VAN Vanco

RNS Number:5869Y
Vanco PLC
19 June 2007

Vanco - Interim Management Statement



Vanco plc, the global Virtual Network Operator (VNO), today publishes its first
Interim Management Statement as required by the revised Listing Authority
Disclosure and Transparency rules. This statement relates to the period from 1
February 2007 to 18 June 2007.



Current Trading



Trading in the year to date has been strong and in line with management's
expectations. Since 31 January 2007, new contracts with a value of #89.5 million
have been signed with new and existing customers. This includes the landmark
contract signed with a leading professional services firm announced on 26 March
2007. Additionally, it excludes account management (including revenue arising
from moves, additions and changes to existing customers' networks) which
continues to be in line with the historic average.



During the period, we also announced that Vanco had entered into a major channel
partner agreement with T-Systems, the business customer brand of Deutsche
Telekom. Further channel agreements have also been entered into with Deutsche
Telekom's International Carrier Sales and Solutions unit (ICSS) and FLAG
Telecom. We continue to believe that our channel partner strategy remains a
highly attractive way of significantly extending Vanco's customer base as well
as its range of services.



We continue to benefit from having a substantial base of contracted revenue and
this provides a high level of visibility on the likely outcome for the year
ending 31 January 2008. Looking at the contracted revenue which falls to be
recognised in the year ending 31 January 2008, we need to achieve revenue of
approximately #49m from new name business (as distinct from further business we
expect to receive from accounts that existed at 1 February 2007) during this
financial year in order to report revenue in line with consensus market
expectations.



Based on the contracts signed during the period from 1 February 2007 to 31 May
2007 and an estimate of how much work will be done in respect of those contracts
in the current financial year, it is expected that revenue of approximately
#15.6 million will be recognised in the period from new contracts signed to
date. Therefore, after one third of the year, it is estimated that deals have
been signed which will deliver 32% of the new name business revenue needed to
meet the consensus market revenue expectation for the year ending 31 January
2008. This is significantly ahead of the position at the same point in previous
years and is against a background of the first four months of the financial year
typically being the weakest trading period.



Gross margins in the year to date are in line with our expectations.



Free cash flow (FCF)



Cash generation remains a key performance indicator and, although the early part
of the financial year is always the weakest, the likely cash generative effect
on the results for the year ending 31 January 2008 as a result of new name
business signed in the year to date, has been better than normal. We estimate
that, of the #15.6 million revenue from new name business signed in the period
and to be recognised in the current financial year, some #12.6m will be received
in cash and #3.0 million will be recognised from accrued income. This represents
a higher proportion attributable to cash than was achieved in both the year
ended 31 January 2007 and the year ended 31 January 2006. For the full year
ending 31 January 2008, as previously indicated, we expect the split of initial
phase revenue supported by cash and that accounted for via accrued income will
be around 50:50 which is in line with what was achieved in the year ended 31
January 2006 and is substantially better than the split achieved in the year
ended 31 January 2007.



Free Cash Flow (FCF) is defined as cash generated from operating activities,
less tax paid, interest paid, cash capital expenditure and finance lease
repayments. FCF for the six months ending 31 July 2007 is expected to be better
than in the six months ended 31 July 2006. Trading is always weighted to the
second half of the financial year. Finance lease and capital expenditure
payments have a disproportionate effect on the FCF trend in relation to cash
generated from operating activities in the first half as they are paid fairly
evenly throughout the year. In addition interest payments will be greater in the
first half of the year ending 31 January 2008 and tax payments are greater in
the second half of the year.



Historically, net debt is at its highest in the first part of the year. The peak
net debt in the first part of the current financial year was approximately 2%
higher than during the equivalent period last year despite the fact that the
market expectation is that revenue for the full year ending 31 January 2008 will
be some 25% higher than in the previous year. The Directors believe that the
current position is likely to result in an improved net debt position for the
year and reflects our expectation that FCF for the year to 31 January 2008 will
be neutral to slightly positive.



Appointment of Finance Director



Peter Johnston has been appointed as Group Finance Director with effect from 1
September 2007. Further details of this appointment are set out in a separate
announcement dated 19 June 2007.



Outlook



The markets in which we operate remain buoyant and we believe that many
opportunities exist to extend and develop our customer base. We remain committed
to delivering the best possible service to our customers and to developing our
business via direct sales to enterprise customers and in collaboration with our
channel partners. We remain confident that results for the year ending 31
January 2008 will be in line with market expectations and that the longer term
prospects for the business remain very encouraging.



For further information please contact:



Vanco plc



Simon Hargreaves, Managing Director, Vanco Solutions & Group Finance Director
T. +44 (0) 208 6361700



Michael Piddock, Marketing Manager
T. +44 (0) 208 6361721
michael.piddock@vanco.co.uk



Katie Tzouliadis, Biddicks
T. +44 (0) 207 4481000



Notes



The information in this announcement is based upon unaudited management
accounts. In addition, certain statements made are forward looking statements.
Such statements are based on current expectations and are subject to a number of
risks and uncertainties that could cause actual events or results to differ
materially from any expected future events or results referred to in these
forward looking statements.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

IMSFGGMVMRNGNZZ

Vanco (LSE:VAN)
Historical Stock Chart
From Jun 2024 to Jul 2024

Vanco (LSE:VAN)
Historical Stock Chart
From Jul 2023 to Jul 2024