Wednesday, July 30, 2008

Green needs to leap hurdle not cleared in 5 years

Published: Wednesday July 30, 2008

Phil Green, Cable & Wireless Jamaica (C&WJ) president, needs to grow earnings by some eight per cent to about $3 billion EBITDA in order to appease London's dissatisfaction with Jamaica's performance.

Green inherited a bad situation from his predecessor, Rodney Davis, but if he cannot steer the company in line with growth targets of the wider division, he may not last long. The target, set by the parent, Cable and Wireless plc and hidden in its annual report, is a combined goal for the international division which includes Jamaica, Panama, the Caribbean, and Macau and Monaco. Next to the Panama operations, Jamaica contributes the single most to the operations earning, so its performance significantly influences the performance.

"We expect EBITDA [earning before subtracting loan interest, depreciation and amortisation or EBITDA] for 2008/09 to increase by eight per cent to 10 per cent to between US$895 million and US$910 million," said John Pluthero, executive chairman of international in the C&W plc annual report, "and our EBITDA margin to be approximately 35 per cent."

It is significant because C&WJ has declined to give growth targets for investors. The figures give a benchmark by which investors can judge its performance. C&WJ's EBITDA margin (EBITDA/revenues) was 12 per cent, even though the company wanted around 35 per cent for its 2007/8 financial year. Others in the division achieved the target, but Jamaica did not. In dollar terms, C&WJ was a disappointment, as its EBITDA declined from $6.98 billion to $2.78 billion up to March. Much of the loss was due to a prepaid landline policy which significantly contributed to a $2 billion drop in annual revenues to $22.8 billion to March.

Green is banking on recouping these lost billions, having recently reorganised the prepaid landline service. If he can build back those revenues and keep expenses at bay, then he will meet the target.

None of Green's three predecessors have been able to meet the parent's EBITDA targets since 2004. They include Gary Barrow, who left in 2004; Jaqueline Holding, who left in 2005; and Davis, who left in 2007. The international division wanted EBITDA margins between 34 and 37 per cent for its subsidiaries between 2004 to date. Jamaica's EBITDA margin was consistently below at: 27.9 per cent in 2004; 29 per cent in 2005; 29.3 in 2006; 28.2 per cent in 2007; and 12.1 per cent in 2008.

Pluthero added that if Jamaica's operations were excluded, the international division's returns would have rocketed.
"We grew our EBITDA by three per cent compared with 2006/07 to US$830 million, representing an EBITDA margin of 34 per cent," said Pluthero. "Excluding Jamaica, our EBITDA would have increased 12 per cent and our EBITDA margin would have been 37 per cent."

Green is the second president in recent times to be transferred from the Pacific Islands. Jacqueline Holding was the first. Green comes having attained EBITDA of 53 per cent in 2005/6. He was aided by the bustling economies of the islands growing at 8-10 per cent. Holding's performance in the Pacific Islands was similarly exemplary, however her stint at C&WJ did not last a year.

Source: Jamaica Oberver

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