Xchanging Share Discussion Threads

[simon gordon] 15/2/2011 15:18

Evening Standard - 15/2/11:

It's not Xccentric to ask why fund managers were so wet

Is it unpatriotic, as a Londoner, to admit that I can't stand the Boat Race? Hordes of hoorays on the banks of the Thames braying at a few posh university paddlers ain't my cup of tea.

So I wasn't overly depressed at the spectacular shares collapse last week of the race's sponsor, that awfully named contracting company Xchanging. A thumping profit warning, £112 million of impairments and the departure of chief executive David Andrews scuppered more than half the company's stock market value.

It always slightly annoyed me that, along with that horrible name, the company thought it was so cool it could create a whole new range of accounting terms. So, instead of the commonly-used Ebit (earnings before interest and tax), it had to be Xebit (Ebit refundable to Xchanging), instead of profits after tax, it had to be Xpat, and so on.

Now that the company has come a tad cleaner on the state of the business, it's clear the market takes another view of its accounts: Xballs. What irks me is that even the most cursory skip through the numbers should have long ago alerted the fund managers who put our pensions into this business that this boat had many worrying holes. Particularly as rumours have been wafting around these accounts for the best part of a year.

Let's start with that Indian acquisition, responsible for a cool £100 million goodwill hit. Xchanging totally overpaid when it spent $145 million (£91 million) for a 75% stake in Bangalore's Cambridge Solutions in 2008. That was suspected long ago. But fund managers failed to spot just how badly.

Xchanging's accounts are complicated, it's true. However, the dire state of Cambridge's trading, although not flagged by Xchanging management's Stock Exchange filings, was plain if you bothered to dig a little. Cambridge publishes quarterly financial results to the Bombay Stock Exchange. You can get them from its website. These showed that, for the nine months to end-September 2010, sales fell 10% and operating profits nearly halved. The pattern was as plain three months earlier at the half-year.

That Xchanging should have detailed this in its Stock Exchange statements last year is a given, but did our highly paid fund managers bother to check? And if they did, why didn't they foresee the size of last week's writedown?

Also easily available are the Companies House records for its Xchanging Procurement Services business. This, I'm led to believe, is the division that handles the contract doing HR and other services for BAE Systems. It was Xchanging's first major contract win, and is still the source of a pretty big chunk of its business.

Its most recent accounts show its operating margins slipped from 7% two years ago to 4% in 2009. Pre-tax profits plunged £4 million to £7.6 million. Horrific. OK Mr Fund Manager, once again, Xchanging's filings to the Stock Exchange are pitifully inadequate on BAE but Companies House is only a website away.

Alternatively, before keeping our pensions and savings in Xchanging, our fund managers could have taken a closer look at the big Lloyd's of London contract it has, processing claims for the insurance market. Lloyd's said in autumn it is keen to open up that lucrative account to more competitors. Given the relative strength of Xchanging's big-boy rivals like Capita, wasn't this another potential sell signal?

Yes, it should be up to the company to fully disclose this sort of stuff more readily. But surely those who invest our money for us, for a grand fee, should be digging around for these warning signs. They will say they did question the board and received assurances that all was well. But, Mr Fund Manager, if the signals look bad, shouldn't you be selling my shares in the company?

Xchanging's very Oxbridge-sounding PR man (Boat Race fan, perhaps?), declined to address the points I raised in this article, saying the business is in its closed period before reporting fully audited figures on 2 March. He does, however, assure me my focus on these aspects of the company is "a touch eccentric". I'm not so certain.

[hvs] 15/2/2011 14:25

Its their IDIOT clients and OTHER PEOPLES MONEY.

[kluk069] 15/2/2011 08:27

Any ideas why Ubs in particular and Morgan Stanley have been piling in?
Would have anticipated more downside but some appear keen to pick 'em up.

[hvs] 14/2/2011 13:39

lol !!!!

Those who are RIGHt are always BORING.

Those who SPIN are very very TALENTED ask Alistair of No 10.

[simon gordon] 14/2/2011 13:16

HVS,

You are so boring....

[hvs] 14/2/2011 13:04

Am sure their CONSULTING "TALENT" will sort it all out.

After all they did GET VERY GOOD BONUSES last year cause they is SO TALENTED.

[rgolding1978] 14/2/2011 10:07

it will all end in tears, CNT all over again

[hvs] 14/2/2011 09:49

Looks like extinction to me .

All that CONSULTING TALENT , Oh Dear

And they BOUGHT A DUD.

Anyone know who CATISA is ?

[rgolding1978] 14/2/2011 09:45

looks like a shorters dream.

[hvs] 12/2/2011 19:08

Do we need a bit of outsourcing at THE TOP HERE ?

[hvs] 12/2/2011 13:35

Massive write off coming.

P 45's all round.

So much Talent they bought a LEMON.

Anyone know who CATISA is ???

[dasv] 12/2/2011 05:45

Just read this thread since my last post in Sep.

Here is my post from April 2010 on the P&F thread. Chart was flagging up problems quite a while back

(there was an inactive target to 102p on the hourly chart too)



-----------------
XCH: looks like a consistent bearish downward channel to me. Downside to 170p for starters.


222p is active on daily but overriding 150p downside target makes me dubious of the upside target (222p).

[typo56] 11/2/2011 17:20

Also you may have trouble trading on Monday - LSE Millennium

[orgasmicbeef] 11/2/2011 15:49

Out for the weekend as many rescue deals or further bad news is discovered on a Sunday

[hvs] 11/2/2011 15:41

Vultures buying here.

There is no meat to be had.

[simon gordon] 10/2/2011 20:51

Seymour Pierce:

2011 pretax profit forecast £76.6 million to £46.7 million.

Given this sharp profit downgrade, we have moved our recommendation from BUY to HOLD with a reduced 60p target price. The shares are likely to be dead money until new management shows it can deliver on its lowered expectations.

We welcome this news as we believe David Andrews's failure to effectively communicate with the City has been an impediment to share price performance. We have previously suggested that the company was an attractive target in a consolidating market. We believe this argument still holds.

Clearly all is not well at Xchanging but in our view it does still have three decent businesses which could be attractive to the likes of Capita or Serco: its insurance division serving the Lloyd's market, its financial services settlement business in Germany as well as a very good call centre business in India.

[hvs] 10/2/2011 17:38

They has a lot of orgasms in the CITY.

All with OTHER PEOPLES MONEY.

[simon gordon] 10/2/2011 17:12

Not attracting as many "morgue traders" as I was expecting, maybe many of them got cremated in CNT & ROK.

[fgump] 10/2/2011 16:55

I'm agreeing with orgasmic albeit this is a punt at this price. I reckon the UK business is definitely worth more than the current enterprise value. If they can hang on financially, customers, staff, restructure etc,etc then could be worth double. Worth a punt with whatever you are prepared to lose!

[orgasmicbeef] 10/2/2011 15:58

shorts running for cover here

[orgasmicbeef] 10/2/2011 15:54

nearly 61p and running up, shorts will cover up soon, lots of value here at this cheap price too

[rgolding1978] 10/2/2011 14:49

added to my short.

[hvs] 10/2/2011 13:30

Will we still get more massive write offs and these brilliant CONSULTANTS bringing in loss making business getting their P 45's with bulging pay offs?

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

Have shareholders been taken for a ride here ?

Why did they not out source the managers in charge of the business ?