Vanco, the pioneer of the 'Virtual Network Operator' model of network sourcing, offers investors highly visible growth in a £15.4bn market.

The company designs and manages communications networks for global heavyweights – Avis, British Airways, Siemens – on long-term contracts. Being ‘virtual’ and ‘asset light’, the group owns no telecoms infrastructure, and is independent of carriers and equipment makers. It treats infrastructure as a commodity, trades with 650 carriers globally, and is able to get the good prices for customers whilst aspiring to deliver high service levels. Solutions are also delivered with partners such as IBM and carriers such as Swisscom and Bell Canada use Vanco to extend their footprint/network capability.

Chief executive Allen Timpany can point to 18-years of uninterrupted top line growth at an average 40% per annum. Contracts are typically 3 to 5 years in length, and from these deals, Vanco consistently makes gross returns of 35% – contracted orders approaching £350m give very high earnings visibility.

‘We have a stunning business model’, surmises Timpany, ‘we have an inverse relationship to technology risk. Our gross margin is consistent regardless of which technology wins out. And globalisation means we are in the right place at the right time'

'Cash generation is terrific, as we get paid quarterly in advance, and we have huge potential revenues from existing clients’, he adds.

Annual numbers to January are slated for April. Forecasts indicate a rise in revenues to £180m (£145m) and a 22% profits push to £17m. Earnings growth of 20% to 18p looks achievable. For 2008, expect an even more aggressive 65% profits surge to £28m and 57% EPS growth to 28.3p.

Vanco trades on a lofty forward multiple of 27 for January ’07. However, that drops to a palatable 17.4 next year – the PEG ratio for 2008 is only 0.3 – and with profitable growth aplenty assured and acquisitions set to sweeten the investment story, the shares have strong appeal.

Vanco	LSE	0pm	p	p
Click here for interactive charting
Other company articles:
Vanco			20/04/2007
Technology teasers			09/02/2007
Vanco			18/01/2007
Vanco			15/09/2003
Vanco			07/11/2002