8th Apr 2009 07:00
Annual Financial Report and Notice of Annual General Meeting
In compliance with the Disclosure and Transparency Rules ('DTR'), a description of the principal risks and uncertainties, a responsibility statement and details of related party transactions are set out below in full unedited text. A condensed set of financial statements were appended to Xchanging's 2008 full year results announcement issued on 2 March 2009, which included an indication of important events that occurred during the year. The additional DTR disclosures below are taken from the 2008 annual report and accounts, and will shortly be available on our website www.xchanging.com within Investor Relations' financial reports and presentations section.
Key risks, impacts and mitigation strategy
(page 37 Annual report and accounts 2008)
Xchanging maintains risk registers for each of the sectors and for the Group, which cover the key internal and external risks to our businesses. The Group's register is reviewed by the Board and ensures we have mitigation plans in place to minimise the impact of these risks on the Group.
|
Key risks |
Impacts |
Mitigation strategy |
|
Our growth strategy is dependent on attracting new customers in large-scale arrangements |
Not attracting new customers could make it difficult to achieve our financial goals |
Clearly defined service offerings and sales strategies Building and developing strong relationships are key to our core values Central and sector sales teams with strong sales governance processes |
|
Our reputation is reliant on successful implementation of large-scale partnerships and outsourcing contracts |
Poor implementation of partnerships could impact customer service levels and profitability, thereby damaging our reputation |
Application of standard procedures for implementing new partnerships Rigid approval processes requiring defined standard deliverables Using experienced employees with strong project, change and people management skills to ensure continuity of service and retention of employees Using standard supporting tools proven to be effective in previous implementations |
|
Our customers and partners demand efficient processing and high levels of service to help them achieve their objectives |
Not meeting our customer and partner demands could impact our relationships and reputation |
Disciplined measuring and monitoring of performance across all functions Continued focus on one of our core values of being responsive to customer needs Clearly defined operating strategy and target model Quality functions focused on improving processes, controls and performance |
|
We may be exposed to complex and technical contractual terms with key customers |
Breaching contract may lead to customer relationship issues and potential financial penalties. In certain cases partners may have rights to 'put' their shares, creating a cash requirement, or to 'call' the Group's shares for little consideration |
Clearly defined partnership governance structures helping to identify and resolve potential issues Embedded Delegated Authorities process requires involvement of senior management for complex transactions Structural service management approach identifies issues early and triggers corrective actions Close monitoring of all key contractual obligations with partners through detailed registers |
|
Continuing to retain our key personnel and recruit new talented individuals is key to our success |
Failure to retain and develop our skill sets may hinder the ability to achieve our goals |
Retention plans in place for key employees Established structure for employee performance and development monitoring Clear recruitment strategy and graduate scheme attracting high-potential employees Leadership training schemes in place to underpin succession plans |
|
Our service delivery and reputation is highly reliant on business continuity and security of our IT systems |
Business disruption or IT system and security issues may result in loss of service, loss or compromise of customer and internal data, breach of legal and regulatory obligations and damage to reputation |
Defined information security policies and protocols Focus on continued development of business continuity and disaster recovery planning and testing Information Security Officer roles within each Sector |
|
We may be impacted by the general economic downturn |
Market conditions have lead to a slow down in economic growth in a number of sectors and territories, potentially impacting our ability to secure new revenue opportunities |
Clearly defined service offerings and sales strategies Strong outsourcing offering and partnership model, complimentary to customer needs in such market conditions Disciplined sales governance processes |
Directors' statement pursuant to the Disclosure and Transparency Rules
(page 49 Annual report and accounts 2008)
Each of the Directors confirm that, to the best of each person's knowledge and belief:
the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets and liabilities, financial position and profit of the Group and Company
the Directors' report contained in the annual report includes a fair review of the development and performance of the business and the position of the Company and Group, together with a description of the principal risks and uncertainties that they face.
Name Function
Nigel Rich Chairman
David Andrews Chief Executive Officer
Richard Houghton Chief Financial Officer
Stephen Brenninkmeijer Non-Executive Director
Johannes Maret Non-Executive Director
Dennis Millard Senior Non-Executive Director
Pat O'Driscoll Non-Executive Director
Tom Tinsley Non-Executive Director
Related party transactions
(page 114 Annual report and accounts 2008)
The following companies are considered to be related parties of the Group as they hold minority shareholdings in a number of the subsidiaries of Xchanging plc.
The Corporation of Lloyd's held a 25% interest in Ins-sure Holdings Limited and a 50% interest in Xchanging Claims Services Limited for the full year ended 31 December 2008. Some of the directors of Xchanging Claims Services Limited are employees of the Corporation of Lloyd's. The emoluments of these directors were borne by the Corporation of Lloyd's.
The International Underwriting Association held a 25% interest in Ins-sure Holdings Limited for the full year ended 31 December 2008.
Deutsche Bank AG held a 44% interest in Xchanging etb GmbH for the full year ended 31 December 2008. Some of the directors of Xchanging etb GmbH are employees of Deutsche Bank AG. The emoluments of these directors were borne by Deutsche Bank AG.
Aon Limited held a 50% interest in Xchanging Broking Services Limited for the full year ended 31 December 2008. Some of the directors of Xchanging Broking Services Limited are employees of Aon Limited. The emoluments of these directors were borne by Aon Limited.
Allianz Global Investors Kapitalanlagegesellschaft mbH held a 49% interest in Fondsdepot Bank GmbH for the full year ended 31 December 2008.
A description of the nature of the services provided to/from these companies by/to the Group and the amount receivable/(payable) in respect of each at 31 December, are set out in the table below:
|
Services provided by/to the Group |
|
Sales/(purchases) |
Year end receivables/(payables) |
||
|
|
2008 |
2007 |
2008 |
2007 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Securities processing services |
96,856 |
68,684 |
2,756 |
6,103 |
|
|
Processing, expert and data services |
35,327 |
35,642 |
1,318 |
1,929 |
|
|
Property charges |
994 |
1,097 |
- |
277 |
|
|
IT costs, premises, divisional corporate charges and other services in support of operating activities |
(28,847) |
(27,654) |
(7,528) |
(3,318) |
|
|
Operating systems, development, premises and other services in support of operating activities |
(420) |
(486) |
(82) |
(134) |
|
|
Desktop, hosting, telecommunications, accommodation and processing services |
(3,741) |
(6,127) |
(2,057) |
(961) |
|
|
Current accounts |
|
- |
- |
2,619 |
760 |
By virtue of a significant shareholding, giving right of representation on the Board, General Atlantic LLC is a related party of the Group. Until 30 April 2007, General Atlantic LLC was the holder of a £15,000,000 non-interest bearing convertible loan note issued following the acquisition of the RebusIS group. This loan was recorded in the balance sheet at its fair value, having been discounted at the market rate of 6.95% on the date of issue. Before maturity the loan could be converted into convertible preference shares in Xchanging BV at a price of £11 per share and was secured over such shares. In April 2007, the loan was converted into 1,363,636 convertible preference class E shares in Xchanging BV.
Transactions with Directors and key management
(pages 114 to 115 and reference to pages 58 to 64 Annual report and accounts 2008)
The compensation disclosure below relates to the Xchanging plc Directors and key senior managers within the Group, who constitute the people having authority and responsibility for planning, directing and controlling the Group's activities.
|
Key management compensation (including Directors) |
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
|
Short-term employee benefits |
6,662 |
6,275 |
|
|
Post-employment benefits |
102 |
82 |
|
|
Share-based payments |
597 |
189 |
|
|
|
|
7,361 |
6,546 |
Further information regarding Xchanging plc Directors' remuneration is disclosed in the Directors' remuneration report on pages 58 to 64 which forms part of these financial statements.
The total gain made by Directors during the year from the exercise of share options was £581,000 (2007: £646,000).
During the prior year, loans were provided by the Xchanging BV Employee Benefit Trust to a number of employees including Directors and key management personnel to enable them to purchase shares in Xchanging BV (these shares have been subsequently exchanged for shares in Xchanging plc). The loans are non-interest bearing and become repayable on the earlier of the cessation of employment, transfer or disposal of the shares, acceptance of another loan from the Group to refinance the shares and 31 December 2011. The Xchanging BV Employee Benefit Trust has a call option over the shares until the loans are repaid in full.
The balances due from the Directors and key management and the carrying amounts in the consolidated financial statements are:
|
2008 |
2007 |
||||
|
Balance outstanding |
Carrying amount |
Balance outstanding |
Carrying amount |
||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
S Beard |
1,590 |
1,590 |
1,590 |
1,531 |
|
|
A Browne |
663 |
663 |
663 |
638 |
|
|
M Bruno |
424 |
424 |
424 |
408 |
|
|
C Buesnel |
530 |
530 |
530 |
510 |
|
|
R Houghton |
663 |
663 |
663 |
638 |
|
|
M Margetts |
398 |
398 |
398 |
383 |
|
|
D Rich-Jones |
1,325 |
1,325 |
1,325 |
1,276 |
|
|
|
|
5,593 |
5,593 |
5,593 |
5,384 |
Annual report and accounts 2008
Copies of the above document have been submitted to the UK Listing Authority and will be available for inspection at the UK Listing Authority's Document Viewing Facility, which is located at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone 020 7066 1000
The Company's annual report and accounts 2008 will shortly be available on the Company's website within Investor Relations' financial reports and presentations section:
www.xchanging.com
Notice of Annual General Meeting 2009
The Company has issued to shareholders its Notice of Annual General Meeting 2009, form of proxy and map of venue. The Annual General Meeting will be held on 21 May 2009 at 11.30am at Xchanging, 34 Leadenhall Street, London EC3A 1AX.
Copies of the above documents have been submitted to the UK Listing Authority and will be available for inspection at the UK Listing Authority's Document Viewing Facility, which is located at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone 020 7066 1000
The Companies Notice of Annual General Meeting 2009 and map of venue will shortly be available on the Company's website under Investor Relations' Shareholder services' AGM section:
www.xchanging.com
Enquiries
Xchanging plc Tel: 020 7780 6999
David Andrews, Chief Executive Officer
Richard Houghton, Chief Financial Officer
Tulchan Group Tel: 020 7353 4200
David Allchurch
Stephen Malthouse
8th April 2009
About Xchanging
Xchanging is a fast growing, pure play global business processor with blue chip customers. Xchanging provides complex industry specific processing to the banking and insurance industries as well as procurement, finance and accounting, and human resources services across industries. www.xchanging.com
Related Shares:
XCH.L