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Back-office solutions provider Xchanging plc (LSE:XCH) signed a new contract with BAE Systems to provide procurement services for another three years, superseding the current contract which is soon to expire at the end of 2012
The newly signed deal will have a lower margin than the previous contract, but nonetheless highlights the ambition in its thrust to gain momentum at profit growth.
The CEO highlighted the seven-year procurement services contract with BAE System’s US operations that the company expects to provide revenues of more than US$150 million for the duration of the contract, with an option to extend to up to three more years.
BAE Systems Australia also extended its procurement services contract with Xchanging for another three years, which was originally signed in 2006, and will end in 2013.
Xchanging’s Procurement Services provide sourcing, spend management, and procure-to-pay solutions with the objective of cost efficiency and savings to clients.
CEO Comments
CEO Lever further commented:
“The new contract announced today will contribute significantly to this, enabling us to retain the benefits of scale as well as our core expertise and infrastructure in the important UK market.”
But not all Good News
In November 2011, BAE Systems announced it will not be renewing its HR outsourcing contract with Xchanging, which will expire when 2012 ends.
Lever maintains the company has an extensive relationship with BAE Systems “across three continents” and considers it a “valued customer”.
Other Contracts
The procurement services division, one of the three services offered by Xchanging, has acquired several contracts in 2011 that Mr. Lever referred to as the division’s “step change”.
L’oreal also awarded a three-and-a-half-year procurement services contract to Xchanging for an expected revenue of £22 million for the whole term.
Investor Reaction
In London trading, Tuesday, 21st February, Xchanging shares are slightly up 1.5 pence, or 1.8%, to 86.5 pence at noon GMT.
Company Spotlight
Xchanging provides procurement, business process outsourcing, and technology services to a host of industries, including aerospace & defence, banks & financial services, energy & utilities, healthcare, insurance, manufacturing, real estate, telecommunications, and trasnportation, travel & leisure.
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