RNS Number:8464S
Xansa PLC
04 December 2003

4 December 2003



                                     XANSA

            INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2003


Xansa is an international business process and IT services company creating and
delivering process and technology solutions that significantly improve its
clients' business performance. Through strong relationships, commercial
innovation and its integrated Indian delivery capability, Xansa drives real and
long-term cost reductions, performance improvements and new ways of working
tailored to each client. Its services are Business and Technology Consulting, IT
Implementation, IT Outsourcing and Business Process Outsourcing.



                             Business Highlights

*     Major orders in the period

      *     Royal Mail, up to #180 million over ten years

      *     Learning & Skills Council, up to #38 million over three years

*     UK business has grown despite market remaining flat

*     India continued to grow rapidly with headcount up by 36%

*     Increased scope and number of high-value, complex back-office processes
      delivered through Business Process Outsourcing

*     Continental Europe - intention to exit existing operations

*     US objective of eliminating losses achieved with return to break-even in
      the half-year

*     Appointment of Bill Alexander as new Chairman



                             Financial Performance

Half-year trading performance in line with expectations:


*     Turnover declined 2.9% to #225.7 million (H1 2003 #232.5 million)

*     Total operating profit fell 7.1% to #14.5 million (H1 2003 #15.6 million)
*

*     Pre-tax profit fell 6.8% to #13.8 million (H1 2003 #14.8 million) *

*     Exceptional costs of #20.9 million including #12.5 million previously
      announced contract settlement

*     Diluted earnings per share rose 4% to 2.34 pence (H1 2003 2.25 pence) *

*     Dividend per share has been maintained at 1.08 pence (H1 2003 1.08 pence)

*     Loss attributable to Shareholders improved to #14.9 million (H1 2003 loss
      of #147.8 million)

*     Orderbank #481m (FY 2003 #569m)



* Numbers quoted are before distribution of shares from the trusts, exceptional
items and goodwill amortisation.




Commenting on the results, Alistair Cox, Chief Executive, said:


"Our UK business has grown despite the market remaining flat.  In India, we are
continuing to grow rapidly and have increased headcount by 36%.  The US has
returned to break even.  In Continental Europe we do not believe that the
marketplace is ready for large-scale outsourcing of IT and business processes
that leverage our offshore model.  Consequently, it is our intention to exit
these operations, keeping the option of re-entering when we believe the market
is more developed.

Our outlook remains consistent with the views we have expressed over the last 12
months.  Corporate IT budgets remain constrained in all our markets and we do
not anticipate any sustained upturn in expenditure until clients have greater
visibility of their own prospective performance.  However, our key propositions
of IT Outsourcing and Business Process Outsourcing delivered by an integrated UK
and India operation with contractually guaranteed benefits is highly relevant
today. Our pipeline is healthy.

In summary, the Board is confident that the actions we are taking will allow us
to compete in today's flat market.  Simultaneously we are rapidly establishing
early positions in those areas most expected to deliver significant future
value."


                                      Ends



Enquiries


Alistair Cox
Chief Executive, Xansa
Tel: +44 (0) 8702 416181
Steve Stratton                              Giles Sanderson, James Melville-Ross
Investor Relations Director, Xansa          Financial Dynamics
Tel: +44 (0) 8702 416181                    Tel : +44 (0) 20 7831 3113
steve.stratton@xansa.com





Chief Executive Statement



Introduction


Market conditions in all our geographies remain tough and corporate investment
in IT continues to be limited.  This environment is unlikely to change until the
second half of 2004 at the earliest and gives a context within which the
progress we are making should be viewed.  At our last set of results announced
in June 2003 I presented our key areas of focus, namely:


*     Build on our IT Outsourcing and Business Process Outsourcing (BPO)
      strengths in the UK

*     Rapidly scale India

*     Address loss-making businesses


Six months on, I am pleased that we have delivered on each of these priorities.

In the UK, our business has grown despite the market remaining flat.  This
business is built around major long-term partnerships with key clients across a
number of sectors.  These partnerships form the building blocks of our strategy.
I believe each of them offers further potential for growth as we enhance our
reputation as an organisation that delivers improved business performance for
our clients while being easy to work with.  This is a significant differentiator
in today's market.

In India we are continuing to grow rapidly and have increased our headcount by
36% to 1426 from 1046 at the end of April 2003. Our newly opened facilities at
Noida and Chennai, with a current capacity of 1525 seats, are fully functioning
and our next phase of construction at Pune is underway to deliver a further 400
seats by the summer of 2004. Once fully built, our total capacity in India will
provide 10,000 seats on a single-shift basis. The role of our India business is
increasingly important to our overall strategy and we have continued to increase
the scope of services offered as well as the number of clients served.

Our focus in India is two-fold. Firstly, the delivery of integrated IT services
to our clients combining skills from offshore with those already in place
onshore.  Secondly, the provision of high-value, complex back-office processes
with the potential to move into front-office processes as our clients require.
We are seeing growth in both these areas and are recruiting heavily to meet
anticipated demand.  Growth in the BPO area has been particularly significant
and we now operate ten discrete processes offshore up from one a year ago.  We
are now the largest supplier of integrated on/offshore services in the UK.

We are growing the business through a combination of consistently excellent
delivery and the development of innovative and compelling ideas for our clients.
Such proposals also allow us to better align our objectives with those of our
clients and develop a business model where our reward is more often based on a
percentage of the total gains delivered to the client, rather than simply the
number of employees involved on the process.  This will lead to a greater
sharing of risk and reward and provides us the opportunity to seek improved
margins based on the quality of results we deliver for our clients.  Again, this
differentiates us in today's market.  Success will mean the growth of a very
significant resource base in India combined with a UK workforce that is likely
to be comparable in terms of scale to that in place today.

It is our job to ensure that we build the appropriate skills in the appropriate
locations and provide training and development opportunities for our employees
to enable them to remain competitive as the industry evolves.

Outside of the UK, we have assessed the potential in each of our operations.  In
Continental Europe (CE), we do not believe that the marketplace is ready for
large-scale outsourcing of IT and business processes that leverage our offshore
model.  This may change over time but we believe that it is a better use of our
resources to focus on winning work in the UK market at a time when the UK is
highly receptive to such propositions.  Consequently it is our intention to exit
current CE operations while retaining the capability to service our UK clients
on the Continent where such services are necessary.  We will keep the option of
re-entering the CE marketplace when we believe it is ready to leverage our
propositions.  Naturally, consultations with the affected employees will be
undertaken.

In Asia Pacific, we have already announced our intention to exit from a business
that is not considered strategic.  We are implementing this plan, ensuring we
discharge our obligations to clients and employees appropriately.

In the US, the team has done an excellent job in bringing the business from a
full-year loss of #1.0 million to breakeven in the half-year.  We have also
enjoyed initial success moving our business model away from project work and
towards Applications Management and Outsourcing.  Having delivered on our key
objective of eliminating losses, we continue to assess our options for the
future development of the business.

Our pipeline is healthy and covers a number of important opportunities in both
the IT and BPO areas.  The complexity and scale of many of these opportunities
does however mean that sales cycles remain lengthy.  Our focus is on winning
these deals, recognising the exact timing of completion is often driven by
factors outside our control.


Financial Performance

Turnover declined to #225.7 million and operating profit fell to #14.5 million
compared with the same period last year.  However, compared with the second half
of last year, turnover has increased by 2% and operating profit by 11%.

The Orderbank has decreased to #481 million from #569 million at the full-year.
This reflects current economic conditions, the lengthy sales cycles that are now
evident and the winning of framework contracts that are anticipated to rollover
each year but are not included at full expected value in the Orderbank.
Throughout this period we signed new deals and contract extensions that
generated total orders of #138 million. Our most significant contract signed in
this period was with the Royal Mail as part of the Prism Alliance.  This
contract, valued at #1.5 billion over ten years for the Prism Alliance, is
included in the Orderbank to a value of #52 million over five years reflecting
the guaranteed element of the contract to Xansa.  In June, 216 employees
successfully transferred from Royal Mail to Xansa.  I am pleased to say that the
first six months of the contract have gone exceedingly well.  The transition was
delivered successfully, we have generated and won new propositions with the
client and we have bedded down the whole governance process that is necessary to
ensure the Alliance works.

In the UK, revenues increased by 1% to #210 million, compared with the same
period last year.  Business Process Outsourcing (BPO) revenues increased to
#34.1 million.  Our predominant BPO relationship is with BT where we provide
business processing duties covering some #13 billion in annual payments, three
million BACS electronic payments and many hundreds of thousands expense claims,
purchase orders and payslips.  We are also working with BT to deliver one of the
world's largest Oracle Financials 11i single instance installations replacing 16
different IT systems with one global network.  In addition, we manage
high-value, complex back-office processes for major Financial Services and
Utilities companies as well as our own Finance, HR and IT Customer Service Desk
from India.

Delivery in other areas has also been encouraging.  For example, at Boots we are
currently working on one of the world's largest SAP retail implementations as
measured by the volumes of complex and varied data handled across 1400 stores,
50,000 products and all of Boots' operations.

In the UK Government sector, we have widened our client base to cover further
departments helping to implement the Government's e-business and modernisation
policies.  In October, we agreed a revised contract with the Learning and Skills
Council to provide IT systems development, support and associated services.
This contract has a potential value of #38 million over three years and a
minimum commitment of #12 million for the first year.  Within the Department for
Work and Pensions, on behalf of Worktrain, we have recently won a three-year
contract renewal for #4.3 million to continue providing development, support and
a hosting service to this internet service for national jobs, learning and
careers.

Recruitment continues to be affected by the general decline for contractors and
pricing pressures.  Its revenues declined by 13% to #16.8 million compared with
the same period last year.  The business continues to be profitable and forms an
integral part of our overall business model.  We use the flexibility that
contractors provide to ensure that short-term requirements and specialist skills
can be met to underpin our delivery obligations as well as providing flexibility
in our cost base. At the end of this period we had 350 contractors placed with
external clients and 725 used directly on Xansa accounts.

In Asia Pacific, our revenues for the period declined by 56% to #1.1 million and
our losses have increased to #0.8 million.

In Continental Europe, revenues for the period have declined by 13% to #2.7
million and our losses increased to #0.8 million.  As stated earlier, it is our
intention to exit these operations.

In the US, revenues have declined by 38% to #11.9 million compared with the same
period last year as a major contract completed.  Against this backdrop, losses
of #1.0 million incurred in the last year have been reversed and we broke even
in the first half of this financial year.

India continues to play an increasingly important part in the business.  It is a
key contributor to our business and its results are fully incorporated into the
UK analysis. Viewing India as a standalone business, revenues have increased by
10% to #18.2 million, net margin has increased by 17% to #12.1 million and
operating profit margin percentage has risen by 0.6% to 46.7% compared with the
same period last year.

The most significant change in the split of revenues by sector has occurred in
the Retail & Consumer Goods and Telecoms sectors with much smaller changes
across the rest of the sectors.  This is a reflection of the continuing impact
of the significant programmes at Boots and Royal Mail (Retail & Consumer Goods)
and at BT and O2 (Telecoms).


*     Banking: 33% (last full year: 34%)
*     Retail & Consumer Goods: 25% (last full year: 20%)
*     Telecoms: 18% (last full year: 14%)
*     Insurance: 9% (last full year: 11%)
*     Utilities: 5% (last full year: 8%)
*     Government: 8% (last full year: 8%)
*     Aerospace & Defence: 2% (last full year: 3%)
*     Pharmaceuticals: