Member Info for ElProfessor

Last year we saw a late push in December taking this to a year high close on New Year's eve of 125p. Clearly we have seen significant upside since then, although not that much above the FTSE 250 index (I know Xch is no longer in there but it seems a far better fit than the Small Cap and beside I am hoping to see it back in next year). Most of what I wrote about on 07 Nov, when the share price was 131p, has come to pass, and we are now at 160p which is where, in the opening line of that post, I had said I thought we should have been then. With this also being the current price to which analyst consensus has now moved it may therefore seem illogical to want to revise my previous view for next year. I think however that we are starting to see a fundamental rerating of Xch and as such could see a p/e being applied far closer to Capita's, which is 17 times earnings estimates, (see article referred to on the HL website in my post of 22 Nov) rather than the discounted one that has been applied since the bloodbath of Feb 11 when David Andrews resigned, and £100M+ of goodwill was written down. Given how cautious our 2 accountants at the helm are and given that they nudged expectations up at Q3 I would expect further good news at the full year. If you combine a p/e uplift with full year earnings ahead of even post Q3 consensus, then we could be in for significant upside to the valuation of Xch perhaps to as much as 250p. Now this is all very good but I don't think the markets are ready to take Xch there yet (although this is a share which in it's heyday was north of 300p and on a a higher p/e than Capita) but I could see around 200p in the next twelve months. The other possibility of course is that, now that the US quagmire has been tidied up (not sure you tidy quagmires but hopefully the point is understood) and Xch has simplified its accounting and commercial models, Xch becomes a takeover target for one of the big boys, motivated either by its juicy procurement division (3rd biggest player in the world) or the way it has managed to hard wire itself into the back office of Lloyds of London. If the takeover were to happen (and I would put the odds at no more than 20%) then the 250p could be seen next year.

Hargreaves Lansdown have reproduced on their site a share tip from the Investors Chronicle in Xchanging. It list Xch as a speculative recommendation but it very positive about the upside potential highlighting the cost out being undertaken, the many recent contract wins and a PE which is half that of Capita. They also talk of likely growth of 20% year on year between now and 2018 (although not sure how they can say that). Worth a read!

Colinco, Not sure why that bothers you so much. The non-controlling interest share of profits is stripped out in the declared profits (I think that you acknowledge that given your last sentence). The non-controlling interests are (well obviously non-controlling) which again clearly you know. What is it that is concerning you? All the best ElP

PingPong, Who knows. If you had asked me back when the full year results I would have said we would be at the 160p by now. If I was to try and analyse what has gone and call the next few months I would go as follows: -full year results delighted people hence 150p but then just as we saw some profit taking which took us off those highs the loss of LME freaked people hence the tumble to 130 and then sticking at 125-128. -volumes became terribly low as people lost interest in what is a pretty small market cap company. Those that had ridden the share from 50p had made a great profit and went elsewhere while those who got in more recently got bored with lack of movement. -eyes have been elsewhere hence blind to the many contract wins, albeit it small that have been notched up recently. -Xch is doing everything it said it would. At the half year Ken Lever said everything was doing great expect procurement which was a bit behind however he was not worried because there were a lot of negotiations that were advanced and the would come through in the second half. -Guess what - what Ken said would happen has happened. -Q3 results next week will be good. I always like Q3 results because they are usually overlooked as they just relate to a quarter so not so sexy as full year or even half year however the key point is that they are issued around 6 weeks away from full year. The management therefore know pretty much to the pence where the full year will be. If Q3s are strong then you know the full year in Feb will be strong and so you can often get in ahead of the upswing with minimum risk. - I predict that on the back of excellent Q3 results (not overhyped because of course we have our two accountants a the helm so they will continue to squirrel away into provisions for the any unexpected events and to smooth future profits) we will then see a steady climb until full year results in Feb which will be excellent. -the share will then overheat at 160-170 in the few weeks after that and fall back by c 10% before starting a steady climb over the year to finish at c180p. Let's see how I do on this particular piece of crystal ball gazing

Xchanging has signed a new five-year technology contract with existing customer, London Gatwick Airport Read more: http://www.digitaljournal.com/pr/1529921#ixzz2hzyYPfg3

Global contract win announced with Diageo, fund manager announces 25% increase intake and that they see this as a great cheap play on the outsourcing market and yet the share price remains in the doldrums. I guess that is August for you as is the complete absence of volume. Let's hope that come early Sep when decision makers in the investment companies are back they will price in all this good news since the great mid year results and the price will rise accordingly.

Panmure Gordon have today reiterated their buy rating on Xchanging; their target price remains unchanged at160p which is pretty much bang on the average analyst target.

Xchanging has today announced a contract win with Standard Bank in Africa. Initially contract is for 1year, value of contract not announced.

Citigroup and Libereum Captial have reiterated their 'Hold' guidance with respectIve target prices of 150p and 145p. Analysts targets are averaging just short of 160p.

Sorry about all the typos on the below post, I hate typing on an IPad. The final words that got cut off were: ... historically saw, although that this had not happened for so long makes this of minor impact.'

Having now had the opportunity to review the mid year update in a bit more detail the following points are worth highlighting: - Xch will be exiting in the second half of this year three areas of significant revenue, two were planned exits: Xchanging Transaction Bank and UK HR Services, one: LME, was not. Despite this Xchanging is leaving its full year guidance unchanged which shows the enormous progress it has made in attracting new customers and taking cost out. -Xch has made a significant change to how it is accounting for revenue in Procurement (financial statements note 1). Previously where it acted as Principal (as opposed to Managing Agent) it would book all customer spend as revenue. As I have previously written this flattered revenues but depressed margins. They have now changed the accounting so that the customer spend is backed out of Xch's revenues. This change disguises the extent of the progress that Xch have made in growing overall revenues. -there is an interesting note about an exceptional receipt of £6M for early relinquishing the lease on Xch's headoffice at 34 Leadenhall. They have already exited their previous headoffice in Hanoveer Square undere this new regime but Leadenhall, whilst ridiculously expensive for what was predominantly processing centre for the Insurance business, had not been moved both because of the long term nature of the lease which presumably had exit penatlies and the complexity of moving that particular office with many specialist staff. They have clearly bitten the bullet on dealing with this complexity, perhaps because it has reduced as they has moved more to India already, and someone has played a blinder in leveraging the high demand for space in th City and getting paid for exiting. The notes also refer to this being an 'initial' payment which begs the question of how much more is there to come. Finally the note says that Xch will vacate the office by Mar 14, I would be interested to know whether they aree going local but to a cheaper area ( I.e so that all the existing workforce will stay) or further afield to reap very large savings but with greater retention issues to manage. In either case this will generate ongoing saving, it is just the quantum that is TBC. -they appear to have cracked the nut that was traditionally Xch's Achilles heel (sorry about the mixed metaphor) and are selling well (both in terms of what they have got over th line and what is in he pipeline). I suspect that a key enabler to this has been the decision to move from chasing the blockbuster deal 'elephants' in the old Xch speak, to many smallere deals. This has the additional advantage of derisking Xch as they have a less concentrated customer base, the downside of which was only to clear when LME were taken over and exercised their 'change of control' provision to exit the contract, the negative of exiting the elephant' hunt is of course that there will not be the occasional incrementally growth that we historic

JP MOrgan Casenove remain overweight on Xchanging however they have upgraded their target price from 166p to 177p.

I presume that what we are seeing today is market manipulation because I can't see the explanation for these price movements in the fundamentals nor in response to the excellent half year results. I would have expected to easily be in the 140s by now and seeing the 150s before too long. I will remain very long on this share as I don't want to get pulled into these silly games.

Ping Pong, I think that initial drop was just an uncrossing trade left over from yesterday. The trading board is pretty much all blue which kind of figures ; if you were waiting until today's announcement to decide whether or not too sell I can't see what in it would have made anyone decide to sell. We have the conf presentation to analysts in half an hour I would expect to see a further rise on the back of that. We will also have Ken Lever and David Bauernfeind meeting with analysts individually over the next week or so, we will hopefully see some price upgrades coming out of those and hopefully share price rises following. I suspect some institutions may also decide to up their holdings on the back of these results. Would be nice if the share price rocketed but as we saw last time that tends to then fall away so a slower rise may prove more sustainable.

What is not too like? Profit up by 50 %, revenues up 7% and confident of hitting full year targets. All sectors doing really well in the first half except Procurment but which has the elements in place for a strong second half. We seem to now be well beyond recovery and into the phase of building a very strong and successful business.

Pp, Like you I noticed the large numbers of sells vs buys today but I am afraid I can't even begin to explain why the share then goes up although it seems not to be all that unusual nor the opposite where there are a lot more buys but the share then falls. As for motivation it could be that someone has made significant profit and being unsure about tomorrow wants to lock that in. For myself, as previously mentionned, I am very confident for tomorrow and so expect to see a further rise. Let's hope I am right!

Xchanging Transaction Bank should not have any negative impact on valuation as the settlement that Xchanging received equated to lost profits for the remainder of the contract. LME was bad news as it was genuinely lost profit however the press release from Xchanging at the time stated that they were confident that they would compensate for the lost profit by overperforming elsewhere. I know what you mean about skeletons in the cupboard at results time however am confident that the new regime of Lever/Bauernfeind is more conservative and will hit any numbers they commit to. I doubt we will see any mention at the half year of further dividends although it would be nice if they did.

Ping Pong, Thanks. The volumes remain tiny and the buys are a multiple of the sells. I am very confident that we will see a rise over the next few days the question is by how much. I am also confident that we will not see a downgrade of expectations but either a reiteration of slight nudge up in the mid year update. If that is enough to convince a few of the big funds to either enter or up their holding then we could see some substantial upside over the next fortnight as with the tiny volumes we have seen of late they will have to pay a significant premium to get the sellers out. ElP

Topped up with just over 3,500 more shares at 126.65. This may fall a further 1% today but think we are at or close to the bottom for this shake out and expecting a significant climb now over the next week or so with mid year due on Wed.

Following on from my note yesterday evening and this morning's fall I have just looked to buy but am getting quoted such a horrible spread I won't do it out of principle. If the spread narrows before the price rises then I will but if not I will let it pass. Spreads of 2% are just not acceptable for a share not far outside the FTSE250.