The company, which demerged from the former Cable & Wireless in March 2010, said it had turned cash positive for the first time, with free cash flow generation of 61 million in the year to 31 March.
Profit before tax and other deductions was up 2.6 per cent to 442m.
Chief executive Jim Marsh described it as "a challenging 12 months". He said: "We expected that the new government would scrutinise budgets and put in place spending reductions, but we did not anticipate the immediacy and depth of the cuts."
But he said that CWW had since won some tendered contracts with the UK government.
Successes in the private sector included becoming the single telecoms supplier to Babcock in a deal to link 250 sites, and an agreement with Boots to provide a high-speed secure network and management system.
The board recommended a final dividend of 3p, which brings the total dividend per share to 4.5p, a level it intends to maintain in the current year.
The firm said it would adopt a "progressive dividend policy" once the payment was covered by free cash flow.