Xchanging founder and CEO quits after profit warning

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Xchanging founder and CEO quits after profit warning

Microscope contributor

The founder and CEO at UK-based BPO firm Xchanging - acquirer of networking reseller Data Integration - has quit following a profit warning.

Revenues for the year to 31 March 2011 are forecast to be in line with expectations but operating profits will likely be at lower end of analysts' estimates of £55.5m to £80.2m; as a result boss David Andrews has resigned.

This is due to a £2m contract termination, a drop of roughly £4m in the US Claims business, £4m worth of business development investments in the Americas and softer margins in the price aggressive Financial Services space.

"Actions are being taken to mitigate the impact on operating profits in 2011 which include restructuring and cost reduction initiatives," said Xchanging in a statement to the City.

The first part of that came today when founder and long serving CEO Andrews stepped down with immediate effect to take on a new position as senior advisor to the Chairman, with CFO Ken Laver taking charge in the interim as a successor is sought.

Andrews said that after 11 years in charge "it is time for me to hand over the leadership role for the next stage of the company's development".

Executive Chairman Nigel Rich said: "2011 will be a year of transition for Xchanging as we realign the cost base and focus on revenue growth to deliver sustainable profits for shareholders".

According to TechMarketView research director John O'Brien, the acquisition of India-based partner Cambridge - on which Xchanging will now take a £12m impairment charge in fiscal 2010 and write down £100m in goodwill primarily against that deal - was among the major issues it encountered.

"Andrews' departure leaves Xchanging vulnerable. Founding investor and 10% shareholder General Atlantic Partner has already exited IT/BPS investments in Patni, and Liberata since the start of 2011. We wouldn't be surprised to see Xchanging face a similar fate," he said in a note this morning.


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