Xchanging procurement faces restructure following ‘poor performance’

Paul Snell is managing editor at Supply Management
30 July 2015

The procurement division of outsourcing provider Xchanging is to be restructured following its “very poor and disappointing performance” during the first six months of this year.

“Procurement’s performance was poor,” said chief executive Ken Lever, announcing the group’s results for the first six months of 2015. “Given a negative outlook, the business will be reorganised over the next half year to facilitate achievement of run-rate profitability.”

External support has also been brought in “to achieve maximum benefit from the strategic realignment”.

The firm also had to write down £47 million of goodwill relating to a historical contract that has not performed as expected. Xchanging said “anticipated new contracts in the second quarter did not materialise". The underperformance was also attributed to a tail spend management contract signed at the end of 2014 which has “proved disappointing, incurring unacceptable losses to date”. The firm said the future of the contract was now under review.

Lever also announced his intention to retire at the end of 2015, as the firm posted a pre-tax loss of £44.4 million, compared with £22.2 million pre-tax profit in the same period of 2014. The procurement division had an operating loss of £6.8 million, compared with £1.7 million in 2014. However, revenue in the technology part of the procurement division did rise.

Procurement outsourcing accounted for 6.5 per cent of the firm’s overall net revenue. Total net revenue was £199.4 million, compared with £205.1 million between January and June 2014.

Xchanging added the procurement division was only a small part of the business and “the significant and unwelcome performance should not obscure the strong growth and future potential of the group.”

"It has been a great honour and privilege to lead Xchanging for the last four years,” Lever added. “During that period the senior management team has supported me to achieve a transition of Xchanging from a traditional outsourcing business to one built on technology and technology enabled services. We have made significant progress but there is more to do,” he said.

Xchanging acquired spend analysis business Spikes Cavell in February in an $11.5 million deal.

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