Cable and Wireless president, Jacqueline Holding, takes a photo of Errol Miller, public relations manager, while he makes a face at her. The president went on the road with her technician to fix the phone cable on Half-Way Tree Road yesterday. - Rudolph Brown/ Chief Photographer
PROFITS DIPPED at Cable & Wireless Jamaica Limited in the second
quarter ended September 30, with its revenues and margins coming under pressure.
The company emerged from the ravages of Hurricane Ivan during the quarter with a heightened
public appreciation for the resilience of its network. But other factors served to erode its financial performance.
"There continues to be significant pressure on revenues and margins both of which declined compared to the previous year," President Jacqueline Holding
stated in her report accompanying the unaudited quarterly results.
Revenues of $5.5 billion were
six per cent below the level for the same quarter last year. Gross
margin stood at $3.4 billion, some
14 per cent below the level for the year before.
"This was due to increases in both outpayments and other cost of sales," she said. Outpayments grew from $1.1 billion in the same quarter last year to $1.2 billion in the same quarter this year.
MIX OF REVENUES
"The year-on-year increase in outpayments is attributable to a lower-than-usual figure last year, due to the mix of revenues, but does also reflect some margin pressures resulting from increased competition," she stated.
Other cost of sales rose from $690 million to $792 million. "Other cost of sales rose due to the higher number of handset subsidies and other customer acquisition costs associated with significant increases in mobile customers joining the Mobile network," the president said.
Handset subsidies are expensed in full as soon as the company takes delivery of the related inventory and other customer acquisition costs are expensed at the time of sale of the handset. As such, increases in the number of mobile customers will be accompanied by initial increases in cost of sales.
"One specific area of decline has been settlement rates on in-bound international traffic," she stated. "The decline has been exacerbated by the very large number of licenses issued to companies who have no attendant obligations to invest in infrastructure in Jamaica."
TRANSFORMATION INITIATIVES
On the positive side, the most recent financials continue to reflect the benefits of recent transformation initiatives with operating profit 18 per cent higher than for the corresponding quarter last year, she said. Operating profit stood at $844 million. This improvement also translated into improvements in net cashflow from operating activities, which increased by three per cent compared to the corresponding quarter last year. Ms. Holding said, "The movements would have been more pronounced had the prior year's figures not benefited from delays in intercompany payments."
Operating expenses excluding depreciation are 27 per cent down on the corresponding quarter last year. She said said the prior year's employee expenses figures
included significant restructuring costs. Depreciation of property, plant and equipment was reduced by 4 per cent compared to the corresponding quarter last year and 12 per cent on a half-year basis.
With the company having
completed a massive multi-year restructuring exercise, Ms. Holding said: "We would like to take the opportunity to thank our staff, our suppliers and other business partners for their unceasing
efforts to provide good customer service in Jamaica."
