If a company is going to issue an upbeat announcement on April Fool's day, it had better not ask for its shares to be suspended just a month later. That seems to be asking for trouble. Yet that is exactly what communications group Vanco has done.
On April 1, the company said it had increased its credit facility to £123m, which would give it "good working headroom", added that it had identified a number of cost savings and trading was good with a strong pipeline of prospective orders.
Today Vanco announced it now had "limited headroom" under the £123m facility and was in talks with its bankers about its financial position. It said it expected to write down the value of certain assets, its historic figures may have to be revised and it will not be able to publish its results by the May 30 deadline. Oh, and chief executive and founder Allen Timpany has resigned immediately, to be replaced by restructuring expert Andrew Coppel, formerly of Queens Moat Houses.
The shares - which jumped to 91p in the wake of the April 1 statement - have been suspended at 65.25p.
Numis analyst David Toms said: "We suspect the equity is unlikely to have any value here.
"In [the April] trading statement Vanco had identified net debt of £63m at the end of January, implying that the company has burnt through close to £60m in three months.
"Our guess, having seen a few similar such situations, is that equity holders are unlikely to extract much, if any value, from the company. The scale of debts and cash burn versus a small equity base makes a rights issue highly unlikely. Furthermore, the uncertain scale of true profitability makes it hard, in our view, for a buyer to want to pay more than the debt for the whole business."
