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The completion of the sale of CSLBPO by Cambridge remains subject to Cambridge shareholder approval, which, in accordance with Indian regulations, will be conducted by a postal ballot, the result of which is expected to be announced on 19 July 2011. The value of the Assets is supported by two independent market valuations. CISV is a workers' compensation insurance business in Australia whose two principal customers are the State of Victoria and the State of New South Wales. CSLBPO in India conducts a range of outsourced business operations mainly for overseas customers. In the year ended 31 December 2010, the Australian assets being acquired recorded revenues of AUD42.4 million (£ 25.2million*) and an operating profit before tax and one-off charges of AUD0.5 million (£0.3 million*). This became an operating loss before tax, after one-off charges, of AUD18.8 million (£11.2 million*). The Australian gross assets being transferred had a carrying value at 31 December 2010 of AUD19.7 million (£12.9 million*). In the year ended 31 December 2010, the Indian assets being acquired recorded revenues of INR1,270.2 million (£17.9 million*) and an operating profit of INR311.2 million (£4.4 million*). The Indian gross assets being transferred had a carrying value at 31 December 2010 of INR330.0 million (£4.7 million*). Xchanging also reports that, following its announcement on 10 June 2011 to call the guarantee extended to it by Cambridge, it will be receiving $66 million dollars to satisfy this guarantee. Cambridge had extended the guarantee to Xchanging to secure a loan provided by Xchanging to Cambridge Insurance Solutions Group Inc ("CISGI"), Cambridge's wholly owned subsidiary in the USA.
Acquisition of Australian and Indian businesses from Cambridge Solutions Ltd and payment of Guarantee Xchanging plc ("Xchanging") (XCH:L), the global business processing company, announces that it is acquiring from Cambridge Solutions Ltd ("Cambridge") (CAMB:NS) its Australian workers' compensation business, Cambridge Integrated Services Victoria PTY Ltd ("CISV"), and its Indian business process outsourcing business ("CSLBPO"), (together "the Assets"). The Assets are currently 100% owned by Cambridge, which is in turn 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. In practical terms the transaction will not affect the operations or employees of the Assets. Xchanging is acquiring the shares in CISV for an agreed valuation of US$16.7 million. It is also acquiring CSLBPO through a business asset purchase for an agreed valuation of US$67.1 million. The total net consideration for the Assets, after adjusting for debt, is US$71.7 million. The total consideration payable by Xchanging will be satisfied in cash. This transaction will have no impact on the net cash position of the Xchanging group.
http://www.investegate.co.uk/Article.aspx?id=201106130700093036I
Guarantee securing loan to Cambridge Integrated Services Group Invoked Xchanging plc ("Xchanging") (XCH.L), the global business processing company, has today informed Cambridge Solutions Ltd ("Cambridge", which is 76% owned by Xchanging) that it is now seeking repayment of a US$66 million term loan extended by Xchanging to Cambridge's 100% owned US subsidiary, Cambridge Integrated Services Group Inc ("CISGI"), and invoking Cambridge's US$66 million guarantee securing the loan. Xchanging extended the loan to CISGI in tranches in 2009 and 2010.
http://www.investegate.co.uk/Article.aspx?id=201106130700092858I
Informative and looks like good news...
Not sure which is the better news, Ken Leaver being confirmed as CEO or David Bauernfeind as CFO. Ken Leaver has not put a foot wrong since his appointment. David Bauernfeind is an old Xchanging hand since 2001 having been business CFO of the HR Business when it started up, Group Financial Controller, CFO of the Financial Services division in Germany and latterly CFO of the UK Business where he was very much the power behind the throne. Having seen some pretty dubious decisions by the Xchanging board over the years, this one is awesome.
I only meant metaphorically. Anyway, I'm just a novice learning the ropes.............if you need anything answered, Prof is your man.
When you say re-structing will pay dividends, do you recon literally dividends or metaphorically...... just curious...:-)
To clarify my position, I'm in and am holding long term. I definitely don't agree with the "Sell" recommendation !! Hope the re-structuring will pay dividends....hopefully break the £1 mark in the next few weeks.
some good news and It looks like it might go back to previous levels (130+) sometime soon...it is very much underrated...again these are personal observations...do your own research..
I didn't post it at the time, but after the recent trading update a week or so ago, I read a tiny article in the Evening Standard which was along the lines of "Peel Hunt continues to recommend XCH as a sell" with one of their analysts saying "It remains one of the most shorted stocks in the sectors". a) Does anyone have any figures about the numbers of shares "shorted" both then and now ? b) Given the recent rise in SP, wont they have to be buying them back anytime soon ? I'd be interested in the opinion of someone with a greater understanding than myself of how it all works.
Panmure Gordon reiterates sell on Xchanging, recommended price 98.75p
Ken Lever, Acting Chief Executive Officer and Chief Financial Officer of Xchanging, commented: "This transaction is a key element of the Four Point Action Plan we outlined in our preliminary results. Specifically it creates intrinsic value through the exiting of a business with unsatisfactory returns and significant future commitments. Selling the Operations to Sedgwick, a market leader in the workers' compensation arena, will provide our customers and employees with a good home for the future."
Disposal of Cambridge Solutions' workers' compensation and third party administration operations in the USA Xchanging plc ("Xchanging"/XCH.L), the global business processing group ("the Group"), is pleased to announce that Cambridge Integrated Services Group Inc ("CISGI"), the US arm of its 76% owned subsidiary Cambridge Solutions Limited, has sold its US workers' compensation and third party administration operations ("the Operations") to Sedgwick Claims Management Services, Inc ("Sedgwick") for $22.7 million (approximately £13.8 million). This disposal will free the Group of a loss making and cash absorbing operation and improve the underlying profitability and cash flow, whilst enabling Xchanging to focus on its profitable, growing businesses. Signing and completion are simultaneous and the consideration has been paid in cash. $3 million of the consideration will be held in escrow for 18 months. The consideration is subject to adjustment by reference to post completion confirmation of the working capital and customer funds accounts as at 31 May 2011. The Operations include the workers' compensation claims, managed care, consumer claims, professional liability claims and structured settlements operations of CISGI. Virtually all of the contracts, assets, employees, current liabilities and future service obligations have been acquired by Sedgwick, although certain liabilities and non-operational assets have been retained by CISGI. CISGI and Sedgwick have also entered into a transition services agreement to facilitate a smooth handover of the Operations. In the year ended 31 December 2010, the Operations being disposed of recorded revenue of $113.4 million*, an operating loss before interest and tax after IFRS 3 amortisation of acquired intangibles of $(8.2) million* and an operating loss before interest and tax of $(1.4) million* excluding those charges. The gross assets being transferred have a carrying value at 31 December 2010 of $14.9 million*. The transaction will be reflected as a discontinued operation in the 2011 half year results and the significant cash flow benefits of the sale will help to fund the Group's future growth.
I like the latest restructure within Xchanging to combine XIS, XCS and XBS under a single management structure. The removal of one executive team, 8-10 people in Xchanging should generate at £2-3M in savings which will go straight to EBIT. Given that this amount is around 10% of current consensus EBIT for next year and this would suggest (assuming it is not already factored into consensus and I doubt it) should therefore be worth around £20M on market value or 10p on the share price. There appears to be a lot of good news coming out on the restructuring front (such as the closure of the West End, Hanover Square office, that suggests Ken Lever is really getting a grip of costs.
After a couple of revised "sell" recommendations from the analysts and a trading update which indicated there was still a few bits to sort out, I thought this might drift lower. So, pleasantly surprised by this weeks gains. Hopefully the market has seen that the company is heading in the right direction and that 2012 will see some good progress. Hopefully the SP will continue edging up over the coming months.
It’s been a rough ride for Xchanging ever since it floated in 2007, and this year has been particularly bad thanks to one day’s trading in February when the outsourcer saw its share price halved after an unexpected profit warning and the resignation of its founder, David Andrews. Management remind us that 2011 is a “year of transition”, and we are not much clearer on how Xchanging will look at the end of it. The initial signs do provide some optimism, but there are too many unknowns for our liking. Sell, the Independent says.
Good to see that the analysts are true to form. Let's just look at Panmure Gordon's target price over the last 9 months or so: 02 Aug 2010 it was 200p 27 Aug 2010 it was 140p 07 Jan 2011 it was 96p 14 Feb 2011 it was 40p In short these guys are admitting that they can't value a company to within 500%, so why do they think anyone is interested that they have today yet again changed their guess (and just In case any of you are interested today's SWAG is 55p.)
With regards to the SP performance today it went up by 3.16% while the FTSE250 fell .46%. An outperformance of 3.66% is not a bad result however I am pretty relaxed as to what the share does in a day and am more interested in what it will do over a longer period. The statement was pretty bland and I don't know whether the sceptics will take the fact that there was no real news as a reason to not change their assessment or whether they will take the fact that no further bad news coming out as reason to change their assessment. If pushed I would lean to the latter; even the most pessimistic analyst must now see that this not a Connaught or a Roc and that this a business with a good future but that took a wrong turn in buying Cambridge and then made bet in putting in place a management structure for rapid global expansion for sales that did not come through fast enough. I found it interesting that on the analysts call Ken Leaver spent less than a minute on a brief before launching into the Q&A part. For me that was him positioning it as 'hey guys, I haven't got too much more to say since the last call but I want to be open cos I know you are nervous; ask me anything you want'. None of the questions were particularly vicious and took them as being from analysts who truely don't know what to make of this business; they want to like it but they feel they have been let down too many times in the past, the new sheriff is in down (Ken Leaver) he has a good track record but for now the analysts are suspending judgement. There were to me a number of interesting points that came out of the Q&A. In answer to how trading was going Ken Leaver said it was steady and in line with management expectations and that the intention was to provide more of an update at the half year. To me that suggests he already knows that there will be some interesting updating / upward adjustment of expectation at the half year but he sees no advantage in allowing expectations to get too high yet. He was also pushed on the statement that Insurance was performing ahead of expections excluding US workers compensation as it suggested the latter was not performing well. To this Ken Leaver answered that it was down but broadly in line with management expectation and that overall it was not performing at a satisfactory level and that they were pursuing actions to address. That smells like they are looking to sell it rather than restructure it. On cost recovery there was some additional questions as to how this was going versus the anticpated savings and the tone of the answers from Ken Leaver suggested to me that he is very confident that they are ahead of the curve. He stated that the most advanced was the bringing together of business units and the trimming of senior mgmt and that there was also progress on offshoring, supplier mgmt and space rationalisation. He reiterated that some benefits will come through by the second half but full benefits will come from 2012 onwards.
Thanks as always for your detailed response. It's all well and good getting the trading statements, but it helps to have your interpretation of the "reading between the lines" aspects. Please keep your posts coming.....and roll on 1st August. Is the SP reaction what you would have expected today ?
You asked before when the mid year results would be out for Xchanging. On today's analyst call Ken Leaver mentioned that this will be on 01 August which is a Monday.
The markets have pumelled this stock out of fear that what we were seeing was the tip of the iceberg. After three months in the chair Ken Leaver issues a statement with nothing new in it which reinforces my view that the tip of the iceberg was all there was in terms of troubles and that was were worse case scenario. The bloated senior manager structure has been addressed which, taking into account the inevitable compromise agreements will mean little profit and cash impact this year but should start to payback big time from 2012; the positive news here is that there will be less of the notorious Xchanging bureaucracy impinging further down the organisation so should free up capacity there. The exiting of the West End Hanover Square office is good news as that was a luxury barely appropriate for when Xchanging was on a p/e of 25 and in a booming market and certainly not appropriate for the current times; that will be a good few million straight to the bottom line (assuming that they have sublet it rather than bought themselves out of the lease). Finally the end of the reseller programme is a good clearing out of the stable, it always looked like buying revenue more than anything else and as well as hurting cash flow was dilutive to margins. In short a 'steady as she goes statement' ahead of the AGM on Wednesday but one that sounds remarkably confident that everything promised will be delivered. I maintain my view that the Aug mid year statement is when we will get the more positive spin being given by Ken Lever and his team and that this year will be significantly ahead of current consensus, particularly on profit.
Commenting, Acting Chief Executive and Chief Financial Officer Ken Lever said: "Since announcing our Four Part Action Plan at the time of our preliminary results we have been very active and have made good progress. We will continue to execute the plan and will be able to report further details at the half year."