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Xchanging struggled to quell concerns over the back-office services group’s financial viability after a £90m ($146m) writedown pushed the former FTSE 250 company into the red.
As part of an “action plan to overhaul our entire business” to restore investor confidence, Xchanging said it was considering possible disposals of underperforming operations.
But analysts said key questions remained about the future of Xchanging, which processes insurance claims for Lloyd’s of London and has lost three-quarters of its market capitalisation since July.
The outsourcing group is to begin refinancing discussions with a banking syndicate led by Lloyds Banking Group, which Henry Carver at Peel Hunt said would have to decide whether it was “worth propping [the company] up”.
Xchanging stressed on Tuesday that it expected to operate within the terms of its borrowing facilities, which include a £75m revolving credit facility and $58m term loan that will mature in October 2012.
In the face of criticism from the City, Ken Lever, who became finance director in October and is now acting chief executive, said: “They’re looking for detail to a degree that we’re just not in a position to supply.”
The outsourcing group on Tuesday scrapped its dividend as it posted a pre-tax loss of £60.3m, including “exceptional items” of £112.5m, such as impairment charges and onerous contract provisions. That compares with a restated 2009 profit of £18.4m. Revenue in the year to the end of December rose from £750.4m to £780.6m.
Under the turnround plan, Mr Lever said staff would be given incentives to “focus on profitability and cash flow and not just revenue”. Further job losses in the west are likely as the company seeks to make more positions offshore.
Analysts said many of Xchanging’s problems came from the integration of Cambridge Solutions, a US-Indian outsourcer the group acquired for £145m.
“We must identify areas that have underperformed,” Mr Lever said. “If we can’t fix [them], we need to consider whether we want to be in those businesses.”
Losses per share were 32.98p (earnings of 2.67p). The shares closed down ½p to 55½p.
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