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Xansa PLC (XAN)

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Thursday 30 June, 2005

Xansa PLC

Final Results

Xansa PLC
30 June 2005

 
30 June 2005


                                   XANSA PLC


              Preliminary results for the year ended 30 April 2005


Xansa, the outsourcing and technology company, is pleased to confirm that its
results for the full year ended 30 April 2005 are in line with expectations.
The results are on track and profitability is continuing to grow, in part due to
the increasing use of Xansa's onshore/offshore model.


                              Business Highlights


•  Underlying profitability continues to improve, in part as contracts and 
   revenues are transitioned to more fully utilise Xansa's fully integrated
   UK-India business model

•  Strong growth of 36% in UK public sector work

•  Major orders in the period:

  • Renewals - BT, Boots, Barclays, AXA and Royal Mail
  • New clients - NHS, Vodafone, Scottish Widows, Prudential, Yorkshire Water,
    Southern Water, BSkyB, Invensys, Littlewoods and Solihull Metropolitan
    Borough Council

•  Total orders taken in the financial year, £353 million, with accelerated deal 
   closure in second half of £212 million from first half of £141 million

•  Number of clients where orders secured in excess of £4 million
   increased to 19 from 11 in 2004

•  India workforce increased by nearly 50% to 2,815 people, with current
   seat capacity of 2,900



                             Financial Performance


Summary                           FY 2005          FY 2004         Change

                                      £'m              £'m

Turnover
Continuing UK operations            376.4            363.7          +3.5%
FBS contract *                          -             35.2
Overseas business #                     -             20.6
                                    376.4            419.5
Operating profit**
Continuing UK operations             21.6             16.7         +29.3%
FBS contract *                          -             11.1
Overseas business #                     -            (1.7)
                                     21.6             26.1

Profit before tax                    10.8           (29.0)



* First Banking Systems contract ended in December 2003

# Overseas businesses were exited in 2003/2004

** Before distribution of shares from the trusts, reorganisation costs and
goodwill amortisation and impairment.



•    Turnover in continuing UK activities increased 3.5% to £376.4 million
     (2004: £363.7 million)

•    Operating profit* in continuing UK activities increased 29.3% to £21.6
     million (2004: £16.7 million)

•    Operating profit of £14.1 million (2004: loss of £24.9 million)

•    Operating margin* in continuing UK activities increased to 5.7% (2004:
     4.6%)

•    Corporate costs reduced further to £4.7 million (2004: £6.2 million)

•    Pre-tax profit* fell 25% to £18.3 million (2004: £24.4 million)

•    No exceptional charges (2004: £21.6 million)

•    Profit before tax of £10.8 million (2004: loss of £29.0 million)

•    Net borrowings of £16.1 million (2004: net borrowings £7.0 million)

•    Diluted earnings per share* increased by 7.5% to 4.87 pence (2004:
     4.53 pence)

•    Diluted earnings per share of 2.58 pence (2004: loss of 11.92 pence)

•    Dividend per share has been maintained at 3.24 pence (2004: 3.24
     pence)



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



Bill Alexander, Chairman, Xansa commented:

"We have become a much more focused business in the last twelve months.  The
major restructuring is behind us and our business model of UK clients and
integrated UK-India delivery is beginning to show results, with nearly half our
people now working in India. We have grown revenues and profits in our
continuing UK business. We have secured new clients. Our business in India has
expanded by close to fifty percent.  We have established a ground-breaking new
partnership with the Department of Health to provide services to the National
Health Service organisations and our work in the public sector has grown by over
one-third.  These results are an indication that our strategy is beginning to
deliver results."



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

"Over the last year we have made demonstrable progress in growing the underlying
UK business.  Looking to the future, we expect this progress to continue.  We
have built a secure foundation for the business and are now generating momentum
in the marketplace.  Our focus is now on increasing this momentum and
reinforcing our position as the experts and leaders in technology and process
services that allow clients to do more with their own businesses.


"We believe we are well positioned to further leverage our onshore/offshore
model to gain market share and look forward to further strong progress in the
year ahead."



                                      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 the outsourcing and technology company. Committed to delivering
guaranteed business outcomes through a combination of technology and process
expertise, Xansa gives its clients the freedom to do more with their business.
Strong relationships, commercial innovation and an integrated Indian delivery
capability ensure that Xansa drives real and long-term cost reductions,
performance improvements and new ways of working tailored to each client. The
services Xansa provides are Business and Technology Consulting, IT
Implementation, IT Outsourcing and Business Process Outsourcing. Xansa is a
FTSE250 company (LSE:XAN) based in Reading, Berkshire and has over 6,800 people
in the UK and India.



Chief Executive's Statement

Introduction

Xansa is now built around the core principle of bringing our technology, process
and industry expertise together to enable our clients to do more with their own
business.  We achieve this in a number of ways:


•   Delivering guaranteed cost savings for our clients to invest in other
    areas of their business

•   Operating key business processes for our clients, thereby freeing up
    their own resources to focus more on their own strategy and customers

•   Managing and bringing continual innovation to our clients' IT landscape 
    so that they can concentrate on extracting the benefits of the
    technology through faster market penetration and greater customer care.


Our approach and our business are unique in today's marketplace and we are
increasingly seeing that recognised by clients, investors and other industry
observers.  Our focus has allowed us to build a business with real scale and
expertise in our chosen services.  For example, our Finance & Accounting
services now manage annually £15 billion of payments, liaise with 60,000
suppliers and undertake over 3 million accounting transactions, making us a
leader in this field.  Similarly, we have built real scale in our offshore
capabilities and today employ around 3,000 people, close to half our workforce,
in India.  Their expertise allows us to provide an increasingly diverse and
complex suite of services from offshore, ranging from credit card fraud
management and medical insurance risk profiling through to the construction of
internet banking systems and the support and maintenance of state-of-the-art
enterprise platforms.   This scale enhances our position as the largest UK-based
supplier of offshore services into the UK market today.


By focusing on delivering such tangible benefits to our clients, we have been
successful at growing our business across all sectors.  A key differentiator is
our ability to blend onshore and offshore services and delivery into a single,
seamless package for our clients.  This capability allows us to closely manage
client relationships in the UK whilst ensuring that the cost and quality
benefits of our India operations are fully available to our clients.  Clients in
the UK private sector increasingly demand these benefits and hence the
transition to offshore delivery has accelerated over the last year. The
consequence of the acceleration of the transition of onshore based rates to
lower offshore based rates is that the underlying growth in activity in our
business is not fully reflected in simple revenue terms or orderbank values.
However, the benefits to Xansa of this shift are two-fold.  Firstly, the
integrated onshore/offshore delivery model is an inherently higher margin
business than the traditional onshore-only model.  Secondly, we are able to
build an evermore competitive business which in turn helps us win more work.
This growth is reflected in increased headcount, higher margins and higher
profits.



Business Performance

Summary

All key indicators for the continuing UK operations have shown growth in the
last twelve months.  Revenues from these operations increased by 3.5% to £376.4
million (2004: £363.7 million), although compared with previous group
performance, fell 10.3% (2004: £419.5 million).  The previous group performance
included the exited overseas businesses and the concluded First Banking Systems
(FBS) Joint Venture.  Operating profits from continuing UK operations rose by
29.3% to £21.6 million (2004: £16.7 million), with operating margins rising from
4.6% to 5.7%.  Again, compared with previous group performance, operating
profits declined by 17.2% (2004: £26.1 million).  These increases in margins and
profit in our core business are after our investment of £2 million to establish
the first private/public joint venture with the Department of Health to form the
NHS Shared Business Services operation.


Summary                             FY 2005          FY 2004
                                        £'m              £'m

Turnover
Continuing UK operations              376.4            363.7
FBS contract                              -             35.2
Overseas business                         -             20.6
                                      376.4            419.5
Operating profit*
Continuing UK operations               21.6             16.7
FBS contract                              -             11.1
Overseas business                         -            (1.7)
                                       21.6             26.1



Tight control of our cost base is reflected in a decline in corporate costs of
24% to £4.7 million (2004: £6.2 million).  Corporate costs now represent only
1.2% of revenues.  With no significant restructuring in the year, no exceptional
charges have been incurred.  As a consequence of the overall improvement in
earnings, coupled with the elimination of the minority payment associated with
FBS, diluted earnings per share* has grown by 7.5% to 4.87 pence (2004: 4.53
pence).

*Before distribution of shares from the trusts, reorganisation costs, goodwill 
amortisation and impairment and loss on disposal of businesses.





Our Clients

•    The Public Sector


Our investment in the UK public sector is beginning to demonstrate significant
results.  Revenues have grown by an impressive 36% to £45.0 million (2004: £33.2
million) and now represent 12% of our total revenues. Success in this sector is
further evidenced by the fact that over half of those new clients entering the
list of our top 30 clients come from the public sector, including Office for
National Statistics, Rural Payments Agency and the Home Office.



•    NHS Joint Venture


We were particularly pleased to announce in October 2004 the creation of the
first private/public joint venture (JV) with the Department of Health, namely
the NHS Shared Business Services (NHS SBS).  The NHS spends annually around £150
million on Finance & Accounting (F&A) services, the bulk of that spend being
serviced by in-house operations in each NHS organisation. Upon our selection as
partner to the Department of Health, only 35 of the 663 NHS organisations were
being serviced by the existing shared service centres.


The JV began operations on 1 April 2005, when 228 staff based in the existing
shared service centres in Leeds and Bristol transferred to Xansa.  The JV
provides F&A services to NHS organisations, offering them the benefits of
guaranteed cost savings, reduced capital expenditure and "best in class"
services, whilst enabling some £224 million to be reinvested into front line
patient care - equivalent to the annual salaries of 3,000 GPs or 12,000 nurses.
The joint venture is seen by the Department of Health as a key component in its
response to the Efficiency Review by Sir Peter Gershon.  By the end of June 2005
NHS SBS had grown to secure 57 NHS organisations. Our business plan assumes we
will secure around half of the organisations within ten years.  We also have the
opportunity to broaden the range of services we can offer from NHS SBS and are
exploring future options.



•    The Private Sector


Whilst the public sector remains buoyant, growth in the private sector has been
more subdued. The underlying level of activity, as indicated by headcount
growth, has in fact increased by around 11% but the effect of the accelerated
transition of revenues for continuing operations from an onshore to an offshore
model has been for revenues to remain flat.


The increasing cost effectiveness of our business which has resulted from the
movement towards offshore delivery has been instrumental in our winning
significant major contract extensions and renewals, most recently with Tesco,
MyTravel and AXA. We have also made good progress in expanding our private
sector client base in general and this now includes new clients including
Scottish Widows, Vodafone, Yorkshire Water, Southern Water, Littlewoods and the
Prudential. This growth in the client base is reflected in an increase in
revenues derived from new clients, rising to £16.1 million (2004: £5.9 million),
representing 4.3% of revenues (2004: 1.4%).



India


Growth in our India business has continued to be strong.  Headcount increased by
49% to 2,815 (2004: 1,886) whilst revenues serviced by our India operations
increased by 45% to £56.3 million (2004: £38.7 million).  During the year, we
expanded our Noida site and opened our new facility in Pune.  Additional
investment to increase the capacity of our Chennai campus is underway.  When
completed later this year, our total India capacity will be 3,500 seats,
although further expansion is likely.  We own sufficient land at our three sites
in Chennai, Pune and Noida to enable us to achieve a capacity of 11,500 seats.
The strong growth in our capacity in India represents a useful indicator for
volume growth in the business.



Xansa Recruitment


Whilst continuing to provide a resourcing cornerstone to Xansa, the performance
of Xansa Recruitment reflected the continuing difficult market for contractor
recruitment and placement in the UK.  The number of external contractors placed
by Xansa Recruitment fell by 13% to 305 (2004: 351). Revenues increased only
slightly by 1.6% to £32.3 million (2004: £31.8 million). The business continues
to be profitable.



Total Sales Orders


Our sales order rate picked up during the year and although the orderbank fell
by 5% to close at £476 million (2004: £500 million), the orderbank increased by
6% in the second half from the first half level of £451 million. The total value
of orders signed showed a marginal increase on last year at           £353
million (2004 : £350 million) and the trend towards an increasing number of
clients placing orders in excess of £4m continues to be positive, 19 in 2005
compared to 11 in 2004.  Examples of our major orders include:



        •     British Telecom - £51.1 million

        •     Boots - £32.1 million

        •     Barclays - £31.5 million

        •     AXA - £28.6 million

        •     Royal Mail - £24.2 million



Workforce

The total workforce, including external and internal contractors, increased 10%
to 6,850 (2004: 6,230), representing a 49% growth in India to 2,815 (2004:
1,886), and a decline in the UK of 6% to 4,018 (2004: 4,291).  The number of
contractors used internally declined by 25% to 519 (2004: 690). We were pleased
to welcome 228 former NHS staff to Xansa as part of the establishment of the NHS
SBS Joint Venture on 1 April 2005.



Strategy

Our strategy continues to be based around three components:


  • Growing the business in the UK market in both public and private sectors
  • Delivering client solutions that benefit from the convergence of IT and
    BPO
  • Leveraging our integrated onshore and offshore capabilities.



We will continue to focus on four key priorities:


  • Sales growth
  • Profit and margin improvement
  • Cash management
  • Expansion in India


Further investment is being channelled into our sales team so that we continue
to grow our business at existing clients as well as winning new clients.  The
public sector is becoming a far more significant market for us and additional
investment will be made in this sector to build on the strong growth delivered
in the last year.


Capital investment will be targeted principally at further expansion in India.
We are likely to begin further construction during the year as well as bringing
on-stream the new capacity at Chennai.  As a result, headcount in India is
anticipated to continue to grow strongly in line with last year and represents a
key indicator for volume growth in the business.


Net debt has increased over the year largely as a consequence of restructuring
charges incurred in previous years.  We are planning to reduce average net debt
over the year through careful account management, ensuring that we retain
sufficient flexibility to execute our capital investment plan in line with
overall growth.



Outlook

The Private Sector


The UK private sector is expected to grow over the next year broadly in line
with GDP. The acceleration of the transition of work to offshore is expected to
continue until the optimal equilibrium of onshore/offshore mix is reached.
Given the rapidly growing requirement of existing private sector clients for a
significantly increased proportion of offshore delivery in the services
delivered to them, revenues in the UK private sector will remain broadly flat,
masking the underlying growth in activity and volumes.  This transition is
likely to continue for the short term, after which, revenue growth in this
sector will reflect more accurately the stronger underlying growth in workload
achieved.


The benefits of this revenue transition are felt immediately in terms of higher
margins and profits.  The evolution of our delivery model allows us to build a
higher margin business and the increase in volumes targeted will allow us to
continue to grow profits in this sector.




The Public Sector


Growth is expected to remain strong in the public sector market. In the public
sector, the use of offshore services is currently more limited.  Although more
government work is likely to be undertaken offshore, the pace of transition is
not expected to be so great as to mask the underlying growth in volume which is
our main goal in this sector.  Consequently, revenues and profits in the public
sector are targeted to increase slightly above anticipated market growth rates.


Over the last year we have made demonstrable progress in growing the underlying
UK business.  Looking to the future, we expect this progress to continue.
Increasing volumes will be reflected in a modest growth in group revenues, even
after accounting for revenue transition. The shift in our business model will
allow us to continue to build a progressively higher margin business.  Profits
are targeted to increase despite the transition costs likely to be incurred to
achieve this shift.  We have built a secure foundation for the business and are
now generating momentum in the marketplace.


Our focus is now on increasing this momentum and reinforcing our position as the
experts and leaders in technology and process services that allow clients to do
more with their own businesses.




Financial Review


Accounting Standards


The Group has adopted Urgent Issues Task Force Abstract 38 (UITF 38) "Accounting
for ESOP Trusts'" in the year to 30 April 2005.  As a result shares in Xansa plc
held by the Xansa Employee Trust, the Xansa 1995 Qualifying Employee Share
Ownership Trust and the Xansa AESOP Trust, previously reported as 'Investments
in own shares' are now recorded as a deduction from equity shareholders' funds.
At 30 April 2004 the carrying value of these shares was £48.5 million.  The
balance sheet as at 30 April 2004 has been restated in accordance with UITF 38.


The Group has also adopted Urgent Issues Task Force Abstract 17 (revised 2003)
(UITF 17) "Employee Share Schemes", under which the basis of calculating the
cost of share schemes is based upon the fair value of the award at the date of
grant.  Previously the charge was based upon the historic cost of the shares
used to satisfy the award.  The profit and loss account for the year to 30 April
2004 has been restated in accordance with the revised UITF 17.  The effect has
been to reduce the charge to profit and loss account in respect of share schemes
by £1.4 million in the year to 30 April 2005 and by £2.2 million in the year to
30 April 2004.


Urgent Issues Task Force Abstract 40 (UITF 40) "Revenue recognition and service
contracts" has no impact on the Group's turnover.




International Financial Reporting Standards


The Group currently prepares its financial statements under UK GAAP.  From 1 May
2005 onwards, the Group is required to prepare its consolidated financial
statements in accordance with International Financial Reporting Standards
(IFRS).  The first announcement of results under IFRS will be in respect of the
six months to 31 October 2005.  The Group intends to publish the effect of the
transition to IFRS on its results for the year to April 2005 and its balance
sheet as at that date, in September 2005.




Profit and loss account


Turnover of £376.4 million reduced by 10% from 2004 and operating profit*
amounted to £21.6 million, a reduction of 17% over last year.  Trading
performance has been reviewed in detail in the Chief Executive's Statement.  The
overall profit for the financial year was £7.9m, compared to a loss last year of
£34.9 million.




Distribution of shares from the trusts


This charge represents the cost of shares awarded to employees as either free
shares or matching shares under the All Employee Share Ownership Plan ("AESOP").
  The charge is recognised over the period from the date of the award to the
date the shares vest with employees, based upon the market value of the shares
at the date of the award.



Goodwill amortisation and impairment


Xansa amortises goodwill, which is a non-cash item, to the profit and loss
account over its estimated useful life of up to 20 years.  The lower goodwill
amortisation charge in 2005 reflects the goodwill impairment charge taken in
2004.  A review of the carrying value of the remaining goodwill concluded that
no further impairment was required.


*Before distribution of shares from the trusts, reorganisation costs and
goodwill amortisation and impairment.




Net interest payable


Higher average borrowings, principally resulting from payments in respect of
re-organisation activities and the previously announced settlement with a former
client, together with a higher interest margin on our committed three-year
revolving credit facility put in place in 2004, resulted in the higher interest
charge in 2005.



Taxation


The tax charge of £2.5 million on profit before tax* of £18.3 million results in
a tax rate of 13.7% (2004: 19.7%).  The tax rate has reduced because of
increased profits in our Indian subsidiary, which presently benefits from a
corporation tax holiday.




Minority Interests


The charge in 2004 principally represented HBOS plc's interest in the First
Banking Systems (FBS) joint business venture, which terminated in December 2003.
The small charge in 2005 represents Barclaycard's interest in Xansa
Barclaycard Partnership Ltd.




Earnings per share and dividends


Diluted earnings per share* of 4.87p (2004: 4.53p) is computed on profit before
tax* of £18.3 million (2004: £24.4 million).  The effective tax rate applied to
these profits is 16.4% (2004: 25.8%), which discounts a £0.5 million tax credit
arising on the distribution of shares from the trusts since the related charge
is not reflected in profit before tax*.  Minority interests of £0.4 million
(2004: £4.6 million) are deducted to arrive at earnings* of £14.9 million (2004:
£13.5 million).


The diluted earnings per share after distribution of shares from the trusts,
reorganisation costs and goodwill amortisation and impairment was 2.58p (2004:
loss per share 11.92p).


A final dividend of 2.16p has been proposed, which together with the interim
dividend of 1.08p would give a total payment of 3.24p for the year, unchanged on
last year.  Dividend cover, defined as basic earnings* per share divided by the
dividend per share, would be 1.5 times (2004: 1.4 times).




Balance sheet


*Before distribution of shares from the trusts, reorganisation costs, goodwill
amortisation and impairment and loss on disposal of businesses.


The reduction in intangible assets reflects the £5.0 million routine goodwill
amortisation.  Tangible assets increased reflecting our continuing investment in
new properties in India.


Investments of £10.0m represent Xansa's investment in our 50%-owned joint
venture with the Department of Health, NHS Shared Business Services Ltd ("NHS
SBS").  Xansa's investment in NHS SBS is being made by way of providing
identified resources to the company free of charge over a period of
approximately five years.


Overall, working capital requirements increased by £10.1 million in the year.
The impact of exceptional items was the principal cause, increasing working
capital by £8.8 million.  The focus on cash generation continues and debtor days
decreased to 28 at April 2005 from 35 at April 2004.



Cash flow


Operating cash inflow of £15.0 million, calculated after capital expenditure but
before cash flows relating to exceptional items, exceeded the outflows in
respect of interest, tax and dividends.  Overall the Group ended the year with
net borrowings of £16.1 million principally as a result of payments in respect
of exceptional items of £12.6 million.


Net borrowings of £16.1 million comprised cash and deposits of £9.5 million
offset by bank loans and overdrafts of £25.6 million.




Treasury policy


The Group holds financial instruments for two principal purposes.  Firstly, to
finance its operations and secondly to manage interest rate and currency risks
arising from its operations and its sources of finance.  The Group finances its
operations by a mixture of cash flow from operations, short term borrowings and
longer term loans from banks.  Derivative financial instruments (principally
forward interest rate agreements and forward currency contracts) are used in
order to manage these interest rate and currency risks.


The Group's key financial risks encompass liquidity and refinancing risk,
interest rate movements and currency exchange rate movements.  These risks are
managed by the Finance Director under policies approved by the Board, which are
summarised below.  These policies have remained unchanged since April 2004.  A
finance committee of the Board receives reports on the Group's treasury
activities, policies and procedures.  The treasury function is not a profit
centre and its activities are subject to internal audit.




Liquidity and refinancing risk


The Group's policy is to ensure that forecast funding requirements can be met
within available committed facilities at a reasonable cost.  To do this the
Group seeks to arrange committed funding at a variety of maturity dates from a
range of sources.


In June 2004 a committed £80 million three-year revolving credit facility was
put in place for the Group's UK operations.  At the year end, £42.0 million of
this facility was undrawn.  This is sufficient to meet current operational
needs.



Interest rate movements


Interest rate policy has the objective of minimising net interest expense and
the protection of the Group from material adverse movements in interest rates.
Throughout the year to April 2005, the Group borrowed at floating rates only.
In order to protect itself from interest rate rises on its core borrowings, an
interest rate cap was purchased during the year.  Interest on borrowings of
£20.0 million is protected against increases in 3-month LIBOR above 5.25% until
May 2007.


Surplus cash from operations is invested in short term bank deposits at market
interest rates.  Credit risks on bank deposits are minimised by restricting such
investment activity to banks which are rated A1 or P1, with a maximum investment
limit with any one bank of £20.0m.  Credit risks on derivative financial
instruments are limited by the use of counterparty limits.




Currency exchange rate movements


Although the Group's client base is largely based in the UK, it has a
significant investment in India.  On translation into sterling, movements can
affect the Group balance sheet and profit and loss account.  Group policy is to
minimise balance sheet translation exposures, where fiscally efficient, by
financing working capital in local currency.  The Group has transactional
currency exposures where sales or purchases by an operating unit are in
currencies other than in that unit's reporting currency.  Where billing
arrangements are in foreign currency Group policy is that committed
transactional exposures are hedged into the business's reporting currency.




Pensions


The charge for pension costs, calculated under SSAP 24, was £20.3 million, of
which £16.4 million related to the Xansa Pension Plan.  This was a reduction of
£2.2 million over the prior period, due to the lower average number of
participants in the plan this financial year following the ending of the FBS
joint venture in December 2003.


The triennial actuarial valuation at 31 December 2003 indicated a deficit of
£32.1 million and confirmed that if funding was maintained at the existing
20.65%, then the past service deficit will be eliminated over the average
working lives of the employees in the scheme.


The FRS 17 deficit in the fund has increased by £15.4 million over the year to
April 2005, to a deficit of £92.1 million, before recognising the benefit of
deferred tax.




Whilst the FRS 17 valuation has benefited from strong investment returns, which
have increased the value of assets in the fund, liabilities have increased by
more than the increase in assets.  FRS 17 liabilities have increased primarily
due to a reduced discount rate, which is based upon corporate bond rates.



Had FRS17 been adopted in full this year, equity shareholders' funds in the
consolidated balance sheet would have been reduced by £79.8 million (2004: £67.1
million reduction) after taking account of deferred tax.  Operating profit*
would have improved by £2.1 million and net interest payable would have
increased by £1.6 million.  The total charge to profit under FRS17 would have
been £15.9 million compared with £16.4 million under SSAP24.


*Before distribution of shares from the trusts, reorganisation costs and
goodwill amortisation and impairment.






Consolidated profit and loss account

For the year ended 30 April 2005


                                                              2005            2004            2004           2004
                                                                            Before     Exceptional          
                                                                       exceptional           items
                                                                             items        (Note 4)          Total
                                                                        (restated)                     (restated)
                                                  Note   £ million      £ million       £ million      £ million
                                                           
Group turnover                                      3        376.4           419.5               -          419.5
Group operating profit (loss):
Before distribution of shares from the trusts,      3         21.6            26.1           (5.7)           20.4
reorganisation costs and goodwill amortisation
and impairment
Distribution of shares from the trusts                       (2.5)           (4.9)               -          (4.9)
Reorganisation costs                                4            -               -          (13.5)         (13.5)
Goodwill amortisation and impairment                         (5.0)           (5.7)          (21.2)         (26.9)
Group operating profit (loss):                                14.1            15.5          (40.4)         (24.9)
Loss on disposal of businesses                      4            -               -           (2.4)          (2.4)
Profit (loss) on ordinary activities before         3         14.1            15.5          (42.8)         (27.3)
interest
Net interest payable                                         (3.3)           (1.7)               -          (1.7)
Profit (loss) on ordinary activities before                   10.8            13.8          (42.8)         (29.0)
taxation
Profit (loss) on ordinary activities before
taxation analysed between:
Before distribution of shares from the trusts,                18.3            24.4           (5.7)           18.7
reorganisation costs and goodwill amortisation
and impairment
Distribution of shares from the trusts                       (2.5)           (4.9)               -          (4.9)
Reorganisation costs                                             -               -          (13.5)         (13.5)
Goodwill amortisation and impairment                         (5.0)           (5.7)          (21.2)         (26.9)
Loss on disposal of businesses                                   -               -           (2.4)          (2.4)
                                                              10.8            13.8          (42.8)         (29.0)
Taxation                                            5        (2.5)           (4.8)             3.5          (1.3)
Profit (loss) on ordinary activities after                     8.3             9.0          (39.3)         (30.3)
taxation
Equity minority interests                                    (0.4)                                          (4.6)
Profit (loss) attributable to shareholders                     7.9                                         (34.9)
Dividends                                           6       (10.1)                                          (9.8)
Transfer from reserves                             13        (2.2)                                         (44.7)

There were no exceptional items in 2005.
                                                             2005                                           2004
                                                  Note                                                (restated)
Earnings per share - before distribution of
shares from the trusts, reorganisation costs,
goodwill amortisation and impairment and loss on
disposal of businesses
- basic                                             7       4.97p                                          4.61p
- diluted                                           7       4.87p                                          4.53p
Earnings (loss) per share
- basic                                             7       2.64p                                       (11.92p)
- diluted                                           7       2.58p                                       (11.92p)



All the results above relate to continuing activities.

Statement of total recognised gains and losses

For the year ended 30 April 2005


                                                                               2005             2004
                                                                                          (restated)
                                                                          £ million        £ million

Profit (loss) attributable to shareholders                                      7.9           (34.9)
Exchange differences on retranslation of net assets of subsidiary             (0.7)            (2.4)
undertakings
Total recognised gains and losses relating to the year                          7.2           (37.3)


In addition, a prior year adjustment arising from a change in accounting policy
has reduced net assets at 30 April 2004 by £48.5 million (Note 2).




Consolidated balance sheet

As at 30 April 2005


                                                             2005             2004
                                                                        (restated)
                                            Note        £ million        £ million

Fixed assets
Intangible assets                                            72.3             77.3
Tangible assets                                              25.3             23.9
Investment in joint venture
   - Share of gross assets                                   13.0                -
   - Share of gross liabilities                             (3.0)                -
                                                             10.0                -
                                                            107.6            101.2
Current assets
Debtors                                      8               60.1             60.3
Cash at bank and in hand                                      9.5             21.3
                                                             69.6             81.6
Creditors due within one year
Short term borrowings                        9              (0.3)           (28.3)
Other creditors                              9             (87.1)           (94.9)
                                                           (87.4)          (123.2)
Net current liabilities                                    (17.8)           (41.6)
Total assets less current liabilities                        89.8             59.6

Long term borrowings                                       (25.3)                -
Provisions for liabilities and charges                     (10.4)            (7.7)
Net assets                                   3               54.1             51.9

Capital and reserves
Called up share capital                                      17.1             17.0
Shares to be issued                                             -              0.5
Share premium account                                        66.1             63.8
Merger reserve                                              760.3            760.3
Own shares                                                 (20.6)           (23.2)
Profit and loss account                                   (768.8)          (766.5)
Total equity shareholders' funds               13            54.1             51.9



Approved by the Board on 29 June 2005




Consolidated cash flow statement

For the year ended 30 April 2005


                                                                 2005          2005           2004           2004
                                                  Note      £ million     £ million      £ million      £ million

Cash inflow from operating activities               10                         11.1                          19.1

Returns on investments and servicing of
finance
Dividends paid to minority interests                                -                        (9.0)
Interest received                                                 0.3                          0.4
Interest paid                                                   (4.2)                        (1.9)
                                                                              (3.9)                        (10.5)

Taxation
Corporation tax paid                                                          (0.7)                         (5.7)

Capital expenditure and financial investment
Payments to acquire tangible fixed assets                       (9.0)                        (6.7)
Receipts from sale of tangible fixed assets                       0.3                          0.4
                                                                              (8.7)                         (6.3)
                                                                              (2.2)                         (3.4)

Acquisitions and disposals
Cash balances of subsidiaries sold                                                -                         (1.4)

Equity dividends paid                                                         (7.6)                         (5.8)
Net cash outflow before financing                                             (9.8)                        (10.6)

Financing
Issue of ordinary share capital                                   0.1                          0.2
Payments to acquire own shares                                  (0.7)                            -
Receipts from sale of own shares                                  1.4                            -
New borrowings                                                   25.3                         10.8
Repayment of borrowings                                        (27.2)                            -
Capital element of finance lease rental                         (0.3)                        (0.3)
payments
                                                                              (1.4)                          10.7
(Decrease) increase in cash at bank and in          11                       (11.2)                           0.1
hand




Notes to the Financial Statements

For the year ended 30 April 2005



1  General



The results for the year ended 30 April 2005 and 2004 are extracted from the
audited accounts of Xansa plc on which the auditors have issued an unqualified
opinion which did not contain a statement under section 237 (2) or (3) of the
Companies Act 1985.  The preliminary announcement was approved by the Board on
29 June 2005 and has been prepared on a basis consistent with the 2004 Annual
Accounts, except for the changes in accounting policy noted below.



The audited accounts for the year ended 30 April 2004 have been delivered to the
Registrar of Companies.  The Annual Report and Accounts for the year ended 30
April 2005 will be posted to shareholders in early August and will be delivered
to the Registrar of Companies following the Annual General Meeting which will be
held at 12 noon on 15 September 2005 at the Chartered Accountants Hall, One
Moorgate Place, London EC2R 6EA.  Copies may be obtained from the Group's
registered office: 420 Thames Valley Park Drive, Thames Valley Park, Reading,
RG6 1PU.



2  Accounting policies



The accounting policies set out in the group's financial statements for the year
to 30 April 2004 have been applied in preparing the 2005 Annual Accounts, except
for the changes in accounting policy noted below.



UITF abstract 17 (revised 2003) 'Employee share schemes' and UITF abstract 38
'Accounting for ESOP Trusts' have been adopted in preparing these 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 effect of adopting the revised UITF 17 has been to reduce the
charge to profit and loss account in 2005 by £1.4 million.  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.



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.  Group 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.




3  Segmental analysis



The Directors consider that the Group operates in one continuing class of
business namely that of computer software and related support services.


                                                                   Operating       Profit before       Net assets
                         Turnover by         Turnover by           profit by            interest         employed
                         destination              source             source*           by source        by source
                                2005                2005                2005                2005             2005
                           £ million           £ million           £ million           £ million        £ million
Geographic analysis
United Kingdom                 376.4               376.4                26.3                18.8             54.1
Corporate overheads                -                   -               (4.7)               (4.7)                -
                               376.4               376.4                21.6                14.1             54.1




* Before distribution of shares from the trusts, reorganisation costs and
goodwill amortisation and impairment.



During 2004 the Group closed or substantially reduced the level of operations in
North America, Continental Europe and Asia Pacific.


                                                                 Operating       Profit (loss)       Net assets
                                                                                        before
                       Turnover by         Turnover by           profit by            interest         employed
                       destination              source             source*           by source        by source
                              2004                2004                2004                2004             2004
                         £ million           £ million           £ million           £ million        £ million
Geographic analysis
United Kingdom               399.2               398.9                34.0                14.8             51.4
North America                 15.9                16.2                   -              (25.6)              0.6
Continental Europe             3.3                 3.3               (1.0)               (6.2)            (0.3)
Asia Pacific                   1.1                 1.1               (0.7)               (3.9)              0.2
                             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, reorganisation costs and
goodwill amortisation and impairment.



Xansa's Indian operation does not have significant external revenue, but
provides resource to the regional operations, principally the United Kingdom.
The costs of supply are included within the regional results.  Net assets
employed in India at 30 April 2005 were £35.5 million (2004: £26.1 million).




4  Exceptional items



There were no exceptional items charged or credited to profit and loss account
in 2005.



Cash flows in 2005 in respect of exceptional items recognised in prior years
were as follows:


                                                      In respect of      In respect of           Total
                                                        exceptional        exceptional
                                                      items charged      items charged
                                                            in 2004            in 2003
Cash flows in the period                                  £ million          £ million       £ million
Contract settlement                                             6.5                  -             6.5
Reorganisation costs                                            2.2                3.9             6.1
                                                                8.7                3.9            12.6




Exceptional items charged to profit and loss account in 2004 were as follows:


                                                          2004             2004            2004
                                                   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                    40.4            (3.5)            36.9
profit
Loss on disposal of businesses                             2.4                -             2.4
                                                          42.8            (3.5)            39.3




In November 2003 Xansa reached a £12.5 million negotiated contract settlement
with a former client concerning the supply of project services that completed in
2002.  The payment was split, half paid in November 2003 with the remainder
settled in May 2004.  The balance of the charge represents associated
professional fees.



A settlement of £8.8 million was received in December 2003 from HBOS following
the early termination of the First Banking Systems contract.  Against this an
accrual was made for a pension fund transfer to HBOS of £1.0 million for the
accrued service of the ex-Xansa personnel who  transferred back to HBOS.



The reorganisation costs of £13.5 million comprise £7.0 million in respect of
redundancies, £2.2 million in respect of provisions for vacant properties, £0.7
million in respect of accelerated depreciation and £3.6 million other costs
associated with the closure of overseas operations.




5  Taxation

                                                                               2005             2004
                                                                          £ million        £ million
Tax on profit (loss) on ordinary activities
The charge for the year comprises:

Current tax
UK corporation tax                                                              1.1              3.7
Adjustments in respect of prior years                                         (0.2)                -
                                                                                0.9              3.7
Foreign tax                                                                     0.1              0.2
Adjustments in respect of prior years                                           0.1                -
Total current tax                                                               1.1              3.9
Deferred tax
Origination and reversal of timing differences                                  1.4            (2.6)
Total deferred tax                                                              1.4            (2.6)

Total tax on profit (loss) on ordinary activities                               2.5              1.3




The difference between the total current tax shown above and the amount
calculated by applying the standard rate of UK corporation tax to the profit
(loss) before tax is as follows:


                                                                                 2005             2004
                                                                            £ million        £ million
Profit (loss) on ordinary activities before tax                                  10.8           (31.2)

Tax on Group profit (loss) on ordinary activities at standard UK                  3.2            (9.4)
corporation tax rate of 30% (2004: 30%)
Effects of:
Expenses not deductible for tax purposes, primarily goodwill                      2.8             12.3
amortisation
Capital allowances in excess of depreciation                                    (0.4)              0.1
Tax relief on shares transferred to the AESOP                                   (1.0)            (0.4)
Utilisation of tax losses                                                       (0.4)              0.3
Differences on tax rates on overseas earnings                                   (3.0)              1.0
Adjustments to tax charge in respect of prior years                             (0.1)                -
Total current tax charge for the period                                           1.1              3.9



6  Dividends



The total dividend of 3.24 pence per share (2004: 3.24 pence) comprises an
interim dividend of 1.08 pence per share which was paid on 7 April 2005 and a
final dividend of 2.16 pence per share which will be paid on 29 September 2005,
if approved, to shareholders on the register at 8 July 2005.  The ex-dividend
date will be 6 July 2005.




7  Earnings per share


                                                                                           2005             2004
                                                                                                      (restated)
                                                                                      £ million        £ million
Earnings (loss)
Profit (loss) attributable to shareholders as used to calculate basic and diluted           7.9           (34.9)
loss per share
Exceptional items net of tax (Note 4)                                                         -             39.3
Distribution of shares from the trusts net of tax                                           2.0              3.4
Goodwill amortisation                                                                       5.0              5.7
Before distribution of shares from the trusts, reorganisation costs, goodwill              14.9             13.5
amortisation and impairment and loss on disposal of businesses

                                                                                         Number           Number
                                                                                           '000             '000
Number of shares
Average number of shares in issue                                                       340,924          337,231
Shares held by the employee trusts                                                     (41,287)         (44,517)
Shares used to calculate basic earnings (loss) per share                                299,637          292,714
Effect of dilutive ordinary shares (Note a)                                               6,424            5,349
Shares used to calculate basic and diluted earnings per share before distribution       306,061          298,063
of shares from the trusts, reorganisation costs, goodwill amortisation and
impairment and loss on disposal of businesses (Note a)



(a) In 2004 the dilutive ordinary shares of 5,349,000 are not taken into account
in computing diluted loss per share as the effect of their inclusion would be to
reduce the reported loss per share.

                                                                                      Per share        Per share
                                                                                         amount           amount
                                                                                                      (restated)
                                                                                          Pence            Pence
Diluted earnings (loss) per share
Diluted earnings (loss) per share                                                          2.58          (11.92)
Effect of potential shares                                                                    -             0.21
Exceptional items net of tax                                                                  -            13.19
Distribution of shares from the trusts net of tax                                          0.65             1.14
Goodwill amortisation                                                                      1.64             1.91
Before distribution of shares from the trusts, reorganisation costs, goodwill              4.87             4.53
amortisation and impairment and loss on disposal of businesses


Basic earnings (loss) per share
Basic earnings (loss) per share                                                            2.64          (11.92)
Exceptional items net of tax                                                                  -            13.42
Distribution of shares from the trusts net of tax                                          0.67             1.16
Goodwill amortisation                                                                      1.66             1.95
Before distribution of shares from the trusts, reorganisation costs, goodwill              4.97             4.61
amortisation and impairment and loss on disposal of businesses


Where there is a loss per share there are no dilutive effects of share options
or contingent share issues.



8  Debtors

                                                                      2005             2004
                                                                 £ million        £ million
Trade debtors                                                         37.2             38.7
Amounts to be billed on contracts                                      8.6              6.2
Other debtors                                                          1.5              1.2
Amounts due from joint ventures                                        0.8                -
Prepayments                                                            9.0              9.8
Deferred tax asset                                                     3.0              4.4
                                                                      60.1             60.3

Amounts falling due after more than one year included above
are:
Prepayments                                                            2.3              2.8
                                                                       2.3              2.8



Included within prepayments is £0.2 million relating to pensions (2004: £0.1
million).



9  Creditors due within one year

                                                                       2005             2004
                                                                  £ million        £ million
Short term borrowings
Overdrafts                                                              0.3              0.8
Loans                                                                     -             27.2
Finance lease obligations                                                 -              0.3
                                                                        0.3             28.3
Other creditors
Revenue in advance                                                     18.9             19.8
Trade creditors                                                         7.2              5.6
Corporation tax                                                         6.6              6.1
Other taxes and social security                                        13.6             19.6
Other creditors and accruals                                           33.1             36.7
Proposed dividend                                                       6.8              6.6
Proposed dividend due to minority interest                              0.9              0.5
                                                                       87.1             94.9
                                                                       87.4            123.2




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


                                                            2005             2004             2004            2004
                                                                           Before      Exceptional
                                                                      exceptional            items
                                                                            items
                                                                       (restated)                       (restated)
                                                       £ million        £ million        £ million       £ million
Group operating profit (loss)                               14.1             15.5           (42.8)          (27.3)
Depreciation charge                                          5.9              6.9              0.7             7.6
Loss on sale of tangible assets                              0.1                -                -               -
Loss on sale of businesses                                     -                -              2.4             2.4
Amortisation of goodwill                                     5.0              5.7                -             5.7
Distribution of shares from the trusts                       2.5              4.9                -             4.9
Goodwill impairment                                            -                -             21.2            21.2
Accrued exceptional costs                                      -                -             18.5            18.5
Exceptional costs spent                                   (12.6)                -           (10.2)          (10.2)
Release of accrual for shares to be issued                 (0.5)            (0.5)                -           (0.5)
(Increase) decrease in debtors                             (0.8)             11.0                -            11.0
(Decrease) increase in creditors and provisions            (2.6)           (14.2)                -          (14.2)
Net cash inflow (outflow) from operating                    11.1             29.3           (10.2)            19.1
activities



11  Analysis of changes in net debt


                                   At 1 May                                   Other       Exchange          At 30
                                                                           non-cash                         April
                                       2004          Cash flow              changes       movement           2005
                                  £ million          £ million            £ million      £ million      £ million

Cash at bank and in hand               21.3             (11.7)                    -          (0.1)            9.5
Overdrafts                            (0.8)                0.5                    -              -          (0.3)
                                                        (11.2)

Debt due within one year             (27.2)               27.2                    -              -              -
Debt due after one year                   -             (25.3)                    -              -         (25.3)
Finance leases                        (0.3)                0.3                    -              -              -
                                                           2.2

                                      (7.0)              (9.0)                    -          (0.1)         (16.1)




12  Reconciliation of net cash flow to movement in net debt

                                                                                         2005             2004
                                                                                            £        £ million
                                                                                      million
Increase (decrease) in cash in year                                                    (11.2)              0.1
Cash (inflow) outflow from (increase) decrease in debt and lease financing                2.2           (10.5)
Cash (inflow) outflow from (decrease) increase in liquid resources                          -                -
Change in net debt resulting from cash flows                                            (9.0)           (10.4)
Translation difference                                                                  (0.1)            (0.4)
Movement in net debt in year                                                            (9.1)           (10.8)
Net (debt) funds at 1 May                                                               (7.0)              3.8
Net (debt) funds at 30 April                                                           (16.1)            (7.0)



13  Reconciliation of movements in equity shareholders' funds

                                                                                              2005            2004
                                                                                                        (restated)
                                                                                         £ million       £ million

Profit (loss) attributable to shareholders                                                     7.9          (34.9)
Dividends                                                                                   (10.1)           (9.8)
                                                                                             (2.2)          (44.7)
Exchange differences on retranslation of net assets of subsidiary undertakings               (0.7)           (2.4)
Charge for distribution of shares from the trusts                                              2.5             4.9
Goodwill charged to the profit and loss account                                                  -             3.5
Issue of shares - scrip dividends                                                              2.3             4.3
Issue of shares - options exercised                                                            0.1             0.2
Scrip dividends received by Xansa Employee Trust                                                 -           (0.4)
UITF 17 accrual for shares to be issued                                                      (0.5)           (0.5)
Payments to acquire own shares                                                               (0.7)               -
Receipts from sale of own shares                                                               1.4               -
Net reduction in shareholders' funds                                                           2.2          (35.1)
Opening shareholders' funds                                                                   51.9            87.0
Closing shareholders' funds                                                                   54.1            51.9




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