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Xansa PLC (XAN)

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Thursday 05 December, 2002

Xansa PLC

Interim Results

Xansa PLC
05 December 2002

05 December 2002
                                   XANSA PLC

                          INTERIM RESULTS ANNOUNCEMENT

                    FOR THE SIX MONTHS ENDED 31 OCTOBER 2002


Xansa is a company that transforms the business capability of its clients
through its expertise in Business Consulting, Information Technology,
Outsourcing and Business Process Management.  The company's operations cover the
UK, North America, Continental Europe, India and Asia-Pacific.

                              Key Features

-  Turnover declined 14% to £232.5m (H1 2002 £269.2m)

-  Total operating profit fell 36% to £15.6m (H1 2002 £24.4m)

-  Operating margin has dropped to 6.7% (H1 2002 9.1%)

-  Pre-tax profit fell 36% to £14.8m (H1 2002 £23.1m)

-  Goodwill impairment of £144.4m

-  Exceptional costs of £1.9m

-  Dividend per share has been maintained at 1.08 pence (H1 2002 1.08 pence)

-  Cash flow from operating activities improved by 100% to £46.1m (H1 2002
   £23.0m)

-  Order bank increased by 41% to £625m (H1 2002 £442m)



These figures are quoted before profit on sale of own shares, distribution of
shares from the trusts, reorganisation costs and goodwill amortisation and
impairment.



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



"The current economic climate suggests that we are unlikely to witness any
marked upturn in demand during our financial year 2003/04 and so we are putting
in place an organisational structure and cost base appropriate to compete in a
market that we assume will be flat.  Trading since the period-end has been in
line with our expectations.



Our immediate focus is on securing more contracts.  We are encouraged by the
tremendous interest shown in our propositions and in particular our ability to
offer cost-effective delivery from our India business.  This is reflected in our
healthy pipeline and strong order bank of £625m.



The streamlining plans are well advanced and the savings flowing from this will
both increase safety and enhance profitability in the next financial year
through significant overhead reductions.



In summary, the Board remains confident that the actions being taken, the
investments being made and sustainable cost savings being generated will
reinforce the company's prospects for a return to growth and the realisation of
shareholder value.  In effect, we are prepared to tackle a continued tough
market but are well positioned for growth."



                                      Ends



Enquiries


Alistair Cox
Chief Executive, Xansa
Tel + 44 (0) 8702 416181

Steve Stratton                                      Giles Sanderson, Ben Atwell
Investor Relations Director, Xansa                  Financial Dynamics
Tel : +44 (0) 8702 416181                           Tel : +44 (0) 20 7831 3113
steve.stratton@xansa.com                            giles.sanderson@fd.com



High resolution images are available for the media to view and download free of
charge from www.vismedia.co.uk.





Chairman and Chief Executive Statement



Introduction

This statement is being written at a time of great change for Xansa.
Significant moves are being made both to adapt our organisation to the current
challenging market conditions, and to propel us forward to deliver profitable
growth in new areas and geographies.  We firmly believe that we will look back
and recognise this period as a turning point in Xansa's evolution and the
opening of an exciting new era in our development.



The current depressed economic climate has resulted in a marked reduction in
expenditure on IT and related services.  However, against this challenging
background, we are witnessing an increasingly strong interest and acceptance of
Business Process Outsourcing as well as IT outsourcing, driven by clients' needs
to deliver significant cost savings and productivity improvements at a time when
their own marketplaces remain difficult.  This shift in emphasis plays well to
Xansa's strengths of long-term partnerships and the advantage of our Indian
delivery capabilities.



The general market downturn has resulted in a significant industry-wide surplus
of IT skills in most of the key markets in which Xansa operates.  Whilst certain
steps have been taken by all who operate in this market, including us, to
address this issue, there remains sufficient excess supply to maintain constant
pressure on prices and fee rates.  These pricing pressures have been illustrated
most significantly in our consultancy business but have been felt broadly across
the entire business.



Despite the adverse market conditions, our business model remains highly
relevant and this is illustrated by the major contract wins announced since the
end of the last financial year, including BT and Boots. Xansa has also been
selected for final contract negotiations as part of the Prism Alliance, with BT
and CSC, as the preferred bidder on a £1.5 billion outsourcing contract with the
Royal Mail Group (formerly Consignia).



The fundamentals of Xansa are very robust; our clients greatly value the
benefits we deliver for them, our worldwide workforce is highly skilled and
motivated to achieve further success and we have the ingredients for a fully
integrated, cost-effective set of client solutions.  However, to reinforce our
position in the market and to provide even greater focus on our clients, we
announced a major reorganisation programme in September that will be effective
from 1 January 2003.



This restructuring represents a major streamlining of the organisation and the
establishment of a cost-base appropriate to compete in a market that in general
shows no signs of an upturn.   Simultaneously, we will be investing in those
areas critical to capturing future growth, for example, sales, marketing and
client management.



Financial Review

-  Turnover declined 14% to £232.5m (H1 2002 £269.2m)

-  Total operating profit fell 36% to £15.6m (H1 2002 £24.4m) and operating
   margin has dropped to 6.7% (H1 2002 9.1%)

-  Pre-tax profit fell 36% to £14.8m (H1 2002 £23.1m)

-  EBITDA down to £19.7m  (H1 2002 £28.6m)

-  Diluted earnings per share declined 41% to 2.25p (H1 2002 3.83p)

-  Goodwill impairment of £144.4m

-  Exceptional costs of £1.9m

-  Dividend per share has been maintained at 1.08 pence (H1 2002 1.08 pence)

-  Cash flow from operating activities improved by 100% to £46.1m (H1 2002
   £23.0m)

-  Net borrowings reversed - funds of £14.8m (H1 2002 borrowings of £22.7m)

-  Order bank increased by 41% to £625m (H1 2002 £442m)



These figures are quoted before profit on sale of own shares, distribution of
shares from the trusts, reorganisation costs and goodwill amortisation and
impairment.



Our performance in the half year reflects the impact of the current depressed
economic climate with falls in revenue, operating profit and margin.  All areas
of the business have been affected, with the exception of our Business Process
Management (BPM) business which remains on target.  Within this period, we have
taken the appropriate actions to ensure that whilst the growth of the business
has been affected, those parts of the business that we can directly control have
been tightly managed.  This is shown in our cash flow which has improved by over
100% since the same period last year to £46.1m, and the reversal of our debt
position to be £14.8m cash positive.  Underlying improvements in cash management
have been made continually over the last five periods. The dramatically improved
position in the half is partially a result of several advance payments from
major clients which will unwind in the second half.



The order bank of contractually committed revenues has grown by 41% to £625m.
This is primarily due to the inclusion of the BT and Boots contracts, but also
due to many other smaller contracts that do not make the headlines.  It also
reflects the changes in future revenues due to the eventual conclusion of the
contract between HBOS and First Banking Systems (FBS), our joint business
venture with HBOS, at the end of 2003.



An exceptional charge of £1.9m is being taken in this half to reflect the
charges related to senior personnel changes made as part of the major
reorganisation.  The full extent of the final charge will be clarified when the
redesign of the organisation is confirmed by April 2003.  The balance of the
charge will be taken at the full year and is fully explained together with the
re-organisation changes later in this statement.



We have undertaken a review of the carrying value of goodwill and as a result
have taken a write down of £144.4m.



Business Performance

We have seen increasing caution and care being exhibited by clients in
commencing large-scale transformational programmes due to their complexity and
magnitude.  Despite this we not only managed to secure Boots and BT, but after
the period had closed, in November, we secured a further £12m deal with Diageo
for 2 years to support them in streamlining their business processes worldwide
through the integration of supply, purchase, accounting and management reporting
systems.  This is additional to other orders taken from Diageo in this period
for £8.8m. Other major orders taken in the period totalled for Lloyds TSB £9.3m,
Co-operative Bank £8.1m, and a major high street retailer, £4.2m.



The Systems Integration business, which includes the Indian delivery channel and
FBS, has been affected by the cut back in discretionary spending and the
increasing caution shown by clients before committing to major programmes.
Nevertheless, it has not been affected as much as some other parts of the
company.  Turnover dropped by 13.5% to £130.4m since the same period last year,
but by only 6.9% compared with the second half of last year.  The entire
reduction of £20.4m is related to the lower minimum guaranteed spending this
year by HBOS, which will decline from £103m in the last financial year to £63m
for this financial year.  In some of our major accounts we are being publicly
recognised for the value of our services.  At Royal Mail Group, for example, we
were awarded overall supplier of the year, as well as achieving a supplier gold
services award and IT IS supplier of the year.  This is the culmination of
building strong working relationships and consistently delivering to time and
budget over many years. We are very pleased to welcome over 200 people to Xansa
from Boots.  This contract has a minimum value of £54m and the potential to
generate revenues of £90m over seven years.  It will guarantee savings of up to
£30m to Boots.



Enterprise Solutions had a strong performance in the period relative to the rest
of the company. Whilst turnover compared with the same period last year has
declined by 13.0% to £42.3m, contribution has risen by 6.4% to £5.0m.  During
this period this business unit has developed integrated propositions, using all
parts of the company to deliver major transformational programmes to key
clients. However, as with other parts of the company, the Enterprise Solutions
business has been impacted by the market.  In September we saw the effect of
client delays on at least two large projects and looking forward, we expect
margins from this business unit to be significantly reduced this financial year
compared with those achieved in 2002.



Revenues in Business Change, which continues to be the most adversely impacted
business unit, have declined by 50.4% to £20.8m since the same period last year,
and 31.4% since the end of the financial year, whilst contributions are now in
loss at £2.3m.  The cutback in discretionary spending has hit all
consultancy-based businesses harder than was originally envisaged.  However,
Business Change is instrumental in designing and delivering major programmes
that encompass skills from across the company.   This level of integration and
programme support is yielding significant value despite the challenging market
conditions.



Xansa Recruitment is challenged by overcapacity in the supply market as well as
reduced demand, leading to pricing pressures.  By taking prudent actions to
ensure that relationships are fully leveraged and costs tightly managed, the
business has been partially insulated from the full extent of the market
downturn.  Revenues have dropped by 25.4% to £20.8m.



Our new business, Business Process Management (BPM), is progressing well.
Initial revenues for its first trading period are £18.2m.  The BT contract,
representing £250m revenue over 7 years and with guaranteed savings to BT of
£93m, commenced on 1 July and is well on track. The strong management inherited
as part of the BT deal are now forming an effective team within the BPM
division.  We are strengthening our pipeline of potential opportunities in this
area.   We believe that we can capture significant growth from the evolving BPM
market and are excited about our future prospects in this business.



Internationally, we have seen the impact of the global downturn on all our
operations.  The previous trend of an increasing international proportion of
revenues has temporarily halted.  Worst hit has been Continental Europe where
revenues have declined by 56.3% since the same period last year, whilst Asia
Pacific has fallen by 26.5%, North America by 17.6% and India by 0.6%.



There have been no significant changes in split of revenue between industry
sectors reflecting the global nature of the current downturn.  The only major
change relates to the BT contract.



-  Banking : 32% (last full year : 33%)

-  Retail and Consumer Goods : 18% (last full year : 14%)

-  Telecomms : 13% (last full year : 7%)

-  Insurance : 12% (last full year : 15%)

-  Utilities : 9% (last full year : 11%)

-  Government : 8% (last full year : 9%)

-  Aerospace and Defence : 4% (last full year : 6%)

-  Pharmaceuticals : 4% (last full year : 5%)



The split between divisions has changed slightly with the introduction of the
new BPM business unit, the impact of consultancy revenues and the return to the
minimum contracted spending for HBOS.



-  Systems Integration : 38% (last full year : 36%)

-  Enterprise Solutions : 18% (last full year : 19%)

-  First Banking Systems : 10% (last full year : 13%)

-  Business Change : 9% (last full year : 14%)

-  Xansa Recruitment : 9% (last full year : 11%)

-  Xansa, India : 8% (last full year : 7%)

-  Business Process Management : 8% (last full year - Nil)



Workforce

Worldwide workforce numbers expressed as half yearly average full time
equivalents have declined by 516 to 5938 since the same period last year, of
which approximately 85% are salaried, and by 214 since the year-end. Of our
workforce, nearly a quarter has a contractual base outside of the UK.  Within
this period, around 550 people joined the workforce from BT and an increased
number of contractors were released.



Dividends

The Board is recommending holding the dividend payment at previous levels of
1.08 pence per share, taking into account not only the strong cash position but
recognising the need to support the realignment of the company.  This represents
dividend cover of 2.1 times.



Share Ownership

It is particularly pleasing to see that employee share ownership of the total
equity of the company, through direct ownership and employee trusts, remains
constant at 28%.



Strategic Review

On arrival Alistair Cox, who joined as Chief Executive on 1 August, was asked by
the Board to undertake a strategic and operational review.  As a result, it was
concluded that Xansa has the right ingredients to address the opportunities and
client requirements arising from the trends in IT and business process
outsourcing. Xansa will be successful because of our ability to win major new
contracts with our clients in the geographies and sectors within which we
operate and deliver on those contracts from a highly efficient resource base.
To win such business Xansa will draw on its:



-  Highly relevant and compelling propositions delivering guaranteed cost
   benefits to its customers

-  Track record of successful partnerships and delivery

-  Cost-effective delivery platform including via India



The core philosophy of the structural changes we will make, effective from 1
January 2003, will be to place the client at the centre of all our activities.
The new organisation will provide greater value to our clients by improving our
flexibility.  It will also reduce our costs via the elimination of duplication
within support functions and the improved utilisation of revenue earning staff.
Thus a more efficient, lower cost business with higher margins will emerge.



As most of our client teams tend to fall naturally into one of our key
geographic markets, we will therefore organise our business units by geography,
each one operating as its own profit centre.



Board and Management Changes

As a consequence of this redesign of the company structure, a number of Board
changes have already been announced, to be effective from 1 January 2003.



The Board changes, each reporting to the Chief Executive Alistair Cox, are:



Steve Weston, currently Managing Director, Systems Integration Business, will
become Managing Director, Xansa, UK.  In this role, Steve will be responsible
for all Xansa client accounts based in the UK.



Allan Wood, currently Managing Director, Enterprise Solutions Business, will
become Managing Director, Business Process Management.  Allan will lead the
worldwide development of this business.



Following the resignation of Geoffrey Dunn, Peter Gill will join the company and
the Board on 1 January 2003 as Finance Director.



Lyn Barrat will continue in her role as Commercial Director, ensuring
commercially viable and innovative propositions are negotiated with clients.



Saurabh Srivastava will continue in his role as Executive Chairman, Xansa,
India. The Indian operations form a key element of Xansa's worldwide service
provision and are increasingly relevant in the current market place.



Jo Connell has expressed a wish to retire from Xansa and, therefore, will
relinquish her role as Managing Director from 1 January 2003. However, Jo has
agreed to continue to work directly for the Chief Executive into 2003 to manage
the streamlining programme and to ensure a smooth transition to the new
organisation structure.  She will remain on the Board during that time.  Jo has
been with Xansa for twenty-five years and a director for the last eleven.  Her
outstanding contribution has been a critical factor in the company's success to
date and the Board wishes to express its thanks and appreciation to her.



Additionally, non-Board management appointments include Peter Drysdale as
Managing Director, Continental Europe and Asia Pacific and John Faraguna as
President, North America, both accountable for delivering profitable growth
within their respective regions.  Judith Halkerston will be responsible for
International Resources.   This role will ensure we develop and deploy the best
skills at the most effective cost to our clients, as well as optimising our
support infrastructure in terms of property and systems.  Narendra Saxena will
continue his role as Managing Director for India responsible for day to day
operations in that business.



Streamlining

The streamlining programme, initiated in late September, is on track to deliver
substantial benefits.   The new organisational structure is ready for
implementation 1 January 2003.   Initial costs have already been taken out of
the business.



Whilst detailed work is currently underway to define the exact implications of
the reorganisation, it is anticipated that total annualised gross savings of
£20m - £23m will be achieved.   Approximately
£13m - £15m of these total savings will be accrued from reduced indirect costs
covering merged overhead functions, property and infrastructure.   These savings
will be partially offset via increased investment in growth areas, higher
business taxes in the UK and increasing costs related to existing employee
benefits.  Around £7m - £8m of the total savings will be related to improved
utilisation of our resource base via the reduction of existing excess capacity.




Regrettably this significant programme of change will result in a number of
redundancies across the entire business. We therefore anticipate a redundancy
programme impacting 380 - 430 people worldwide over the next 4 months.   The
timing of this programme with completion so close to the end of our financial
year suggests that savings captured in the current year will be minimal.  Whilst
the exact details of the redundancy process are currently being worked through,
we are committed to completing this process as rapidly as possible and dealing
with issues fairly and sensitively.   We do believe however that we will emerge
from this process with a sharper organisation, fitter to deal with future
challenges and capture future growth.



An exceptional charge of £1.9m has been taken this half and we expect the
remaining costs of this programme to be accounted for as an additional
exceptional item in the full year results.  Our current estimate of this total
is around £22m - £25m.



Outlook

The current economic climate suggests that we are unlikely to witness any marked
upturn in demand during our financial year 2003/04 and so we are putting in
place an organisational structure and cost base appropriate to compete in a
market that we assume will be flat.  Trading since the period-end has been in
line with our expectations.



Our immediate focus is on securing more contracts.  We are encouraged by the
tremendous interest shown in our propositions and in particular our ability to
offer cost-effective delivery from our India business.  This is reflected in our
healthy pipeline and strong order bank of £625m.



The streamlining plans are well advanced and the savings flowing from this will
both increase safety and enhance profitability in the next financial year
through significant overhead reductions.



In summary, the Board remains confident that the actions being taken, the
investments being made and sustainable cost savings being generated will
reinforce the company's prospects for a return to growth and the realisation of
shareholder value.  In effect, we are prepared to tackle a continued tough
market but are well positioned for growth.





Consolidated profit and loss account
                                                                   6 months to  6 months to      Year to
                                                                    31 October   31 October     30 April
                                                                          2002         2001         2002
                                                                                        (as
                                                                                  restated)
                                                                    (reviewed)   (reviewed)    (audited)
                                                          Note       £ million    £ million    £ million
Group turnover                                             3             232.5        269.2        515.1
Group operating (loss) profit:
Before profit on sale of own shares, distribution of       3              15.6         24.4         49.1
shares from the trusts, reorganisation costs and goodwill
amortisation and impairment
Profit on sale of own shares                                                 -          0.8          1.6
Distribution of shares from the trusts                                   (2.0)        (0.9)        (3.1)
Reorganisation costs                                                     (1.9)            -       (13.2)
Goodwill amortisation and impairment                                   (151.6)       (21.3)      (539.6)
Group operating (loss) profit                              3           (139.9)          3.0      (505.2)
Net interest payable                                                     (0.8)        (1.3)        (2.6)
(Loss) profit on ordinary activities before taxation                   (140.7)          1.7      (507.8)
(Loss) profit on ordinary activities before taxation
analysed between:
Before profit on sale of own shares, distribution of shares from                       
the trusts, reorganisation costs and goodwill amortisation and
impairment                                                                14.8         23.1         46.5
Profit on sale of own shares                                                 -          0.8          1.6
Distribution of shares from the trusts                                   (2.0)        (0.9)        (3.1)
Reorganisation costs                                                     (1.9)            -       (13.2)
Goodwill amortisation and impairment                                   (151.6)       (21.3)      (539.6)
                                                                       (140.7)          1.7      (507.8)
Taxation                                                    4            (4.0)        (7.5)       (11.7)
Loss on ordinary activities after taxation                             (144.7)        (5.8)      (519.5)
Equity minority interests                                                (3.1)        (4.2)        (8.6)
Loss attributable to shareholders                                      (147.8)       (10.0)      (528.1)
Dividends                                                   5            (2.6)        (3.0)       (10.2)
Transfer from reserves                                                 (150.4)       (13.0)      (538.3)

                                                                                6 months to
                                                                   6 months to   31 October      Year to
                                                                    31 October         2001     30 April
                                                                          2002          (as         2002
                                                                                  restated)
                                                                    (reviewed)   (reviewed)    (audited)
Earnings per share - before profit on sale of own shares,
distribution of shares from the trusts, reorganisation
costs and goodwill amortisation and impairment
- basic                                                                  2.25p        3.89p        7.76p
- diluted                                                                2.25p        3.83p        7.55p
Loss per share
- basic                                                               (51.00p)      (3.52p)    (184.66p)
- diluted                                                             (51.00p)      (3.52p)    (184.66p)



Statement of total recognised gains and losses

                                                                          6 months  6 months to     Year to
                                                                     to 31 October   31 October    30 April
                                                                              2002         2001        2002
                                                                                  (as restated)
                                                                        (reviewed)   (reviewed)   (audited)
                                                                         £ million    £ million   £ million
Loss attributable to shareholders                                          (147.8)       (10.0)     (528.1)
Exchange differences on retranslation of net assets of subsidiary            (2.1)        (0.7)       (1.1)
undertakings
Tax charge on gift of shares from the Quest                                  (0.1)        (0.5)       (0.6)
Total recognised losses relating to the period                             (150.0)       (11.2)     (529.8)



Consolidated balance sheet

                                                                       31 October  31 October    30 April
                                                                             2002        2001        2002
                                                                                          (as 
                                                                                    restated)
                                                                       (reviewed)  (reviewed)   (audited)
                                                              Note      £ million   £ million   £ million
Fixed assets
Intangible assets                                                           105.5       779.4       261.3
Tangible assets                                                              24.2        23.1        24.5
Investment in own shares                                                     56.2        59.3        58.2
                                                                            185.9       861.8       344.0
Current assets                                                 6            111.4       119.1       117.9
Creditors due within one year
Short term borrowings                                                      (14.3)      (21.1)      (21.0)
Other creditors                                                7          (113.9)      (77.8)      (97.6)
                                                                          (128.2)      (98.9)     (118.6)
Net current (liabilities) assets                                           (16.8)        20.2       (0.7)
Total assets less current liabilities                                       169.1       882.0       343.3
Long term borrowings                                                        (0.3)      (30.6)      (18.2)
Provisions for liabilities and charges                                      (0.8)       (2.6)       (1.3)
Net assets                                                                  168.0       848.8       323.8

Capital and reserves
Share capital                                                                16.7        16.4        16.4
Reserves                                                                    150.0       830.8       306.3
Total equity shareholders' funds                                            166.7       847.2       322.7
Minority interests
Equity interests in subsidiary undertakings                                   1.3         1.6         1.1
                                                                            168.0       848.8       323.8



Consolidated cash flow statement
                                                                         6 months to  6 months to     Year to
                                                                          31 October   31 October    30 April
                                                                                2002         2001        2002
                                                                                              (as
                                                                                        restated)
                                                                          (reviewed)   (reviewed)   (audited)
                                                                  Note     £ million    £ million   £ million

Cash inflow from operating activities                               8           46.1         23.0        56.0
Net interest paid                                                              (0.9)        (1.4)       (3.1)
Dividends paid to minorities                                                   (4.8)        (3.5)       (7.4)
Returns on investments and servicing of finance                                (5.7)        (4.9)      (10.5)
Taxation                                                                       (2.1)        (7.5)      (15.8)
Capital expenditure and financial investment                                   (6.8)        (4.5)      (10.2)
Acquisitions                                                                       -        (0.6)       (0.9)
Equity dividends paid                                                          (6.0)        (5.4)       (8.0)
Cash inflow before use of liquid resources and financing                        25.5          0.1        10.6
Management of liquid resources                                      9          (0.4)        (0.3)       (2.5)
Financing                                                           9         (22.1)          5.1      (10.7)
Increase (decrease) in cash at bank and in hand                    10            3.0          4.9       (2.6)





Notes to the Accounts



1. General

The interim financial statements for the period to 31 October 2002 were approved
by the Board on 4 December 2002.  They are unaudited but have been reviewed by
the Auditors.  The comparative figures for the year to 30 April 2002 have been
abridged from the Group's statutory accounts which have been delivered to the
Registrar of Companies.  The Auditor's report on the statutory accounts was
unqualified and did not include a statement under Section 237 (2) or (3) of the
Companies Act 1985.



2.  The accounting policies set out in the Group's financial statements for the
year to 30 April 2002 have been applied for the purposes of this statement. The
Group's policy for accounting for Employee Share Ownership Trusts changed as at
30 April 2002 to comply with Urgent Issues Task Force Abstract (UITF) 32 "
Employee benefit trusts and other intermediate payment arrangements" issued by
the Accounting Standards Board on 13 December 2001. Accordingly, comparatives
for the six months to 31 October 2001 have been restated.



3.  Geographic analysis
                                                    6 months ended 31 October 2002 (reviewed)
                                        Turnover by  Turnover by     Operating     Operating             'Net
                                        destination       source     profit by (loss) profit  assets employed
                                                                      source *     by source        by source
                                          £ million    £ million     £ million     £ million        £ million
United Kingdom                                207.3        191.2           9.3       (145.3)            129.3
India                                             -         16.5           7.6           7.6              6.8
North America                                  19.3         19.2         (0.7)         (1.5)             23.7
Continental Europe                              3.4          3.1         (0.5)         (0.6)              1.8
Asia Pacific                                    2.5          2.5         (0.1)         (0.1)              5.1
                                              232.5        232.5          15.6       (139.9)            166.7
Minority interests                                -            -             -             -              1.3
                                              232.5        232.5          15.6       (139.9)            168.0

                                             6 months ended 31 October 2001 (as restated) (reviewed)
                                          £ million    £ million     £ million     £ million        £ million
United Kingdom                                236.1        218.8          18.1         (2.9)            807.3
India                                           0.2         16.6           6.3           6.3              4.7
North America                                  23.6         23.3           1.1           0.6             30.4
Continental Europe                              5.5          7.1         (1.4)         (1.4)              1.3
Asia Pacific                                    3.8          3.4           0.3           0.4              3.5
                                              269.2        269.2          24.4           3.0            847.2
Minority interests                                -            -             -             -              1.6
                                              269.2        269.2          24.4           3.0            848.8

                                                       Year ended 30 April 2002 (audited)
                                          £ million    £ million     £ million     £ million        £ million
United Kingdom                                451.1        418.9          39.0       (511.5)            284.7
India                                           0.6         31.7          11.5          11.5              5.2
North America                                  45.9         45.4         (0.8)         (2.4)             26.9
Continental Europe                              9.7         12.2         (1.7)         (3.9)              1.0
Asia Pacific                                    7.8          6.9           1.1           1.1              4.9
                                              515.1        515.1          49.1       (505.2)            322.7
Minority interests                                -            -             -             -              1.1
                                              515.1        515.1          49.1       (505.2)            323.8

Before profit on sale of own shares, distribution of shares from the trusts,
reorganisation costs and goodwill amortisation and impairment



4.  Taxation
                                                                     6 months to   6 months to      Year to
                                                                     31 October    31 October      30 April
                                                                            2002          2001         2002
                                                                                 (as restated)
                                                                      (reviewed)    (reviewed)    (audited)
                                                                       £ million     £ million    £ million
UK corporation tax                                                           4.3           3.8         10.6
Adjustments in respect of prior years                                          -           0.2        (0.3)
                                                                             4.3           4.0         10.3
Overseas taxes                                                               0.2           0.7            -
Adjustments in respect of prior years                                        0.1             -        (0.1)
Total current tax                                                            4.6           4.7         10.2
Deferred taxes                                                             (0.6)           2.8          1.5
                                                                             4.0           7.5         11.7



5.  Dividends

The Interim dividend of 1.08p (2001: 1.08p) per share will be paid on 10 April
2003 to members registered at the close of business on 31 January 2003.



6.  Current assets
                                                                           31 October   31 October     30 April
                                                                                 2002         2001         2002
                                                                                               (as
                                                                                         restated)
                                                                           (reviewed)   (reviewed)    (audited)
                                                                            £ million    £ million    £ million
Trade debtors                                                                    52.9         56.5         62.4
Amounts to be billed on contracts                                                16.3         24.9         18.0
Other debtors                                                                     2.4          3.1          1.2
Prepayments                                                                      10.4          5.6          8.0
Cash at bank and in hand                                                         29.4         29.0         28.3
                                                                                111.4        119.1        117.9



7.  Other creditors
                                                                           31 October   31 October     30 April
                                                                                 2002         2001         2002
                                                                                               (as
                                                                                         restated)
                                                                           (reviewed)   (reviewed)    (audited)
                                                                            £ million    £ million    £ million
Revenue in advance                                                               47.0         11.7         22.5
Trade creditors                                                                   4.1          6.2          7.0
Corporation tax                                                                  10.7         10.7          8.1
Other taxes and social security                                                  15.4         12.9         16.1
Other creditors and accruals                                                     30.6         29.1         32.1
Proposed dividend                                                                 3.2          3.4          7.0
Proposed dividend due to minority interest                                        2.9          3.8          4.8
                                                                                113.9         77.8         97.6



8.  Reconciliation of operating (loss) profit to net cash inflow from operating
activities
                                                                  6 months to      6 months to       Year to
                                                                   31 October       31 October      30 April
                                                                         2002             2001          2002
                                                                                 (as restated)
                                                                   (reviewed)       (reviewed)     (audited)
                                                                    £ million        £ million     £ million
Operating (loss) profit                                               (139.9)              3.0       (505.2)
Depreciation charge                                                       4.1              4.2           8.0
Loss on sale of tangible assets                                           1.5                -           0.1
Goodwill impairment                                                     144.4                -         497.0
Amortisation of goodwill                                                  7.2             21.3          42.6
Profit on sale of own shares                                                -            (0.8)         (1.6)
Distribution of shares from the trusts                                    2.0              0.9           3.1
Accrued reorganisation costs                                              1.9                -           5.1
Reorganisation costs spent                                              (5.0)                -             -
Release of accrual for shares to be issued                              (1.1)                -             -
Decrease in debtors                                                       6.8              1.7           2.1
Increase (decrease) in creditors and provisions                          24.2            (7.3)           4.8
Net cash inflow from operating activities                                46.1             23.0          56.0



9.  Analysis of changes in net (debt) funds
                                          At 1 May    Cash flow         Other         Exchange At 31 October
                                                                     non-cash         movement          2002
                                              2002                    changes
                                         £ million    £ million     £ million        £ million     £ million
Cash at bank and in hand                      25.7          1.1             -            (0.4)          26.4
Overdrafts                                   (4.2)          1.9             -              0.2         (2.1)
                                                            3.0
Debt due within 1 year                      (16.5)          4.3             -              0.3        (11.9)
Debt due after 1 year                       (17.7)         17.6             -              0.1             -
Finance leases                               (0.8)          0.2             -                -         (0.6)
                                                           22.1
Cash deposits maturing in one year             2.6          0.4             -                -           3.0
                                            (10.9)         25.5             -              0.2          14.8



10.  Reconciliation of net cash flow to movement in net funds (debt)
                                                                        6 months to   6 months to       Year to
                                                                        31 October    31 October       30 April
                                                                               2002          2001          2002
                                                                                    (as restated)
                                                                         (reviewed)    (reviewed)     (audited)
                                                                          £ million     £ million     £ million
Increase (decrease) in cash in period                                           3.0           4.9         (2.6)
Cash outflow (inflow) from decrease (increase) in debt and lease               22.1         (5.1)          12.0
financing
Cash outflow from increase in liquid resources                                  0.4           0.3           2.5
Change in net funds (debt) resulting from cash flows                           25.5           0.1          11.9
Translation difference                                                          0.2             -             -
Movement in net debt in the period                                             25.7           0.1          11.9
Net debt at period start                                                     (10.9)        (22.8)        (22.8)
Net funds (debt) at period end                                                 14.8        (22.7)        (10.9)





Independent review report to Xansa plc



Introduction

We have been instructed by the Company to review the financial information for
the six months ended 31 October 2002 which comprises the Consolidated Profit and
Loss Account, Statement of Total Recognised Gains and Losses, Consolidated
Balance Sheet, Consolidated Cash Flow Statement and the related notes 1 to 10.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.



Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors.  The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and reasons for them, are disclosed.



Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom.  A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed.  A review excludes
audit procedures such as test of controls and verification of assets,
liabilities and transactions.  It is substantially less in scope than an audit
performed in accordance with the United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit.  Accordingly, we do not
express an audit opinion on the financial information.



Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2002.


Ernst & Young LLP
London
4 December 2002


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