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Haha Thats more like it - up 7.7% and in auction The MM's tried to bring it down after the rns - and had to take it up instead. My limit sell didn't trigger at 84.5 - so I sold it at 86 instead!!
http://moneyam.uk-wire.com/cgi-bin/articles/201108171430035448M.html Contract win
I wrote yesterday in my posting at 1258 that the L'Oreal deal was big but I thought not the biggest as that honour would belong to the United Bisuits deal done in 2004. If the below articl is correct then I was wrong and this is a whopper. [ARTICLE STARTS] French cosmetic giant L'Oréal is to outsource more than €500 million (£439 million) of indirect procurement spend, according to press reports. L’Oréal has awarded a three-and-a-half year procurement co-sourcing contract to Xchanging, the business process and technology services provider and integrator. As part of the contract, Xchanging will manage a significant amount of indirect procurement on behalf of L’Oréal across five countries – France, the UK, Germany, Italy and Spain. The contract runs to 31st December 2014. As part of the deal, Xchanging will assign 40 procurement staff to work in collaboration with the cosmetic company’s in-house purchasing teams across Europe. [ARTICLE ENDS] If the number of £439M is right then over the three and a half years of the contracts this woudl equate to over £1.5Bn in short more than two thirds bigger than the United Biscuits deal. What I therefore find amasing is that this seems to have been glossed over in the coverage of Xchanging since yesterday and also in the share price reaction. In short this looks like the biggest deal Xchanging had done since Deutsch Bank. To me the story at Xchanging in buller point form goes as follows: -new CEO at the helm who appears not to have set a foot wrong -new CEO is on the accouting standard board so will not allow any accounting policies that are even remotely grey -new CFO is a long term Xchanging hand and known to provision for all the worse possible opportunities -confident message from CEO and CFO that Xchanging will hit full year forecast (there is no incentive for them to be saying this if it is not already in the bag as they could blame the previous regime) -banking issue is sorted -overinflated mgmt structure has been addressed with massive cost savings. -real estate footprint has been rationalised including shutting down the Hanvoer Square officer (annual saving c £1m) and the recently opened Chicago white elephant office -all cost associated with above two points have been taken in first half numbers -new 2000 seat processing centre on track to open in Shimoga (India) in Nov which will both drive down costs which have been rising signfiantly in Gurgaon and Mumbai and help retention signicantly -sales appear to be on track with the enormous L'Oreal procurement deal signed and something even bigger looking likely to complete in the US before year end What is there not to like?
New banking facilities agreed to 2015 We announced yesterday the successful signing of an agreement for the refinancing of our term and revolving credit facilities. This is an important cornerstone in the foundations of our transition programme under our Four Point Action Plan. The agreement ensures we have funding in place to support our future plans. It was back in March that we announced we had embarked on a process to refinance our principal banking facilities and we expected to complete the exercise by the time of the Half Year Results on 1 August 2011. With the support of the Group's relationship banks (Lloyds Banking Group, Barclays, RBS, DBS and HSBC), we have now signed the new agreement.
Xchanging (XCH) kept its "hold" rating from Seymour Pierce, with an increased target price of 100p from 80p. Operating profits were in-line with the broker's forecasts for the first half at 13.8 million pounds, although down from 24 million for the comparable period in 2010, and the outsourcing company is expected to meet its end of year target of adjusted pre-tax profits of 52.5 million pounds. Pierce notes that the firm is expected to save 13.5 million pounds through reduction in senior and middle management and believes it is on its way to a turnaround. The shares edged down 0.5p to 98.5p.
Clearly the responsible writers at the FT that usually make that paper a reliable objective read are on leave and they have hired some junior reporter recently let go from the News of the World as cover. What kind of a headline is the FT one that boldly states that Xchanging profits have crashed by 95%. Yes it would survive the court case because factually if you take the first half profit and discount all the exceptional that are what will allow the massive upturn in profit in H2 and in future years then the maths just about stack up. Does it however capture the quintessence of today's results (just used that word so that any NoW reporter has to resort to a dictionary)? Not in the slightest, what they actually said was they expect to meet the full year expectations (and when two accountant recently promoted tell you that, you know they will comfortably exceed this). This therefore smacks of gutter journalism not worthy of the FT that seeks to make an extreme headline in order to drive up readership. As mentioned earlier, today's news when taken in the round is excellent; when the grown ups get back to the news desk from their break I hope that they may start to write something that reflects this.
The third piece of news and the subject of your questions, is the results. On the surface there was nothing earth shattering but if back in Feb you could have fast forwarded to a mid year statement of this nature you would have been delighted. With regards to your question on numbers yes the difference in half year versus full year. (Xchanging typically has a slower first half than second). The profit number contain a lot of exceptional costs which relate primarily to the shedding of head office staff (1/3rd have been taken out) and so will have a positive impact in the second half of the year and obviously will feed straight through to profit and margin in future years. The four point plan is progressing better than expected which is great. An interesting point came out at the analyst presentation with regards to £1.3M of cost being incurred on a Sales opportunity in the US. Firstly £1.3M in half a year suggests that this is an enormous opportunity, secondly David Bauernfeind referred to it being either landed or closed down by the year end. Questions were asked to probe about both size and how many other firms were still in the running, which Ken declined to answer saying he would rather discuss opportunities once they had been signed rather than before. Once again this is a sign of a far more cautious Xchanging, in the past under the previous regime they would have trumpeted this opportunity at this stage. My take is that if Xchanging have pumped £1.3M into pursuing this opportunity and are planning to pump more which means they will have put over £2m into it over the year then they are most likely now the final preferred bidder, that they are pretty confident of winning it and that the deal is massive. For me this is the nugget in the results annoucement. FInally I am suprised by the lacklustre response to the shareprice today, three bits of good Xchanging news and a macro economic piece of good news with the US debt ceiling should see a far higher share price than this. I put this down to the analysts miss reading the understated tone of the annoucement as being that Xchanging are concerned rather than just open and conservative. I would expect the share price to increase over the next week or so as Ken Lever and David Bauernfeind tour the investement community and explain the position in more depth including their future vision for the company. I would expect the share to then increase signifcantly in the autumn as people wake up to the success of the business turn around since Feb combined with the realisation that the situation in Feb was no where near as bad as initially believed.
I would take it in the round; there were three annoucements today all of them good. The news of the bank agreements was crucuial. If you remember back to Feb one of the fears that led to the halving of the share price was that Xchanging would breach its banking covenants and would be illiquid. The banks will have crawled all over Xchanging's books before giving the four year revolving credit facility of £75M that they have on top of a £20M loan so the bank agreement is good for two reasons: because it provides Xchanging with the cash required to continue to invest of the next four year and equally importantly because on looking closely at Xchanging the banks consider it safe to do business with. The second important announcement was the L'Oreal deal. Don't be fooled by the small numbers for revenue of £22M over four years; this part of Xchanging being far more conservative in how it annouces its' successes. In the past this would have been annouced using the principal figures (i.e all spend managed would have been counted as revenue) so would have been high revenue but very low margin. Here they will be annoucing just the managing agent figures so the revenue will be low but the margins enormous (i.e all of the £22M minus the costs to service which will be low). In today's analyst briefing Ken Lever also referred to the fact that the £22M number was a conservative one that is likely to grow. In another article I saw reference to this being the largest procurement deal Xchanging had done; I am not sure that I believe this after all United Bisuits was something like £130M a year over 7 years so close to a billion but to come back to my previous point this was the principal model figures not managing agent. Another key element of this deal is that it moves the procurement side of the Xchanging business firmly into Continental Europe. To date other than the UK there has just been a small presence in France (the remenants of United Biscuits Northern Europe) and the acquisition of Mercuris (which did procurement for the Caisse D'Epargne). I will come onto the third piece of news namely the results in another post.
Prof, would be interested to hear your views on the Half Year Results. In line with your expectations ? A novice like me is struggling to compute your figures of 795m and 24m, against the results of 329m and 24m. I'm probably comparing Half Year figures against Full Year figures, but I'd be grateful for an explanation. Cheers.
Ken Lever, Chief Executive Officer of Xchanging, said: "I am delighted to announce the contract with L'Oréal. It is a prestigious win for Xchanging, underscoring our ability to work with the world's largest companies internationally, and bolstering our position in the procurement services market."
XCHANGING PLC WINS L'ORÉAL PROCUREMENT CONTRACT Xchanging plc ('Xchanging'), the business process and technology services provider and integrator, has won a three-and-a-half year procurement services contract with L'Oréal. The contract commences on 1 August 2011 and runs to 31 December 2014. It is expected to generate revenues in excess of €25 million (c. £22 million) over the life of the contract. The contract reinforces Xchanging's established position in the global procurement services market where the Company manages over £4 billion of indirect procurement spend on behalf of a broad range of customers. Xchanging helps optimise the value their customers receive from the money they spend and simplifies the administration involved in the purchasing process. On behalf of L'Oréal Xchanging will manage a significant indirect procurement budget across five countries - France, UK, Germany, Italy and Spain. Xchanging will work alongside L'Oreal's purchasing team to help streamline their purchasing processes across various categories of spend and improve overall costs and quality of supply. The categories include: Information Technology and Telecommunications, Facilities Management, Human Resources, Light Transport and Logistics Supplies, Travel, Industrial Supplies & Services, Utilities and Laboratory Supplies. Xchanging will also provide procurement management activities including reporting, supplier and contract management.
Ken Lever, Chief Executive, commented: "This is a year of transition for Xchanging as we put in place a structure and strategy for renewed growth. I am pleased with the significant progress the Group has made with the Four Part Action Plan. We have disposed of the US BPO business, taken action to reduce costs and improve cash management, and secured our funding. In the second half of the year we will continue to develop our strategy focusing on our competitive strengths to ensure we return to profitable growth. For 2011 we are on track to achieve our financial expectations for the year as a whole."
Operational Highlights · Significant progress made against the Four Part Action Plan · Renegotiation of the Group bank facilities completed - new term of four years · Sold US workers' compensation business for £13.6 million · Acquired 100% ownership of Cambridge Solutions Limited's ("Cambridge") Australian workers' compensation and Indian BPO businesses · Stabilised Kedrios and introduced new management team · Re-focused senior management teams, eliminating duplication
Half Year Results for the six months ended 30 June 2011 In the first half of the year, considerable progress has been made with the Four Part Action Plan announced in March. Financial Highlights (continuing operations) · Reported revenue was £329.5 million (HY 2010: £333.9 million) · Adjusted operating profit was £13.8 million (HY 2010: £24.0 million) · After adjustments mainly related to restructuring costs statutory operating profit was £3.2 million (HY 2010: £21.7 million) · Adjusted operating margin was 4.2% (HY 2010: 7.2%) · Adjusted basic earnings per share was 1.63 pence (2010 HY: 5.54 pence
In the current turmoil Xchanging has held up well; sure it has lost 15% from its recent high but for a share that has recently doubled and where people thought the roof was about to cave in this is a pretty good performance given the current jitters on the markets and the significant falls in most indexes. I topped up this week ahead of the mid year update on Monday as I believe Ken Lever will use it to adjust the analyst expectations upwards for the year. Consensus is c£795M for revenues and £24M for profit. The revenues feel about right to me but the profit is way to far south; I would expect guidance to be given to a £30 to £35M figure and even that will allow for David Bauernfeind, the new CFO to do what he is well known for (and due credit to him) namely to build up provisions that he can release in when required. Xchanging has spent too many years selling the hind before it was shot; they are now doing the opposite.
If this go lower will top up, but lets hope it doesn't. Any views?
Yes, really should have held my nerve a little longer. Tempted to get back in, I must say, but might have to wait for a retrace. In the meantime, Prof, if you got any other share tips..... ;o). You seem very well informed. Thanks for all your help with XCH regardless.
Sorry to hear you got out at 99.25. My take remains the same as in my previous postings namely that we will have a very good mid year statement on 01 Aug and that the full year will be well above current consensus and so the full year statement will see this go to somewhere between 150 and 200p. If I were in your shoes I would get back in.
Outsourcer Xchanging in 2008 bought 76% of Cambridge Solutions, a quoted Indian business. The purchase was a disaster. Several weeks ago Cambridge sold its loss-making American business. Now Xchanging has moved to buy outright the bits of Cambridge it wants, an Australian workers’ compensation business and an Indian business outsourcer. The discovery of the problems in India prompted the shares to collapse from well above GBP2 to a low of 52¾p in February. Some analysts believe this tidying up could make the company more attractive to a larger rival. Highly speculative, but interesting, says the Times.
....I sold at 99.25 !! Good luck everyone. Where do you see this SP going to ?
It looks like good time for XCH aswell for us
Xchanging buys two Cambridge firms for $71.7m By Benjamin Chiou Date: Monday 13 Jun 2011 LONDON (ShareCast) - Business processing firm Xchanging is acquiring two businesses from Cambridge Solutions for a total of $71.7m in cash. The Australian workers' compensation business, Cambridge Integrated Services Victoria PTY (CISV), and its Indian business process outsourcing business (CSLBPO) are currently 100%-owned by Cambridge, and in turn are already 76%-owned by Xchanging. "This transaction enables Xchanging to gain full ownership of the Assets and also to consolidate all of its insurance business interests worldwide," the statement said. CISV will be acquired for $16.7m, while CSLBPO will cost $67.1m, taking the total consideration for the acquisitions to $71.7m, after adjusting for debt. "These transactions simplify our business structure and our financing arrangements. They deliver repayment of the substantial part of the outstanding loan to CISGI [provided by Xchanging to Cambridge's US subsidiary], bring Xchanging 100% ownership of the major assets of Cambridge, reduce the level of minority interest and enable Xchanging to consolidate all its insurance operations worldwide," said Xchanging's chief executive officer Ken Lever.
Ken Lever, Chief Executive Officer of Xchanging plc, commented: "We are pleased to be making this announcement. These transactions simplify our business structure and our financing arrangements. They deliver repayment of the substantial part of the outstanding loan to CISGI, bring Xchanging 100% ownership of the major assets of Cambridge, reduce the level of minority interest and enable Xchanging to consolidate all its insurance operations worldwide."