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Vanco PLC (VAN)

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Monday 15 September, 2003

Vanco PLC

Interim Results

Vanco PLC
15 September 2003



                                   Vanco plc
                                Interim results
                     For the six months ended 31 July 2003


Highlights

• Results slightly ahead of internal budgets

• Turnover up 53.3% to £35.3 million in the six months to 31
  July 2003 (six months to 31 July 2002 - £23.0 million)

• Operating profit of £1.0 million for the six months to 31
  July 2003 (six months to 31 July 2002- £1.5 million operating loss)

• Contracted revenue up 71.9% to £150.1 million at 31 July
  2003 (31 July 2002- £87.3 million). New business sold in the six months to 31
  July 2003 of £42.0 million compared to £33.0 million in the comparable period 
  of last year

• Cash balance of £3.0 million at 31 July 2003 (31 July 2002- £3.6 million)

• Net debt of £13.0 million at 31 July 2003 (31 July 2002- £6.2 million)

• Gross margin of 32.3% for the six months to 31 July 2003
  (six months to 31 July 2002- 30.2%)

• Average annual contract value has increased by 28.9% to
  £410,000 at 31 July 2003 compared to £318,000 at 31 July 2002

• Average annual contract value for new customers was
  £521,000 in the six month period to 31 July 2003 compared to £450,000 in the
  equivalent period in the previous year

• Customers in 71 countries globally at 31 July 2003, compared to 43 at 
  31 July 2002


Commenting on the results, Vanco's new Non-Executive Chairman, Prof Dr Thomas
Wolf said:

'Since listing Vanco has consistently met the financial expectations of the
market for revenue growth and profitability. For this six month period no
expectations were set in the market nor were any predictions made by analysts.
We have however slightly exceeded our internal budgets for the period. The
strong management and focus of the business ensures that Vanco continues to set
the industry standard for servicing the network requirements of multinationals.'

For further information, please contact

Vanco plc

Allen Timpany, Chief Executive                    Tel: +44 208 636 1700

Simon Hargreaves, Finance Director                Tel: +44 208 636 1700

Andy Brown, Public Relations Manager              Tel: +44 208 636 1721



CHIEF EXECUTIVE'S STATEMENT


Introduction

I am pleased to report further good progress for the half year with both
budgeted revenue and profit targets being achieved. Vanco's virtual network
operator (VNO) business model has a number of attractions to multinational
organisations with large data networks. It provides such organisations with
global access to the most relevant technologies coupled with lowest carrier
costs, flexibility and high service standards. These benefits to customers are
reflected in the new business signed in the first half of the year which
provides further confirmation that Vanco's products and services continue to
make a compelling business case to major organisations and we believe will
provide the platform for further growth in the business.

Financial Information

In the six month period to 31 July 2003 turnover was £35.3 million which
represents an increase of 53.3% over the comparable period in 2002. The value of
our contracted revenue at 31 July 2003 was up 71.9% to £150.1 million (31 July
2002 - £87.3 million), of which some £47.3 million will be recognised in the
year ending 31 January 2005.

Gross margin for the period to 31 July 2003 was 32.3% which was higher than the
30.2% achieved in the comparable period in 2002. Average annual contract value
has increased to £410,000 at 31 July 2003 compared to £318,000 at 31 July 2002.
In the six month period to 31 July 2003 the average annual contract value for
new customers was £521,000 compared to £450,000 in the six months to 31 July
2002.

Cash outflow from operating activities amounted to £1.0 million and at the
period end cash balances amounted to £3.0 million and net debt £13.0 million.
There was cash absorption as a result of short term timing differences in
working capital movements.

Market Environment

We have seen no major changes in the market and conditions continue to remain
very favourable. We have seen no new competitors enter the market and Vanco
continues to win new business at the expense of the former monopoly telecoms
providers. We are able to do this as customers continue to make data network
purchasing decisions on a combination of price, service and technology which, as
a VNO we are ideally placed to offer.

Investment in global service operations

Vanco has continued to expand its global service coverage, with customer sites
now being managed in 71 countries, with solutions available to customers in 230
countries and territories.

Vanco's focus on enhancing the quality of service delivered to customers has
been recognised by industry analysts, consultants, journalists and most
importantly end-users. Vanco won the title of Best Service Provider of the Year
at the 2003 Networking Industry Awards. The awards are designed to reward the
innovative and effective use of networking and telecommunications technology.
Vanco was particularly commended for its high quality customer care and global
service capabilities. Vanco has also been short listed in two categories at the
World Communication Awards for Best Customer Care and Best Managed Service.
Recognition of the business was also highlighted in a research study by ICM,
which revealed Vanco as the leading non-asset owning brand in Europe in terms of
market awareness amongst CIOs of major companies. This was backed up in a study
by industry analyst Gartner, who also recognised Vanco as the leading non-asset
owning provider of network services in Europe.


New contracts won

In the first half of 2002 we expanded substantially our international operations
by opening offices in the United States and Singapore while increasing our
presence in Germany, Holland, France, Italy and Spain. This allowed us to
deliver Vanco's products and services to domestic businesses in these countries
whilst also accommodating the requirements of our multinational customers. In
the UK we recently signed a contract with RMC plc, the world's fourth largest
building materials group to design, implement and manage a data network which
covers 1,000 sites in Europe. Additionally, we have entered into contracts with
Smith's Group, Countrywide Surveyors, Baring Asset Management and BAX Global.

New customers in Europe include Go Sport, Sephora and Staubli in France, Mario
Boselli in Italy and Coperion in Germany. In Australia we now manage a network
for O'Brien Glass Industries, a subsidiary of our existing customer Belron and
in Singapore we signed a contract with WesTech. Additionally, Accor, an existing
customer extended its contract to cover the UK and Australia. These contract
wins confirm our belief that Vanco's VNO model is ideally suited to providing
businesses with network solutions across national boundaries.

As well as winning new customers Vanco has successfully retained or renewed
contracts with a number of its existing customers. This is testimony to the high
quality of service offered. Based on annual contract value, Vanco's customer
churn over the last 12 months is just 1%. Secure Trust Bank, who first signed
with Vanco in 1991 have recently renewed their contract. This reflects our
ability to deliver competitive data network solutions over the long term.

Additions to the Board

Vanco has recently announced some important additions to the Board of Directors.
Firstly we are delighted that Ted Raffetto has accepted a permanent role as CEO
of the Vanco's US operation with effect from 10 July 2003. Mr Raffetto was
Non-Executive Chairman of Vanco plc prior to this, a role he had held since our
flotation in November 2001. Previously Mr Raffetto had been the President and
CEO of Bell Atlantic Data Solutions Group.
On Mr Raffetto's appointment Prof Dr Thomas Wolf assumed the role of Non- 
Executive Chairman having served as a Non-Executive Director since Vanco's 
flotation. Finally Jean-Pierre Gaudard was appointed a Non-Executive Director
of the company on 1 September 2003. He joins Vanco following a diverse career
within SITA, including a period as Managing Director of SITA-Equant.

Future prospects

The continued strong growth of the business and the excellent standards achieved
in customer service are the result of considerable skill, dedication and
commitment from Vanco's global team. I would like to thank the staff for their
hard work and professionalism.

Historically Vanco's profits have been concentrated in the second half. Vanco
expects this trend to continue in the current year. We remain positive about the
ability of the business to continue to meet the market expectations.



Allen Timpany
Chief Executive
15 September 2003



INDEPENDENT REVIEW REPORT TO VANCO PLC


Introduction


We have been instructed by the company to review the financial information for
the six months ended 31 July 2003 which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated statement of
total recognised gains and losses, the consolidated cash flow statement, the
reconciliation of net cash flow to movement in net debt, the reconciliation of
operating profit to net cash outflow from operating activities and the related
notes 1 to 5. We have read the other information contained in the interim report
and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
polices and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information expressed in pounds Sterling as
presented for the six months ended 31 July 2003. On the basis of our review, the
pro forma information expressed in Euros has been properly translated on the
basis described in note 4.



Deloitte & Touche LLP
Chartered Accountants
Reading
15 September 2003



Consolidated Profit and Loss Account
Six months ended 31 July 2003

                                                                                       Pro forma
                                                  Year                                      Year
                                              ended 31     Pro forma     Pro forma      ended 31
                Six months ended 31 July       January    Six months ended 31 July       January
                      2003          2002          2003          2003          2002          2003
                 Unaudited     Unaudited       Audited     Unaudited     Unaudited       Audited
                         £             £             £          Euro          Euro          Euro

Turnover -      
continuing
operations      35,258,329    23,004,690    52,993,656    49,361,661    32,206,566    74,191,118

Cost of        
sales          (23,857,896)  (16,050,700)  (34,350,951)  (33,401,055)  (22,470,980)  (48,091,331)     
               ----------------------------------------------------------------------------------
Gross profit    11,400,433     6,953,990    18,642,705    15,960,606     9,735,586    26,099,787

Administrative 
expenses       (10,386,111)   (8,444,885)  (17,664,096)  (14,540,555)  (11,822,839)  (24,729,734) 
               ---------------------------------------------------------------------------------- 
Operating
profit (loss)

Continuing       
operations       1,014,322    (1,490,895)    1,103,212     1,420,051    (2,087,253)    1,544,497
Discontinued            
operations               -             -      (124,603)            -             -      (174,444)
               ----------------------------------------------------------------------------------
                 1,014,322    (1,490,895)      978,609     1,420,051    (2,087,253)    1,370,053

Gain on sale
of current
asset
investments        138,120             -             -       193,368             -             -
Interest           
receivable and
similar
income             364,177       169,376       573,788       509,848       237,126       803,303
Interest          
payable and         
similar
charges           (875,620)     (221,115)   (1,129,732)   (1,225,868)     (309,561)   (1,581,625)
               ----------------------------------------------------------------------------------
Profit (loss)
on ordinary
activities
before
taxation           640,999    (1,542,634)      422,665       897,399    (2,159,688)      591,731
               ----------------------------------------------------------------------------------
Tax on profit
(loss) on
ordinary
activities        (226,797)      321,016      (551,469)     (317,516)      449,423      (772,057)
               ----------------------------------------------------------------------------------
                    
Profit (loss)
on ordinary
activities
after taxation
and retained
profit (loss)      414,202    (1,221,618)     (128,804)      579,883    (1,710,265)     (180,326)
               ==================================================================================
                    
Basic earnings                                                                                 
(loss) per
ordinary share
(pence) (Euro
cent)                 0.79         (2.35)        (0.25)         1.11         (3.29)        (0.35)
               ===================================================================================
                    
Diluted                                                                                        
earnings
(loss) per
ordinary share
(pence) (Euro
cent)                 0.76         (2.35)        (0.25)         1.06         (3.29)        (0.35)
               ==================================================================================
                    
Adjusted                                                                                       
diluted
earnings
(loss) per
ordinary share
(pence) (Euro
cent)                 0.70         (2.35)        (0.25)         0.98         (3.29)        (0.35)
               ==================================================================================



Consolidated Balance Sheet
31 July 2003

                                                                        Pro forma
                             31 July                     Pro forma      31 July        Pro forma
                 31 July     2002          31 January    31 July        2002           31 January
                 2003        Unaudited     2003          2003           Unaudited      2003
                 Unaudited   as restated   Audited       Unaudited      as restated    Audited
                 £           £             £             Euro           Euro           Euro

Fixed
assets
Intangible       
assets           4,366,444     4,112,186     4,420,575      6,113,022      5,757,060      6,188,805
Tangible        
assets          14,669,970     9,089,569    11,881,617     20,537,958     12,725,397     16,634,264 
                -----------------------------------------------------------------------------------
                19,036,414    13,201,755    16,302,192     26,650,980     18,482,457     22,823,069
Current
assets
Stock of            
components          19,204         7,452        17,572         26,886         10,433         24,601
Debtors
Due within      
one year        24,858,560    18,674,454    21,426,227     34,801,984     26,144,236     29,996,718
Due after       
more than one
year            13,003,512     7,101,517     9,517,502     18,204,916      9,942,123     13,324,502
Investments        612,564       234,714       234,057        857,590        328,600        327,680
Cash at bank     
and in hand      3,027,501     3,557,561     5,569,472      4,238,501      4,980,585      7,797,261 
                -----------------------------------------------------------------------------------
                41,521,341    29,575,698    36,764,830     58,129,877     41,405,977     51,470,762
Creditors:
amounts
falling due
within one
year
Trade           
creditors       13,329,335    11,991,615    12,603,319     18,661,069     16,788,261     17,644,647
Other            
creditors        7,347,753     2,777,878     6,238,541     10,286,854      3,889,029      8,733,957
                -----------------------------------------------------------------------------------
                20,677,088    14,769,493    18,841,860     28,947,923     20,677,290     26,378,604
                -----------------------------------------------------------------------------------

Net current     
assets          20,844,253    14,806,205    17,922,970     29,181,954     20,728,687     25,092,158 
                -----------------------------------------------------------------------------------
Total assets    
less current
liabilities     39,880,667    28,007,960    34,225,162     55,832,934     39,211,144     47,915,227

Creditors:
amounts
falling due
after more
than one
year           (11,077,786)   (7,646,821)   (9,792,466)   (15,508,900)   (10,705,549)   (13,709,452)
                -----------------------------------------------------------------------------------
Provisions
for
liabilities
and charges       (447,195)     (247,028)     (409,193)      (626,074)      (345,840)      (572,870)
                -----------------------------------------------------------------------------------

                28,355,686    20,114,111    24,023,503     39,697,960     28,159,755     33,632,905
                ===================================================================================

Accruals and    
deferred
income          14,441,160     8,524,996    10,844,112     20,217,624     11,934,994     15,181,757

Capital and
reserves
Called up        
share
capital          2,636,645     2,598,467     2,633,802      3,691,303      3,637,854      3,687,323
Share premium    
account          7,860,645     7,099,697     7,778,140     11,004,903      9,939,576     10,889,396
Profit and       
loss              
account          1,273,404      (618,145)      568,132      1,782,765       (865,403)       795,385
                -----------------------------------------------------------------------------------
Equity          
shareholders'     
funds           11,770,694     9,080,019    10,980,074     16,478,971     12,712,027     15,372,104
                -----------------------------------------------------------------------------------
Non-equity       
minority
interests        2,143,832     2,509,096     2,199,317      3,001,365      3,512,734      3,079,044
                -----------------------------------------------------------------------------------

                28,355,686    20,114,111    24,023,503     39,697,960     28,159,755     33,632,905
                ===================================================================================



Consolidated Statement of Total Recognised Gains and Losses
Six months ended 31 July 2003

                                                                 Year ended 31
                                        Six months ended 31 July       January 
                                              2003          2002          2003
                                         Unaudited     Unaudited       Audited
                                                 £             £             £

Profit (loss) for the period               414,202    (1,221,618)     (128,804)
Foreign currency translation               
differences                                291,070        (9,782)       83,681
                                          -------------------------------------
Total recognised gains and losses          705,272    (1,231,400)      (45,123)
                                          =====================================
                                                                       



Consolidated Cash Flow Statement
Six months ended 31 July 2003

                                                                 Year ended 31
                                        Six months ended 31 July       January
                                              2003          2002          2003
                                         Unaudited     Unaudited       Audited
                                                 £             £             £

Net cash (outflow) inflow from
operating activities                      (987,741)     (849,137)    1,591,368

Returns on investments and
servicing of finance
Interest received                           11,238         8,339        14,937
Interest paid                             (436,421)     (120,124)     (701,324)
                                          -------------------------------------
                                           
Net cash outflow from returns on
investments and servicing of finance      (425,183)     (111,785)     (686,387)
                                          -------------------------------------
                                                                  
Taxation paid                             (310,170)     (235,291)     (376,272)

Capital expenditure and financial
investment
Payments to acquire tangible fixed        
assets                                    (789,718)     (752,440)   (1,644,451)
Payments to acquire intangible             
fixed assets                               (11,337)       (9,035)      (13,871)
Receipts from sales of current             
asset investments                          235,356             -             -
                                          -------------------------------------  

Net cash outflow from capital
expenditure and financial investment      (565,699)     (761,475)   (1,658,322)
                                          -------------------------------------
                                                                       

Acquisitions
Investment in subsidiary                   
undertaking                                (49,020)      (71,965)     (130,925)
Investment in own shares by       
Employee Benefit Trust                    (475,742)            -       (45,326)
                                          -------------------------------------                             

Net cash outflow from                     
acquisitions                              (524,762)      (71,965)     (176,251)
                                          -------------------------------------
Net cash outflow before                 
financing                               (2,813,555)   (2,029,653)   (1,305,864)

Financing
Payment for nil paid shares in             
Vanco Group Limited                        473,318             -             -
Capital element of finance lease
and hire purchase payments              (1,671,968)   (1,208,999)   (2,292,504)
New medium term loans                    1,500,000     1,000,000     2,895,080
New loan                                         -       332,898       884,639
Capital element of loan                   
repayments                                (132,511)      (60,045)     (159,304)
Medium term loan repayments                (53,890)     (272,419)     (383,401)
                                          -------------------------------------
                                                                       
Net cash inflow (outflow) from
financing                                  114,949      (208,565)      944,510
                                          -------------------------------------


                                          
Decrease in cash                        (2,698,606)   (2,238,218)     (361,354)
                                         ======================================
                                                                        




Reconciliation of Net Cash Flow to Movement in Net Debt
Six months ended 31 July 2003

                                                                  Year ended 31
                                         Six months ended 31 July       January
                                               2003          2002          2003
                                          Unaudited     Unaudited       Audited
                                                  £             £             £
                                          --------------------------------------
Decrease in cash                         (2,698,606)   (2,238,218)     (361,354)
                                          -------------------------------------
                                    

Cash outflow from changes in lease
and hire purchase financing               1,671,968     1,208,999     2,292,504
New loans                                (1,500,000)   (1,332,898)   (3,779,719)
Cash outflow from loan repayments           186,401       332,464       542,705
                                          -------------------------------------

Change in net debt resulting from        
cash flows                               (2,340,237)   (2,029,653)   (1,305,864)
                                          -------------------------------------
New finance leases                       (2,853,343)   (2,150,088)   (5,116,182)
Foreign currency translation                
differences                                  47,342        (4,783)      103,330
Other movements in other loans              487,390             -             -
                                          -------------------------------------

Movement in net debt                     (4,658,848)   (4,184,524)   (6,318,716)

Opening net debt                         (8,338,542)   (2,019,826)   (2,019,826)
                                          -------------------------------------

Closing net debt                        (12,997,390)   (6,204,350)   (8,338,542)
                                         ======================================



Reconciliation of Operating Profit (Loss) to Net Cash (Outflow) Inflow from
Operating Activities

Six months ended 31 July 2003

                                                                 Year ended 31
                                     Six months ended 31 July          January
                                           2003          2002             2003
                                      Unaudited     Unaudited          Audited
                                              £             £                £
Operating profit (loss)               1,014,322    (1,490,895)         978,609
Depreciation                          1,428,792     1,092,745        2,478,300
Amortisation of intangible fixed        
assets                                  144,521       136,801          296,370
(Increase) decrease in stock             (1,632)       16,418            6,298
Increase in debtors                  (7,705,615)   (3,539,362)      (8,784,165)
Increase in creditors                   994,526     1,845,547        3,068,966
Increase in accruals and deferred     
income                                3,137,345     1,089,609        3,486,990
Increase in other non-cash items              -             -           60,000
                                     ------------------------------------------

Net cash (outflow) inflow from         
operating activities                   (987,741)     (849,137)       1,591,368
                                     ==========================================



Notes

1.       The interim financial information for the six months ended 31 July 2003
and 31 July 2002 has not been audited and does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985. Certain comparative
information for the six months ended 31 July 2002 has been restated to reflect
consistent presentation with the current year. Accruals of £3,010,216 have been
reclassified from other creditors to accruals and deferred income.

2.       The profit and loss account for the year ended 31 January 2003 and the
balance sheet at that date are derived from the Company's full accounts which
have been filed with the Registrar of Companies and on which the Company's
auditors gave an unqualified report.

3.       The interim financial information has been prepared on the basis of the
accounting policies stated in the financial statements for the year ended 31
January 2003.

4.       The translation of the financial information into pro forma balances in
Euros is included solely for convenience and the pro forma balances in Euros are
stated, as a matter of arithmetical computation only, on the basis of all
balances being translated from pounds Sterling to Euros at the rate prevailing
on 31 July 2003. This translation should not be construed as meaning that the
pounds Sterling amounts actually represent, or have been or could be converted
into the stated number of Euros.

5.       Adjusted earnings per share has been calculated after taking into
account the potential dilutive effect of the conversion of deferred ordinary
shares of 0.1p each in Vanco Group Limited into ordinary shares of 5p each in
Vanco plc. At 31 July 2003, none of the targets regarding the contingently
issuable shares to Directors and senior executives had been met. Accordingly,
these shares are not dilutive for the purposes of calculating earnings per
share. This additional disclosure has been given for information only.







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