Xchanging benefits from a possible recession – moving work back home
SOURCE: Guardian.co.uk
DATE: Feb 25th, 2008
Mohit SoapBox:
XChanging CEO makes an interesting comment about companies looking to get work closer to home – an optimum mix
of nearshoring and offshoring. In some ways this contradicts the statement that firms will benefit from recession as
companies look to reduce their cost base by moving to offshore locations. There has been a lot of conversation around firms
looking to create global footprint and I see that in a # of conversations I have had with executives across corporations. The question is that does cost reduction and global footprint creation go hand and hand ? I believe that for firms who already have a mature offshore presence and have scale, a global footprint is going to be be essential to balance risk and cost. For firms who are starting to get into the offshoring space to manage their cost basis – a near shore only opportunity is going to be hard to put a business case for.
British outsourcing group Xchanging Plc said on Monday it hoped to benefit from a global economic downturn in 2008 as more financial services companies look to slim down their cost base.
“A recession will put pressure on costs. Companies will be forced to look at making cost savings,” Chief Executive David Andrews told reporters, adding that this year could be a “defining moment” for the outsourcing industry.
He said the company was in talks with a number of parties about possible partnership deals — such as those already signed with insurance broker Aon and Allianz — and was still on the hunt for acquisitions.
“We are looking to increase our international footprint. Europe is a particular focus for us,” he added.
Xchanging, which floated last April and provides a range of outsourcing services to the financial services industry, earlier said full-year revenue rose 19 percent to 468.2 million pounds ($919.8 million), while adjusted operating profit was up 20 percent at 38.9 million pounds.
Andrews said analysts were expecting another year of around 20 percent growth, and he was comfortable with that. “We are always looking to beat industry growth, expected this year to be around 14 percent,” he said.
The results were slightly higher than expected by analysts at Landsbanki, who had forecast revenue of 460 million pounds and profit of 38 million.
Shares in the company, which have gained around 11 percent since the IPO, were down 0.5 percent at 265.25 pence, valuing the business at 570 million pounds.
Landsbanki analyst Michael Donnelly said the group’s revenue visibility already covered 84 percent of his expectations for 2008, and increased his profit forecast for the year.
“It is difficult to find anything wrong with the results. The shares may be off because they rallied last week. There are also no new contract wins,” he told Reuters.
One setback was a profit decline at its financial markets arm — the smallest of its three divisions — due to discounts awarded to major customer Deutsche Bank. Donnelly said this was only a concern if other customers such as banking giant Citigroup demanded a similar treatment.
Xchanging’s cash position nearly doubled during 2007 to 98.4 million pounds, while the maiden dividend was set at 2 pence a share.
David Andrews said further growth opportunities would come from a growing trend to bring offshore outsourcing back to the country of origin. “I think the simple offshoring model is running out of steam — people are looking for a balance of on, near and off shore,” he said. (Reporting by John Bowker, editing by Will Waterman)
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