Vanco Share Discussion Threads

[02bursar] 25/2/2008 14:42

M776

I agree; gearing is high and I have stated so before but I think Johnstone's got a firm grip on the rudder by giving himself [as hoped] room to manoever, not only by the drive to squeeze out as much inefficiency as possible [£6m pa cost saving programme announced] but also by setting the agenda for getting best commercial terms possible on new contracts. For these reasons, as well as the growing maturity of ongoing contracts and channel partner strategies [particularly T-Systems / Deutsche Telekom], I think the gearing issue will decline. As it does and the share price fires up again, then maybe we'll see a call for further capital if growth opportunities are not to be turned away.

It will indeed be a pivotal moment when Johnstone begins to acquire shares and he will know that.

[astol] 25/2/2008 09:03

No trades going through???apart from 313

[masurenguy] 25/2/2008 07:54

I largely agree although the level of gearing will remain an issue in my view. It will be interesting to see when Johnstone starts acquiring shares on his own account - that could be a pivotal moment for the share price.

[02bursar] 25/2/2008 02:28

M773

Assuming that under the 'more conservative approach to its recognition of revenue, commission payments and the depreciation of software assets', they recognise the revenue and associated costs of the initial phase [design, set up / roll out] over the course of the contract, writing costs to WIP and initial fees paid to deferred income in the balance sheet, then yes, we could see a loss in 2007-08. .

On further reflection, the effect on this years contracts is likely to last a couple more years, though progressively less so as those contracts come to maturity and revenues from quarterly network fees flow in. Indeed, a big chunk of total revenue [£135m] now represensts quarterly network fees and channel partner work. Moreover, the full effect of the cost saving programme from the operational revue [£6m], should materialise in 08-09. Thus new contracts from new enterprise clients are likely to form and increasingly smaller proportion of total revenue, so WIP may become correspondingly smaller.

Neat move on Peter Johnstone's part to distance himself from the old policy by a balance sheet review by PwC and their immediate appointment as auditors. Very decisive but then his CV said all. He'll want to distance himself from the low point of the share price asap, hopefully not before buying a few thousand shares himself.

As ever, my opinion only..

[davius] 24/2/2008 22:57

In more positive comment, Daniel Stewart reiterated its 'buy' view and 245 pence price target despite the statement being thin on conclusive detail, in its opinion.

[masurenguy] 24/2/2008 17:18

Weekend FT Comment (page 19) quotes David Toms at Numis as stating that, as a result of the adoption of a more conservative approach to revenue recognition and the greater future alignment of accrued income with cash collection, "we suspect that this will mean losses in full year 2008 and 2009"

[taffee] 24/2/2008 16:15

evil has had some great wins but also some great losses.

[02bursar] 24/2/2008 16:06

Quote from July 07 Interims: "New contracts are normally cash generative shortly after signature by the payment of an Initial Fee but in the early stages of the contract cash is absorbed as the project is rolled out. Within the industry it is normal practice for the traditional ABCs to capitalise the costs of network set up on the balance sheet and recover these over the term of the contract. By contrast, Vanco does not own the costs of the network and therefore recognises as revenue the amount of work involved in the design and installation of the network. Whilst Vanco has been successful in recovering most of this work in the Initial Fee, it is commercially difficult to recover all of these costs up front. To the extent to which Vanco does not recover the revenue as cash, it recognises the difference as an increase in accrued income in the balance sheet. Over time more revenue will derive from existing accounts, which are typically contracts with an average life of more than 3 years; and the revenue from initial fees will constitute a decreasing proportion of the total revenue of the business." End quote

Quote from company update 22 Feb 08: "While this review has confirmed that the policies adopted by the Company in prior years are in compliance with IFRS, the Company has decided to apply a more conservative approach to its recognition of revenue, commission payments and the depreciation of software assets.

This approach will be applied to contracts written and costs incurred in the 2007/08 financial year and will be reflected in the reported results for that period. The financial effect of the review will be announced prior to the preliminary results announcement in May 2008. One benefit of these changes will be that going forward accrued income written in any one financial year will be more closely aligned to cash collected from accrued income in the same financial year." End quote.

To me, this signals that Vanco will no longer book installation work as revenue where it is not chargeable in one year or less. At the half year, £67m was booked as debtors due after more than 1 year. My guess is that whatever was booked there against new contracts [07-08] will be reversed and all costs associated with such work, including commssions, will be charged to WIP.

With the share price as low as it is, I suspect that Peter Johnstone is preparing the ground to get all the bad news out the way in 07-08 so be prepared to see an exceptional item of circa minus £20m or more as the new accounting policy is implemented on all new 07-08 contracts. He has distanced himself from the old policy by the appointment of PwC and satisfied himself [and stakeholders in general] that there is nothing buried in the balance sheet that is non-recoverable and all liabilities are disclosed.

Going forward, the operational review is very encouraging if certain expensive head office functions can be merged and others transferred to low cost centres offshore without loss of operational performance, generating a net saving of circa £6m.

All good stuff IMO and I see 2008-09 as the turning point.

I continue to be un-phased by the debt level, not only because of the tighter controls on contracts and on operational overheads as announced, but also because more cash generative business is likely to make up an increasingly larger proportion of revenue; I have in mind both the cash generation from quarterly network fees [ £135m pa] and the channel partner strategy with the likes of T Systems [Deutsche Telecom] where they utilise Vanco's existing technology with no further investment by Vanco.

As ever, just my opinion.

[brad44] 23/2/2008 13:07

google his name and you will find all the info you want.Evil Knievel personally I would stay clear of his investment advice and do your own reasearch IMHO

[jimelson] 23/2/2008 09:36

Can someone tell me who this Simon Cawkwell person is. He seems to have made some good calls on this share.

[masurenguy] 22/2/2008 20:44

Inevitably !

[moob] 22/2/2008 20:04

wonder if they will need to restructure their huge debts

[astol] 22/2/2008 19:03

INSIDE INFO although cannot advise the source

It all started to go horribly wrong when Evil Knievel decided to short them when they were £5+

It's strange that it has fallen so low because Vanco has signed quite a few significant deals in the last few weeks with some very big global companies, also, some big existing clients have re-signed with us, but Vanco hasn't anounced them for some reason. I know the debt is higher than anticipated, but they are still well within their limits, so I can only think that there has been a massive over reaction by the markets.

[philjeans] 22/2/2008 12:26

Getting stronger by the minute - back to a pound until the real results are released and analysed when we'll see 150p.

PW adds credibility to the business and it's very reassuring to know that there are no major issues. The new broom is cutting costs and ensuring all new business has a good margin.

Excellent news.

[pugugly] 22/2/2008 11:23

Taffee:> Thanks for your - 753 of 763

You have confirmed my view re Spin - and more spin by omission.

I suspect share price will continue to flutuate untill review concluded and a definate move to cash flow positive.

[davius] 22/2/2008 10:47

Of course, but would you if you'd seen your stake drop from around £150m to £25m in 10 months?

Bottom line is it depends on his expectations for a recovery, but how many of us sell our shares when they've dropped by over 80%? Probably not very many, we hang on waiting for a recovery.

Anything is possible. My shares are paid for, although not many and averaged closer to a pound than where we are now I think I'll make a good profit on a medium term hold.

85-87p
Buy volume 56K depth 15
Sell volume 23K depth 9

[windjammer] 22/2/2008 10:40

davius

he may just decide he want`s a change, and decides to sell.people do you know.
concentrate more on that hobby he never got round to

[davius] 22/2/2008 10:40

Lol, the offer book just went dead, nothing left for a couple of seconds.

85-87.25p now.

[davius] 22/2/2008 10:36

In auction at 83p, sell order book has dried up, just the MMs on offer now.

[wapper] 22/2/2008 10:34

This will end up closer to £1 than 80p today IMHO. Ready to fly any time.

[windjammer] 22/2/2008 09:42

think this one will bob around untill the facts are clarified . Daniel Stewart must be thinking along the lines that there will be a bid approach, just a case of holding for me anyway.

[taffee] 22/2/2008 09:23

think the covenant fears are valid,however,they must be in talks to extend this facility imo

[philjeans] 22/2/2008 09:22

The bank has brought in PW and asked them to do a full appraisal - it seems they found nothing of note!

As I said - all is well and life goes on. Buy while they are this cheap.

[robbie12] 22/2/2008 09:17

STOCKWATCH Vanco lower after uninspiring update; Landsbanki repeats 'reduce'


LONDON (Thomson Financial) - Shares in Vanco PLC were lower after an
uninspiring trading statement this morning, with Landsbanki in reaction
repeating its 'reduce' stance on concerns the company is at risk of breaching
covenants of its existing facilities.
At 9.08 am, shares in Vanco were down 1-1/2 pence, or 1.85 pct, at 79-1/2,
while the FTSE small cap index lost 1.3 points at 3,227.7.
Earlier, the telecommunications company said it expects the results for the
year ended 2008 to be in line with market expectations, prior to the accounting
and balance sheet review and added it is confident about new year outlook.
In reaction, Landsbanki said it feels the trading statement was largely in
line with expectations although it was disappointed there was little guidance on
full year 2009.
The broker added while the company believes it will be cash flow neutral/
slightly positive in 2009, it expects further cash outflow and thinks there is a
material risk that the company will breach the covenants on its existing
facility.
In more positive comment, Daniel Stewart reiterated its 'buy' view and 245
pence price target despite the statement being thin on conclusive detail, in its
opinion.