, cloud and data services business whilst becoming more competitive and efficient in the mature product areas”. Pluthero was the architect behind the successful turnaround of C&W prior to its demerger, so he has plenty of goodwill in the company, and now a “full mandate to accelerate growth and maximise profitability." Restructuring is therefore likely to be on the cards, and also a refocusing on where its strengths really lie (see Cable & Wireless in talks to exit international businesses). This would surely scupper any rumoured bid for UK services firm 2e2 (see Will 2e2 get 'cabled up'?).