Business process outsourcing (BPO) group Xchanging spent much of last year implementing its Four Part Action Plan to stop the "bleeding" and stabilise the business in the face of severe strategic and operating issues. As part of this, the group sold its US workers' compensation business, which was "incurring accelerating losses and absorbing cash", according to recently appointed chief executive Ken Lever.
The targeted £16m of annualised cost savings are starting to come through, with £8m achieved in the year. But savings in 2012 will be offset by investment to expand the insurance business – which continued to show steady growth and maintained good profitability and cash generation in the year – and potential expansion into Spain.
Revenue from the technology business of £97.9m (£116.2m in 2010) was disappointing, particularly given the group's investment in its infrastructure management services offering. The procurement and other BPO division suffered from the impact on a key customer of government spending cuts, and the outlook was further hit by BAE Systems not renewing its human resources contract.
The results include net exceptional costs of £31.8m (£53.4m in 2010), which relate primarily to restructuring costs and asset impairment. The dividend remains suspended and will be reviewed again at the half year. Prior to these results, JPMorgan Cazenove forecast 2012 EPS of 7.6p (6.6p in 2011).
| XCHANGING (XCH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 94p | MARKET VALUE: | £226m | |
| TOUCH: | 94-95p | 12-MONTH HIGH: | 115p | LOW: 51p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 70p* | NET CASH: | £45.2m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 468 | 32.5 | 7.9 | 2.0 |
| 2008 | 558 | 49.2 | 13.5 | 2.5 |
| 2009 | 750 | -60.3 | -33.0 | nil |
| 2010 | 689 | -7.6 | -16.8 | nil |
| 2011 | 651 | -2.5 | -5.8 | nil |
| % change | -5.5 | – | – | – |
*Includes intangible assets of £220m, or 92p a share | ||||
