‘The other’ UK-based BPO player, Xchanging, is parting company with its founder and CEO David Andrews and issued a profits warning. Andrews will be replaced immediately by CFO Ken Lever, who will take on the role of acting CEO until a replacement for Andrews is found. Chairman Nigel Rich will now become the executive chairman. Andrews will continue to act in a “senior advisor” role. Prior CFO, Richard Houghton, resigned in July last year (see here). Xchanging won’t be paying a dividend in FY10 either, and will now “keep it under review”. The news sent Xchanging’s share price crashing 43%. It is now down 63% yoy.
All sorts of things went wrong at Xchanging, not the least of which was the acquisition of Cambridge, Xchanging’s India-based partner bought for c£83m back in 2008 (see here). Xchanging will now take an impairment charge of c£12m in FY10, and write down c£100m in goodwill primarily against Cambridge. This relates to two-thirds of the Cambridge acquisition. Xchanging will also implement cost reductions and restructuring across the business, which will impact FY11.
This is a bleak day for Andrews, whom we regarded very highly. Xchanging, rose to prominence on the back of a landmark joint venture HR outsourcing deal with BAE Systems in 2000, and since diversified into a leading insurance and financial services business process services (BPS) provider, through major deals with clients such as Aon and Lloyds of London (see Xchanging talks up IT, networking and the cloud).
Andrews’ departure leaves Xchanging vulnerable. Founding investor and 10% shareholder General Atlantic Partners (GAP) has already exited IT/BPS investments in Patni (see here), and Liberata (see here) since the start of 2011. We wouldn’t be surprised to see Xchanging face a similar fate.