Xchanging's CE Ken Lever is continuing his reshaping of the business following his appointment to the top job last week (see Lever gets the top job at Xchanging). He is now acquiring the remaining 24% of Cambridge Solutions' Australian workers' compensation BPO business, Cambridge Integrated Services Victoria (CISV), and its Indian BPO business (CSLBPO) for a total of $71.7m in cash. At the same time, Cambridge’s US business, Cambridge Integrated Services Group (CISG), which it sold to Sedgewick earlier this month (see Xchanging exchanges US business for cash), is paying back a $66m loan and “much of the debt” due to Xchanging. Lever said that the combined transaction will not have an impact on the net cash position of Xchanging.
In a call to investors Lever said this was principally a “tidying up exercise” to put a call on the loan guarantee given to CISG, and to transfer the assets of Cambridge's Australian and Indian BPO businesses into full ownership. He said: “These transactions simplify our business structure and our financing arrangements…and enable Xchanging to consolidate all its insurance operations worldwide."
CISV, the Australian BPO operation being acquired, made a pre-tax loss of £11.2m and revenue of £25.2m in FY10, meanwhile, CLSBPO, the Indian BPO operation made an operating profit of £4.4m and revenue of £17.9m (25% margin). While the Indian operation looks in good health, Lever will clearly be hoping that after writing down charges for an onerous contract during FY10, the Australian business is now out of the woods. Excluding that provision CISV would have broken even in the year.
This leaves Xchanging with a 76% stake in Cambridge’s India-based ITO business, which has operations in the US and South East Asia and accounts for £30m in revenue and £1m in EBIT. Lever said Xchanging now needs to assess whether this business should remain within the group. Also potentially at risk is Kedrios, its loss-making Italian financial services business.