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Xansa PLC (XAN)

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Thursday 02 December, 2004

Xansa PLC

Interim Results

Xansa PLC
02 December 2004

Press Release

2 December 2004


                                     XANSA

            Interim results for the six months ended 31 October 2004

Xansa, the international business process and IT services company, is pleased to
announce its results for the six months ended 31 October 2004.

                              Business Highlights

•       Improvement in key financial indicators

•       Turnover up 4.3% in continuing operations to £189.5 million since first
        half 2004

•       Margins increasing in continuing operations from 4.0% to 5.5% since
        first half of 2004, despite ongoing investment

•       Corporate costs tightly controlled

•       No exceptional items

•       Sector Focus delivering results

•       New Clients - NHS, Prudential, Yorkshire Water

•       Strong growth in Government

•       India operations continue to expand

•       Increased headcount by 23% to 2,329 since April 2004

•       Increased revenue by 38% to £25.2 million since first half of 2004



                             Financial Performance


•       Turnover declined to £189.5 million (H1 2004: £225.7 million), due to
        the exit of overseas operations and termination of First Banking Systems 
        joint venture.

•       Continuing businesses increased turnover by 4.3% to £189.5 million (H1
        2004: £181.7 million)

•       Operating profit increased to £6.5 million (H1 2004: Loss of £11.7
        million)

•       Profit before tax increased to £4.9 million (H1 2004: Loss of £12.4
        million)

•       Diluted earnings per share increased to 1.15 pence (H1 2004: Loss of
        4.75 pence)

•       Corporate costs reduced to £2.8 million (H1 2004: £3.3 million)

•       Adjusted diluted earnings per share maintained at 2.34 pence (H1 2004:
        2.34 pence)

•       Dividend per share maintained at 1.08 pence (H1 2004: 1.08 pence)


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

"Our Company looks very different to the one it was 12 months ago.  The
restructuring is complete and we are now focusing on growing our business in the
UK marketplace, supported by our India delivery capability, and we continue to
be the largest UK-based supplier of offshore services.  Our strategy is to grow
our business by providing expert services that allow our clients to outsource
more of their technology and associated process operations.  This focus is
already paying off as shown in our first-half results, with revenues from our
continuing businesses growing and with margins improving."

Bill Alexander, Chairman commented:

"We are beginning to see the benefits of our more focused strategy as we invest
in developing new business in the UK and delivering capacity and capability in
India.  There are still many challenges ahead but the Board is confident that
under Alistair's leadership, Xansa can become the benchmark company in our
sector."

                                ENDS

Contact:

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

About Xansa

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 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.  Based in
Reading, Berkshire, Xansa is listed on the London Stock Exchange (LSE:XAN) with
6,400 people in the UK and India.

Chief Executive's statement

Our Company looks very different to the one it was 12 months ago.  Our
restructuring is complete and we can now focus on growing our business in the UK
marketplace, supported by our India delivery capability. I believe that focus is
already paying off as shown in our first-half results compared with the first
half of 2004.  Revenues from our continuing businesses are growing, margins are
improving, earnings per share are maintained despite the conclusion of the First
Banking Systems joint venture and we have incurred no further exceptional
charges.  Progress has been made in almost all areas of the business; let me
describe this progress in greater detail.

The UK marketplace is really two marketplaces: private sector and public sector.
The private sector continues to show, at best, very modest growth and is
unlikely to improve in our second-half.  By contrast, the public sector
continues to grow.  The government modernisation and efficiency agenda is clear
and is unlikely to be diverted, providing prospects for further growth in demand
for our services.

As a part of our earlier restructuring, we focused our organisation around core
sectors.  We believe that each sector in which we operate should provide
opportunities for profitable growth.  I am pleased to say that we are now seeing
the benefits of that focus.  We are both extending our services with existing
clients and winning new clients. We have invested in our sales team to broaden
our client base and have enjoyed success in winning contracts with important new
clients such as Yorkshire Water, Prudential and the NHS.

The demands of our marketplace are also changing.  Clients are moving away from
traditional technology procurement and are increasingly requiring suppliers to
assume full end-to-end accountability for business processes and the
technologies that enable them.  This trend is a significant opportunity for us.
To capitalise on this opportunity we are investing to develop and operate expert
systems and processes, differentiated on a sector by sector basis. Examples
include arrears management services for utilities organisations, back-office
loans and mortgage processing for banks, and medical insurance underwriting for
our insurance clients.  Our objective is to be recognised as the expert operator
of critical processes and technology in each of our chosen sectors and we will
continue to invest in solution design, sales and marketing to achieve that goal.

In addition, we have invested in horizontal service offerings that are relevant
across all sectors.  Our clearest example is our Finance and Accounting (F&A)
offering where we are providing back office finance services to clients such as
BT, O2, MyTravel and shortly to the NHS.  The scale and complexity of these
operations around our shared service centres in the UK and India makes us the
leader in F&A services in the UK today.  For example, we now process £14 billion
of invoices, manage 450,000 expense claims and provide 230 million accounting
entries per year.   To enable these processes, we are installing new technology
platforms in both Oracle 11i and SAP to provide scale and efficiency gains.

I am particularly pleased that we have been selected as the joint venture
partner for the Department of Health to provide F&A services to the NHS Trusts.
The potential scale of this venture could mean that currently this could be the
largest contract secured by Xansa.  We announced contract completion shortly
after the half-year and are on track to formally commence the joint venture on 1
April 2005, at which time 230 staff will transfer to Xansa's employment group.
Currently 36 trusts out of 663 utilise the Shared Service Centres (SSC) in Leeds
and Bristol.  We are currently investing to improve the efficiency of the SSCs
and to increase the number of trusts using these services.

As these examples illustrate, our strategy is to grow our business by providing
expert services that allow our clients to outsource more of their technology and
process operations.  Our clients benefit from more effective and cost-efficient
services and greater freedom to do more with their core business, without the
distraction of internal process management.

This strategy leverages our entire range of skills: business consulting,
technical design and development, process design and management, service
management and commercial structuring of contracts.  Furthermore, the strategy
is based on our unique capabilities to blend onshore and offshore resources to
deliver services to our clients.

Today we remain the largest UK-based supplier of offshore services.  However, it
is our track record of providing that capability in a fully-integrated fashion
for the last seven years that really sets us apart from our competition.
Establishing an offshore operation is feasible for any company; understanding
how to integrate onshore with offshore to create a single, seamless organisation
takes much longer but is critical in order to ensure low risk/high quality
service delivery to our clients. Our clients recognise this and our track record
is a key differentiator today.

Growth in our India business has continued to be strong.  We increased headcount
by 23% to 2,329 from 1,886 at the end of April 2004. In June 2004 we opened our
new facility at Pune.   Across our 3 centres in Pune, Noida and Chennai we now
have installed capacity for 2,780 seats on a single-shift basis with sufficient
land to build 10,000 seats.  Based upon our pipeline of work, we will continue
to recruit and expect to commence construction of further capacity in the near
future. In the UK, the workforce declined slightly by 4% to 4,105.  The number
of contractors used internally in the UK also declined, by 5% to 658.  Overall
group headcount grew by 4% to 6,470.

The execution of this strategy has required us to invest in new skills and
resources, proposition development, marketing and bid management and building
capacity in India. Whilst this investment has restricted short-term improvement
in our margins, it will provide a platform for future growth.

Business Performance

Turnover for the six months ended 31 October 2004 was £189.5 million compared to
£225.7 million in the first half last year.  However, on a like for like basis,
removing the effects of the now discontinued overseas businesses and the
terminated First Banking Systems joint venture, £189.5 million represents a 4.3%
increase in turnover over the first half last year.

Our enhanced focus on the Government sector is reflected in that sector
contributing 11% of turnover in the first half, up from 9% in the year to April
2004.  We are also seeing a higher proportion of our turnover now being
delivered through our India operation, 13% in the first half, up from 11% in the
year to April 2004.

Operating profits (before share distributions, goodwill amortisation and
exceptional items) in the first half were £10.4 million compared with £14.5
million in the first half last year. This movement is again distorted by
discontinued activities. In our continuing business operating profit of £10.4
million represents an increase of 44% from £7.2 million, and an increase in
margin to 5.5% from 4.0% over the first half last year.  This improvement in
margin is helped by a continuing focus on our corporate overheads, which reduced
over the same period to £2.8 million from £3.3 million.

Interest costs increased from £0.7 million to £1.6 million reflecting higher
interest rates and an increased level of underlying debt as a consequence of the
exceptional costs incurred in previous years.  We are pleased to report no
exceptional costs in the first half this year. Net debt at 31 October 2004 was
£24.2 million, up from £7.0 million at 30 April 2004.  We remain very focused on
our operating cash performance and our debtor days outstanding are at a very
creditable 35 days.  Going forward, our debt position will benefit from the
elimination of exceptional charges.

The increase in the proportion of our profit earned in India, which currently
enjoys a tax holiday, is reflected in a significant reduction in the tax rate
applied to our adjusted profits in the first half to 17.0% from 25.8%. There has
also been a significant reduction in the charge for minority interests as a
consequence of the termination of the FBS joint venture.

Reported adjusted basic earnings per share of 2.38 pence are slightly ahead of
the 2.37 pence reported in the first half last year. Diluted earnings per share
remained constant at 2.34 pence.

The orderbank at 31 October 2004 stood at £451 million compared with £500
million at 30 April 2004.  This reflects the fact that a number of orders signed
in the period were framework contracts where, although there is low contracted
forward revenue, we believe that there could be significant long-term revenue
opportunities. These contracts included Yorkshire Water and Prudential.  In
addition, we signed orders with BT valued at £30.3 million over 4 years,
Barclays valued at £13.0 million over 3 years and a major retailer valued at
£12.7 million to be delivered in-year.

Dividends

The Board is recommending maintaining the interim dividend payment at 1.08 pence
per share.  This dividend is covered 2.2 times by interim diluted earnings per
share of 2.34 pence.

Outlook

Our outlook remains unchanged from that at the time of our Preliminary Results
in June 2004.  Market recovery in the private sector is anticipated to remain
slow whereas the public sector is expected to continue to grow.  Whilst there
may be a short-term slowdown in contract letting immediately preceding any
election, this is unlikely to have any sustained impact on the growth we expect
in the government sector.

We are targeting to broaden our client base further in the second-half.  Whilst
the nature of contracts being signed is moving towards framework contracts and
contracts with an increasing proportion of offshore work, which together may
limit headline orderbank growth, we expect to increase the lifetime value of our
contract base.  Increasingly we expect to see the pipeline consist of end-to-end
process solutions, although our traditional strengths in pure IT outsourcing
will continue to make a key contribution.  Leveraging our offshore capabilities
will be fundamental to our business and we expect to see continued growth in our
India operations. Our new contract wins, in particular the NHS, are also
anticipated to require recruitment in the UK.

In summary, the Board is confident that the Company is being well positioned in
the sectors likely to enjoy the best prospects. We are successfully building
leadership positions in our chosen sectors and continue to invest to enhance
these positions.

Alistair Cox   Chief Executive


Consolidated profit and loss account
For the six months ended 31 October 2004

                                                                         (Reviewed)     (Reviewed)      (Audited)
                                                                        6 months to    6 months to        Year to
                                                                         31 October     31 October       30 April
                                                                               2004           2003           2004
                                                                                        (restated)     (restated)
                                                            Note          £ million      £ million      £ million

Group turnover                                               3                189.5          225.7          419.5

Group operating profit (loss):
Profit before distribution of shares from the trusts,
exceptional items and
goodwill amortisation                                        3                 10.4          14.5            26.1
Distribution of shares from the trusts                                        (1.4)          (2.2)          (4.9)
Exceptional items                                            4                    -         (20.9)         (40.4)
Goodwill amortisation                                                         (2.5)          (3.1)          (5.7)
Group operating profit (loss)                                                   6.5         (11.7)         (24.9)
Exceptional loss on disposal of businesses                                        -              -          (2.4)
Profit (loss) on ordinary activities before interest         3                  6.5         (11.7)         (27.3)
Net interest payable                                                          (1.6)          (0.7)          (1.7)
Profit (loss) on ordinary activities before taxation         5                  4.9         (12.4)         (29.0)
Taxation                                                     6                (1.2)            2.0          (1.3)
Profit (loss) on ordinary activities after taxation                             3.7         (10.4)         (30.3)
Equity minority interests                                                     (0.2)          (3.4)          (4.6)
Profit (loss) attributable to shareholders                                      3.5         (13.8)         (34.9)
Dividends                                                    7                (3.4)          (3.3)          (9.8)
Transfer to (from) reserves                                                     0.1         (17.1)         (44.7)


                                                                         (Reviewed)     (Reviewed)      (Audited)
                                                                        6 months to    6 months to        Year to
                                                                         31 October     31 October       30 April
                                                                               2004           2003           2004
                                                                                        (restated)     (restated)
                                                                          £ million      £ million      £ million
Earnings per share - before distribution of shares from
the trusts, exceptional items and goodwill amortisation
- basic                                                                       2.38p          2.37p          4.61p
- diluted                                                                     2.34p          2.34p          4.53p
Earnings (loss) per share
- basic                                                                       1.17p        (4.75p)       (11.92p)
- diluted                                                                     1.15p        (4.75p)       (11.92p)





Statement of total recognised gains and losses
For the six months ended 31 October 2004



                                                                      (Reviewed)      (Reviewed)      (Audited)
                                                                     6 months to     6 months to        Year to
                                                                      31 October      31 October       30 April
                                                                            2004            2003           2004
                                                                                      (restated)     (restated)
                                                                       £ million       £ million      £ million

Profit (loss) attributable to shareholders                                   3.5          (13.8)         (34.9)
Exchange differences on retranslation of net assets of subsidiary          (1.0)           (1.1)          (2.4)
undertakings
Total recognised gains and losses relating to the period                     2.5          (14.9)         (37.3)







Consolidated balance sheet
As at 31 October 2004


                                                                     (Reviewed)       (Reviewed)      (Audited)
                                                                     31 October       31 October       30 April
                                                                           2004             2003           2004
                                                                                      (restated)     (restated)
                                                           Note       £ million        £ million      £ million

Fixed assets
Intangible assets                                                          74.8             98.0           77.3
Tangible assets                                                            24.4             23.5           23.9
                                                                           99.2            121.5          101.2
Current assets
Debtors                                                      8             69.8             73.4           60.3
Cash at bank and in hand                                                    3.4             22.2           21.3
                                                                           73.2             95.6           81.6

Creditors due within one year
Short term borrowings                                                     (0.9)           (25.9)         (28.3)
Other creditors                                              9           (85.3)          (107.5)         (94.9)
                                                                         (86.2)          (133.4)        (123.2)

Net current (liabilities) assets                                         (13.0)           (37.8)         (41.6)
Total assets less current liabilities                                      86.2             83.7           59.6

Long term borrowings                                                     (26.7)            (0.1)              -
Provisions for liabilities and charges                                    (5.8)            (8.6)          (7.7)
Net assets                                                   3             53.7             75.0           51.9

Capital and reserves
Share capital                                                              17.1             16.9           17.0
Reserves                                                                   36.6             56.9           34.9
Total equity shareholders' funds                              13           53.7             73.8           51.9
Minority interests
Equity interests in subsidiary undertakings                                   -              1.2              -
                                                                           53.7             75.0           51.9





Consolidated cash flow statement
For the six months ended 31 October 2004



                                                                      (Reviewed)      (Reviewed)      (Audited)
                                                                     6 months to     6 months to        Year to
                                                                      31 October      31 October       30 April
                                                                            2004            2003           2004
                                                                                      (restated)     (restated)
                                                           Note        £ million       £ million      £ million

Cash (outflow) inflow from operating activities             10             (3.9)             5.3           19.1

Net interest paid                                                          (2.4)           (0.6)          (1.5)
Dividends paid to minorities                                                   -           (3.5)          (9.0)
Returns on investments and servicing of finance                            (2.4)           (4.1)         (10.5)
Taxation                                                                   (0.3)           (2.4)          (5.7)
Capital expenditure and financial investment                               (5.3)           (2.6)          (6.3)
Cash balances of subsidiaries sold                                             -               -          (1.4)
Equity dividends paid                                                      (5.6)           (3.7)          (5.8)
Cash outflow before use of liquid resources and financing                 (17.5)           (7.5)         (10.6)
Management of liquid resources                                                 -               -              -
Financing                                                                  (0.2)             9.0           10.7
(Decrease) increase in cash at bank and in hand             12            (17.7)             1.5            0.1







Notes to the Accounts


1     General
      The interim financial statements for the period to 31 October 2004 were approved by the Board on 1 December
      2004.  They are unaudited but have been reviewed by the Auditors.  The comparative figures for the year to
      30 April 2004 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.

      The accounting policies set out in the group's financial statements for the year to 30 April 2004 have been
      applied for the purposes of this statement, except for the changes in accounting policy in respect of UITF
      17 (revised) and UITF 38 (see note 2).

2     Accounting Policies
      The accounting policies set out in the group's financial statements for the year to 30 April 2004 have been
      applied for the purposes of this statement, except as described below.

      UITF abstract 17 (revised 2003) 'Employee share schemes' and UITF abstract 38 'Accounting for ESOP Trusts'
      have been adopted for the first time in preparing the interim financial statements.

      In accordance with the revised UITF 17 the charge to profit and loss account in respect of employee share
      schemes is calculated by reference to the fair value of the award at the date of grant rather than the cost
      of the shares purchased by the Group.  The charge to profit and loss account for 2004 has been restated in
      accordance with the revised UITF 17, reducing the charge from £7.1 million as reported in the 2004 audited
      accounts to £4.9 million in this statement and reducing the charge for the six months to October 2003 from
      £3.3 million to £2.2 million.

      In accordance with UITF 38 Xansa's holding of own shares is deducted from shareholders' funds, rather than
      being presented as an asset on the balance sheet.  Shareholders' funds of £100.4 million as reported in the
      audited April 2004 accounts have been reduced by £48.5 million to £51.9 million in this statement.
      Shareholders' funds of £127.3 million as reported in the October 2003 interim report have been reduced by
      £52.3 million to £75.0 million in this statement.


3      Geographic analysis


                                                       6 months ended 31 October 2004 (reviewed)
                                         Turnover by      Turnover       Operating    Profit          Net assets
                                         destination     by source       profit by    (loss)            employed
                                                                          source *    before                  by
                                                                                      interest by         source
                                                                                      source
                                           £ million     £ million       £ million       £ million     £ million
     United Kingdom                            189.5         189.5            13.2             9.3          53.0
     Discontinued overseas                         -             -               -               -           0.7
     operations
                                               189.5         189.5            13.2             9.3          53.7
     Corporate overheads                           -             -           (2.8)           (2.8)             -
                                               189.5         189.5            10.4             6.5          53.7

* Before distribution of shares from the trusts, exceptional items and goodwill
amortisation.



3      Geographic analysis continued


                                                 6 months ended 31 October 2003 (reviewed and restated)
                                         Turnover by      Turnover       Operating          Profit    Net assets
                                         destination     by source       profit by          (loss)      employed
                                                                          source *          before            by
                                                                                       interest by        source
                                                                                            source
                                           £ million     £ million       £ million       £ million     £ million
     United Kingdom                            210.0         210.0            19.4           (0.6)          56.4
     Discontinued overseas                      15.7          15.7           (1.6)           (7.6)          17.4
     operations
                                               225.7         225.7            17.8           (8.2)          73.8
     Corporate overheads                           -             -           (3.3)           (3.5)             -
     Minority interests                            -             -               -               -           1.2
                                               225.7         225.7            14.5          (11.7)          75.0


                                                    Year ended 30 April 2004  (audited and restated)
                                           £ million     £ million       £ million       £ million     £ million
     United Kingdom                            399.2         398.9            34.0            14.8          51.4
     Discontinued overseas                      20.3          20.6           (1.7)          (35.7)           0.5
     operations
                                               419.5         419.5            32.3          (20.9)          51.9
     Corporate overheads                           -             -           (6.2)           (6.4)             -
                                               419.5         419.5            26.1          (27.3)          51.9

* Before distribution of shares from the trusts, exceptional items and goodwill
amortisation.


 4   Exceptional items


                                                                  6 months ended 31 October 2003 (reviewed)
                                                                    Exceptional          Tax on          Total
                                                                   items before     exceptional
                                                                            tax           items
                                                                      £ million       £ million      £ million
     Contract settlement                                                   13.0           (3.9)            9.1
     Reorganisation costs                                                   7.9           (0.8)            7.1
                                                                           20.9           (4.7)           16.2


                                                                     Year ended 30 April 2004 (audited)
                                                                         Exceptional          Tax on       Total
                                                                        items before     exceptional
                                                                                 tax           items
                                                                           £ million       £ million   £ million
    Contract settlement                                                         13.5           (4.1)         9.4
    FBS termination settlement                                                 (7.8)             2.7       (5.1)
    Goodwill impairment                                                         21.2               -        21.2
    Reorganisation costs                                                        13.5           (2.1)        11.4
    Exceptional items charged to operating profit                               40.4           (3.5)        36.9
    Loss on disposal of business                                                 2.4               -         2.4
                                                                                42.8           (3.5)        39.3


 5   Profit (loss) before tax


                                                                      (Reviewed)       (Reviewed)      (Audited)
                                                                     6 months to      6 months to        Year to
                                                                      31 October       31 October       30 April
                                                                            2004             2003           2004
                                                                                       (restated)     (restated)
                                                                       £ million        £ million      £ million
     Profit (loss) on ordinary activities before taxation analysed
     between:
     Profit before distribution of shares from the trusts,
     exceptional items and
     goodwill amortisation                                                   8.8             13.8           24.4
     Distribution of shares from the trusts                                (1.4)            (2.2)          (4.9)
     Exceptional items                                                         -           (20.9)         (42.8)
     Goodwill amortisation                                                 (2.5)            (3.1)          (5.7)
                                                                             4.9           (12.4)         (29.0)




6  Taxation
                                                                                 (Reviewed)      (Reviewed)    (Audited)
                                                                                6 months to     6 months to      Year to
                                                                                 31 October      31 October     30 April
                                                                                       2004            2003         2004
                                                                                  £ million       £ million    £ million

   UK                                                                                   0.3           (1.6)          3.7
   corporation
   tax
   Foreign tax                                                                            -             0.1          0.2
   Total current                                                                        0.3           (1.5)          3.9
   tax
   Deferred tax                                                                         0.9           (0.5)        (2.6)
                                                                                        1.2           (2.0)          1.3



     The tax charge of £1.2 million on profit before tax, distribution of shares from the trusts and goodwill
     amortisation of £8.8 million results in a tax rate of 13.6% (Year to 30 April 2004 19.7%).  The tax charge
     includes a credit on the distribution of shares from the trusts of £0.3 million (Year to 30 April 2004 £1.5
     million).  The tax charge excluding this item is £1.5 million, which results in an effective tax rate of
     17.0% (Year to 30 April 2004 25.8%).


 7   Dividends

     The interim dividend of 1.08p (2003: 1.08p) per share will be paid on 7 April 2005 to members registered at
     the close of business on 28 January 2005.




 8   Debtors
                                                                       (Reviewed)     (Reviewed)       (Audited)
                                                                       31 October     31 October        30 April
                                                                             2004           2003            2004
                                                                        £ million      £ million       £ million
     Trade debtors                                                           45.0           51.5            38.7
     Amounts to be billed on contracts                                       10.4            8.0             6.2
     Other debtors                                                            1.3            1.4             1.2
     Prepayments                                                              9.6           10.1             9.8
     Deferred tax asset                                                       3.5            2.4             4.4
                                                                             69.8           73.4            60.3

     
 9   Other creditors


                                                                       (Reviewed)     (Reviewed)       (Audited)
                                                                       31 October     31 October        30 April
                                                                             2004           2003            2004
                                                                        £ million      £ million       £ million
     Revenue in advance                                                      23.3           23.1            19.8
     Trade creditors                                                          6.0            5.9             5.6
     Corporation tax                                                          6.2            4.0             6.1
     Other taxes and social security                                         14.9           18.0            19.6
     Other creditors and accruals                                            30.9           49.8            36.7
     Proposed dividend                                                        3.3            3.3             6.6
     Proposed dividend due to minority interest                               0.7            3.4             0.5
                                                                             85.3          107.5            94.9


 10  Reconciliation of operating profit (loss) to net cash (outflow) inflow from operating activities


                                                                       (Reviewed)     (Reviewed)       (Audited)
                                                                      6 months to    6 months to         Year to
                                                                       31 October     31 October        30 April
                                                                             2004           2003            2004
                                                                                      (restated)      (restated)
                                                                        £ million      £ million       £ million
     Operating profit (loss)                                                  6.5         (11.7)          (24.9)
     Depreciation charge                                                      2.9            4.0             7.6
     Amortisation of goodwill                                                 2.5            3.1             5.7
     Distribution of shares from the trusts                                   1.4            2.2             4.9
     Goodwill impairment                                                        -              -            21.2
     Accrued exceptional costs                                                  -           20.5            18.5
     Exceptional costs spent                                                (9.7)          (5.3)          (10.2)
     Release of accrual for shares to be issued                                 -          (0.2)           (0.5)
     (Increase) decrease in debtors                                         (9.7)          (1.7)            11.0
     Increase (decrease) in creditors and provisions                          2.2          (5.6)          (14.2)
     Net cash (outflow) inflow from operating activities                    (3.9)            5.3            19.1



 11  Analysis of changes in net funds (debt)


                                                   At 1 May        Cashflow          Exchange     At 31 October
                                                       2004                          movement              2004
                                                  £ million       £ million         £ million         £ million

     Cash at bank and in hand                          21.3          (17.9)                 -               3.4
     Overdrafts                                       (0.8)             0.2                 -             (0.6)
                                                                     (17.7)

     Debt due within one year                        (27.2)            27.0                 -             (0.2)
     Debt due after one year                              -          (26.7)                 -            (26.7)
     Finance leases                                   (0.3)             0.2                 -             (0.1)
                                                                        0.5

                                                      (7.0)          (17.2)                 -            (24.2)

     There were no non-cash changes in net borrowings during the period.


 12  Reconciliation of net cash flow to movement in net funds (debt)

                                                                        (Reviewed)     (Reviewed)      (Audited)
                                                                       6 months to    6 months to        Year to
                                                                        31 October     31 October       30 April
                                                                              2004           2003           2004
                                                                                       (restated)     (restated)
                                                                         £ million      £ million      £ million
     (Decrease) increase in cash in period                                  (17.7)            1.5            0.1
     Cash outflow (inflow) from decrease (increase) in debt and                0.5          (8.8)         (10.5)
     lease financing
     Change in net funds (debt) resulting from cash flows                   (17.2)          (7.3)         (10.4)
     Translation difference                                                      -          (0.3)          (0.4)
     Movement in net funds (debt) in the period                             (17.2)          (7.6)         (10.8)
     Net (debt) funds at period start                                        (7.0)            3.8            3.8
     Net (debt) funds at period end                                         (24.2)          (3.8)          (7.0)



 13   Reconciliation of movements in equity shareholders' funds


                                                                 (Reviewed)       (Reviewed)           (Audited)
                                                                6 months to      6 months to             Year to
                                                                 31 October       31 October            30 April
                                                                       2004             2003                2004
                                                                                  (restated)          (restated)
                                                                  £ million        £ million           £ million
     Total recognised gains (losses) relating to the                    2.5           (14.9)              (37.3)
     period
     Dividends                                                        (3.4)            (3.3)               (9.8)
     Goodwill charged to the profit and loss account                      -                -                 3.5
     UITF 17 accrual for shares to be issued                              -            (0.2)               (0.5)
     Issue of shares - scrip dividends                                  1.0              3.2                 4.3
     Scrip dividends received by Xansa Employee Trust                     -            (0.4)               (0.4)
     Issue of shares - share options exercised                          0.1              0.2                 0.2
     Distribution of shares from trusts                                 1.4              2.2                 4.9
     Proceeds from sale of own shares                                   0.6                -                   -
     Purchases of own shares                                          (0.4)                -                   -
     Net increase (decrease) in equity shareholders' funds              1.8           (13.2)              (35.1)

     Opening equity shareholders' funds as previously                 100.4            142.6               142.6
     reported
     Prior year adjustment (note 2)                                  (48.5)           (55.6)              (55.6)
     Opening equity shareholders' funds as restated                    51.9             87.0                87.0
     Net increase (decrease) in equity shareholders' funds              1.8           (13.2)              (35.1)
     Closing equity shareholders' funds                                53.7             73.8                51.9


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 2004
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 13.  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.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 'Review of interim
financial information' issued by the Auditing Practices Board.  To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have
formed.

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 'Review of interim financial
information' 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 tests 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 2004.




Ernst & Young LLP
London
1 December 2004




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