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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.

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.

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.

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 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.

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.

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.

The Xch financial year is calendar based so they will close down their mid year on 30 Jun. They are therefore likely to provide half year result early August. As I have said before I would expect these to good with subtle guidance given to analysts to upgrade their full year forecasts; they are also likely to announce good progress on the restructuring but with significant work still to be done. The share price should therefore go to around £1. I anticipate that the end of year results (Feb 12) will then further exceed, by some signficant margin, what the the analysts will have revised their forecast up to. My rational on this is two fold, firstly consensus is way too low based on what Xch have actually said, secondly Ken Lever will have brought out all the dead and then some and is underselling the position to guarantee a strong outperformance which is essential for Xchanging, after many years of overpromising, and for him in his first year at the helm (whether as CEO or CFO). I still maintain we will see 150-200p per share inside of 12 months, the exact value being dependant on what deals are announced in this period.

Another very quite morning with less than 3000 shares traded by midday and even by 1300hrs just over 10,000 traded. The below being the full list: Time Price Volume Value Buy/Sell Type 12:30 79.50p 226 £180 Sell AT 12:30 79.50p 345 £274 Sell AT 12:30 79.50p 2,764 £2,197 Sell AT 12:30 79.50p 470 £374 Sell AT 12:14 79.75p 2,634 £2,101 Sell AT 12:14 79.75p 470 £375 Sell AT 12:14 79.75p 470 £375 Sell AT 12:14 79.75p 102 £81 Sell AT 12:14 79.75p 235 £187 Sell AT 12:14 79.75p 235 £187 Sell AT 09:09 79.25p 2,068 £1,639 Buy AT 09:09 79.25p 200 £158 Buy AT 08:00 80.00p 470 £376 Buy UT

In the three days of the week so far Xch has barely broken through the 300,000 volume in total; that is tiny when you look at the historic volumes particularly since the Feb bombshell. Not sure what to make of it.

This is why I don't day trade; there is no really new data out there just higher than normal volumes. It could be as simple as a fund manager has decided to use this long weekend and next to get ten days holiday for the price of 3; they bought at 50p and so are sat on a 60% profit and are unloading some of their position to avoid it being open for ten days while they are away. Who knows? If I look at the share price since the the roof caved in it has performed rather well both in absolute (up 60% as noted above) and in terms of reduced volatility (for the past month or so we have traded between 75 and 85p) The previous management of this company lost the confidence of the analysts over the past few years. Even having cleared out the previous team that confidence is not going to return until they seem some clear signs. What signs? Well a nice fat contract win, a good mid year statement that guides the estimates upwards (which I believe we will get), a closure of the loss making US business, a new CEO or the confirmation of Ken Lever in post followed by the recruiting of a strong alternate CFO are all events that would provide a much needed boost. Very few analysts will go against the herd, that means we will not see an immediate takeoff in shareprice without something concrete happening although it does not mean we will not see a continued gradual increase.

Stoopid, Very interested in the data that you dug up on the shares out of loan; I had completely missed that. Looking at the graph it looks like the day the number exploded was 29 Mar which is the day after Xch hit 85p its high of late. Not sure who is playing at what but assuming that they don't have inside knowledge of some pending horror story about to come out, and I am pretty confident that Ken Lever will have got them all out already, then they will have to unwind that position before too long which should make the share price soar.

Was pleased to see the following press annoucement from Xchanging today. One of the key worries about these shares is whether or not the BAE Systems contract will be renewed for HR and Procurement (although the key one is Procurement, both as a generator or revenue and EBIT). That BAE Systems is willing to extent the Australia procurement contract out to 2013 is a good sign as the UK procurement one is due to end 31 Dec 2012. Were they planning not to renew the UK procurement contract would they be wanting to lock themselves in for Australia beyond Dec 2012? Xchanging extends BAE contract until 2013 Date: Monday 18 Apr 2011 LONDON (ShareCast) - Outsourcing specialist Xchanging has announced that BAE Systems Australia has extended its procurement services contract until the end of 2013. The group said it will manage over AUD180m of indirect spend for the defence firm over three years. “From an initial core objective focused on cost savings, Xchanging will continue to deliver a holistic business solution that transforms the indirect goods and services supply chain for enhanced value across BAE System's procurement spend in Australia,” the statement said. "Over the years, we have developed a close working relationship with BAE Systems Australia. We are delighted with this contract extension and look forward to delivering enhanced value through our renewed arrangement,” said Xchanging Asia Pacific executive director Kerry Purcell.

Xch is a highly volatile share in a market that is presently highly volatile itself; a 6% drop should not therefore worry you particularly as this just takes the share price back to where it was 2 days before. I keep seeing people talk of day trading. Good luck to them but speaking for myself, I am not smart enough to make money that way. This stock has a firm upward trend because people have now realised that the worse case scenario of the company going under, will not happen. They have realised it is not a Connaught but then again it never was. Consensus view is still a downer on this company but it is less of a downer than a few weeks ago. This view will continue to change for the better and the share price will continue to rise. I remain certain that within the year this stock will be north of 150p; I hope that some of the companies circling Xch decide pounce and we see the company's fair value sooner.

You are stacking the odds far more in your favour looking at the fundamentals of the company that trying to make a quick return on the day to day variation; there is no way you can call that accurately, only get lucky. To come back to the valuation question, at today's share price Xchanging is trading at 7.7 times the consensus forecast number of £22.9M profit for 2011. I don't want to have another rant about analysts but how on earth did they come out at that conclusion? I know that there is £2M to take out from the UK's profit for next year as a result of the loss of pensions last year, that there is the loss of £4M consulting revenue and a few other reduction to factor in however there will also be further wins in the year not least hopefully from the extended relationship with Gatwick. The worry over the BAE Systems contracts ending at the end of 2012 will also be weighing on some minds but that is not until next year so should not impact this year's profits. I agree that it will be impacting the p/e as it is factored in for future years but even with the BAE Systems profit out the number should still be well north of £22.9M, particularly as by then the cost cutting activities announced this year will have been paid for and had a full year of benefit. If you try and imagine yourself in Ken Lever's shoes there will have been every incentive to throw the kitchen sink into the the negative side when presenting the numbers to the analysts so that he can exceed his numbers in the first year. My bet is that we will see the analysts being guided at the half year by Lever to upgrade their numbers, with a corresponding increase in share price, and that when the end of year numbers come in, in just under 12 months, they will show a profit in excess of £40M. Apply a p/e of 11.5 to that (why? cos with the 230M share it makes the maths easy) and you company valuation of £460M hence a price per share of £2. I am not sure that any of that analysis is over optimistic; you could see at pe in line with Capita's if the analysts catch up with the rest of the world and see that the company is in pretty good shape in a growing market. Further upside could come from large contract wins being announced (unlikely to impact this year's profits but likely to influence the pe positively) or a takeover. I hear rumours that a few VCs are circling however the fact that the directors are still able to buy share means that they are not in lock down so cannot have had any meaningful approaches. If any of the VCs break cover then the share price will quickly soar as I would expect a bid to have to be around £2 to succeed and if it is a two horse or more raise could be upwards of £2.50 (which would still only be a pe of around 15 on profits of £40M so hardly excessive). How long will this take? I really don' t know for the takeover but just on the fundamentals I believe it will be north of £1.50 this time next year. M

Not sure whether the £153K you refer to was a buy or a sell. On this site it shows as a buy but have cross checked it elsewhere and it appears as a sell. In some ways I think it is irrelevant as Xchanging should have a good day tomorrow. The source of my optimism? Well the news is out that Ken Lever (CFO and acting CEO) bought 60,000 shares on 04 Mar at 69.5 p as did Michael Paulin (non-exec director) who bought 30,000 also on 04 Mar and at the slightly better price of 65.5p. This coming on the heels of Nigel Rich (executive Chairman) having bought 50,000 shares on 03 Mar, makes that a third of the board who have bought in the past week; and this is on top of Paddy Byrne (Head of UK) who has also been getting his cheque book out. Mind you not everyone is paying to get in on the act, it seems that the key exec players having been showered with options (200,000 each to be precise, of which 38,772 are in the HMRC approved scheme) at a strike of 77.375p. The names of the lucky few: Paddy Byrne, Daniel Kasmir (Group HR Director), Kerry Purcell (Head of Asia), Jane Tutoku (Head of Americas) and Joerg Brand (Corporate Finance); presumably these are the members of the Xchanging Management Board that Nigel Rich and Ken Lever have decided to lock in with golden handcuffs. This is a great time to get options with the strike having been set in lines with the market price of the shares are the time of issue there is plenty of upside potential over the next three years (which is the vesting period). I just hope that they have got it right this time in who they are showering the options on as they have been a bit hit and miss in the past; having said that the list looks reasonably sensible. Part of me thinks their strike price is too low and they will make money just out of the market anomaly that is going on in the pricing of Xchanging at present but then is that not what all the people buying the shares at present are hoping to do? If three years down the line (which is probably an academic question as the odds of Xchanging still being independant then are low) the price is £1.20 then I reckon this team will have had a real free ride in getting these options; if it is £5 then they deserve every penny.

We know the fundamentals, they would suggest a share price somewhere in the region of 150-200p, but we also know that for the past year or so this share has been priced first by disappointment, then fear, moving onto paranoia and finally insanity. Well last week we finally broke away from insanity, although how the market can price a share at 50p on Tuesday and 81p by Friday is beyond me. Remember the old adage that the market is all knowing? It strikes me that the market is a blundering idiot. My favourite definition: ' the market, the result of millions of individuals responding to information, misinformation and whim'. So what will the all seeing market do to Xchanging this week. In all honesty I haven't a clue; it could lose a good ten pence on Monday as we see profit taking or it could continue last week's meteoric rise driven by who knows what: someone taking a position ahead of a takeover or perhaps nothing more than short sellers unwinding their positions. One thing is for sure and that is that we have seen the bottom for the Xchanging share price. Those who got in in the fifties (not to mention the few who got in in the forties) will already have made a pretty packet; they may lose some of that this week, who knows, but they will make even more if they hold on for a while. We may even break out of the world of paranoia and into the world of simple fear. Within the year we might even get to the strange land of rationality.

Nearly 3.5million shares traded today (that's 1.5% of the company) and an increase of 18.25% after two previous days of large increases. Is someone taking a position?