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Xansa PLC (XAN)

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Thursday 07 December, 2006

Xansa PLC

Interim Results

Xansa PLC
07 December 2006

7 December 2006



Interim Results Announcement for the half year

ended 31 October 2006

Xansa, the outsourcing and technology company, is pleased to announce its
results for the half year ended 31 October 2006.

Business Highlights

  • Revenue grew by 7.4%
  • Profit before tax increased by 13.3%
  • Public sector revenues up 91% year on year to £59.3 million
  • Underlying margins* were constant at 7%
  • Strong new client list including: BBC; Financial Services Authority;
    Transport for London; Threshers; Morrisons; National Air Traffic Services
  • India workforce increased by 38% since last half year to 4661 people, now
    representing 54% of the total workforce
  • 123 trusts (before reflecting mergers in the existing customer base) are
    now live or in migration with NHS Shared Business Services: on track towards
    profitability

Financial Performance

Summary                              H1 2007              H1 2006                   Change
                                           £            £ million
                                     million                                             %
Revenue                                188.4                175.4                      7.4
Underlying operating profit*            13.2                 12.3                      7.3
Underlying operating margin*            7.0%                 7.0%                        -
Profit before tax                        8.5                  7.5                     13.3

  • Revenue increased 7.4% to £188.4 million (H1 2006: £175.4 million)
  • Underlying operating profit* increased 7.3% to £13.2 million (H1 2006:
    £12.3 million)
  • Underlying operating margin* was 7.0% (H1 2006: 7.0%)
  • Profit before tax increased 13.3% to £8.5 million (H1 2006: £7.5 million)
  • Diluted earnings per share increased by 8.4% to 2.06 pence (H1 2006: 1.90
    pence)
  • Dividend per share has been proposed at 1.08 pence (H1 2006: 1.08 pence)
    for the half year

* Before share based payments, but including share of joint venture losses after
tax



Bill Alexander, Chairman, Xansa commented:

"Over the last couple of years Xansa has transformed itself to achieve a
leadership position that meets the demands of a rapidly evolving marketplace.
Today, we are pursuing a strategy to focus on the delivery of key technology and
business services to our clients.  Progress has been strong in both the
government sector, where revenues have risen 91%, and in the private sector
where we have continued our 100% success rate of contract renewal.  As a result
of our strong performance our financial results for the first half of the year
have been encouraging."

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

"In the first half of 2007 we have continued to deliver against our key metrics.
  Revenue and profit have grown and our sales momentum has continued.  NHS
Shared Business Services, our joint venture with the Department of Health, is
growing strongly and is on track towards profitability.

Our investment in new services is beginning to bear fruit with a foundation HR
outsourcing contract signed with Lloyds TSB in the half year.  Our contract win
at the BBC, one of the most prominent finance and accounting (F&A) deals let to
date, strengthens our position as the UK leader in F&A services.

Our strategy of delivering technology and business services to our clients and
our focus on building the most compelling solutions around these services has
enabled us to create exciting opportunities for our business.  Our priority is
to deliver those opportunities and consolidate our leadership in key services by
continuing to win new clients and to bring innovative and differentiated
solutions to the market.  This focus is yielding benefits and we expect to
continue to grow revenue and profits in the second half.  Our objective of
creating a high margin and growing business is on track."


Contacts

Alistair Cox, Chief Executive, Xansa                  Giles Sanderson, James Melville-Ross
Gordon Stuart, Finance Director, Xansa                Financial Dynamics
Tel : + 44 (0)8702 416181                             Tel : + 44 (0)20 7831 3113

About Xansa

Xansa is a UK-based outsourcing and technology company with over 8000 people in
the UK and India.

With a 44-year history of sustaining long-term relationships and pioneering
better ways of working, Xansa drives real and long-term cost reductions and
performance improvements. Committed to delivering guaranteed business outcomes
through a combination of technology and process expertise, Xansa gives clients
across the private and public sectors the freedom to do more.

Xansa is listed on the London Stock Exchange (XAN.L) with revenues for 2006 of
£357.3 million.

Further information on Xansa can be found at: www.xansa.com



Business Review

Over the last three years, our market place has changed significantly.  Clients
are very focused on the tangible returns they will achieve from their technology
spend.  At the same time, they are looking for ways to improve productivity in
their services whilst simultaneously freeing up resources to concentrate on
their own customers.  These changes present significant opportunities to those
organisations that can evolve rapidly and focus on delivering expert, high-value
solutions to the changing demands of the market.  Xansa has embraced that
evolution and has transformed itself into a fundamentally different organisation
in order to achieve a leadership position in the market place of the future.

•  We have built the largest offshore operation of any of our UK
   competitors.

•  We have established the leading shared service capability in UK
   government.

•  We are the acknowledged leader in key corporate services.

Our strategy is to focus on the delivery of key technology and business services
to our clients and I am pleased to say that results in the first half of our
year have been encouraging and our key performance indicators have shown
improvement.

Revenues have grown 3.6% sequentially and at £188.4 million were 7.4% higher
than the first half last year.  Group operating profit increased by 7.3% to
£13.2 million (H1 2006: £12.3 million) before share based payments.  Profit
before tax increased by 13.3% to £8.5 million (H1 2006: £7.5 million).

Revenue growth reflects three key achievements:

•  Our investment in the government sector has delivered revenue growth
   of 91%.

•  We have won a number of significant new clients and extended contracts
   with several existing ones.

•  Our transition towards offshore delivery for existing work is almost
   complete.

Progress has been strong in the government sector and we have won work at new
clients including: Monitor in Government; Kent Connects; and Oxford Strategic.
We are progressing with the construction of a new platform for web access and
content management for The Club, a consortium of government departments
consisting of the Cabinet Office, Department of Health and Department for
Education & Skills.  This scalable platform represents a solution for the
management of the entire estate of government web content and services for
citizen access.  Our largest operation in the public sector is NHS Shared
Business Services, our joint venture with the Department of Health to deliver
Finance and Accounting services to NHS Trusts.  On a like for like basis we have
123 trusts either live on the system or undergoing migration although the actual
number of entities is now 113 due to mergers within the existing client base.
As volumes increase, we are coming towards the end of the start-up phase of this
investment and expect NHS Shared Business Services to move into profitability in
the near future.  As well as providing an exciting position in the NHS, the
model we have created in partnership with the government represents an ideal
form of venture that could be replicated in other areas of the public sector.
It allows the government and local authorities to access private sector
expertise, achieve immediate savings and retain a share of the upside as we
invest to make our services even more productive.

Our investment in sales has paid off in the private sector too.  We have
continued our 100% success rate of contract renewal and extended contracts at
Barclays (minimum commitment £75 million), Office for National Statistics
(minimum commitment £6 million) and Lawson. In addition, we have won contracts
at new clients including Threshers, Morrison, Financial Services Authority,
National Car Parks Ltd, Eversheds, National Air Traffic Services and Portman
Building Society.

I am particularly pleased that we were selected by the BBC to deliver Finance,
Accounting and Payroll services.  This contract, worth £85 million over 10 years
and signed in early November, further consolidates our position as market
leaders in the UK Finance & Accounting market.  Furthermore, it represents the
BBC's first engagement with offshore services.  As the BBC embarks upon a period
of strategic change, the opportunity for us to build a position as their trusted
partner around key business services is important to us.

Over the last six months we have extended our service lines and entered the HR
administration market with our contract with Lloyds TSB.  This five year
contract provides a wide range of HR services including administration,
recruitment and existing helpdesks for training, advice and guidance and general
queries. Xansa is working with Lloyds TSB to develop, host and support new
recruitment and management information platforms and to transform HR processes.

The HR administration market is expected to grow significantly and we are
putting in place the capabilities to address this opportunity, just as we have
built a leadership position in the Finance & Accounting market.

We have continued to build delivery capability to service the increased demand
for our services.  The scale and diversity of our Indian operations continue to
go from strength to strength.  Headcount in India increased 19% over the last 6
months to close at 4661 at the end of October.  Integrated UK/India delivery is
at the heart of our business.  Being the largest UK-based supplier of these
services gives us a key advantage in our market place.  We have opened new
capacity at each of our centres in Delhi, Chennai and Pune and expect strong
growth to continue.

Our strategy is to create the most compelling solution to our clients' issues.
That often means working in partnership with other organisations who are experts
in their own fields.  I am pleased to say that we have extended and strengthened
this capability and are now working closely with a wide range of organisations
providing capabilities in areas as diverse as consultancy, infrastructure, niche
and enterprise applications and contact centres.  The results of this strategy
are evident as a number of our major programmes successfully reach important
milestones.  An excellent example is our work for Northern Ireland Water
Services where we and our partners are successfully building complex billing
systems and progressively rolling out and administering those systems and the
entire customer support network that is required for the Northern Ireland
market.  I anticipate that such eco-systems of partners will become more
prevalent in the marketplace and this trend will play to our strengths.



Financial Performance

Revenue for the six months ended 31 October 2006 was £188.4 million.  This is an
increase of 7.4% over the comparable period in the previous year. Operating
profit before share based payments in the first half was £13.2 million compared
with £12.3 million in the first half of last year. The increase in profit
reflects improved performance in our business as well as in NHS Shared Business
Services.  This profit represents a margin of 7.0% (2006: 7.0%).  Our underlying
business performance has improved, however the headline margin remains constant
due to start up costs of new contracts and services.

The charge for share-based payment increased from £1.5 million in the first half
of last year to £2.1 million this year and compares to £2.3 million in the
second half of last year.

Progress in NHS Shared Business Services continues to be positive and the share
of loss for the period was £1.2 million (2006: £1.5 million).  Revenue included
for the period in relation to arm's length services supplied to NHS Shared
Business Services was £7.7 million and £5.4 million in relation to employment
group services.

Net finance expenses decreased from £3.3 million to £2.6 million.  The net
finance expense associated with the defined benefit pension plans reduced by
£0.8 million to £0.4 million, whilst the £0.1 million increase in other net
finance costs reflects higher average borrowings, which were £38.2 million in
the six months to 31 October 2006 compared to £33.0 million in the comparable
period last year.

Working capital (defined as receivables, prepayments and inventories less trade
and other payables) increased from a net liability of £15.5 million at April
2006 to a net asset of £1.8 million at 31 October 2006 and reflects the changing
nature of contracts as the payments in advance which Xansa has benefited from in
the past become less common.  We continue to focus on operating cash management,
evidenced by the level of debtor days, which were 32 compared to 34 at the same
period last year and 35 at 30 April 2006.

As noted in the 2006 Annual Report, Xansa undertook a consultation last
financial year with employees, members, the scheme trustees and other interested
parties of the Xansa Pension Plan to determine the best way to address the
pension funding deficit.  As a result of this consultation, contributions to the
scheme increased to £8.8 million in the six months to 31 October 2006, up £1.2
million from the comparable period last year.  Despite this increase the deficit
in the fund increased from £84.5 million at 30 April 2006 to £103.0 million at
31 October 2006, primarily because the interest rate used to discount
liabilities back to a present day value reduced by 0.2%.

The effective tax rate for the period continues to track significantly below the
UK headline rate due to the Indian tax holiday under which a significant
proportion of our profits are assessed.  This tax holiday is progressively
phased out from March 2007.  For the period our tax rate is 16.9% compared with
14.1% for the year ended 30 April 2006, an increase partly attributable to one
month of tax being payable on certain Indian operating profits.

Diluted earnings per share of 2.06 pence were 8.4% higher than the 1.90 pence
for the first half last year.



Dividend

The Board proposes to maintain the interim dividend payment at 1.08 pence per
share. The dividend is covered 1.9 times by interim diluted earnings per share
of 2.06 pence.

Outlook

Xansa has successfully executed a major transformation over the last two years.
Our focus is to deliver key technology and business services to our clients and
we have already established leadership positions in certain services, including
Finance & Accounting Outsourcing and Application Management.  At the same time,
we have entered new services including HR Administration and Web Content &
Access management and intend to build equivalent leading positions in each of
these core lines.  The potential market for each of these service lines is
significant, although a number of these markets are still at relatively early
stages of development.  By building the most compelling solutions, we aim to
help open up these markets, as well as establishing ourselves as the expert
provider in each case.

This focus has allowed us to create a very material and exciting set of
opportunities for our company.  Our priority now is to deliver those
opportunities, consolidate our market leadership in key services by continuing
to win new clients and bring new innovative and differentiated solutions to the
market.  Having grown our business faster than at any other time over the last 5
years, this strategy will allow us to further accelerate revenue growth and
allow us to continue to improve the overall margin of the business.  With
increased sales momentum and continued progress in key metrics we view the
future with confidence.



Consolidated Income Statement
For the six months ended 31 October 2006
                                           6 months to    6 months to         Year to         Year to        Year to
                                            31 October     31 October        30 April        30 April       30 April
                                                  2006           2005            2006            2006           2006
                                                                               Before     Exceptional
                                                                          Exceptional           Items          Total
                                                                                items

                                 Note        £ million      £ million       £ million       £ million      £ million

Group revenue                                    188.4          175.4           357.3               -          357.3

Operating profit:

Before share-based payments and

share of joint venture's loss                    
after tax                                        14.4           13.8            26.0           (4.3)           21.7
Share-based payments                             (2.1)          (1.5)           (3.8)               -          (3.8)
Share of joint venture's loss                   
after tax                                        (1.2)          (1.5)           (2.7)               -          (2.7)

Operating profit                                  11.1           10.8            19.5           (4.3)           15.2

Finance income                    2                0.6            0.2             0.5               -            0.5
Finance expense                   2              (3.2)          (3.5)           (6.7)               -          (6.7)

Profit (loss) on ordinary
activities before taxation                         8.5            7.5            13.3           (4.3)            9.0
Taxation                          4              (2.0)          (1.4)           (2.8)             1.4          (1.4)
Profit for the period                              6.5            6.1            10.5           (2.9)            7.6

Attributable to:
Equity shareholders of the                 
company                                            6.5            5.9            10.2           (2.9)            7.3
Minority interests                                   -            0.2             0.3               -            0.3

                                                   6.5            6.1            10.5           (2.9)            7.6
Earnings per share expressed in
pence per share
- basic                           5              2.09p          1.94p                                          2.39p
- diluted                         5              2.06p          1.90p                                          2.32p

Earnings per share before
share-based payments

and exceptional items:
- basic                           5              2.70p          2.37p                                          4.42p
- diluted                         5              2.66p          2.31p                                          4.29p

Proposed dividend per share                      1.08p          1.08p                                          3.24p
Proposed dividend (£ million)                      3.5            3.4                                           10.2

Dividend paid per share                          2.16p          2.16p                                          3.24p
Dividend paid (£ million)                          6.9            6.8                                           10.2





Consolidated balance sheet
As at 31 October 2006
                                                                      31 October      31 October        30 April
                                                                            2006            2005            2006
                                                          Note         £ million       £ million       £ million

ASSETS
Non-current assets
Property, plant and equipment                                               23.9            22.4            24.9
Deferred income tax assets                                                  19.9            17.0            20.4
Intangible assets                                                           84.8            85.1            85.9
Prepayments                                                                  1.7             1.9             1.6
Investment in joint venture                                                  7.6             8.9             8.8
Other receivables                                                            0.2               -             0.2
                                                                           138.1           135.3           141.8
Current assets
Inventories                                                                  0.3               -             0.2
Trade and other receivables                                                 51.9            48.5            49.1
Amount due from joint venture                                                3.1             2.0             6.5
Prepayments                                                                  9.8             5.8             7.1
Cash and cash equivalents                                  7                24.1            22.8            33.3
                                                                            89.2            79.1            96.2

TOTAL ASSETS                                                               227.3           214.4           238.0


EQUITY AND LIABILITIES
Issued capital                                                              17.4            17.2            17.3
Reserves                                                                  (31.5)          (31.6)          (11.4)

Total equity attributable to equity holders of           
the parent                                                 8              (14.1)          (14.4)             5.9

Non-current liabilities
Trade and other payables                                                     0.8             1.8             0.5
Interest bearing loan and borrowings                       7                 0.7            32.7            38.3
Provisions                                                                   3.7             3.2             3.9
Post-retirement benefit liability                          9               103.6            95.7            84.8
                                                                           108.8           133.4           127.5

Current liabilities
Trade and other payables                                                    64.4            71.8            79.7
Interest bearing loans and borrowings                      7                57.0             9.8            12.7
Income tax payable                                                           7.9             9.6             6.5
Provisions                                                                   3.3             4.2             5.7
                                                                           132.6            95.4           104.6


TOTAL LIABILITIES                                                          241.4           228.8           232.1

TOTAL LIABILITIES AND EQUITY                                               227.3           214.4           238.0




Consolidated cash flow statement
For the six months ended 31 October 2006
                                                                       6 months to     6 months to         Year to
                                                                        31 October      31 October        30 April
                                                                              2006            2005            2006
                                                          Note           £ million       £ million       £ million

Profit before tax for the period                                               8.5             7.5             9.0
Depreciation and amortisation                                                  4.7             3.0             6.9
Cost of employee share schemes                                                 2.1             1.5             3.8
Finance income                                                               (0.6)           (0.2)           (0.5)
Finance expense                                                                3.2             3.5             6.7
Pension contributions (in excess of) lower than current                    
service cost                                                                 (2.1)             1.4             3.6
Share of joint venture's loss after tax                                        1.2             1.5             2.7
Exceptional costs charged to profit and loss account        3                    -               -             4.3
Exceptional costs spent                                     3                (1.7)           (2.2)           (4.1)
Working capital                                                             (17.5)           (3.4)           (4.4)
Cash generated from operations                                               (2.2)            12.6            28.0

Interest paid                                                                (2.5)           (2.2)           (3.6)
Tax (paid) received                                                          (0.2)             0.3           (0.8)
Net cash generated from operating activities                                 (4.9)            10.7            23.6

Cash flows from investing activities
Proceeds on disposal of property, plant and equipment                          0.1             0.1             0.1
Interest received                                                              0.6             0.2             0.5
Investment in joint venture                                                  (0.9)           (2.1)           (3.9)
Purchases of property, plant and equipment                                   (3.3)           (3.1)           (6.5)
Purchases of intangible assets                                               (0.9)           (3.8)           (5.9)
Net cash flows used in investing activities                                  (4.4)           (8.7)          (15.7)

Cash flows from financing activities
Proceeds from new borrowings                                                  17.7               -               -
Repayments of amounts borrowed                                                   -           (5.6)           (0.1)
Cash paid to acquire own shares                                              (0.9)           (0.4)           (1.2)
Proceeds from sale of own shares                                               0.8             0.8             2.1
Payment of finance lease liabilities                                         (0.4)           (0.2)           (0.6)
Dividends paid to the Company's equity holders                               (5.7)           (5.7)           (7.8)
Net cash flows from financing activities                                      11.5          (11.1)           (7.6)

Net increase (decrease) in cash and cash equivalents        7                  2.2           (9.1)             0.3

Cash and cash equivalents:
At beginning of period                                                        22.4            21.9            22.0
Effect of changes in foreign exchange rates                                  (0.5)             0.2             0.1

At end of period                                                              24.1            13.0            22.4

Cash and cash equivalents consist of:
Cash and cash equivalent current assets                                       24.1            22.8            33.3
Overdrafts                                                                       -           (9.8)          (10.9)

At end of period                                                              24.1            13.0            22.4




Consolidated statement of recognised income and expense
For the six months ended 31 October 2006
                                                                        6 months to    6 months to        Year to
                                                                         31 October     31 October       30 April
                                                                               2006           2005           2006

                                                                          £ million      £ million      £ million


Employee defined benefit obligations:
- actuarial losses on defined benefit obligations                            (20.5)          (0.5)           13.7
- deferred taxation recognised directly in equity                                 -              -            5.0
Employee share option scheme - deferred taxation recognised                  
in equity                                                                     (0.1)              -            0.3
Net exchange adjustments                                                      (2.2)            0.9          (0.4)

Net (expense) income recognised directly in equity                           (22.8)            0.4           18.6

Profit for the period                                                           6.5            6.1            7.6


Total recognised (expense) income for the period                             (16.3)            6.5           26.2

Attributable to:
Equity shareholders of the company                                           (16.3)            6.3           25.9
Minority interests                                                                -            0.2            0.3

                                                                             (16.3)            6.5           26.2



Notes to the Accounts



1               Basis of preparation

The Group prepares its annual financial statements on the basis of International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and
in accordance with the provisions of the Companies Act 1985. The financial
information presented in this interim report has been prepared in accordance
with the accounting policies expected to be used in preparing the annual
financial statements for the year ended 30 April 2007, which do not differ
significantly from those used for the most recent financial statements, with the
exception that the requirements of IFRIC 4 'Determining Whether an Arrangement
Contains a Lease' has been adopted.  The adoption of IFRIC 4 did not have a
significant impact on the results or financial position of the Group.

This interim report was approved by a duly appointed and authorised committee of
the Board of directors on 6 December 2006.  This statement does not comprise the
statutory accounts of the Group, as defined in section 240 of the Companies Act
1985. The financial information for the half years ended 31 October 2006 and 31
October 2005 are unaudited. The financial information for 30 April 2006 has been
extracted from statutory accounts on which an unqualified audit report has been
issued.

The statutory accounts of Xansa plc for the year ended 30 April 2006 have been
delivered to the Registrar of Companies. The auditors, Ernst and Young LLP,
reported on those accounts in accordance with section 235 of the Companies Act
1985 and their report was unqualified and did not contain an emphasis of matter
reference or a statement under section 237(2) or (3) of the Companies Act 1985.





2             Finance income and expense




                                                              6 months to      6 months to              Year to
                                                               31 October       31 October             30 April
                                                                     2006             2005                 2006
                                                                £ million        £ million            £ million

      Finance income                                                  0.6              0.2                  0.5

      Finance expense, excluding items relating to
      pension scheme                                                (2.8)            (2.3)                (4.4)
      
      Expected return on pension fund assets                          8.0              5.9                 12.0
      Interest on pension fund liabilities                          (8.4)            (7.1)               (14.3)
      Finance expense                                               (3.2)            (3.5)                (6.7)







3              Exceptional costs



In the years to 30 April 2004 and 2006 Xansa incurred costs which were
classified as 'exceptional' in the income statement in that year.  In the cash
flow statement 'Exceptional costs spent' represents the utilisation of the
accruals and provisions so created.



4              Taxation


                                                              6 months to       6 months to              Year to
                                                               31 October        31 October             30 April
                                                                     2006              2005                 2006
                                                                £ million         £ million            £ million

UK corporation tax                                                    1.5               2.4                  0.6
Foreign tax                                                           0.1               0.1                    -
Total current tax                                                     1.6               2.5                  0.6
Deferred tax                                                          0.4             (1.1)                  0.8
                                                                      2.0               1.4                  1.4




The tax charge of £2.0 million on profit before tax, share based payments and
share of joint venture's results of £11.8 million (year to 30 April 2006: £19.8
million) results in a tax rate of 16.9% (year to 30 April 2006: 14.1%).  The tax
charge includes a credit in respect of share based payments of £0.2 million
(year to 30 April 2006: £0.5 million).  The tax charge excluding these items is
£2.2 million, which results in an effective tax rate of 18.6% (year to 30 April
2006: 16.7%).

5             Earnings per share


                                                              6 months to       6 months to              Year to
                                                               31 October        31 October             30 April
                                                                     2006              2005                 2006
Basic and diluted earnings per share
Profit attributable to equity holders of the company             
(£ million)                                                           6.5               5.9                  7.3

Weighted average number of ordinary shares in issue,
excluding shares held by ESOP trusts (thousands)                  310,992           303,560              305,745
Adjustments for dilutive effects of share options and
free and matching shares (thousands)                                4,282             7,642                8,621        
                                              
Weighted average number of ordinary shares for diluted
 earnings per share (thousands)                                   315,274           311,202              314,366

Basic earnings per share (pence per share)                           2.09              1.94                 2.39

Diluted earnings per share (pence per share)                         2.06              1.90                 2.32

Adjusted basic and diluted earnings per share
Profit attributable to equity holders of the company     
(£ million)                                                           6.5               5.9                  7.3
Adjustments for:
 - share based payments                                               2.1               1.5                  3.8
 - exceptional items                                                    -                 -                  4.3
 - tax effect of the above adjustments                              (0.2)             (0.2)                (1.9)
Adjusted profit (£ million)                                           8.4               7.2                 13.5

Basic earnings per share (pence per share)                           2.70              2.37                 4.42

Diluted earnings per share (pence per share)                         2.66              2.31                 4.29





6           Dividends



The directors have declared a dividend of £3.5 million out of the profits for
the six months to 31 October 2006 (31 October 2005: £3.4 million), representing
1.08 pence per share (31 October 2005: 1.08 pence), payable on 12 April 2007 to
members registered at the close of business on 26 January 2007.  The final
dividend for the year to 30 April 2006 of £6.9 million, representing 2.16 pence
per share, was paid during the six months to 31 October 2006.



7           Reconciliation of net increase in cash and cash equivalents to
            movement in net (debt) funds


                                                           6 months to      6 months to              Year to
                                                            31 October       31 October             30 April
                                                                  2006             2005                 2006
                                                             £ million        £ million            £ million

Increase (decrease) in cash and cash equivalents                
in period                                                          2.2            (9.1)                  0.3
                                                                (17.3)              5.8                  0.7
Change in net (debt) funds resulting from cash                
flows                                                           (15.1)            (3.3)                  1.0
New finance leases                                               (0.2)            (0.7)                (1.9)
Amortisation of issue costs of debt                              (0.1)            (0.2)                (0.4)
Translation difference                                           (0.5)              0.3                (0.6)
Movement in net (debt) funds in the period                      (15.9)            (3.9)                (1.9)

Net (debt) funds at start of period                             (17.7)           (15.8)               (15.8)

Net (debt) funds at period end                                  (33.6)           (19.7)               (17.7)

Net (debt) funds comprises:
Cash and cash equivalent current assets                           24.1             22.8                 33.3
Interest bearing loans and borrowings due within              
one year                                                        (57.0)            (9.8)               (12.7)
Interest bearing loans and borrowings due after
more than one year                                               (0.7)           (32.7)               (38.3)
                                                             
                                                                (33.6)           (19.7)               (17.7)





8              Changes in Equity


                                                           6 months to       6 months to              Year to
                                                            31 October        31 October             30 April
                                                                  2006              2005                 2006
                                                             £ million         £ million            £ million
Opening equity                                                     5.9            (16.9)               (16.9)

Profit for the period attributable to equity
shareholders of the company                                        6.5               5.9                  7.3

Net actuarial losses on defined benefits
obligations, net of tax                                         (20.5)             (0.5)                 18.7
                                                               
Net exchange adjustments                                         (2.2)               0.9                (0.4)
Employee share option scheme
 - value of employee services                                      2.1               1.5                  3.8
 - deferred taxation recognised directly in equity               (0.1)                 -                  0.3
Issue of ordinary shares - scrip dividends                         1.2               1.1                  2.4
Payments to acquire own shares                                   (0.9)             (0.4)                (1.2)
Receipts from sale of own shares                                   0.8               0.8                  2.1
Dividends paid                                                   (6.9)             (6.8)               (10.2)

Closing equity                                                  (14.1)            (14.4)                  5.9





9              Post-retirement benefit liability


                                                          31 October        31 October             30 April
                                                                2006              2005                 2006
                                                           £ million         £ million            £ million
Fair value of plan assets                                      249.9             201.9                235.2
Present value of defined benefit obligation                  (353.5)           (297.6)              (320.0)
Deficit                                                      (103.6)            (95.7)               (84.8)



The material financial assumptions used for estimating the benefit obligations
are set out below.


                                                          31 October        31 October             30 April
                                                                2006              2005                 2006
                                                         % per annum       % per annum          % per annum
Rate of increase in salaries                                     3.7               4.0                  3.7
Rate of increase in deferred pensions and pensions
in payment                                                       3.0               3.0                  3.0
Discount rate                                                    5.0               5.1                  5.2
Inflation assumption                                             3.0               3.0                  3.0



Assumptions regarding future mortality experience are set based upon published
statistics and experience.  The calculations as at 31 October 2005 are based
upon the '80 series' mortality tables, whilst those at 30 April 2006 and 31
October 2006 are based upon the updated '92 series' mortality tables with a
short cohort projection.  These assume that the average life expectancy of a
male at age 60 is 86.5 years and of a female is 89.4 years (80 series: 82.8
years and 86.0 years respectively).



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 2006 which comprises the Consolidated Income
Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,
Consolidated Statement of Recognised Income and Expense and the related notes 1
to 9. 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 the preceding annual accounts except where any changes,
and the 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.  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 International Standards on Auditing (UK
and Ireland) 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 2006.



Ernst & Young LLP

London

6 December 2006







Financial calendar




Ex-dividend date for 2006/2007 interim dividend                          24 January 2007

Record date for 2006/2007 interim dividend                               26 January 2007

2006/2007 interim dividend paid *                                        12 April 2007

Financial year end                                                       30 April 2007

Announcement of annual results                                           28 June 2007

Ex-dividend date for 2006/2007 final dividend                            4 July 2007

Record date for 2006/2007 final dividend                                 6 July 2007

Annual General Meeting                                                   13 September 2007

2006/2007 final dividend paid *                                          27 September 2007




* A scrip dividend alternative will be available






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