Member Info for ElProfessor

Interesting in that he as a member of the Xchanging Management Board and Head of UK he should be pretty much in the know. Having said that I am slightly puzzled by the relatively small purchase quantities by both him and Nigel Rich; they are not exactly betting the bank which you might expect if they thought this could be a runaway share price on the up. Against that with the eratic behaviour of the late of the Xchanging share price a little reticence is understandable and if the two purchases were just being done as an outward show of confidence you would expect them to have phased them.

Paddy Byrne is not a main board director but is the Head of the UK Business which at present is very much the powerhourse behind Xchanging. He is also a member of the Xchanging Management Board which is the exec body. Interesting to see him buying.

Not just any director, Nigel Rich is the executive chairman. Although the last time he bought was a few months ago at 119.5 when he bought another 50,000. You can take that one of two ways: he knew about all the issues then yet still thought the company was worth more than 119.5p or he didn't have a clue what was really going on inside the company he was chairing (he was non-exec Chairman then). On a more general point about directors being on the ball (or not as the case may be), you have to wonder how many directors will do the honourable thing and not put themselves up for re-election come the AGM; my case is zero. Am I the only one to question what value is brought by a bunch of guys who have overseen the destruction of value from 317p to sub 50p in the space of a few years? With the exception of Ken Lever who has joined of late I suggest they should all look long and hard into the mirror and question why they are worth their pay.

Glad to hear that you are in and didn't think you had missed the boat when you commented with the share price at 60p and you were looking back at the price at 53.5. Shares rarely go up without any fall backs but I can't help but be convinced we will see this one north of £1 within the month. My estimated valuation of £1.50 may take a little longer although a large sales announcement could propel it there.

QED! So we now have HSBC calling 30p and Jeffries calling 290p. Our experts are now diverging on the value of the company by a factor of 10. Personally I would put the value of Xchanging at present at around 150p a share so if you take the average of these two extremes you are pretty much there. Numbers, numbers everywhere, Analysts haven't got a clue, They pick their numbers from thin air, Then stick to them like glue.

I really wouldn't worry about not having bought at 53.5. You can't call a share that is as volatile as Xchanging is to within 10%. The share is currently 60p, I suspect it will fall on opening tomorrow morning on profit taking, but even if it doesn't, what do you think, in both your heart and mind, the right thing to do with a share that is trading on a p/e of 2.5 yet is a growth stock?

Mirror mirror on the wall, Who is the most pointless of them all? The analysts are, without a doubt. Thank you mirror, Over and out. You've got to hand it to the analyst teams at these big banks and investment houses; they sure know how to value a company. Was it Sandy Chen at Panmure Gordon who had Barclays as a sell back in 2008 when it was sub 50p? I wonder how those people who took his advice felt when it hit £3 less than a year later. It seems the main way they value is by taking the trend of the share price and then projecting that forward; when a share is falling they are cutting their estimates of fair value and when it is rising they are increasing their estimate. And so we see HSBC with a current estimate on Xchanging of 30p. Well hello boys, how did you work that one out? Sure Xchanging technically made a loss this year but if you write off nearly £100m of assets then that is how the numbers will look. Value the company at 30p a share and you are suggesting a total value of the company of £60M which is close to a p/e of 1. Capita trades at somewhere around 15 so do our friends at HSBC really believe Xchanging merits a discoung factor of 15? Is there a lot of work to be done at Xchanging? Sure there is; in particular they need to get the Sales engine rolling but it is still a highly profitable company with the UK region alone turning in profits of c£50M. Total value of £60M HSBC? I don' t think so. I have got nothing against HSBC, they are a great company, in fact I bank with them cause their service is pretty slick so it seems only fair to point out that while HSBC are the most bearish in their valuation plenty of other analysts are calling some pretty dafy numbers. Can I suggest that you spend some of your large bonuses on maths lessons?

So why is everyone so alarmed? We had an announcement on 09 Feb which was shocking but if we look at the root cause it all goes back to the 2007 Cambridge acquisition. It was a poor purchase and the price too high but it was not entirely without merit. It took Xchanging from being a company of c4500 mainly based in the UK with a strong German presence and an Indian outpost of c500, to being a truly global company with as more people in Indian than in the UK, more people in the US than Germany and a new outpost in Australia (OK there were 20 people there before but you get my point). The company has now written off £90M for Cambridge (basically the purchase cost) but put that aside, and admittedly it is a big aside, and you have a company that is now truly global and still growing. Even if you take the acquisitions out it is pretty much standing still on revenues. The profit margin is not where it should be but basically that is because the company introduced a management structure that would allow it to operate as a FTSE 100 company and it jumped the gun; the sales did not follow but against a backdrop of the worst world recession since 29 you can just about forgive that. Did David Andrews do a great job of growing the company prior to IPO, yes! Was it time for him to move on, definitely! But again this is not abnormal, you get a visionary leader building a company but the somewhat autocratic style, which is not more than the other side of the visionary coin, is not necessarily suited for the next stage of the company's development. Is Ken Lever the right man to be the new CEO? I don't know, but for someone who has only been in post for 3 months he sure as heck impressed me at the analyst presentation today. The idea that there can be any accounting issues lurking in the Xchanging closet is laughable; Ken Lever is one of the gurus of the accounting profession and still, I believe, sits on one of the standards boards for the bean counters' union. Why would he risk his professional reputation as an accountant by hiding anything, particularly when he has had every incentive to bring out all the skeletons and then some. In fact the opposite is almost certainly the case, namely that a few skeletons have been brought out that are actually far from dead; but hey, as they say in the shipping business, when you count your wrecks, start at the Titanic and work forwards. Why is this important? The market is discounting this share because since IPO there have been many bold claims but reality has always lagged and the market does not like this. Put it another way and the market lost confidence in the management, or more precisely the previous management of this company. There is a new broom, albeit interim for the time being, and he comes across as a pretty straight guy not to say competent. There is also fear about the banking covenants being breached but today's analysts' presentation suggest that they are safe. Is this a Connaught? Get real!