RNS Number:1184V
Vanco PLC
18 April 2007
Vanco plc
18 April 2007
Preliminary Results
For the year ended 31 January 2007
REPLACEMENT
This announcement replaces the previous announcement (RNS 0483V) of Vanco's
preliminary results for the year ended 31 January 2007 issued at 7.00am
this morning.
The note headed Net Cash Inflow From Operating Activities has been
corrected in the Unaudited 2007 column as follows:
- Operating profit now reads GBP 18,998,273 replacing GBP 19,498,273
- Depreciation now reads GBP 4,593,168 replacing GBP 4,116,740
- Amortisation of intangible fixed assets now reads GBP 930,846 replacing GBP 1,407,274
- As a result, Operating cash flows before movements in working capital now reads GBP 24,522,287 replacing
GBP 25,022,287
- Increase in payables now reads GBP 21,355,014 replacing GBP 20,855,014
- Cash generated by operations is therefore unchanged
In all other respects the announcement is unchanged. This revision has no effect on Free Cash Flow.
FINANCIAL HIGHLIGHTS (Unaudited)
2007 2006
#m #m
REVENUE 183.2 146.6
========= =========
OPERATING PROFIT 19.0 14.0
========= =========
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 14.7 11.0
========= =========
NET ASSETS AT YEAR END 63.5 50.9
========= =========
CASH IN HAND AT YEAR END 19.6 10.6
========= =========
CASH GENERATED BY OPERATIONS 5.7 11.6
========= =========
NET DEBT AT YEAR END 19.8 13.6
========= =========
CONTRACTED ORDER BOOK AT YEAR
END 363 326
========= =========
BASIC EARNINGS PER ORDINARY 16.3 13.3
SHARE (PENCE)
========= =========
DILUTED EARNINGS PER ORDINARY 15.6 12.9
SHARE (PENCE)
========= =========
18 April 2007
VAN.L
VANCO PLC
Preliminary Results for the Year ended 31 January 2007
Vanco plc ("Vanco") designs, implements and manages companies' communications
networks, providing this service globally without owning any underlying network
infrastructure. The company pioneered this Virtual Network Operator ("VNO")
approach, and is the largest VNO in the world.
Highlights - Record Results
* Turnover up by 25.0% #183.2 million (2006- #146.6 million).
* Operating profit increased by 35.7% #19.0 million (2006- #14.0 million).
* Profit before tax rose by 33.2% to #14.7 million (2006- #11.0 million).
* Basic earnings per share increased by 22.6% to 16.3p per share (2006-
13.3p per share).
* In the six months ended 31 January 2007, free cash flow generation (see
page 6) was #5.4 million, the best ever recorded by Vanco in a six month
period.
* #131 million of new business announced, including contracts with
supermarket chain Somerfield, global recruitment services company, Kelly
Services and Hilton International, the hotel group
* Value of contracted order book increased by 11.3% to #363 million at 31
January 2007 (2006- #326 million).
* Significant progress made with channel partner strategy generating some
#30 million of contracted order book intake.
* Outlook remains very encouraging- some #75 million of new business has
been secured since 31 January 2007.
* Post period end, Vanco announced that it had been appointed by Ernst &
Young to design, implement and manage a global Wide Area Network connecting
offices in over 80 countries. The 76 month contract is worth approximately
US$104 million and is the largest deal ever signed by Vanco.
Commenting on the results, Allen Timpany, Chief Executive, Vanco said:
"These are record results and represent our 19th consecutive year of increased
revenue and profitable growth.
Vanco has made excellent progress over the year. Growth has been driven by
continuing high levels of new business wins as well as additional work from
existing customers. We secured some very significant new customers and announced
a combined total of #131 million of new orders from new and existing customers.
This brings the total value of our contracted business to #363 million. Our
contracted revenue is from some 200 clients, mostly multi-national companies.
Given the long term nature of these contracts, it gives us very good visibility
in earnings as we look forwards.
The potential to build the business remains significant and we continue to
believe that Vanco is well-positioned to grow at a fast rate. We remain
confident that the outlook for the new financial year, to 31 January 2008, is
very encouraging."
For further information please contact;
Allen Timpany, Chief Executive Officer, Vanco
Tel +44 (0)20 8636 1700
Simon Hargreaves, Managing Director, Vanco Solutions & Group Finance Director
Tel +44 (0)20 8636 1700
Michael Piddock, Group Marketing Manager, Vanco
Tel +44 (0)20 8636 1721
Katie Tzouliadis, Biddicks Associates
Tel +44 (0)20 7448 1000
CHIEF EXECUTIVE'S REVIEW
Introduction
Vanco has made excellent progress over the year. Growth has been driven by
continuing high levels of new business wins as well as additional work from
existing customers. Over the year, we secured some very significant new
customers and during the year, we announced a combined total of #131 million of
new orders from new and existing clients. This brings the total value of our
contracted business to #363 million. Our contracted revenue is from some 200
clients, mostly multi-national companies. Given the long term nature of these
contracts, it gives us very good visibility in earnings as we look forwards.
Post period end, Vanco announced that it had been appointed by Ernst & Young
Global Services (EYGS) LLP to design, implement and manage a global Wide Area
Network connecting Ernst & Young offices in over 80 countries. The 76 month
contract is worth approximately US$104 million and is around twice the size of
the next largest contract that Vanco has previously won.
This year has also been significant in terms of the progress we have made in
developing indirect routes to market; our 'channel partner strategy'. In the
first half of the year, we redirected sales and other resource to the
development of our channel partners. This resulted in a greater weighting of
both revenue and operating profits in the second half of the year compared with
previous years. However, we expect that the investment we have made in our
channel partner relationships will help us to capture more business in future
years. At this early stage, channel partners contributed approximately #30
million of new business which was signed this year, and we are pleased with this
start. It is our intention to develop more relationships of this kind with Asset
Based Carriers ("ABCs"), IT Outsourcers and Systems Integrators ("SIs").
Given the scale of the potential growth opportunity available to us, it is
important to ensure that the business has the processes and systems in place to
support significantly greater numbers of networked customer sites. Over the
year, we completed the installation of a new global Enterprise Resource Planning
(ERP) System. It represents the culmination of several years' work. By the year
end, all clients had been transferred across to the new system.
Financial Overview
In the year ended 31 January 2007, turnover amounted to #183.2 million (2006-
#146.6 million), which represents an increase of 25.0% (2006- 41.0%). The
directors believe this is a strong result given the investment phase in the
first half. By comparison, the percentage revenue growth in the year to 31
January 2006 was higher due to the acquisition of Universal Access on 1 August
2005. If the effect of this is excluded from the results for the year end 31
January 2006, the year on year growth would have been reduced from 41.0% to
28.5%.
Operating profit amounted to #19.0 million up from #14.0 million in the previous
year which represents a 35.7% increase. This was after an IFRS2 charge in
respect of share based payments of #1.2 million (2006- #2.6 million). Profit
before tax rose by 33.2% to #14.7 million (2006- #11.0 million).
Basic earnings per share increased by 22.6% to 16.3p (2006- 13.3p).
Gross margin is 35.8% compared with 34.3% in the previous year. This increase is
due to a higher proportion of revenue being derived from the sale of services
which carry a higher gross margin than the circuit and equipment element of
contracts.
In addition, in the period, we also undertook a project to review all our
agreements with Asset Based Carrier suppliers, from whom we purchase network
capacity for customers. As a result of this, we have renegotiated a number of
these supplier contracts, leveraging our increased buying power to ensure we
have more favourable terms going forward. Some benefit from this was realised in
the year to 31 January 2007.
In terms of gross margin outlook, there are two main influences;
* It has been our view for some time that we would expect to see a gradual
reduction in gross margin as the scale of the business increases. The reason
for this is that the majority of our gross margin is generated from the
service element of the contract, and a much lower percentage return is
generated by the commodity element- the connectivity and the equipment. The
general trend in the business has been to sign larger contracts. Because the
service element of the contract has a fixed and variable element, it becomes
a smaller proportion of the overall contract spend on larger contracts. The
resulting mix effect would tend to reduce overall gross margin. We believe
that the renegotiation of carrier contracts will protect gross margins and,
subject to the comments below regarding Ernst & Young, will allow them to be
maintained at the recent historical levels.
* The Ernst & Young contract will tend to reduce gross margin due to the
mix effect described above.
Overall the net effect of the above will be that gross margin will fall in the
year ending 31 January 2008 by around 0.5% against the previously expected
levels.
Free cash flow (FCF) is defined as cash generated from operations less net
interest paid, taxation, capital expenditure and finance lease repayments. For
the year ended 31 January 2007, FCF was an outflow of #9.7 million compared with
an outflow of #3.9 million in the previous year. The performance in the second
half of the year represented by the six month period to 31 January 2007 was
particularly strong, with an FCF inflow of #5.4 million (six months ended 31
January 2006- absorption of #1.0 million). Not only is this the best FCF result
that Vanco has achieved in any six month period, but it was also significantly
better than the FCF out flow of #15.1 million achieved in the six months ended
31 July 2006.
In the six months ended 31 July 2006, total debtors rose to #111 million from
#99 million at 31 January 2006. This is an increase of 12.1% whilst revenue fell
by 9% in the same period. In the six months ended 31 January 2007, this trend
was reversed with revenue increasing by 34% and debtors increasing to #142
million which represents a 29% increase over the position at 31 July 2006. The
directors expect this relative improvement in debtors to continue and to
contribute to an anticipated improvement in FCF so that this is neutral to
slightly positive for the full year ending 31 January 2008.
At 31 January 2007, net debt was #19.8 million which is some #6.2 million higher
than the #13.6 million at 31 January 2006, but #4.6 million lower than the level
reported at the interim reporting date of 31 July 2006.
During the year, the group made cash payments in respect of capital expenditure
of #4.6 million and made finance lease payments of #4.8 million, which together
amount to #9.4 million (defined as Cash Capital Expenditure). This reflects
costs incurred in bringing the core Oracle modules to the point of going live
and the cost associated with the office move to Great West Plaza (see comments
below under Progress of Offices). Whilst some work is still required to complete
the development of Oracle, and the remainder of the building work on Great West
Plaza will be completed in the year ending 31 January 2008, the Cash Capital
Expenditure is likely to be #2-3 million lower than the amount incurred in the
year ended 31 January 2007.
The value of our future contracted order book at 31 January 2007 was up 11.3% to
#363 million compared with #326 million at 31 January 2006. This excludes Vanco
Direct contracts, which tend to be of a shorter initial term (often a year).
Growth in the year is less than has been achieved in the past. This is mainly
due to the effect of the group's channel partner strategy in the first half of
the financial year and the resulting investment of a significant amount of the
new business sales team's time in developing channel partners rather than
selling externally. Of the future contracted order book, some #114 million will
be fulfilled in the year ending 31 January 2008 (2006- #97 million in respect of
the year ending 31 January 2007) and some #94 million will be fulfilled in the
year ending 31 January 2009 (2006- #78 million in respect of the year ending 31
January 2008).
In addition to this, since the year end, new customers with a total contract
value of some #75 million have been signed. These will make a material
contribution to revenue and operating profit in the year ending 31 January 2008
and beyond. As at the date of this announcement, the future contracted order
book stands at around #400m.
The directors will not be proposing a dividend in respect of the year ended 31
January 2007 (2006- #nil).
Business Development
A major focus this year was the development of our channel partner strategy. In
the first half, we diverted a number of our key sales and technical staff from
the sales process to the development and support of channel partners. In total,
around a dozen people were involved. While this had a short term effect on
results in the first half, the staff involved returned to working on the sales
process in the middle of the year. The significant deals signed since 1 August
2006 include Hilton International, a voice contract with Kelly Services,
Somerfield and Ernst & Young. The level of customer cancellations was low.
The deals we signed over the year were a mix of new customers, renewals and
contract extensions with existing customers. New customers included:
*Somerfield, the UK supermarket chain;
*Kelly Services, one of the world's leading providers of staffing
solutions and a Fortune 500 company;
*Hilton International, the global hotel company;
*Royal Haskoning, the Dutch-based worldwide architecture and engineering
consultancy;
*Sioen Industries, the Belgian producer of coated technical textiles,
protective clothing and fine chemicals;
*Lovells, the global law firm;
*Nutreco Holdings, the international animal nutrition company; and
*Continental, the leading supplier of brake systems, chassis components,
vehicle electronics and tyres.
It is pleasing to note that the Somerfield contract, worth a total of #18.6
million, represented our UK direct sales team's largest win to date. The
contract covers 886 Somerfield sites in the UK.
Also of note were the two contracts signed with Kelly Services. The first was a
Wide Area Network across 242 of Kelly's European sites, signed in July 2006. The
second, a #13.5 million contract for the management of fixed line voice, mobile
handset and private branch exchange (PBX) maintenance, represents Vanco's
largest ever account management deal. Significantly, this demonstrates Vanco's
ability to sell additional solutions outside of the data network to existing
blue-chip customers; especially important given the accelerating drive towards
voice and data 'convergence' amongst enterprise businesses.
We extended or renewed contracts with a number of clients globally, including
ADT, Baring Asset Management, Mitsubishi Motors UK, and Capespan, the global
fruit distributors.
Aside from Ernst & Young, since 31 January 2007, further new business deals have
been signed with Stena Line, an international transport and travel service
company and one of the world's largest ferry operators, and Knorr- Bremse AG,
the leading manufacturer of brake systems for rail and commercial vehicles,
amongst others. The total value of contracts signed since 31 January 2007 is
some #75 million.
Our channel partner strategy is still at a relatively early stage but these
partnerships have the potential to significantly increase our sales without a
substantial increase in our own cost base. We already have agreements in place
with a number of Asset Based Carriers, including Swisscom, Asia Netcom and
Telecom Italia Sparkle. We also have agreements with Systems Integrators and IT
Outsourcers, including IBM, Accenture, CSC and ARINC. During the financial year
under review, we were pleased to add two new major partners; Bell Canada
Enterprises ("BCE"), Canada's largest communications company, and Business
Connexion Pty Ltd ("BCX"), South Africa's leading Systems Integrator.
Our channel partner agreement with Bell Canada Enterprises is a three year
contract, signed in June 2006, with its division that focuses on providing
information communications and technology solutions to Canada's largest business
and government customers. Under the agreement, it will be using Vanco's global
VNO services to provide its customers with network 'reach' outside the scope of
its existing infrastructure.
Our agreement with BCX is for three years and was signed in the second half of
the year, in October 2006. Again, BCX will be using Vanco's global VNO
services in order to extend its network reach outside South Africa.
As with all our channel partners, in order for us to maintain Vanco's the
independence which is critical to Vanco's business model, we are not obliged to
select Bell Canada or BCX when we design communications network for our own
directly contracted customers.
During the period, new business signed through our channel partners amounted to
approaching #30 million. Most noteworthy was a #16.8 million contract with IBM
to provide network services to Mitchells and Butlers, the UK's leading operator
of managed pubs and pub restaurants. This contract was secured in partnership
with IBM as part of IBM's wider outsourcing deal with Mitchells and Butlers.
The contract is for five and half years and we will be providing Wide Area
Network and IP Telephony (IPT) infrastructure for over 2,000 sites in the UK.
The pipeline of prospects from our channel partners remains good, and we expect
channel partners to make a strong contribution to revenues in the new financial
year and beyond. Discussions continue with a number of other potential channel
partners and we hope to sign further channel partner deals in the next half
year.
We are continuing to see an increasing take up of Voice over IP (VoIP) services
amongst our client and prospect base, and see this as a gradual trend over the
next five to ten years. As with the contract with Kelly Services, Vanco's
management of the legacy voice network, in order to ensure the smooth
introduction of VoIP and voice/data convergence, is an important step in the
process. This represents an important revenue opportunity from within Vanco's
existing customer base.
Scaling Systems and Processes for Future Growth
During the period, the Oracle Enterprise Resource Planning ("ERP") system was
launched globally, following a pilot and an extended period of development and
testing. It is now in use across all Vanco's principal offices globally and is
supporting the business's processes in a robust and fully scaleable way, in
preparation for future growth.
The ERP system brings an automated connection between the operational and
commercial functions of the business, delivering greater cost control as Vanco
continues to scale. It also provides the management team with consistent
information across the entire business. All customers were transferred to the
new system by the year end.
We also rolled out the Voyence secure router configuration tool across our
entire customer base. This allows greater control and access security for the
management of router configurations across the customer base. Additionally, we
improved our 'trouble ticket' integration with channel partners (this is the
means by which network faults are spotted, logged and managed), delivering
greater efficiency and customer service to these channel partners' enterprise
clients.
Progress of Offices
In October 2006, we transferred selected head office functions and the UK
Network Management Centre to our new head office at Great West Plaza in
Brentford. The new office more than doubles the amount of space available, from
28,000 sq ft to 64,000 sq ft. The move was executed without any impact on
operations or customer networks and we will be transferring the remaining head
office functions in mid 2007.
We also opened a new support office in Durban, South Africa. This office will
deliver much of the back-end network procurement and fault monitoring from a
low cost location. The pilot has been successful with the centre delivering
against expectations. The focus is initially on supporting UK operations. The
second phase is to move into larger premises and scale the operation to enhance
the service Vanco delivers worldwide. We now operate from 27 offices around the
world, including nine Network Management Centres and our potential service
coverage extends to 230 countries and territories. Currently we deliver a
service in 161 of these countries and territories.
Industry Recognition
Over the last six years, we have used independent agencies to conduct market
research amongst our target audience, namely chief information officers and
network/infrastructure managers at large organisations around the world. The
last four surveys have been undertaken by ICM.
In this year's survey, conducted in January 2007, Vanco's unprompted brand
awareness stood at 23% globally, up from 16% in the January 2006 survey.
Globally, Vanco was the joint fourth most named brand for managed network
services alongside Verizon Business, behind BT, Orange Business Services/Equant,
and AT&T, and ahead of Deutsche Telekom, Colt, Cable & Wireless and Sprint.
Gartner, one of the leading IT analysts, again included Vanco in the Leaders'
Quadrant of its influential 'Magic Quadrant for Network Service Providers in
Europe'. This places Vanco in the elite list of service providers based on
various criteria, summarised as 'Vision' and 'Ability to Execute'. Vanco also
appears in the Magic Quadrant for Network Service Providers in Asia for the
third consecutive year. The Magic Quadrant for North America was written in May
2006. At the time of Gartner writing the report, Vanco had not released its
financial results for the year ended 31 January 2006, and so did not meet the
$250 million minimum revenue criteria to qualify for entry.
In the wider industry, Vanco won the award for 'Best Customer Care' at the World
Communications Awards 2006. These awards are the most recognised in the industry
on a global level, and feature award entries from the majority of the major
Asset Based Carriers around the world.
Competitive Environment
The Asset Based Carriers that compete with Vanco on the large multinational
contracts for which it bids have not significantly changed their
competitiveness. The IT Outsourcers continue to prefer to partner for Wide Area
Network services rather than to deliver those themselves. The Directors believe
that smaller VNOs do not play a significant part in the markets that Vanco
addresses as they largely provide domestic rather than global services.
Vanco meanwhile continues to target and secure larger deals and increases its
global capability, focused on delivering Wide Area Networks and related
solutions. The Directors believe that Vanco remains the market leading provider
of VNO services globally, while analyst and industry comment supports this
claim.
Board and Management Team
Two new Directors have joined the Board of Vanco plc. Mark Thompson became an
Executive Director in February 2007 and John Mumford was appointed as a new
Non-Executive Director in September 2006.
Mark Thompson, aged 43 years, is Deputy Managing Director of Vanco Solutions and
Northern European Managing Director. He joined Vanco as Head of UK Operations
in 2003 from Energis plc, where he was Director of Sales of Energis' Corporate
Business Unit and has an excellent track record in developing and negotiating
significant contracts within Vanco. John Mumford, aged 43, is a highly
experienced corporate financier who was instrumental in the flotation of Vanco
in November 2001. He has advised Vanco on a number of projects since that date.
In February 2007, after 17 years with the business, Tony Nester, formerly
Managing Director for Southern Europe and the Asia Pacific region, stepped down
from Board and from the Group. He contributed significantly to the Group and
the Board thanks him and wishes him well for the future. Tony's territory
responsibilities have been divided. Eric Havette, Tony's second in command, who
has been with the business for five years, has assumed responsibilities for
Southern Europe and Diarmid Massey has been recruited to head Vanco's Asia-
Pacific operations. Diarmid has over 20 years experience of the Asia Pacific
region and was previously at NexTone, a specialist VoIP solutions provider, and
ITXC, the wholesale carrier.
In March 2007, we were delighted to announce that Simon Hargreaves, Group
Finance Director, is to assume the position of Managing Director of Vanco
Solutions, the Group's enterprise sales division. He will report to Allen
Timpany, Chief Executive Officer. Simon will be retaining his role as Group
Finance Director until a new appointment is made. We have commenced the process
to select a suitable successor and will make an announcement in due course.
Current Trading and Future Prospects
The potential to build the business remains significant and we continue to
believe that Vanco is well-positioned to grow at a fast rate. Vanco's brand
awareness continues to increase on a global basis and we believe our proposition
as a truly independent and global provider of communication networks,
unencumbered by the ownership of network infrastructure, remains compelling.
This "virtual" approach offers customers clear benefits, not only in terms of
cost but also flexibility.
We are now targeting larger contracts and are also pleased to see that we are
gaining good revenue growth within the existing customer base as we secure
additional parts of customers' total communications networks.
We see our strategy of developing indirect routes to market through channel
partners as an effective means of building a larger, more globally distributed
sales force and are pleased with how this is developing. Vanco NetDirect, our
web portal, is also progressing well and will aid growth.
Taking account of the various analysts' forecasts in thee market, we remain
confident with the outlook for the new financial year to 31 January 2008. We
continue to be committed to building Vanco's global business in an orderly and
methodical manner to ensure the best service possible for our customers and
sustainable long-term returns for our shareholders.
Allen Timpany
Chief Executive
18 April 2007
MARKET AND COMPANY BACKGROUND
Information Technology plays an important role in most businesses. Organisations
need to transfer information between employees, and often to their suppliers,
customers and other stakeholders. In order to connect these groups and
individuals via their PCs in a safe and reliable way, a data network is
required, and where this network extends across more than one location, this
requires a Wide Area Network (WAN).
Prior to deregulation, companies went to the incumbent network provider for
every country in which they operated and an internal team managed these
non-competing providers. Deregulation delivered huge investment in supply, an
explosion of choice and reduced prices. However, it also increased the
complexity of managing a company's IT requirements and operation. In order to
maintain a competitive IT solution, companies had to remain abreast of changing
technologies and pricing as well as managing the complication of selecting the
best infrastructure provider in each geography.
The VNO approach
Since 1988, Vanco has built a successful business in solving this problem for
companies by inviting them to outsource their data network requirements. With an
extensive understanding of the global marketplace - the network suppliers, the
technologies available, service levels, pricing, the integration of
technologies, and customer requirements - Vanco focuses on the design,
implementation and management of Wide Area Networks. By contracting with Vanco,
companies gain the benefits of multiple suppliers (each the most appropriate for
their needs in terms of geography, technology, pricing and service) with the
ease of working with a single supplier - a VNO.
Vanco pioneered the VNO model, and in order to provide the most competitive
solutions from the start, it was fundamental that these services were delivered
without owning any fibre and copper transmission circuits, or having any
contractual allegiance to any particular technology provider. Vanco instead
designs networks using the most relevant technologies and purchases commodity
infrastructure from the most suitable telecommunications ABCs to build the
network. This service fills a very significant market gap between the ABCs, for
whom it is economically unviable to own all the telecommunications
infrastructure necessary to satisfy the network requirements of geographically
diverse enterprises, and enterprises, for whom the design and management of a
complex network diverts resources from core activities.
Market development
Leading industry analysts have recognised the emergence of the VNO concept and
rank Vanco as a highly credible competitor alongside the traditional ABCs, such
as BT, Orange Business Services, and AT&T, when discussing the marketplace. This
awareness is increasingly matched by companies recognising that Vanco and the
VNO approach is an alternative means of purchasing their data networks to the
traditional approach of buying direct from one or more ABCs. As a result, Vanco
is regularly included in companies' initial lists of potential WAN suppliers.
Vanco's VNO proposition is a very clear differentiator as the selection process
continues and a supplier is chosen.
Market consolidation has reduced the number of underlying ABCs, but they are
still numbered in their thousands, and this will continue to underpin the logic
of outsourcing to a VNO. Additionally, the pace of change of technology has
increased the range of solutions available and with it the complexity of choice
facing customers, which Vanco is ideally positioned to manage on behalf of its
clients. This complexity also makes it more difficult for new entrants to enter
the market, as customers wish to see a long record of success before agreeing to
outsource their business critical data networks.
Vanco's propositions
Vanco addresses this market in a number of ways. For eighteen years, Vanco has
served enterprise organisations directly, designing, implementing and managing
WANs for companies such as Avis Europe, British Airways, Ford Motor Company,
Pilkington and Siemens. More recently, Vanco has served enterprises through
channel partners: IT Outsourcers and SIs, and also ABCs and market-specific
channel providers. Vanco offers its services to ABC channel partners both
through long term contracts and on a circuit-by-circuit basis through Vanco
Direct. Across these routes to market, the VNO proposition is fundamentally the
same, but the benefits gained by Vanco's customers vary:
* Enterprises contract with Vanco to design, implement and manage their
corporate WAN, accessing a global solution and the benefits of a competitive
market (flexibility, choice, better pricing) through a single, independent,
service-focused supplier.
* IT Outsourcers and SIs deliver a wide range of IT solutions to
enterprise customers. Where they are not able to provide all the services in
the overall IT solution, such as the management of a data or voice network,
they subcontract that part to Vanco. Vanco's independent VNO approach is
attractive to IT Outsourcers and SIs as they can offer their clients all the
benefits that Vanco offers its enterprise clients, but also because Vanco
does not represent a competitive threat in other areas of the overall
contract.
* ABCs contract with Vanco to extend the reach of their geographically
limited physical networks, utilising the VNO model in countries or regions
where they do not own a network. This allows them to sell global solutions
to their enterprise customers, defending their existing business with these
customers, and increasing their accessible market. Vanco represents a
quicker, easier, and far less capital intensive means of ABCs being able to
offer a global solution, compared to either building a physical network in
each country, or partnering directly with other ABCs.
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 JANUARY 2007
Unaudited Audited
2007 2006
# #
REVENUE 183,173,636 146,591,447
Cost of sales (117,564,609) (96,262,309)
-------------- --------------
Gross profit 65,609,027 50,329,138
Administrative expenses (46,610,754) (36,345,582)
-------------- --------------
OPERATING PROFIT 18,998,273 13,983,556
Interest and finance income 120,113 253,461
Interest costs (4,424,236) (3,204,181)
-------------- --------------
PROFIT BEFORE TAXATION 14,694,150 11,032,836
Taxation (4,628,657) (3,525,892)
-------------- --------------
PROFIT FOR THE YEAR 10,065,493 7,506,944
======== =========
Basic earnings per
ordinary share (pence) 16.3 13.3
======== =========
Diluted earnings per
ordinary share (pence) 15.6 12.9
======== =========
All amounts derive from continuing operations.
CONSOLIDATED BALANCE SHEET
YEAR ENDED 31 JANUARY 2007
Unaudited Audited
2007 2006
# #
Non-current assets
Intangible assets 33,758,756 28,352,071
Property, plant and
equipment 8,954,917 11,539,226
Deferred tax asset 1,854,333 1,656,113
------------- -------------
44,568,006 41,547,410
Current assets
Inventories 15,412 14,386
Trade and other
receivables
Due within one year 77,295,538 62,032,061
Due after more than one
year 63,823,633 36,803,803
Cash and cash
equivalents 19,578,729 10,598,045
------------- -------------
160,713,312 109,448,295
------------- -------------
Total assets 205,281,318 150,995,705
------------- -------------
Current liabilities
Trade payables (36,589,846) (30,741,009)
Other payables (65,625,840) (44,508,764)
------------- -------------
(102,215,686) (75,249,773)
------------- -------------
Net current assets 58,497,626 34,198,522
------------- -------------
Non-current liabilities
Other payables (38,174,589) (23,863,392)
Deferred tax liabilities (1,349,999) (990,132)
------------- -------------
(39,524,588) (24,853,524)
------------- -------------
Total liabilities (141,740,274) (100,103,297)
------------- -------------
Net assets 63,541,043 50,892,408
======== ========
Equity
Share capital 3,136,067 2,988,172
Share premium account 9,240,611 7,163,972
Other reserves 25,424,335 23,753,453
Retained earnings 27,160,344 17,094,851
Foreign exchange
translation reserve (1,420,314) (108,040)
------------- -------------
Shareholders' funds 63,541,043 50,892,408
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 JANUARY 2007
Year ended Share capital Share premium Other reserves Retained Foreign Total
31 January account earnings exchange
2006 (audited) translation
reserve
# # # # # #
Balance at 1
February 2005 2,730,989 6,716,422 1,138,348 9,587,907 (4,941) 20,168,725
Profit for the
financial year - - - 7,506,944 - 7,506,944
Foreign currency
translation
differences - - - - (103,099) (103,099)
Issue of new
ordinary shares 257,183 447,550 19,338,938 - - 20,043,671
Share based
incentive plans - - 3,276,167 - - 3,276,167
--------- ------------- ------------- ------------- ------------- -------------
Balance at 31
January 2006 2,988,172 7,163,972 23,753,453 17,094,851 (108,040) 50,892,408
======== ======== ======== ======= ======= ========
Year ended
31 January
2007 (unaudited)
Balance at 1
February 2006 2,988,172 7,163,972 23,753,453 17,094,851 (108,040) 50,892,408
Profit for
the year - - - 10,065,493 - 10,065,493
Foreign currency
translation
differences - - - - (1,312,274) (1,312,274)
Issue of new
ordinary shares 147,895 2,076,639 - - - 2,224,534
Share based
incentive plans - - 1,670,882 - - 1,670,882
-------- ------------- ------------- ------------- ------------- -------------
Balance at 31
January 2007 3,136,067 9,240,611 25,424,335 27,160,344 (1,420,314) 63,541,043
======== ======== ======== ======== ======= ========
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 JANUARY 2007
Unaudited Audited
2007 2006
# #
Operating activities
Cash generated by operations (i) 5,719,077 11,582,188
Interest paid (3,198,543) (3,189,249)
Tax paid (2,877,267) (3,362,331)
----------------- -----------------
Net cash from operating
activities (356,733) 5,030,608
----------------- -----------------
Investing activities
Interest received 120,113 88,461
Purchases of property, plant
and equipment (4,550,563) (4,026,570)
Acquisition of businesses and
subsidiary undertakings (168,899) (14,014,773)
----------------- -----------------
Net cash used in investing
activities (4,599,349) (17,952,882)
----------------- -----------------
Financing activities
Proceeds from issues of share
capital 2,224,534 19,866,154
Repayment of borrowings (1,031,013) (86,462)
Repayment of obligations
under finance leases (4,783,283) (4,927,185)
New other loans raised 5,600,000 -
New bank loans raised 12,350,000 823,531
----------------- -----------------
Net cash from financing
activities 14,360,238 15,676,038
----------------- -----------------
Net increase in cash and cash
equivalents 9,404,156 2,753,764
Cash and cash equivalents at
beginning of year 10,598,045 7,878,562
Effect of foreign exchange
rate changes (423,472) (34,281)
----------------- -----------------
Cash and cash equivalents at
end of year 19,578,729 10,598,045
========== ==========
(i) Reconciliation of operating profit to net cash inflow from operations is
presented on page 17.
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
YEAR ENDED 31 JANUARY 2007
Unaudited Audited
2007 2006
# #
Increase in cash and cash
equivalents 9,404,156 2,753,764
Cash outflow from changes in
lease and hire purchase
financing 4,783,283 4,927,185
New loans (17,950,000) (823,531)
Cash outflow from loan
repayments 1,031,013 86,462
----------------- -----------------
Change in net debt resulting
from cash flows (2,731,548) 6,943,880
New finance leases (3,095,013) (4,474,162)
Foreign currency translation
differences (388,472) (46,207)
----------------- -----------------
Movement in net debt (6,215,033) 2,423,511
Opening net debt (13,564,135) (15,987,646)
----------------- -----------------
Closing net debt (19,779,168) (13,564,135)
========= =========
NET CASH INFLOW FROM OPERATING ACTIVITIES
YEAR ENDED 31 JANUARY 2007
Unaudited Audited
2007 2006
# #
Operating profit 18,998,273 13,983,556
Depreciation 4,593,168 5,281,682
Amortisation of intangible
fixed assets 930,846 631,715
----------------- -----------------
Operating cash flows before
movements in working capital 24,522,287 19,896,953
(Increase) decrease in inventories (1,026) 4,121
Increase in receivables (40,157,198) (32,943,276)
Increase in payables 21,355,014 24,624,390
----------------- -----------------
Cash generated by operations 5,719,077 11,582,188
========= =========
1. STATEMENT OF MOVEMENTS ON RESERVES
Foreign
Profit and exchange Share
Other loss translation premium
Reserves account reserve account Total
# # # # #
At 1 February
2006 23,753,453 17,094,851 (108,040) 7,163,972 47,904,236
Profit for the
financial year - 10,065,493 - 10,065,493
Foreign
currency
translation
differences - - (1,312,274) - (1,312,274)
Share premium
arising on
issue of new
ordinary
shares - - - 2,076,639 2,076,639
Share based
incentive
plans 1,670,882 - - - 1,670,882
------------- ------------- ------------- ------------- -------------
At 31 January
2007 25,424,335 27,160,344 (1,420,314) 9,240,611 60,404,976
======= ======= ======= ======= =======
2. STATEMENT OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2007 2006
# #
Profit for the financial year 10,065,493 7,506,944
Foreign currency translation
differences (1,312,274) (103,099)
Issue of new ordinary shares 2,224,534 20,043,671
Share based incentive plans 1,670,882 3,276,167
------------- -------------
Net increase in shareholders'
funds 12,648,635 30,753,683
Opening shareholders' funds 50,892,408 20,168,725
------------- -------------
Closing shareholders' funds 63,541,043 50,892,408
======= =======
3. REVENUE
An analysis of the Group's revenue is as follows:
2007 2006
# #
Managed network services 155,867,310 133,292,401
Advance network provisioning 27,306,326 13,299,046
------------- -------------
183,173,636 146,591,447
======== ========
4. GEOGRAPHICAL AND BUSINESS SEGMENT REPORTING
The primary format for reporting segment information of the Group is based on
the geographical locations of its operations
Segment revenue is revenue reported in the Group's income statement that is
directly attributable to a segment and the relevant portion of the Group
revenue.
Segment expense is represented by expense resulting from the operating
activities of a segment that is directly attributable to the segment.
GEOGRAPHICAL SEGMENTS
Year ended 31 January 2007
Allocations United Kingdom France Germany Other European USA Rest of Unallocated Consolidated
to segments Countries the world
# # # # # # # #
Revenue from
external
customers 80,577,562 23,570,426 19,555,184 19,913,086 36,432,620 3,124,758 183,173,636
Intersegment
revenue 221,789 (337,181) (664,598) (87,048) 501,830 365,208 -
------------- ----------- ---------- ----------- ---------- ---------- -----------
Total revenue 80,799,351 23,233,245 18,890,586 19,826,038 36,934,450 3,489,966 183,173,636
========= ========= ========= ========= ========= ========= ==========
Segment result 11,370,807 3,678,918 354,822 993,406 1,861,501 738,820 18,998,273
========= ========= ========= ========= ========= ========= ==========
Segment assets
Consolidated
total assets 149,862,741 17,199,205 11,657,232 10,196,433 13,879,263 2,486,445 205,281,318
Segment
liabilities
Consolidated
total
liabilities (105,571,211) (9,420,619) (5,668,259) (6,696,059)(12,812,338) (1,571,790) (141,740,275)
------------- ----------- ---------- ----------- ---------- ---------- -----------
Net assets 44,291,530 7,778,586 5,988,973 3,500,374 1,066,925 914,655 63,541,043
========== ========== ========== ========== ========== ========== ==========
Depreciation
and amortisation
of segment assets 4,227,400 26,402 344,688 496,031 316,518 112,976 5,524,015
========= ======== ========= ========= ========= ======== ==========
Capital
expenditure 6,965,360 45,277 293,785 32,646 122,020 136,621 7,595,709
========== ========== ========== ========== ========= ========== ==========
4. GEOGRAPHICAL AND BUSINESS SEGMENT REPORTING (Continued)
GEOGRAPHICAL SEGMENTS
Year ended 31 January 2006
Allocations United Kingdom France Germany Other European USA Rest of Unallocated Consolidated
to segments Countries the world
# # # # # # # #
Revenue from
external
customers 54,478,797 17,786,883 26,095,032 19,508,395 25,845,349 2,876,991 146,591,447
Intersegment
revenue 7,652,935 (820,722) (7,666,627) 918,962 329,845 (414,393) -
------------ ----------- ---------- ------------ --------- ---------- -----------
Total revenue 62,131,732 16,966,161 18,428,405 20,427,357 26,175,194 2,462,598 146,591,447
========= ========= ========= ========= ========= ========= ==========
Segment result 7,183,932 2,789,747 2,406,020 1,387,084 1,863,206 (955,760) (690,673) 13,983,556
========= ========= ========= ========= ========= ========= ======== ==========
Segment assets
Consolidated
total assets 96,253,577 12,654,776 11,606,722 13,071,268 15,598,681 1,810,681 150,995,705
Segment
liabilities
Consolidated total
liabilities (64,453,068) (5,935,049) (5,629,518) (8,901,053)(14,131,129) (1,053,479) (100,103,297)
-------------- --------- ---------- ------------- ---------- ------------ -----------
Net assets 31,800,509 6,719,727 5,977,204 4,170,215 1,467,552 757,202 50,892,408
========== ========== ========== ========== ========== ========== ==========
Depreciation
and amortisation
of segment assets 4,216,665 287,554 266,374 704,003 295,791 143,010 5,913,397
========= ======== ========= ========= ========= ======== ==========
========= ======== ========= ========= ========= ======== ==========
Capital
expenditure 8,476,922 379,319 240,258 599,598 43,462 195,442 9,935,001
========= ======== ========= ========= ========= ======== ==========
4. GEOGRAPHICAL AND BUSINESS SEGMENT REPORTING (Continued)
Secondary segment reporting
Business segments Managed network Advance network
services provisioning Total
2007 2006 2007 2006 2007 2006
# # # # # #
Allocation to
segments
Segment revenue 155,867,310 133,292,401 27,306,326 13,299,046 183,173,637 146,591,447
========== ========== ========= ========= ========== ==========
Segment assets 188,487,569 136,535,749 16,793,749 14,459,956 205,281,318 150,995,705
========== ========== ========= ========= ========== ==========
Additions of
PPE and
intangible
assets 8,772,765 13,386,500 (1,008,159) 10,747,126 7,595,709 24,133,626
========== ========== ========= ========= ========== ==========
5. EARNINGS PER SHARE
Earnings per ordinary share have been calculated by dividing the profit after
taxation for each year by the weighted average number of ordinary shares of the
Company during the year. The diluted weighted average number of ordinary shares
has been calculated after taking into account the effect of the vesting of
shares issued to certain employees of the Group which are due to vest providing
only that the employees concerned are still employed by the Group at the due
date for vesting and where it is expected that the contingently issuable shares
due to Directors and senior employees will vest as the relevant targets have
been met.
The weighted average number of ordinary shares and the diluted weighted average
number of ordinary shares used in the calculations are as follows:
2007 2006
No. of No. of
shares shares
Weighted average number of ordinary shares 61,897,704 56,440,944
======== ========
Diluted weighted average number of
ordinary shares 64,591,409 58,187,318
======== ========
The profit for the financial year used in the calculation is as follows:
2007 2006
# #
Earnings attributable to ordinary
shareholders 10,065,493 7,506,944
======= =======
6. ANALYSIS OF NET DEBT
1 February 2006 Cash flow Exchange Other 31 January
Movements Movements 2007
# # # # #
Cash at bankand in hand 10,598,045 9,404,156 (423,472) - 19,578,729
Bank loans -due in more than one year (15,617,906) (12,350,000) - - (27,967,906)
Loans -due in less than one year (25,910) 1,031,013 - (3,949,770) (2,944,667)
-due in more than one year (16,467) (5,600,000) - 3,949,770 (1,666,697)
Finance leases and hire
purchase agreements (8,501,897) 4,783,283 35,000 (3,095,013) (6,778,627)
-------------- -------------- -------------- -------------- --------------
(13,564,135) (2,731,548) (388,472) (3,095,013) (19,779,168)
======== ======== ======== ======== ========
7. STATUS OF THE FINANCIAL INFORMATION
The financial information set out in the announcement does not constitute the
company's statutory accounts for the years ended 31 January 2007 or 31 January
2006. The financial information for the year ended 31 January 2006 is derived
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditors reported on those accounts; their report
was unqualified and did not contain a statement under s237(2) or (3) Companies
Act 1985. The statutory accounts for the year ended 31 January 2007 will be
finalised on the basis of the financial information presented by the directors
in the preliminary announcement and will be delivered to the Registrar of
Companies following the company's Annual General Meeting.
The preliminary announcement has been prepared on the basis of the accounting
policies as stated in the financial statements for the year ended 31 January
2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BLGDSBUBGGRI
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