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Xchanging’s FY12 showed welcome signs of recovery following a torrid couple of years. In the twelve months to 31 December, adjusted revenue was up 2.8% to £668.3m, reversing a 4.7% decline in FY11 (see Xchanging posts unsurprisingly bleak FY11). Encouragingly, organic revenue grew by 5.6% on a like-for-like basis. Xchanging also reinstated the dividend, pleasing investors who sent Xchanging's shares up 9%.
Profitability is also now heading in the right direction. Xchanging’s adjusted operating margin (before the nasty bits) went up 90 basis points to 7.5%. Statutory operating profits however (which include the nasty bits) went up almost 6 fold to £46m - giving Xchanging a 6.9% margin vs. 1% last time. This shows how well the bottom line is recovering under CE Ken Lever’s stewardship and his Four Part Action Plan to turn Xchanging around.
In terms of verticals, financial services is struggling. Revenue here was down 9.3% due to a weak securities market volumes market at its FTB business in Germany. Profitability slumped 9.2% largely due to the £3m loss for the year from its Italian securities processing business Kedrios. Despite this Xchanging continues to pump money into Kedrios (see Xchanging acquisition for troubled Italian business). The technology division meanwhile seems to be on a more stable footing, with revenue up 2.9% on a like for like basis thanks to wins at Gatwick Airport, the London Metal Exchange, a 'significant improvement' by Data Integration, and a win for Xuber with Marsh at the beginning of December 2012.
Procurement and insurance were the best performers however. ‘Procurement and other BPO’ grew 14% to £209m thanks to higher volumes from BAE Systems (see Xchanging wins UK procurement renewal with BAE), as well as deals with L'Oréal in Europe, others North America, and finance and accounting business in India.
Insurance revenue meanwhile was up 4.5% and the operating margin remained a very healthy 19%, thanks to its five year renewal with Lloyds of London in October (see Xchanging renews Lloyds BPS deal), and increased market share in its Australian State of Victoria contract.
Insurance is where Xchanging is investing for growth. It launched its new flagship Xuber platform during the year following a £20m four-year investment (see Xchanging’s Xuber platform targets SaaS/BPaaS). Since then it has launched a mobile/tablet app for Lloyds’ agents and brokers called X-presso, and Netsett, a global (re)insurance and settlements service, which is now in pilot phase.
We will have plenty more colour and movement later for TechMarketView subscribers in UKHotViewsExtra.
