26th Feb 2015 10:31
LONDON (Alliance News) - Xchanging PLC saw its shares drop Thursday after it reported a sharp drop in profit as a result of a disposals programme and cautioned of the impact of a regulator review into its Agencyport Europe acquisition, even though it predicted renewed growth in 2015 now that its transformation process is complete.
The provider of outsourced services to businesses like processing and procurement management has been selling off some business in areas where it no longer wanted to operate, while bolstering its new areas of focus with acquisitions. The aim was to become less reliant on a small number of large contracts, de-risking by garnering a broader spread of customers and simplifying the business structure.
That continued revamp in 2014 meant its revenue dropped by over 20% and its profits fell as a result. It reported a pretax profit of GBP32.5 million for 2014, down from GBP78.3 million in 2013, as revenue declined to GBP573.5 million, from GBP685.9 million.
However, excluding exceptional items and acquisition-related expenses and amortisation, its operating profit rose to GBP55.8 million, from GBP55.5 million.
The company raised its dividend for the year to 2.75 pence, from 2.5p, despite burning through cash. It ended 2014 with net cash of GBP13.7 million, down from GBP120.1 million at the end of 2013, after spending GBP90.3 million on acquisitions and GBP43.4 million on capital expenditure.
It said the dividend increase reflected its growth prospects for the business in 2015.
"I am very pleased to report that we have achieved our key objective for 2014 which was to make up the gap from exiting certain businesses and maintain profitability in what was a challenging year, demonstrating good underlying growth performance. We also met our objective of positioning Xchanging for renewed growth in 2015," Chief Executive Ken Lever said in a statement.
"Our focus for 2015 is entirely on driving the revenue and profit growth performance of the new Xchanging," he added, saying that the company's technology and procurement businesses offer higher growth and margin expansion potential and its business processing services unit the prospect of moderate growth, good margins and strong cash generation.
The company blamed its recent weak share price performance on the impact of the UK anti-trust regulator's decision in December to refer its proposed acquisition of insurance software company Agencyport Europe for a deeper review. Xchanging has had to put the integration of the business on hold.
"We have felt and, in the first half of 2015, will continue to feel the negative effects of the demands the CMA review process places upon the company's resources, and on our ability to win new business in the insurance software market. We cannot predict the outcome of the review, expected mid-2015, however we remain confident that our own assessment at the time we made the acquisition in July 2014, showing no competition issues, was sound," the company said in its statement Thursday.
Its shares were down a further 9.2% at 133.94 pence Thursday morning, making it one of the worst-performing stocks on the AIM All-Share index. The stock is down 12.2% so far in 2015 and has fallen 25% over the last six months.
By Steve McGrath; [email protected]; @stevemcgrath1
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