Xchanging seeks new procurement deals after key contract changes

Will Green is news editor of Supply Management
27 February 2014

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27 February 2014 | Will Green

Xchanging embarked on a quest for new procurement deals in 2013 after a key contract making up around a third of revenue became “no longer as profitable”.

Chief executive Ken Lever told SM Xchanging’s procurement division in the UK was largely built on a contract with BAE Systems that had been in place for 12 years, but a new contract came into force in 2013.

“Our procurement department didn’t perform as well as we expected last year,” he said.

“We did have a longstanding contract in the UK with BAE Systems which came to an end. The contract was reconfigured. It had been in place for 12 years. The basis of the price changed. It was no longer as profitable.”

As a result the firm went looking for new business, signing contracts with Godiva, Severn Trent Services, Diageo and Vodafone, as well as buying up e-sourcing provider MarketMaker4.

Lever said Xchanging mainly took care of indirect spend for clients, including travel, car hire, consulting services and facilities management.

He said MarketMaker4 had grown its customer base by 50 per cent since the acquisition and they were investing £5 million in the procurement business. “We’re very confident about the procurement side,” he said.

Lever, speaking as the firm announced its 2013 results, said the procurement division made up around 10 per cent of Xchanging’s total business, which also includes business process and technology services.

Xchanging reported profits before tax of £51.7 million in 2013, up 13.6 per cent on 2012, on net revenue of £526.4 million, which was down 0.3 per cent on 2012. The firm said there was “exceptional profit” from the disposal of Xchanging Transaction Bank for £12.5 million and the forfeiture of the lease on offices in Leadenhall Street, worth £13.3 million.

Lever took over as chief executive in 2011 after David Andrews, who founded the company in 1999, stepped down as CEO as the company predicted a “challenging year”.

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