20/04/2007
A drop in the price of Vanco – recommended by Growth Company Investor at 492.5p – presents a terrific buying window, with this “disruptive” technology business having delivered record numbers for the year to January.
On turnover lifted 25% to £183.2m, pre-tax profits surged more than 30% north to £14.7m, driving earnings 23% higher to 16.3p. Tellingly, the latter half of the year saw Vanco deliver its best ever half of free cash flow generation at £5.4m, and gross margins grew to 35.8% (34.3%) as the proportion of higher margin services sales increased within the mix. Vanco, which has now delivered 19 consecutive years of sales and profits growth, is the world’s largest Virtual Network Operator (VNO), an approach pioneered by chief executive Allen Timpany.
In short, Vanco designs, implements and manages companies’ communications networks, providing its services globally without owning any network infrastructure of its own. Its solutions, which bring flexibility and cost benefits, have lured new names such as supermarket chain Somerfield and Hilton International onto the client roster.
New business wins, as well as extra work from existing customers, drove growth in a year in which a total of £131m of new orders was announced, driving the group’s contracted business to £363m. There was also significant investment in Vanco’s ‘channel partner strategy’, with investment here sure to assist in securing new business in coming years.
Since year-end, the group has also clinched a milestone win with Ernst & Young (to implement and manage a Wide Area Network connecting offices in more than 80 countries). This 76-month deal, worth US$104m (£51.9m), is double the size of the next biggest contract that the group has ever won.
Great earnings visibility via long-term deals with multinational clients and a huge growth opportunity ahead should stir investor interest. ‘I’m looking to build a multi-billion dollar business which will stay independent,’ assures Timpany. Trading on a historic earnings multiple of 27 times, the shares aren’t especially cheap, but growth prospects are immense.
| Market cap: | £274m |
| PE Historic: | 27 |
| Share price: | 437p |
| LSE | 0pm |
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