Cable & Wireless is hit hard by Budget
CABLE & Wireless Worldwide (CWW) has said its trading has been hit hard by the spending squeeze announced in the emergency Budget, sending its shares a staggering 18 per cent lower.
About £285m, or 12 per cent of CWW’s revenue, came from UK public sector customers such as the NHS and the Ministry of Justice last year.
A spokesman for the firm, which split from the former Cable & Wireless Group earlier this year, said: “Following the emergency Budget, non-contracted spending in the UK public sector has slowed very significantly.
“Given the nature of our public sector business, this reduction will adversely impact trading in the current year.”
Chief executive Jim Marsh said although less than two per cent of the company’s revenues were affected, the cuts would wipe £30m from its gross margin this year. Around £10m will be clawed back through spending cuts.
Marsh said the freeze had a near-immediate impact. “It’s either that or the spirit of that which is causing departments to look very hard at what they spend. We are seeing work that’s in train stop.”
The firm says the cuts in public-sector contracts will slow growth in core earnings and it cut its profit forecast for this year to the lower end of analysts’ expectations, ranging from £452m to £484m.
The coalition government is cutting spending by £6.25bn this year and next in a bid to bring down the record budget deficit, and it has already imposed a freeze on IT and communications projects worth over £1m.