Xchanging is selling one of its flagship enterprise partnership (EP) joint ventures Xchanging Transaction Bank GmbH (XTB) back to partner Deutsche Bank for €40.5m in cash. Deutsche Bank apparently decided that the securities processing services provided by XTB are now core to the business, and so it wouldn’t have renewed in May 2016. XTB had revenues of £97.4m in FY12, so Xchanging’s 51% stake would have delivered just shy of £50m last year. Xchanging's shares took a 9% cut on the news.
Xchanging also provided an in line update for the first four months of 2013, having ‘sustained the momentum’ it achieved in the second half of last year (see Xchanging’s FY12 shows signs of recovery). Of course HotViews readers will know it hasn’t all been plain sailing since the start of 2013, with the news last month that Xchanging will lose its largest infrastructure contract at the London Metal Exchange (see here).
Progress is apparently being made in insurance, following a contract extension in Australia with Toyota. Its recently launched Netsett central accounting and settlement service has also had ‘some initial interest’ and is now in pilot phase. In the technology division, Xchanging’s Xuber insurance business process platform has apparently secured a number of contracts since the start of the year, including with Q-Re and Aviva.
However the US procurement business, which it picked up from BAE Systems in 2011 (see Xchanging wins new BAE deal in the US) is underperforming due to slower than expected implementation. Consequently, revenues from the deal are now likely to be lower than the $150m over seven-years it originally expected.
It's clearly still a bumpy road to recovery. We will provide more colour and movement later following this morning's call with management in UKHotViewsExtra.