VAN Vanco

RNS Number:5260O
Vanco PLC
22 February 2008


Pre-Close Trading Update


Vanco plc ("Vanco"), the global Virtual Network Operator ("VNO"), today issues a
pre-close trading update in respect of its financial year ended 31 January 2008
and prior to the announcement of its preliminary results in May 2008.


Summary

   *The Company expects the trading results for the year ended 31 January
    2008 to be in line with market expectations, prior to the accounting and
    balance sheet reviews described below.

   *The Company has reviewed its accounting policies with the assistance of
    PricewaterhouseCoopers LLP ("PwC").

   *While this review has confirmed that the policies adopted by Vanco in
    prior years are in compliance with International Financial Reporting
    Standards ("IFRS"), the Company has decided to apply a more conservative
    approach to its recognition of revenue, commission payments and the
    depreciation of software assets which will be reflected in the reported
    results for the year ended 31 January 2008.

   *A separate review of the remainder of the balance sheet is being carried
    out which is expected to result in provisions against certain assets as at
    31 January 2008, which are not expected to be material in the context of the
    overall balance sheet.

   *The accounting and balance sheet reviews are in the process of being
    completed and the financial impact will be announced prior to the
    preliminary results announcement in May 2008.

   *The adoption of these changes will have no impact on the Company's cash
    position and the Company remains in compliance with its banking covenants.

   *The Company is finalising a review of its cost base and announces a cost
    reduction and operational efficiency programme aimed at reducing labour and
    overhead costs by approximately �6m in the 2008/09 financial year.

   *The Company announces the appointment of PwC as its auditors with
    immediate effect.

   *The trading outlook for the business remains positive.


Trading update

In the announcement dated 1 February 2008 the Company reported that a number of
contracts in the course of negotiation did not complete by the year end which
resulted in a higher than expected net debt as at 31 January 2008. However, as
these contracts were expected to complete close to the year end this did not
have a significant impact on the Company's results for the 2007/08 financial
year. The Company therefore expects the underlying trading results for the year
ended 31 January 2008 to be in line with market expectations, prior to the
accounting and balance sheet reviews, details of which are set out below.


Accounting review

During the second half of the year, Peter Johnston, the new Group Finance
Director, engaged PwC to assist in a review of the Company's accounting
policies. This review is in the process of being completed. 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.

The adoption of these changes will have no impact on the Company's cash
position.


Balance sheet review

The Company is conducting a review of its balance sheet as at 31 January 2008.
This review is still ongoing, and is subject to audit, but is expected to result
in provisions against certain assets as at 31 January 2008. These are not
anticipated to be material in the context of the overall balance sheet.

The Company is also reviewing the basis of presentation of its Total Contract
Value to aid understanding and will provide more information in future on the
composition and ageing of the contracted order book.

Following the accounting and balance sheet reviews the Company remains in
compliance with its banking covenants.


Cost reduction and operational efficiency programme

Building upon the significant investments made by Vanco in software and systems
in the last few years, Peter Johnston has undertaken a review of the operational
and administrative organisation and has identified several potential areas of
improvement. As a result, the Company announces a cost reduction and operational
efficiency programme which should improve overall service delivery to customers
and better positions the business for its continued growth.

The programme will comprise a restructuring of certain Head Office functions,
the potential off-shoring of more network management roles to existing Vanco low
cost centres and the integration of the Vanco Direct business into the core
Vanco Solutions business. This programme is expected to result in labour and
overhead cost reductions in 2008/09 compared to 2007/08 of approximately �6m (on
an annualised basis �8m). The anticipated implementation cost of this programme
is approximately �4m and will be recognised in the results to 31 January 2009.


Change of auditors

As at the date of this announcement PwC has accepted the Company's invitation to
become auditors of Vanco plc with immediate effect.


Trading outlook

The Company remains confident that the outlook for the new financial year, to 31
January 2009, is encouraging.

Vanco's business is based upon robust long term contracts with multi-national
organisations. The business has demonstrated over a number of years that it is
capable of strong revenue growth through the winning of new contracts and the
provision of innovative data solutions and high levels of service. Furthermore,
the services provided by Vanco remain attractive in times of economic
uncertainty when the rationale for outsourcing data communications services
becomes increasingly based on cost efficiency considerations.

In view of this, the Company continues to consider that both near term and long
term growth prospects remain strong and that the business is well positioned to
take advantage of opportunities in the market place.

Additionally, the cost reduction and efficiency programme set out above will
enable the business to achieve greater operational leverage and this will result
in an earlier improvement in cash flow trend and a higher quality of earnings.


For further information please contact:


Vanco plc


Allen Timpany, Chief Executive Officer
T +44 (0) 208 636 8810


Peter Johnston, Group Finance Director
T +44 (0) 208 636 8812


Morten Singleton, Director of Corporate Communications
T + 44 (0) 208 636 6529


Katie Tzouliadis, Biddicks
T + 44 (0) 207 448 1000






                      This information is provided by RNS
            The company news service from the London Stock Exchange

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