Phil Green inherited a loss-making operation when he joined Cable and Wireless Jamaica 15 months ago. Now, he is spending big to return the LIME to profitability. - File
SALES AT Cable and Wire-less Jamaica Limited, now trading as LIME, all but stagnated in its first half year, but having strangled close to a billion dollars from the company's cost of doing business, president Phil Green has teased more than a quarter billion dollars of operating profit from the struggling operation, beset by rivalry.
Revenues of $11.27 billion at September 30 represented a slight 1.3 per cent gain on the six-month income recorded in the comparative period in 2007.
But the earliest sign of the company's improved performance was gross income, which rose 66 per cent to $7.4 billion from $6.28 billion year on year, due to the $550 million sliced off outpayments to local and international carriers on whose network C&WJ calls terminated, and another $430 million from other cost of sales.
Within those numbers, signs of how Green hopes to revive the loss-making company are emerging.
Big turnaround
Growth might not come immediately from big gains in revenues, he suggests in response to Financial Gleaner queries, but rather how efficiently each dollar is spent. Translation: cost containment and a trimmed staff corps.
"While we expect only moderate improvement in revenues from some areas of the business, we expect positive results in relation to EBITDA," says Green.
In the past six months, for example, eight per cent of the workforce was cut, eliminating 99 jobs.
Staff costs fell $150 million in the period, but 'administrative marketing and selling expenses rose by more than half a billion dollars, suggesting that Green was more heavily focussed on product development and placements within the period.
Revenue was almost flat, but earnings before interest taxes depreciation and amortisation or EBITDA was up 55 per cent, from $1.4 billion to $2.2 billion, year on year.
"Most of our EBITDA growth will come from gross margin growth and cost reduction initiatives and not necessarily from revenue," says Green, when asked about the company's near-term outlook.
An albatross
"Some other contributing factors will be the imminent deployment of our 3G network in key areas of the country; continuous improvement in service levels in our contact centres; and the traction of our new branding initiative," he says.
The Cable and Wireless brand has become something of an albatross, symptomatic of arrogance, lack of responsiveness to customer needs and poor service - all holdovers from its monopolistic era.
By coating itself with the new name LIME - the rebranding occurred October 31 right across the Caribbean - the telecoms is hoping to shrug off its stodgy, lumbering persona and project a new image of freshness and a company on the cutting edge.
That takes money, a good deal of it. LIME Jamaica has already spent $359 million on its restructuring plan over the summer alone, and plans to invest more in the months ahead in a purposeful push towards profitability even as the company braces against chief rivals Claro Jamaica and Digicel Jamaica.
"There will be some further restructuring costs which might militate against immediate prospects for net profit results," says Green, "but which in the medium and long term will make us a more profitable and stronger company."
Toward new business
LIME Jamaica said gross returns were better this half-year because it reshaped its product mix and withdrew "a number of unecono-mic pricing plans from the market".
Green and his team are already laying the groundwork to new business, starting with the deployment this month of additional services linked to a new 3G platform being built by Sony Ericsson under a $2-billion contract issued four months ago.
"We launched phase one of our 3G network in July 2008," says C&WJ at the top of week in a statement appended to its half-year earnings report, "mobile broadband is due to be launched later in November 2008."
Cost-cutting drive
LIME, the new face of Cable and Wireless.
LIME Jamaica is on a cost-cutting drive, evidence of which was seen in the $150 million dip in employee expenses, and eight per cent reduction in headcount.
Referencing other gains in the reporting period, LIME Jamaica said it added 1,649 top-up locations for mobile phone credit and "refreshed" 30 dealerships and began rebranding of its own retail operation as 'Lifestyle' stores.
The company said too that it cut 12 points of "call abandonment rates" which refers to customer calls that went unanswered at its contact centres, while turnaround on service installations improved by 70 per cent under the refinement pro-gramme for customer care - an area in which the company's image is most tattered, and which Green, now 15 months in the job, has signalled he is intent on repairing amidst intense competition.
LIME Jamaica says there was an uptick in second quarter revenue, which grew by $383 million or 7.4 per cent to $5.6 billion, due to improved returns on its fixed-line operations.
Good wins
The company also landed exclusive deals with two of Jamaica's largest companies.
"We had some good wins in the half year with our corporate customers, including Bank of Nova Scotia and the Sandals group," the company said.
Were it not for a $359-million restructuring bill, all spent in the second quarter, the company would have made $629 million on operations in its first half year, notwithstanding a net rise in operating expenses. Instead, midline profit or earnings before interest and taxes (EBIT) was $267.7 million in the six-month period, compared to a loss of $98 million in the year prior.
But that was the good news. The telecommunications company still remains highly leveraged with a $12-billion debt load owed entirely to its British parent following a resche-duling of loans in May.
Long-term liabilities, totalling $16.4 billion, now outpace EBIT by 61 to one, and EBITDA by some eight to one.
Debt and taxes
Within the April to September period, LIME Jamaica shelled out $845 million to service its debt, plunging the company $427 million into the red, pre-taxes. At the bottomline, the loss was thinned to $266 million, but only because Green reached for more tax credits.
In the past year and a half, LIME has consumed $3.2 billion of tax credits to shore up its bottom-line.
Losses in this period were half the $507 million lost in the half-year ending September 2007.
Accumulated losses
At the balance sheet, the company's losses continued to accumulate. Weighed down by a $5.5 billion accumulated deficit, the company's book value fell to $13.76 billion at September 30, compared to $14.7 billion six months ago, in March, and $19.3 billion one year ago.
On the plus side, the company has emerged from its negative working capital position, with current assets of $5.7 billion outpacing current liabilities by about $200 million.
In March, the positions were reversed, with short-term liabilities then running $940 million ahead of current assets.
Additionally, LIME Jamaica's fixed assets have climbed by $600 million to $26.3 billion within its first half year, resulting in a net addition to balance sheet assets of less than one percentage point, from $35.4 billion to $35.7 billion.
lavern.clarke@gleanerjm.com