Xchanging's shares sink after new profits alert

Shares in the back-office outsourcing group Xchanging lost more than half their value yesterday after the group issuing a second profits warning, cancelled its dividend and announced the departure of its founder and chief executive, David Andrews.

The company, which sponsors the Oxford and Cambridge universities' boat race, has been battling for months against growing City misgivings over fair-value accounting policies, particularly in relation to the £83m acquisition of Indian rival Cambridge Solutions in 2008.

Yesterday's trading statement turned the skirmish into a rout. Xchanging's 2010 results will take a hit from a £12m impairment charge and a £100m goodwill writedown on the Cambridge business, the company said. Furthermore, 2011 profits will come in "below the lower end" of the £55.5m to £80.2m forecast range, dragged down by a string of factors including a £2m contract termination and the absence of the £6.9m worth of "contract settlements" recorded in the 2010 results.

Given the circumstances, Xchanging will not be paying a dividend for 2010, the company said.

There is also a shake-up at the top. Mr Andrews will step down with immediate effect, although he will retain an advisory role. Ken Lever, appointed as chief financial officer (CFO) last October, will take over the top job in the interim, while a permanent replacement for Mr Andrews is being found. The chairman Nigel Rich will become executive chairman. Xchanging's management stressed that "actions are being taken to mitigate the impact on operating profits in 2011 which include restructuring and cost-reduction initiatives". But investors took fright. The shares opened down 44 per cent at 65.25p, before plunging to just 54.75p later in the day, recovering only slightly to close down by 52 per cent at 56.5p.

Some City analysts were quick to smell blood. Henry Carver, at Peel Hunt, cut Xchanging's target price from 110p to 30p and warned that "bankruptcy remains a distinct possibility" citing squeezed margins, an uncertain cash position and the risk from the loss of Mr Andrews.

Even the more bullish commentators warned that the company faces a long road back to credibility. "The company will have to deliver on expectations in terms of profits, cash and contract retention," Mike Murphy, an analyst at Numis, said. "If all that falls into place, then it's conceivable that the stock could get back above £1 in 12 to 18 months' time."

"The fundamental point is that XChanging has a new CFO who has looked at the books and decided that maybe he ought to be more conservative in the way that he accounts for things," Mr Murphy said.

Xchanging's problems started with last August's warning of "slightly lower" revenues for the 2010 financial year, as what Mr Andrews described as "caution across industries and across geographies" left the group without the slew of private-sector deals it had expected.

The stock slumped by 12.5 per cent that day, and just kept falling. Within weeks it was down by 40 per cent - nearer 110p than the 200p it was at the end of July – and Mr Andrews was forced to take a public stand against "incorrect speculation" and "completely baseless rumours".

Start your day with The Independent, sign up for daily news emails
Voices
Lucerne’s Hotel Château Gütsch, one of the lots in our Homeless Veterans appeal charity auction
charity appeal
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France
tv
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
News
ebooksNow available in paperback
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
tech
Voices
Jimmy Mubenga died after being restrained on an aircraft by G4S escorts
voicesJonathan Cox: Tragedy of Jimmy Mubenga highlights lack of dignity shown to migrants
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum