Member Info for ElProfessor

Weapon, The question is why have the three contracts hit the assurance division. The concern will be that they are symptomatic of something larger that is wrong. I am not saying that it is but I have seen companies follow this kind of pattern before (Xchanging in particular). I bought a large quantity here yesterday (luck enough to get in below 90p) but am watching it like a hawk. Having said that I might well top of further this morning as I do think there could be more to come today. Best wishes, Prof

Weapon, You could be right. The concern now however will be what is actually under the bonnet of the company. They are undertaking a fundamental review to be reported back in July, there will be a reticence among many professionals to put a penny into this company until they know what on earth is going on. Having said all everything has its price and so at the right level many others will stomach the uncertainty and go for the recovery play. The trouble with that of course is that you can get your fingers badly burnt. Like another poster who commented yesterday, I was watching and waiting for the 170p level to buy in as a recovery play, not least because like you I believe in the sector. Do I now buy in because it is so much cheaper than my target or accept that the goal posts have changed and wait for the dust to settle? I will probably do the latter for the time being. Best wishes, Prof

Well we are a week out from the original deadline for the companies making a bid. Will Apollo use the extra time that they have now got or will they stick to the original time line and state their intentions this week? As a shareholder I obviously hope that they firm up on their bid at 170. Clearly I am biased for the aforementioned reason but if Capita, who were a few weeks ahead in their due diligence, found nothing to put them off their bid at 160 then I am optimistic that the same will apply to Apollo with their 170 bid.

HI Phoenix, You asked why was the Xch Board favouring Capita or was this just the way the game was played when there are more than two bidders circling. My view is that the Board is not particularly pro-Capita but are just playing the game. I agree with Filshare's excellent analysis in its entirety. We have to remember that the share price over the summer has been predominantly in the 90s and even dipping into the 80s. The Board knows that if this falls through because of mishandling by them then the big holders are going to go after them taking the smaller holders with them in a class action as Filshare remarks. So far I think the Board is playing this perfectly. They were approached over the summer by Capita with a ridiculous offer although it was still a 50%+ mark up on the share price at the time. They rebuffed them a couple of times and then when Capita put in a more serious bid at 155 they partially opened up the books, confident that this would drive a higher bid which it did at 160p. I don't believe it a coincidence that Apollo are on the scene too but presume that the Board after the Capita approaches had decided that the best way to maximise shareholder value was a sale and so either Xchanging or their brokers touted the company around the big PE firms and Apollo liked what they heard. With two players going through Xchanging's books the risk was always that there would be something there unpalatable to either and that the takeover would collapse. The impact of that on the share price would have been disastrous as it would say to the market that when looking under the bonnet two companies had decided they did not like what they saw. We are fortunately beyond that, as witnessed by Capita firming up their offer. The Xch Board has been quite right to say it will 'recommend subject to...' as we now have Capita locked in with a floor of 160p, a clear signal to any prospective third bidder that it all looks good under the bonnet, Apollo still going through the books to determine if they wish to follow through on their 170 knowing that they can't adjust their bid downwards as Capita are in that price space and finally Capita having reserved the right to go up in price if Apollo do bid. Well played Xchanging Board!

Phoenix, Great to hear that you have made a good amount on the share and even better to hear that you have crystallised it! I have taken some profits but left the majority on the table as I am pretty confident that we will see a bid from Apollo at 170 and then a higher bid from Capita at 175. Not sure whether it Apollo will then go in again but I think the ultimate buyer will be Capita (at 175 if Apollo go once or 185 if they have come back with a 180) as they will get the greatest synergies hence will be able to afford the greatest price (unless Apollo see the insurance software as a goldmine, invest heavily in it and flog the company in a few years time for a multiple of the current value - who knows!). Thanks for explaining your logic for exiting. I admire your wisdom and lack of greed. I do wonder whether I am doing the right thing in staying in for the bids however having been invested for so long I feel that I want to see the journey to the very end. Let's hope I don't regret it. After this morning's firm bid by Capita I feel more comfortable as we now have, barring disaster, a floor at 160 and as I wrote in my earlier post, room for upside. Best wishes, Prof.

A good development this morning with Capita putting a 160p bid in as this effectively puts a floor under the share price at that level while having no effect on the potential upside. Apollo are still in play and if they confirm their bid at 170p, Capita has reserved themselves the right to come back at a higher price. Capita have plenty of upside here and they can afford to pay quite a lot more. Clearly they are not going to pay any more than they have to so in the absence of another bidder joining the merry game the key question is how far will Apollo go when they have not got the same scope for synergies as Capita.

HI Mcfirth, Big but not massive in the context of a company in takeover talks. I would have expected to see a steady flow of deals of this size as Capita and Apollo seek to build up positions. What do you make of the fact that we are not seeing that? Best wishes, Prof.

... given the current likelihood of a takeover but the 20 day average has just shot through the 100 day average. Hoorah, anyway!

Initial trading prices suggest people are pricing in a bidding war which will take us above the current highest bid of 170p which I think is correct. As a shareholder you could not really ask for this to be set up better. There are two bidders with very deep pockets and there is still the possibility of other bidders joining in. I wonder how Liberum are currently feeling about having reduced their guidance price from £2.10 to £1 after the July results.

Xchanging have released a statement on their website. It is a section with all the boiler plate that you would expect with an offer so this is obviously serious. It turns out that Capita made a first offer back in early August at 140p which was rejected by the board who told them they were undervaluing the company.They have since made three over offers and are now at 160p. Apollo Capital have far more recently entered an offer at 170 (cash) albeit both offers are conditional. Xchanging have opened up their books to both parties to conduct due diligence and under takeover rules they have until 02 Nov to make an offer. As Xchanging say in their statement there is no guarantee that an offer will be made but to me this is looking good. There are two bidders and they are now combing through Xchanging's books to work out the true value. I am confident that Ken will have made the accounts rock solid and conservative over the past four years. North of £2 would be wonderful and while that may or may not happen I am pretty confident that an offer will be made north of £1.80. Roll on tomorrow morning to see what the market makes of all this.

EMRG, Thanks for posting that, I am out of the country so had missed it. It is covered in tomorrow's Sunday Times as well. The price being quoted strikes me as a bit low at 160p although obviously real numbers will be being held close to the chest of the relevant players so this is just a journalist/ commentators punt. They talk about other bidders perhaps joining the fray so let us hope that this happens and there is a bidding war. North of £2 would be nice! Best wishes, Prof.

Phoenix, Thank you very much. Ref Xch shooting itself in the foot I agree with you that they don't seem to always put the strength of their position across well at Quarterly reporting and their PR is sometimes lacking. I am optimistic that the new CEO will be more 'salesy' but only time will tell. As you said in your post of 31 Jul they will need to gaining market confidence back. Admittedly the market sentiment has already improved since you wrote that but I think it will be a long journey to become a stock market darling. They seem to have moved over the past few weeks from being a dog but there remains a long way to go and that will need both substance and spin. Best wishes, Prof

Filshare, You could well be right ref the single buyer. If that is the case then we will see, in the next few days, as they will have to update their shareholding in the company publicly. With regards to the future move 1.25 by the end of the month is definitely possible although where it goes from there will depend a lot on the tone and content of the Q3 statement (albeit Q1 and Q3 are typically kept short.) If positive then I agree 1.70 in a few months is likely. Obviously six months would take us past the full year statement at the end of Feb so that will also have an impact. If the full year is good and they sound upbeat on sales and numbers for the year ahead then we may just break the £2 barrier by next summer. Here's to hoping! Best wishes, Prof.

... just before close there was a buy at 111.75p which is only the second time since Nov 14 that Xch has traded above the 100 day average. Clearly when it is the day's close that is above it will be more impressive and when it is the 20 day average that is above it will be even more so. Nevertheless there is an accumulation of positive chart news and of real news over the past couple of weeks. Today's increase is impressive and this time is based on no news. I can only put it down to the winds of change with regards to sentiment. Blow winds, blow!

The 20 day moving average has not been consistently above the 50 day moving average for a year (Jun to Oct 14 in fact). The 20 days is currently 96.58 and the 50 day 99.82. It does not take a mathematical genius to work to that if the share price holds in its current region of 107 then the 20 day average will break though the 50 day average in the next couple of weeks. Given the 100 day is only at 111.78 then with a bit of positive upwards movement in the share price we could see the 20 day average push through that one too in the month or so. I am feeling very positive!

Ping Pong, Thanks for your kind words, glad to hear that you enjoy the posts. Let us hope indeed that what I outlined is correct as it will make us both better off. Having said that I have been pretty much consistently wrong footed by Xch over the past twelve months so please do remember that. Best wishes, Prof

...will be slightly ahead of those suggested at Q2 (which said in line with last year), that margins are continuing to increase and a reiteration, in a confident manner. that 2016 will see a return to growth, could ensure that the recent upswing in the share price continues and that we see the share price trend positive for a good number of months returning it back to where it was last year. I think we may just get that.

Hi Phoenix, I don't think that we will see a repeat of last week with all the gains being given up. Then, a number of bits of good news (new CEO joining the board early, selection as e-Governance service provider for National Council for Teacher Education in India, Emergence win) drove the share price from to a closing high of 104, with 5 days of successive rises before giving up about a third of the increase to settle around the pound level. I can't remember when we last saw 5 successive days or rises for Xchanging but I am pretty sure it was when it was last on the way up to 190p. Yesterday we saw some more good news and while I don't think it is enough yet to make the share price shoot up I think that we are seeing enough for people to lose their loss of confidence even they have not yet gained euphoria for the company. The news yesterday was good however I have a couple of reservations: firstly it suggests a few recent wins, such as Axis Re, however the 20 new wins it refers to covers the period back to the beginning of the year and so some of this is just re-packaging of old news (on the plus side at least(not least the PR function is being a little more proactive), secondly there are no numbers which makes it difficult to quantify what this will do for Xchanging's revenue and bottom line. Given that Ariel Re are adopting all strands of Xuber with it becoming their strategic reinsurance platform and the contract is for 6 years it suggests a pretty big deal, furthermore David Bauernfeind has previously hinted that margins on such new sales would be excellent. The other reason for optimism is that is Axis Re have gone for an end to end Xuber solution it suggests others may follow and that could be very lucrative particularly if Xchanging manage to become the market standard in the same way as Oracle or SAP have. I also find it hard to judge the scale of the deal with NCTE in India for e-governance however any steps into the enormous Indian state bureaucracy are welcome and could be a massive market particularly given Xchanging's excellent links with India (when they moved into Shimoga they became one of the biggest employers in the city and the local University agreed to change some of its course to better teach the skills that Xch needed). For a number of years many people have opined that what was really holding Xch back was its inability to sell. Clearly to sell you have to have product that people want and that it what Ken Lever has been seeking to address during his tenure by repositioning Xch as a technology provider. What we are seeing here suggest that he is being successful in this and as a result beginning to be successful in sales. A confident Q3 statement at the back end of October which says the Procurement division has successfully been integrated into Technology and BPS and it is no longer loss making on a run rate basis, that Sales in all other areas remain ahead of plan, that the full year numbers for profit and revenue.

Well we now have the name of the new CEO and it interesting that Xch continue to look for experience from the tech world which confirms where they view their future. Xch's PR on this has again been notable by its absence which strikes me as a missed opportunity. The share price took a thumping when it was announced that Ken was leaving because there was a view that he had been pushed for underperformance. As previously noted the long lead time prior to his departure suggests that this was not the case and that it was amicable and probably his choice; the fact that they have new man running in parallel with Ken for a couple of months confirms this to me. If the Board had lost confidence in Ken he would either have been pushed out immediately, as happened to David Andrews, with perhaps Geoff Unwin taking on the temporary role of Acting CEO, or at the very least they would have exited Ken as soon as Craig Wilson started. Filshare commented on Wed that he hoped Wilson would not feel the need to 'kitchen sink it' which is whay all too often new CEOs do - a couple of profit warnings, assets written off and provisions refilled all blamed on the previous team before a few years of good numbers which they then take the credit for. In the defence of CEOs doing this the previously team has often tried to keep the lid on the bad news so there can often be a need to clean the stables out. Ken however, unusually, has already taken one for the team and done the large write off by impairing worthless legacy procurement assets. The big fall off in revenues that Ken has had to deal with over the past four years are now over with the last one incurring this year. The restructuring is done and paid for, the heavy investment in technology also. Margins are excellent. In the half year report Ken confirmed that outside of procurement (remember only 6% of the business) they are ahead on their sales for both in year and total contract volume. A few sales in insurance software and this share price could really fly. Craig Wilson has joined at a very good time!

A month ago I wrote that the top 10 shareholders were sat on 56% of the company this has now risen to just short of 62% with the top 2 shareholders (Artemis and FIL) holding just over a quarter of the company between them.