Cable & Wireless has confirmed that it intends to revive its plans to split its business via a demerger of its worldwide division but a profit warning on the back of continued weakness at the company’s Caribbean operations has overshadowed the protracted break up of the business.

Shares in C&W tumbled by more than 6 per cent to 140p after the warning. The company sliced its full-year earnings guidance for its CWI division, a regional telecoms specialist that provides fixed-line and mobile services in many countries, to between $880 million (£533 million) and $900 million, reducing its previous guidance by $55 million.

The warning comes due to the collapse of tourism in the Caribbean over the past year and conditions have deteriorated further since the summer according to C&W. The weakness was partially offset by an improved performance in Panama, Macau and Monaco and the company benefited from the consolidation of its operation in the Maldives after it raised its stake in the business.

The company’s worldwide division, which services business customers in the UK, Europe, Asia and the US, recorded a 14 per cent rise in revenue to £1.1 billion and a 44 per cent increase in earnings to £205 million. C&W said the integration of Thus, the Scottish telecoms company it acquired last year, is going to plan and increased its cost saving target by £10 million.

Jonathan Groocock, an Investec analyst, said the company’s first-half results were weak and he expects to downgrade his earnings forecast for the year by 10 per cent. He added that stripping out the consolidation of the Maldives unit, the underlying downgrade was more of the magnitude of $95 million.

The company has been under pressure to demerge the two businesses for years but shelved plans to effect the split last year due to the deterioration in market conditions. C&W was widely expected to kickstart the process again due to the rise in economic confidence and stock market valuations over the past six months and confirmed that it intends to pursue a demerger of the business.

Richard Lapthorne, chairman of the company, said: "The board believes that a demerger is the right structure to drive further growth and value for shareholders by enabling both businesses to pursue their strategies independently, and it is keen to push ahead as quickly as possible."

However, the company has issued no details of the demerger such as the intended timing of the split. The company said it will release more details by the end of the month but the lack of clarity about its plans frustrated analysts who argued that the uncertainty over the value of the demerger had contributed to the share price weakness.

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