Vanco Share Discussion Threads

[safman] 05/2/2008 15:02

telcos taking a battering today.. VAN no exception.. must admit surprised to see these keep falling and will wait for an entry point.. into these..

good luck..

saffy..

[mark3tmaker] 05/2/2008 14:55

half shares, ha. these are looking weak at the moment. how far will they drop!

[linney3] 05/2/2008 14:49

They dont sell half shares at 50p? Need a loan to buy a full one?

[mark3tmaker] 05/2/2008 14:48

50p maybe worth a punt!

[pugugly] 05/2/2008 13:37

taffee;> i suspect the response could be a standard one - Can anyone else confirm or deny?

I copy below part of an e-mail sent to Morten some time ago before the last rns WHICH HE DECLINED TO RESPOND TO, and as I result I did not invest (This has at the current price saved me a small fortune - Thank you!!)

"The bottom line being to determine when the company will be cash flow positive and when as an investor I would see a return in the form of dividends. I have ignored any possibility of a takeover at the moment. It is possible, that if it helps a marketing man like me understand the business, it could help other investors appreciate the apparently hidden value my broker keeps pushing at me. I will then have to use skill and judgement to make an estimate of the future growth of the business and the effect of competition and changes in technology."

In my view the jury is still out.

e & oe - dyor no investment advice intended just a plea for CLEAR figures.

[moob] 05/2/2008 13:26

Vanco has already gone bust once hasnt it from memory

[masurenguy] 05/2/2008 13:25

A view from a salaried director who appears not to own any shares (which he had the opportunity to buy before the close period). If he is so confident why hasn't he backed his optimism and confidence with hard cash ?

Taffee - you keep ignoring the big issue of debt. Just posting random bullish statements won't make it go away !

[taffee] 05/2/2008 13:18

let me refer you too vanco's recent e-mail to me

Thank you for your query



I am happy to reply in writing, but also happy to have a conversation if you prefer...my direct dial number is below.



From a personal perspective I believe the fundamental value of this business is a matter of several multiples of where the market has us at the moment



The market is very short term, momentum and cash flow focussed at the moment. While we are making good use of our facilities we are not breaching the levels of available debt, nor the covenants over the facilities.



We are approaching the point where the business will mature to free cash flow neutrality and into positive territory, and we have a new FD who has come in and made a number of great improvements in the systems procedures and operations of the finance function and the business generally...though these will take a few months to come through in the numbers.



I remain excited by the opportunities for Vanco and convinced that this is the perfect business model for addressing the global data networking market. Vanco is a global leader in this field and should continue to build a sustainable and more profitable, cash generative business going forward.



Our biggest asset is not on the balance sheet (£0.5bn of order book of contracted cash in flows from blue chip customers, with no history of bad debt (c£400k in 19 years of operations).



In my opinion the market is too myopic for Vanco and the fundamental value will win through in the medium term.



If you have any further specific questions please don't hesitate to ask.



Kind regards,



Morten Singleton



Morten Singleton

Director of Corporate Communications

Vanco UK Limited, part of Vanco plc,

3 More London Riverside, 1st Floor, London SE1 2RE, UK

W

[taffee] 05/2/2008 13:15

listen guys and gals..I don't think you understand the business model at all.

Had the same with autonomy..investors simply didn't get it....eventually theey did.

[pugugly] 05/2/2008 13:11

taffee:> I was encouraged by your contract figire until I multiplied it by the operating margin as per the last company presentation of 5.9%. Unless I am doing something wrong, or have failed to understand the model, 5.9% of £500 million of contracts only produces sone £29.5 million at the operating margin level. This would not appear to be sufficient to make a very large hole in the average debt of £79 million.

[masurenguy] 05/2/2008 13:02

"taffee - 5 Feb'08 - 12:50 - 618 of 618: vanco has almost £500 million of signed contracts with totally outweighs the debt."

How can you possibly justify the claim that the value of these signed contracts 'totally outweighs the debt' ! Their pretax last year was 8% of sales. On that ratio the potential pretax on £500m of signed contracts is £40m, which is around 50% of the average H2 debt and circa 60% of the most recent projected year end debt.

Get a reality check - why on earth do you think the share price has fallen by 80% !

[taffee] 05/2/2008 12:50

vanco has almost £500 million of signed contracts with totally outweighs the debt.

Vanco will hit big profits at some point in the future as the income dribbles in from these.

[02bursar] 05/2/2008 12:35

M614

"I think therefore, this is a short term gamble. If the fuller update due on or shortly after the 18th reveals profits on target of perhaps £20m, then even with the higher debt this would surely be a screaming buy with a P/E of around 3?"

I would agree with that sentiment.

FD must be pushing to improve debt / equity [withdrawn from one of the contracts being negotiated for 'sound commercial reasons'] Morton indicated that his presence is being felt.

"The RNS made no mention of expected profits. That either means that they do not yet have the figures or that the profits are up with concensus estimates."

The top line is fairly predictable. They must have a good idea of the last 5 months of H2 down to the operating profit level from monthly management accounts.

[alexacj] 05/2/2008 12:13

To be fair Davius....I have NEVER seen any director or company spokesman tell shareholders anything other than "the market has got it wrong"....."we are very upbeat about our prospects".......from what I can see the profit is not the issue....it's the debt.......only a statement showing declining debt or some form of cast iron assurance that debt will/has fallen will re-ignite this share........until we see signs of that then any share purchase is a gamble....which may or may not pay out.......I think jonwigs previous analysis of this company has come to fruition. Worth a read imho!

[imprima2] 05/2/2008 12:13

how big are the debt?

[davius] 05/2/2008 12:07

Morten stated to me in an email that they were obliged to come to the market without delay when they knew they had missed the concensus expectation for net debt.

The RNS made no mention of expected profits. That either means that they do not yet have the figures or that the profits are up with concensus estimates.

I think therefore, this is a short term gamble. If the fuller update due on or shortly after the 18th reveals profits on target of perhaps £20m, then even with the higher debt this would surely be a screaming buy with a P/E of around 3? If the figures come in much lower than forecast then I suppose the shares could fall further, depending on the numbers. However, the upbeat email from Morten suggests he at least is confident.

[alexacj] 05/2/2008 12:06

Anyone know what the "headroom" is in their facility........could they be looking to issue convertible bonds??

[windjammer] 05/2/2008 11:59

masurenguy

i agree with the initial fall. but feel trading range of 140 / 190 is about right this at the moment is well overdone. i am holding at about 130 so not to concerned and will buy more. expect profits of about 20 mil to be anounced with falling interest rates. not sayimg its perfect but for the above range ok

[masurenguy] 05/2/2008 11:18

"02Bursar - 5 Feb'08 - 10:33 - 607 of 609: Operaing profit covers interest more than 4 times. The P&L does fairly reflect the co's profitability for work donew IMO. Cash profile lags P&L profile due the contract phases so timing issue - working capital finance. Notwithstanding the medium / long term nature of the booked debt in the balance sheet, its quality cannot be an issue for the bank since the co's history of bad debts is virtually nil in 19 years."

I don't have a problem with their accounting treatment and I can also see that current projected profits provide 4 x interest cover. I also like the company and its business model. However it is overleveraged in my opinion and the implementation of their business model is handicapped by the size of their debt. That is why the share price has fallen by 80% in less than 12 months ! At some point this issue will have to be addressed and that will result in dilution unless they are bought out.

"windjammer - 5 Feb'08 - 10:52 - 608 of 609: masurenguy, i noticed you forgot to mention that daniel stewart has it down for a buy target 245p the statement was in the same paragraph as the Landsbanki. mmmm strange that".

You are very defensive - so I assume that you are an existing investor who is underwater at the moment. This is not intended to be a put down either - I have some other shareholdings underwater too in this current market malaise. There is nothing strange about ignoring the DS position since I have not seen any case made by them to support their 245p target so it doesn't mean anything to me. If you have a copy of a DS Note that provides reasons to substantiate their price target then please post a link since I would be interested to read it. Landsbanki have given a clear reason (level of debt) to justify their view and this happens to concur with the views that I have previously expressed here for exactly the same reason. Why do you think the share price has fallen by 80% in less than a year ?

[02bursar] 05/2/2008 11:15

M609

"An oportunistic offer may be made with the share price the way it is."

See M607

Why should the Board consider an offer if the company continues to operate within its banking arrangements? What evidence is there that it can't?

[gluefactory] 05/2/2008 10:57

An oportunistic offer may be made with the share price the way it is.

[windjammer] 05/2/2008 10:52

masurenguy

i noticed you forgot to mention that daniel stewart has it down for a buy target 245p the statement was in the same paragraph as the Landsbanki.
mmmm strange that.

[02bursar] 05/2/2008 10:33

M606

"As I've said before - good business model but its success is threatened by the undercapitalization of the company. This makes it vulnerable to dilution in order to raise further working capital or possibly to a predator. This is not a healthy financial equation especially in the highly constrained credit environment that is prevalent at the moment."

I have been an private investor in the company for some time and recently added. My opinion for what its worth:

Operaing profit covers interest more than 4 times.

The P&L does fairly reflect the co's profitability for work donew IMO. Cash profile lags P&L profile due the contract phases so timing issue - working capital finance.

Notwithstanding the medium / long term nature of the booked debt in the balance sheet, its quality cannot be an issue for the bank since the co's history of bad debts is virtually nil in 19 years.

The prospects to move to cashflow neutral / positive must be increasing as many of the contracts in the order book must be maturing to phase 2.

AT is on record as saying that he won't sell in the foreseeable furure. He's had offers in the past. Given that the share price is now 80% that of a year ago, yet the co is increasingly profitable, the liklihood of a change of mind to sell his near 50% stake or dilute it significanly must be remote IMO.

[masurenguy] 05/2/2008 09:48

"mercury123 - 5 Feb'08 - 08:49 - 605 of 605: I think the downside at least in the short term is limited. Remember the banking covenants have not been breached and this is still a profitable company in a fast growing sector. Also interest rates around the world are falling in so that monster debt may not hurt quite so badly as people fear"

Well only 3 months ago the company stated that its average H2 debt was £70m and now it has increased by a further 13% to £79m. Banking covenants have not been breached so far but that is no guarantee for the future.

"LONDON (Thomson Financial)04/02/2008: Landsbanki, however, shifted its stance on the stock to 'reduce' from 'hold', saying the indication that average net debt was considerably ahead of guidance significantly increases the risk that Vanco will breach the covenants on its existing facility."

As I've said before - good business model but its success is threatened by the undercapitalization of the company. This makes it vulnerable to dilution in order to raise further working capital or possibly to a predator. This is not a healthy financial equation especially in the highly constrained credit environment that is prevalent at the moment.

[mercury123] 05/2/2008 08:49

Shorters having a field day here. I've decided to top up at these levels - first in at 1.08 which isn't looking too clever now but next in at .9165 and I think the downside at least in the short term is limited. Remember the banking covenants have not been breached and this is still a profitable company in a fast growing sector. After such a steep fall it deserves the benefit of the doubt. Also interest rates around the world are falling so that monster debt may not hurt quite so badly as people fear