Xchanging Share Discussion Threads

[simon gordon] 10/2/2011 12:31

OB,

There is value in the UK & European operations. America is a disaster and will probably end up being closed down at great cost. The Asian operations are low value.

The only worth in the business is the big contracts mentioned above. If top talent starts getting poached then those contracts could start crumbling.

I think XCH should put themselves up for sale immediately and be glad if they get 50p.

[orgasmicbeef] 10/2/2011 12:19

simon
Yes OK but Capita or another big european similar co would be able to give comfort to clients [probably share some anyway] and there are line managers already dealing with the clients no doubt. A big disruption to change this sort of operational outsourcing arrangement methinks?

[simon gordon] 10/2/2011 11:39

Matrix:

A purchaser could buy the business and find suddenly find that its three largest clients (BAE, Deutsche Bank, and Lloyds of London: c. 45% sales) terminate the contracts at the earliest opportunity (2012 in the case of BAE). Moreover, the EPs may exercise their put options and Xchanging is left with a significant cash call. The business, in its current state, looks as though it will have to undergo further restructuring, which could take at least a year, and possibly up to three. What the cash cost of this could be is unknown, although note that the group already spent £29.2m restructuring in 2009, which principally required a cash outflow in 2010.

[orgasmicbeef] 10/2/2011 11:35

Don't agree rgolding
a company with good contracts and 8000 employees in an IT/Support role will have many takers, be patient and it will recover or be taken over in my view. I have just purchased and will buy more. IMO and DYOR etc but you can knock off 100 for Cambridge and another 50m for surprises and work it out. At 35m pft, what is the company worth?

[rgolding1978] 10/2/2011 09:28

This has to be a shortes dream.

[rgolding1978] 10/2/2011 09:14

Looks like another CNT to me. i would get out of this while you still can, far to risky.

[hvs] 10/2/2011 08:14

Perhaps they should have outsourced the purchase of Cambridge Solutions.

Anyone found out how CATISA fits into all this ?

[2magpies] 09/2/2011 21:13

OUCH!!

As they say: 'you don't know what you don't know'!

And there was the CEO a few months back moaning that the market was undervaluing the Co.

Wasn't it his son (or another director's son) who borrowed, or lent, £2m to buy XCH shares when they were way above £1?

[simon gordon] 09/2/2011 19:42

Peel Hunt:

We move our price target to 30p from 110p. Our 30p price target is based on a PE of 5x our revised EPS forecasts. Before the trading update the shares were trading on 6.8x. However, we believe a further discount is appropriate given the ongoing uncertainty over the business's future, especially highlighted by the removal of the 2.8p dividend.

Conclusion – bankruptcy remains a distinct possibility

In conclusion, we remain sellers, given the considerable risks to the business at the current time. We do not think it is unfeasible that a loss of confidence among
Xchanging's clients could lead to significant contract losses, and we are not sure that the business's current financial position could support it for long enough.

[matthewa] 09/2/2011 17:58

golfer25 - spot on!

[simon gordon] 09/2/2011 17:54

HVS,

With that logic every single employee of XCH has no Talent. XCH have been brought down by a deluded CEO and a terrible buy in Cambridge. For instance, XCH have top Talent running the highly profitable back office IT platform for Lloyds of London, this ain't mickey mouse business. The Lloyds contract is their crown jewel and from what I've read they have a very good reputation on this contract.

WIKI

In 2000, Xchanging and BAE Systems created the first of these 'Enterprise Partnerships' , for HR services. A second followed soon after, again with BAE Systems, for indirect procurement.

Two years later, Xchanging and Lloyd's of London created two more 'Enterprise Partnerships', one for claims processing, and one for the London Insurance market's back office system; the latter including the IUA as a partner too. Further partnerships were signed with Deutsche Bank in 2004 (launching Xchanging into the European financial market), Aon in 2006 (in broking services) and Allianz GI in 2007.

[simon gordon] 09/2/2011 17:32

Has the CFO kitchen sinked it, will he now put up the company for sale? The European and Asian arms must be worth a few bob, the new owner could sell or close the American division. Or will it just unravel like CNT?

-

Xchanging PLC (LSE: XCH) is pleased to announce that Ken Lever will be appointed to the Board as Chief Financial Officer (CFO) on 5 October 2010 and will begin the transition phase of his new role immediately. Ken will replace Richard Houghton who announced on 15 July his intention to step down as Director and to leave the Company. Richard will also be stepping down from the Xchanging Board on 5 October.

Ken joins Xchanging from Numonyx B.V., the Swiss-based technology company, where he was Chief Financial Officer and Senior Vice President. He joined private equity financed Numonyx B.V. in 2008 having previously served as Chief Financial Officer of Tomkins plc, the global engineering and manufacturing group, from 1999 to 2007. From 1995 - 1999 Ken was Finance Director at Albright & Wilson plc, the FTSE 250 chemicals manufacturer, and prior to that he was Finance Director at the international construction, house building and aggregates group, Alfred McAlpine.

[simon gordon] 09/2/2011 17:24

Numis:

Xchanging's trading update demonstrates again the opaqueness of the business and the disastrous acquisition of Cambridge. The CEO has rightly, in our opinion, fallen on his sword. The new CFO appears to have cleared the decks and it is possible everything, bar the proverbial kitchen sink, has been thrown into the 2011 numbers. However, it is difficult to see relations being repaired with the market until the group delivers on expectations. As such we see a lowly rating for the shares of c6x and move from our Buy recommendation to Sell and a target price of 54p.

2011 Numbers: The absence of the £11.8m above together with a contract termination (£2m), a deterioration in the US claims business (c£4m) and higher business development costs in the Americas (c£4m) is likely to result in 2011 EBITA of some £22m below previous expectations. The previous forecast range for 2011 EBITA was £55.5m to £80.2m. We were on £77.3m and we have reduced our forecast to £50m.

[golfer25] 09/2/2011 17:01

NO CEO
NO FD
NO DIVIDEND
NO HOPE
NO TALENT
NO BOUNCE


ANY MORE?

[simon gordon] 09/2/2011 17:00

HVS,

Of course there is Talent in the company, top software and sales staff for starters. XCH are constantly poaching Talent from competitors, this will now go into reverse big time. Unless XCH offer above market contracts new Talent won't join.

They bought Cambridge for the chance to go Global. They bought a dog, the CFO & CEO are gone and many top employees have lost a fortune as the share has collapsed. Andrews was deluded and bought a shedload on the way down. It was a very bad deal, it's not an anomaly.

The CATISA contract is a mystery to me, no doubt more light will be shed on this.

[hvs] 09/2/2011 16:52

CATISA was also indirectly 50% shareholder in Cambridge.

Something very fishy.

[golfer25] 09/2/2011 16:40

From anchor to w^nker as Sir Alan said

[rgolding1978] 09/2/2011 16:38

i walk past there offices every day. i may have to mumble short short as i walk past tonight

[wcjan26] 09/2/2011 16:24

hvs

catisa is one of cambridge solutions customers, isn't it? they had a fixed term contract which is presumably now running out - hence the removal of the profits from the forecast

the wider question is how they are writing off £100m of intangibles mostly relating to cambridge when the consideration for the cambridge deal was only £83m ?

[hvs] 09/2/2011 16:19

There could be a flood of talent out of this sinking ship, if they are going to sell up they should do it quickly, if they can find a buyer.

What TALENT ??? Just a bunch of ..... !!!!

Why did they buy Cambridge ? and what is the link with CATISA ?

Anyone know ?

[wcjan26] 09/2/2011 16:05

no bounce either

[golfer25] 09/2/2011 15:49

sit by my earlier observation -
20p on the next warning - working in progress review by auditors is usually the next thing with these situations and they have long term contracts
NO CEO
NO FD - or a newbie
NO DIVIDEND
NO HOPE

[robbie paul] 09/2/2011 14:49

But amongst the small caps, XChanging plunged 54 to 63p after the outsourcing company issued a profit warning and its chief executive stepped down.

David Brockton, an analyst at Espirito Santo, reiterated his "sell" recommendation. He said:

"Today's update addresses some of our concerns for the Xchanging business, but does not resolve them fully and raises many further issues. Further deterioration in US activity, the dividend cut and departure of its founder create additional uncertainty as to the precise value and opportunity of Xchanging."

[simon gordon] 09/2/2011 14:25

"Xchanging has also seen a deterioration of performance in the US Claims business of around £4.0m while at the same time it is investing more heavily, to the tune of around £4m, in developing business in the Americas."

Seemingly, competition is savage in this marketplace with low operating margins. They'd probably be better selling off or closing down the American operation as it's devouring them.

I would imagine there will be lots of bitter top management as many followed Andrews and bought shares after the Spring profit warning in 2010. There could be a flood of talent out of this sinking ship, if they are going to sell up they should do it quickly, if they can find a buyer.