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Xansa PLC (XAN)

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Wednesday 25 June, 2003

Xansa PLC

Final Results

Xansa PLC
25 June 2003

25 June 2003

                                   XANSA PLC

                              PRELIMINARY RESULTS

                        FOR THE YEAR ENDED 30 APRIL 2003

Xansa is an international business process and IT services company creating and
delivering process and technology solutions that significantly improve its
clients' business performance. Through strong relationships, commercial
innovation and its integrated Indian delivery capability, Xansa drives real and
long-term cost reductions, performance improvements and new ways of working
tailored to each client. Its services are Business and Technology Consulting, IT
Implementation, IT Outsourcing and Business Process Outsourcing. Xansa is
established in the UK, North America, Continental Europe and Asia Pacific with
three process and technology centres across India.

                                  KEY FEATURES

•         Turnover declined 12% to £453.9m (2002: £515.1m)

•         Total operating profit fell 42% to £28.7m (2002: £49.1m)

•         Operating margin has dropped to 6.3% (2002: 9.5%)

•         Pre-tax profit fell 40% to £27.7m (2002: £46.5m)

•         Exceptional costs from restructuring of £25.2m

•         Diluted earnings per share down 3.42p to 4.13p (2002: 7.55p)

•         Dividend per share has been maintained at 3.24 pence (2002: 3.24

•         Operating cash flow* improved by 6% to £57.5m (2002: £54.1m)

•         Order bank increased by 10% to £569m (2002: £518m)

•         Net funds of £3.8m (2002: borrowings £10.9m)

•         Major New Orders

          •       BT, £250m over 7 years

          •       Boots, £54m over 7 years

          •       O2, £21m over 5 years

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

*  cash flow from operating activities before exceptional items less net
payments on tangible fixed assets

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

"We now have in place a structure that reinforces our strategy of delivering
integrated offerings in IT services and Business Process Outsourcing, leveraging
the cost effectiveness of our Indian delivery capability whilst providing our
clients with strong local support, as shown by our recent contracts with Royal
Mail, BT, Boots and O2.  Our focus now is to execute this strategy in all our
markets, despite our view that our market places will remain challenging and
highly competitive at least through the current financial year.  Tight cost
control, a focus on cash generation and winning new profitable business will be
the key mantras in the business."

Commenting on the results, Hilary Cropper CBE, Chairman, said:

"I am pleased to report a year of progress in the fundamental competitiveness of
Xansa.  The financial results are in line with the management expectations set
last September.  The most important aspect of the last year has been the
creation of a new Executive team under Alistair Cox, Chief Executive, who joined
Xansa on 1 August 2002.  The new team has undertaken a major strategic review of
the business, has sharpened the investment focus and has streamlined the
organisation, centred around client relationships, with profit accountability by
country.  The effect of the streamlining is a more efficient organisation with
significant reductions in overhead costs."


Contact: Steve Stratton                     Giles Sanderson, James Melville-Ross
Investor Relations Director, Xansa          Financial Dynamics
Tel : + 44 (0) 121 788 6327                 Tel : + 44 (0) 20 7831 3113
Email : [email protected]

Chairman's Statement

In this, my last report to you as Chairman, I am pleased to report a year of
progress in the fundamental competitiveness of Xansa despite its first setback
in revenues and operating profits since the last recession.  This decline is due
to the same market conditions which have affected all our competitors.  The
financial results, which are detailed below are nevertheless in line with the
management expectations set last September.

The most important aspect of the last year has been the creation of a new
Executive team under Alistair Cox, Chief Executive, who joined Xansa on 1 August
2002.  At Board level, we were pleased to welcome Peter Gill as Finance
Director, joining us from Pearson on 1 January, whilst continuity was preserved
through Lyn Barrat, Commercial Director and Saurabh Srivastava, Executive
Chairman India, the promotion of Steve Weston to Managing Director, UK and the
appointment of Allan Wood to Managing Director for the Business Process
Outsourcing business.  At the executive level, we welcomed John Faraguna as
President of the USA business and Murali Vullaganti as Managing Director Xansa,
India, whilst Peter Drysdale was promoted to Managing Director, Continental
Europe and Asia Pacific, and Judith Halkerston to International Resource
Director.  Mike Harling continues as Director of Human Resources with Phil Cook
remaining as Company Secretary and General Counsel.

This new team has undertaken a major strategic review of the business, has
sharpened the investment focus and has streamlined the organisation, centred
around client relationships, with profit accountability by country.  The effect
of the streamlining is a more efficient organisation with significant reductions
in overhead costs.  Alistair's report gives further details.

Xansa's entry into the Business Process Outsourcing market, on the back of the
£250m Accounting & Finance outsourcing contract with BT, is the second most
important aspect of the financial year and I am very pleased that before I
retire we have achieved this key objective.  This market, which is forecast to
grow dramatically, plays to all Xansa's strengths as an IT services and business
process specialist with the added dimension of a well established, fully
integrated Indian capability.  We shall exploit our know-how in Accounting &
Finance and Human Resource systems as well as developing the off-shore delivery
services for bespoke customer contact and back office systems.

This year has also seen a number of Board changes.  Jo Connell retired from
Xansa at the end of March and relinquished her role as Managing Director in
January 2003.  She continued to work directly for the Chief Executive to manage
the streamlining programme and to ensure a smooth transition to the new
organisational structure.  Jo had been with Xansa for 25 years and a Director
for the last eleven.  Her outstanding contribution has been a critical factor in
the Company's success to date.  I shall always value her contribution to the
growth and success of Xansa as well as her personal support and the enjoyment of
working with her.

Geoffrey Dunn, previously Finance Director, resigned from the Board in October
2002 and we thank him for his contribution.

In March 2003 we announced that David Tebbs, formerly Chairman of Druid, had
retired from the Board, having been a Non-Executive Director since March 2000.
At the same time we were delighted to announce the appointment of Lord Wilson of
Dinton as a Non-Executive Director.  Lord Wilson, Master of Emmanuel College,
and formerly Secretary of the Cabinet and Head of the Home Civil Service, will
bring additional clarity of thought and a truly worldly perspective of events to
the Board.

Employee share ownership continues to remain at the heart of Xansa and extensive
programmes are undertaken to promote our innovative share schemes to encourage
employees to participate in the schemes and grow their shareholding in the
Company.  I am very proud that seven years after our flotation, we continue to
have one of the highest levels of employee share ownership in the industry and
in the FTSE 250 with a level today of 26%.  New employees joining Xansa from
transfers receive tailored presentations on the Company's shares schemes.  We
are delighted with the high levels of take-up amongst this employee population,
some of whom have not had the opportunity to participate in such schemes with
their previous employers.  In April 2003, Xansa was recognised for its
outstanding achievements in operating international employee share plans by
receiving the prestigious Global Equity Organisation 2002 Award for Best

As part of Xansa's approach to employee share ownership, over the years, the
share options scheme has been offered widely through the employee base.  The
Board has become increasingly concerned that the exercise price for most of
these options are well in excess of the current share price.  In order to
maintain motivation, the Board is proposing to put a resolution to the next AGM,
to allow them to make an offer for a cancellation of existing options for all
employees, excluding the Board members, in return for fewer options at an
exercise price closer to current values.

We are consulting extensively with individual institutional investors and with
representative bodies, and having listened to their advice, hope we will be able
to design a scheme which will be equally acceptable to institutional investors,
private and employee shareholders.   The Board believes this move would be
consistent with Xansa's culture and be beneficial in creating shareholder value.


As we announced in June, it is my intention to step down from the Chairmanship
and the Xansa Board following the AGM on September 17, 2003.  The primary reason
for this is that I have been receiving treatment for cancer for almost two years
and whilst I remain relatively well, the time is right to hand over the reins.
The 18 years during which I have led the Company have been immensely satisfying,
largely because of the people in Xansa, with whom it has been a joy to work. I
am thrilled that the Board want to honour me with the title Honorary President
and I will continue to promote and assist the Company in the future.

Of course, one gets nowhere without clients!  I should like to thank all our
clients for their continued business, the opportunities they give us and for the
personal friendships which I have formed with them.

I am content that I leave Xansa in good hands. We have a strong Board and a new
Executive team who know where they are going and are determined to get there.
My good wishes go to you all.

Chief Executive's Statement

The last year has been one of significant challenge and significant change.  The
market conditions have been, and continue to be, some of the toughest our
industry has experienced.  To tackle this challenging environment, I have acted
quickly and decisively to sharpen our advantage in a very competitive
marketplace and put in place an organisational structure and streamlined our
cost-base to allow us to compete ever more effectively.  My team and I have
developed an exciting vision for our future; a vision that encompasses growth,
deepens our relationships with our clients and reinforces Xansa as a company
that attracts and engages the best talent in our industry.   Clients are our
lifeblood and so I have implemented a management structure that puts the client
at the heart of everything we do.   I have rationalised our overheads and
focused our resources on market opportunities where we expect to see significant

I am a great believer in clarity and in times of such change it is vital that we
communicate a clear message about what Xansa does and how we add value to our
clients.  Through our deep understanding of technology and business processes
that are enabled by technology, Xansa delivers significant, sustainable cost
reductions and performance improvements to our clients' business.   Our skills
in IT, process design and outsourcing, coupled with our ability to manage major
organisational change programmes, introduce our clients to new and more
effective ways of working.   We innovate and tailor our solutions to each
client's situation.  Our unique ability to integrate on-shore and off-shore
delivery through our investment in resources in India allows us to guarantee the
bottom line benefits that we will deliver.  Through this approach we build
strong and effective business relationships with our clients that endure over
many years and that enable Xansa to grow as our clients grow.

This proposition is very relevant in today's marketplace.  Clients are grappling
with tough commercial issues and have cutback on discretionary IT expenditure
across the board.  However they are willing to invest in solutions that deliver
a strong return on investment and a guaranteed outcome whilst remaining
sensitive to other aspects of their business.  They want to see innovation and
flexibility in their suppliers in order to find the most advantageous joint
approach to solving business issues.   They are also increasingly prepared to
take radical steps forward in terms of their own organisational structure and
internal processes and are seeking long-term partners who are able to design,
implement and operate fully integrated solutions that impact at the heart of
their own business.  Such long-term relationships are the foundation of our
business model and it is no coincidence that many of our successes in winning
major IT outsourcing contracts for example with Boots and Royal Mail, and
Business Process Outsourcing (BPO) contracts with BT and O2 in the last year
were based on such deep-rooted partnerships.

We have had to take difficult decisions but I am extremely pleased that despite
the challenges we have faced we have successfully implemented a major
organisational change whilst continuing to win significant new business and
maintaining our record of outstanding delivery for existing clients.  This has
required the commitment and dedication of our people and thanks are due for
their determination and contribution to our success.

Market Conditions

The markets in which we operate both in the UK and internationally continue to
be challenging.   However, driven by the general economic uncertainty we all
witness, the market for IT outsourcing and BPO shows progress and further
substantial potential as clients seek to capture the bottom line benefits that
such services provide.  In order to compete effectively in this marketplace and
capture outsourcing opportunities profitably, I initiated a streamlining
programme in September 2002 that was designed to reduce our cost base whilst
aligning our organisational structure to better serve our clients.


The streamlining programme was formally completed in March 2003 and I am pleased
to say that the programme was more effective than was originally envisaged.
All of our key targets were met or exceeded within the original deadlines and
the overall costs of the programme were in line with our initial estimate.

The results of the programme are profound for Xansa:

  • We have reorganised our business around client profit centres which
    provide improved visibility of our clients' operations as well as our own
    returns and growth opportunities.   Given the geographic breakdown of our
    client base, full profit and loss responsibility is now consolidated at
    country level.

  • We have eliminated duplicate administration and infrastructure surrounding
    the prior organisational structure and have created greater clarity through
    the more effective allocation of our own resources.

  • We have reduced our cost base significantly through a combination of
    property and associated infrastructure rationalisation, together with a
    reduction in workforce costs from a worldwide redundancy programme.

  • We have invested in new senior talent in the Company and have built a
    highly skilled and effective Executive team accountable for delivering

Overall employee numbers were reduced by 502, more than originally planned.
Workforce numbers now stand at 5,583 as of 30 April 2003, compared to 5,638 a
year earlier.  This is broken down as 4,170 employees in the UK, including 755
new colleagues joining us as part of the Boots and BT contracts, 1,046 in India,
191 in USA, 65 in Continental Europe and 111 in Asia Pacific.

Overall I am pleased that our expected annualised savings of £27.1m are ahead of
the originally planned level of £20m - £23m.   These savings will not just
protect our future profitability but will serve to offset higher business costs,
National Insurance increases, increased pension contributions and other
employee-related charges in the UK as well as providing funds for investment to
grow our company.   The overall cost of completing this programme was in line
with initial expectations and a full-year exceptional charge of £25.2m has been
taken, including the charge of £1.9m taken at the half-year.


The year has also seen us continue to invest in areas where we anticipate
significant growth.  Within our organisational restructuring we retained a
separate business unit accountable for rapidly growing our Business Process
Outsourcing (BPO) operations and firmly establishing Xansa as a leader in this
field.   Our focus is on providing outsourcing solutions for client shared
service centres in the Accounting & Finance and Human Resources arenas.   I
believe, and our clients tell us, that these services are highly relevant and
valuable as they seek to improve their own business performance.   In addition,
we are now providing outsource options for complex, high value processes that
benefit from a significant level of off-shore delivery from our Indian
operations.   Such processes are usually at the core of our clients' business
and frequently involve interfacing with our clients' customers.   The
willingness for our clients to outsource these critical aspects of their
business therefore reflects the trust they have in Xansa's skills and our
ability to deliver results day in, day out.

Our Indian operations continue to play an increasingly important role in our
worldwide business.   We have been utilising off-shore support for over a decade
now and have had our own subsidiary for over five years.   Today I believe Xansa
is unique in its ability to provide a totally integrated on-shore/off-shore
solution to address our clients' needs.  This capability provides cost-effective
and high quality services whilst maintaining a high level of local client
support, industry expertise and insight.   Our competitors have also recognised
the importance of this proposition and are investing to catch up.   My focus is
on maintaining the competitive edge we currently hold.   Accordingly we have
invested around £8.1m in India over the last 12 months and have now opened two
new development and processing centres at Noida and Chennai, providing 1,575
seat capacity on a single shift basis.   Our strategy is one of building further
capacity to develop fully our three centres at Noida, Chennai and Pune, ensuring
both flexibility and scalability, and I expect additional investment to be made
over the next year.

Xansa's Pension objective is to maintain a healthy pension fund for applicable
employees, as we regard this as a valuable employee benefit.  In the UK, we are
taking prudent actions, ahead of our triennial valuation in December 2003, to
address our current funding deficit.  As a result, the Company has decided to
increase its contributions from 1 May 2003 and will be looking to scheme members
to bear a similar level of additional contribution through our flexible benefit
scheme from 1 January 2004.

Business Performance

The year has been characterised by the background of economic uncertainty and
declines in IT related spending.  Faced with these conditions we have focused on
securing new business, maintaining margins and generating cash.  This year we
have won a significant number of new contracts, for example Royal Mail for up to
£180m, BT for £250m, Boots for £54m and O2 for £21m.  We have also reduced our
net debt from £10.9m at the end of 2002 to a cash surplus of £3.8m at the end of

Turnover was down by 12% to £453.9m, and operating profit* fell to £28.7m, a
reduction of 42% over last year and operating margins declined to 6.3% from
9.5%.  UK margins have come under pressure due to changes in the contract mix
with older contracts at higher margins being completed and new contracts at
lower initial margins beginning to come on stream and we expect this to continue
during the course of this current year.

The Orderbank increased by 10% to £569m.  This increase primarily reflects the
BPO contract signed with BT in June 2002 for outsourcing its key Accounting &
Financial Services, valued at a minimum of £250m over a seven year period.
Throughout the year, we have signed a total of £494m of orders in excess of £4m,
to be delivered over a period of up to seven years.

After the year-end, in May 2003, we were very pleased to announce as a member of
the Prism Alliance a contract with Royal Mail to outsource its IT operations in
an arrangement worth £1.5 billion over ten years.   As a part of the alliance,
Xansa will provide Applications Management and software development services and
solutions to Royal Mail and Post Office Limited.   Xansa's services are valued
at up to £180m over the contract period.   This contract is not reflected in the
orderbank but inclusion of the guaranteed portion of the contract (£53m) would
show the orderbank increasing 20% year on year.  In June 2002, over 220 staff
transferred to Xansa as the deal commenced, and I look forward to reporting
further progress on this exciting contract.  Overall we have improved our book
to bill ratio, which measures the relationship between orders signed and
turnover, from 1.0 to 1.1 times.

The UK is the largest part of the Company accounting for 91% of total revenues,
(£411m).  On a restated yearly basis, this shows a decline in profits of 33%
driven largely by the winding down of the First Banking Systems (FBS) contract
prior to its termination in December 2003, when we will receive a termination
payment of around £9m. However, our relationship with HBOS is far from over and
as a result of the efforts of our team and their delivery of results we have
signed a framework agreement directly with HBOS for the provision of a variety
of services.

Included in the UK analysis is the Business Process Outsourcing business.  This
has had a terrific start achieving revenues of £46m in its first year.  We have
leveraged our success with BT to secure an Accounting & Financial Services
contract with O2 for £21m over five years.  We have also initiated a number of
pilot projects with several clients covering a range of business-critical
processes.  Each of these pilots leverages our Indian delivery centres and we
anticipate them building up significantly in the future.

Recruitment is also included within the UK analysis.  As expected, this business
continues to be affected by the general decline in the demand for contract staff
and pricing pressures.   Revenues have declined by 23% year-on-year to £38.4m
although the business remains profitable.   Recruitment remains an integral
aspect of the business as it provides us with ready access to contractors to
allow us to maintain flexibility in our cost base.  At the end of the year we
had 410 contractors placed with external clients and 664 being used directly on
Xansa accounts.

Internationally, we continue to see the impact of the global downturn on all our
operations.  Continental Europe has been the most affected with revenues
declining 49% to £6.2m and an operating loss of £1.2m.   Action has been taken
to focus on Applications Management and BPO and the businesses have been
restructured both to support this strategy and return these businesses to
profitability. For the longer term, we consider Continental Europe to be an
attractive market for our integrated services and we continue to explore
opportunities to leverage our presence there.

Similarly impacted has been our business in Asia Pacific where revenues have
fallen 46% to £3.7m, incurring a loss of £2.6m.  Again, action has been taken to
minimise operating losses whilst retaining our ability to service clients in
this region.

In the USA, revenues have fallen by 28% to £32.7m to yield an operating loss of
£1.0m.   The business has now been restructured significantly to reduce the cost
base and focus on IT outsourcing, Applications Management and BPO.   The US
market, whilst highly competitive, is also one that is hugely receptive to
Xansa's fully integrated propositions leveraging all our skills and
on-shore/off-shore delivery.   Early indications of our refocus are encouraging
and we have recently secured a number of contract extensions.   Our focus is to
continue to build on this momentum and create a sustainable business on this

Underpinning our performance is the contribution made by our Indian operations.
 Our new organisational structure means that the financial results of India are
fully incorporated into the results of the local market businesses,
predominantly the UK.  If however the Indian operations were viewed as
standalone, revenues would have been broadly flat at £31.5m whilst operating
profit would have increased to £15.1m versus £11.5m the previous year.   These
figures exclude the allocation of any costs that would be necessary if the
business were truly standalone such as sales costs and corporate overhead.
Inclusion of such costs would indicate margins to be comparable with similar
Indian-based companies.

The split of revenue by industry sectors shows that there are few significant
changes over the period, reflecting the universal nature of the downturn.  The
only major changes reflect the impact of the BT and O2 contracts within the
telecoms sector and the impact of the Boots and Diageo contracts on Retail &
Consumer Goods.

•              Banking 34% (2002: 33%)

•              Insurance 11% (2002: 15%)

•              Retail & Consumer Goods: 20% (2002: 14%)

•              Utilities 8% (2002: 11%)

•              Government 8% (2002: 9%)

•              Telecoms 14% (2002: 7%)

•              Aerospace & Defence 3% (2002: 6%)

•              Pharmaceuticals 2% (2002: 5%)

Strategy and Outlook

We now have in place a structure that reinforces our strategy of delivering
integrated offerings in IT services and BPO, leveraging the cost effectiveness
of our Indian delivery capability whilst providing our clients with strong local
support.   Our focus now is to execute this strategy in all our markets, despite
our view that our marketplaces will remain challenging and highly competitive at
least through the current financial year.  Tight cost control, a focus on cash
generation and winning new profitable business will be the key mantras in the
business.  Consequently, the start to the year is in line with our expectations.
The benefits realised from the streamlining programme will maintain our
profitability in the UK, despite higher employee costs and the margin dilution
expected in the UK as new major contracts, at initially lower margins, change
the overall contract mix.  Additionally we would expect to move our non-UK
businesses toward profitability in the current financial year.

In reorienting the business, I have allocated increased investment in sales and
delivery skills and in infrastructure where growth opportunities exist.   In the
UK, demand for IT outsourcing and BPO is expected to remain positive although
discretionary spend will continue to be curtailed.  I fully expect us to capture
a share of the outsourcing opportunities that become available.   In the USA the
appetite for our broader services is well established and we will seek to grow
our business on the back of this ready acceptance.   In Continental Europe there
is the potential for major markets to engage more fully in significant
outsourcing.   Our objective is to position the business to capture this growth
as it materialises.   Above all I see the ability to deliver high quality
solutions from a cost-effective off-shore operation as being imperative to
competing in every one of our marketplaces and we will invest in our Indian
business accordingly.

In summary, we are now a leaner organisation, well equipped to compete
effectively and are pursuing a strategy designed to keep us at the forefront of
current trends in IT services and IT and process outsourcing.

Consolidated profit and loss account
For the year ended 30 April 2003
                                                        2003          2003      2003          2002        2002      2002
                                                      Before   Exceptional     Total        Before                 Total
                                                 exceptional         items             exceptional
                                                       items                                 items Exceptional 
                                         Note      £ million     £ million £ million     £ million   £ million £ million

Group turnover                             3           453.9             -     453.9         515.1           -     515.1
Group operating profit (loss):
Before profit on sale of own shares,       3            28.7             -      28.7          49.1           -      49.1
distribution of shares from the trusts,
reorganisation costs and goodwill
amortisation and impairment
Profit on sale of own shares                               -             -         -           1.6           -       1.6
Distribution of shares from the trusts                 (4.8)             -     (4.8)         (3.1)           -     (3.1)
Reorganisation costs                                       -        (25.2)    (25.2)             -      (13.2)    (13.2)
Goodwill amortisation and impairment                  (10.3)       (144.4)   (154.7)        (42.6)     (497.0)   (539.6)
                                                        13.6       (169.6)   (156.0)           5.0     (510.2)   (505.2)

Net interest payable                                   (1.0)             -     (1.0)         (2.6)          -     (2.6)
Profit (loss) on ordinary activities                    12.6       (169.6)   (157.0)           2.4    (510.2)   (507.8)
before taxation
Profit (loss) on ordinary activities
before taxation analysed between:
Before profit on sale of own shares,                    27.7             -      27.7          46.5          -      46.5
distribution of shares from the trusts,
reorganisation costs and goodwill
amortisation and impairment
Profit on sale of own shares                               -             -         -           1.6          -       1.6
Distribution of shares from the trusts                 (4.8)             -     (4.8)         (3.1)          -     (3.1)
Reorganisation costs                                       -        (25.2)    (25.2)             -     (13.2)    (13.2)
Goodwill amortisation and impairment                  (10.3)       (144.4)   (154.7)        (42.6)    (497.0)   (539.6)
                                                        12.6       (169.6)   (157.0)           2.4    (510.2)   (507.8)
Taxation                                   4           (8.0)           6.1     (1.9)        (14.8)        3.1    (11.7)
Profit (loss) on ordinary activities                     4.6       (163.5)   (158.9)        (12.4)    (507.1)   (519.5)
after taxation
Equity minority interests                                                      (6.5)                              (8.6)
Loss attributable to shareholders                                            (165.4)                            (528.1)
Dividends                                  2                                   (9.1)                             (10.2)
Transfer from reserves                                                       (174.5)                            (538.3)

                                                                                                         2003      2002
Earnings per share - before profit on sale of
own shares, distribution of shares from the
trusts, reorganisation costs and goodwill
amortisation and impairment

- basic                                   5                                                             4.14p     7.76p
- diluted                                 5                                                             4.13p     7.55p
Loss per share
- basic- -  - basic                       5                                                          (57.09p) (184.66p)
- diluted                                 5                                                          (57.09p) (184.66p)

All the results above relate to continuing activities.

Statement of total recognised gains and losses
For the year ended 30 April 2003

                                                                                          2003               2002
                                                                                     £ million          £ million

Loss attributable to shareholders                                                      (165.4)            (528.1)
Exchange differences on retranslation of net assets of subsidiary                        (2.7)              (1.1)
Tax charge on gift of shares from the QUEST                                              (0.2)              (0.6)
Total recognised gains and losses                                                      (168.3)            (529.8)

Consolidated balance sheet
As at 30 April 2003

                                                                                          2003              2002
                                                                          Note       £ million         £ million

Fixed assets
Intangible assets                                                                        101.9             261.3
Tangible assets                                                                           26.4              24.5
Investment in own                                                                         55.6              58.2
                                                                                         183.9             344.0
Current assets
Debtors                                                                     6             71.6              89.6
Cash at bank and in hand                                                                  20.9              28.3
                                                                                          92.5             117.9
Creditors due within one year
Short term                                                                               (5.6)            (21.0)
Other creditors                                                             7          (106.9)            (97.6)
                                                                                       (112.5)           (118.6)
Net current (liabilities) assets                                                        (20.0)             (0.7)
Total assets less current liabilities                                                    163.9             343.3
Long term borrowings                                                                    (11.5)            (18.2)
Provisions for liabilities and charges                                                   (8.8)             (1.3)
Net assets                                                                  3            143.6             323.8

Capital and reserves
Called up share capital                                                                   16.7              16.4
Shares to be issued                                                                        1.0               9.5
Share premium account                                                                     59.6              54.0
Merger reserve                                                                           760.3             760.3
Other reserve                                                                             36.3              40.6
Profit and loss account                                                                (731.3)           (558.1)
Total equity shareholders' funds                                                         142.6             322.7
Minority interests
Equity interests in subsidiary undertakings                                                1.0               1.1
                                                                                         143.6             323.8

Consolidated cash flow statement

For the year ended 30 April 2003

                                                                2003           2003              2002               2002
                                                Note       £ million      £ million         £ million          £ million

Cash inflow from operating                       8                             51.1                                 56.0

Returns on investments and servicing of
Dividends paid to minority                                     (7.6)                            (7.4)
Interest received                                                0.8                              0.8
Interest paid                                                  (1.8)                            (3.8)
Interest element of finance lease rental                       (0.1)                            (0.1)
                                                                              (8.7)                               (10.5)

Corporation tax paid                                                          (5.6)                               (15.8)

Capital expenditure and financial
Payments to acquire tangible fixed                            (12.5)                           (10.2)
Receipts from sale of tangible fixed assets                      0.7                              0.2
Payments to acquire own shares                                 (2.2)                            (2.9)
Receipts from sale of own shares                                   -                              2.7
                                                                             (14.0)                               (10.2)
Net cash inflow before financing                                               22.8                                 19.5
Payments to acquire investments in                                                -                                (0.9)

Equity dividends paid                                                         (8.1)                                (8.0)
Cash inflow before management of liquid                                        14.7                                 10.6

Management of liquid resources
Withdrawal of short term deposits                                3.0                              3.7
Placement of short term deposits                               (0.4)                            (6.2)
                                                 9                              2.6                                (2.5)
Issue of ordinary share capital                                    -                              1.3
New borrowings                                   9              30.5                             38.6
Repayment of borrowings                          9            (48.0)                           (50.3)
Capital element of finance lease rental          9             (0.2)                            (0.3)
                                                                             (17.7)                               (10.7)
(Decrease) increase in cash at bank and in       10                           (0.4)                                (2.6)

                Notes to the Accounts
1  General

The results for the year ended 30 April 2003 and 2002 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
24 June 2003 and has been prepared on a basis consistent with the 2003 Annual

The audited accounts for the year ended 30 April 2002 have been delivered to the
Registrar of Companies.  The Annual Report and Accounts for the year ended 30
April 2003 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 12.00 noon on Wednesday 17 September 2003 at the Queen Elizabeth II
Conference Centre, London, SW1P 3EE.  Copies may be obtained from the Group's
registered office: Campus 300, Maylands Avenue, Hemel Hempstead, Hertfordshire
HP2 7TQ.

2  Dividends

The total dividend of 3.24p per share (2002: 3.24p) comprises an interim
dividend of 1.08p per share which was paid on 10 April 2003 and a final dividend
of 2.16p which will be paid on 1 October 2003, if approved, to shareholders on
the register at 12 July 2003.  The ex-dividend date will be 10 July 2003.

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.

During the year Xansa undertook a major reorganisation which resulted in
organisational and Board level changes. This resulted in a new structure built
around clients and organised by geographic regions.  A key change has been to
recognise that our Indian operation does not have significant external revenue,
but supplies resource and services to our regional operations, principally the
UK. The costs of the supply are now included within the regional results. In
addition, corporate costs are separately analysed.

                                                                            Operating      Operating   Net assets
                                            Turnover by    Turnover by         profit         (loss)     employed
                                                                            (loss) by      profit by
                                            destination         source        source*         source    by source
                                                   2003           2003           2003           2003         2003
                                              £ million      £ million      £ million      £ million    £ million
Geographic analysis
United Kingdom                                    410.6          411.3           42.3        (139.3)        117.1
North America                                      32.7           32.7          (1.0)          (3.8)         21.0
Continental Europe                                  6.9            6.2          (1.2)          (1.2)          2.2
Asia Pacific                                        3.7            3.7          (2.6)          (2.9)          2.3
                                                  453.9          453.9           37.5        (147.2)        142.6
Corporate overheads                                   -              -          (8.8)          (8.8)            -
Minority interests                                    -              -              -              -          1.0
                                                  453.9          453.9           28.7        (156.0)        143.6

                                                   2002           2002           2002           2002         2002
                                               Restated       Restated       Restated       Restated     Restated
                                              £ million      £ million      £ million      £ million    £ million
Geographic analysis
United Kingdom                                    451.7          450.6           62.9        (487.6)        289.9
North America                                      45.9           45.4          (0.8)          (2.4)         26.9
Continental Europe                                  9.7           12.2          (1.7)          (3.9)          1.0
Asia Pacific                                        7.8            6.9            1.1            1.1          4.9
                                                  515.1          515.1           61.5        (492.8)        322.7
Corporate overheads                                   -              -         (12.4)         (12.4)            -
Minority interests                                    -              -              -              -          1.1
                                                  515.1          515.1           49.1        (505.2)        323.8

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

4  Taxation
                                                                                           2003             2002
                                                                                      £ million        £ million
Tax on loss on ordinary activities
The charge for the year comprises:
Current tax
UK corporation tax                                                                          4.6             10.6
Adjustments in respect of prior years                                                       0.1            (0.3)
                                                                                            4.7             10.3
Foreign tax                                                                                 0.1                -
Adjustments in respect of prior years                                                       0.1            (0.1)
Total current tax                                                                           4.9             10.2
Deferred tax
Origination and reversal of timing differences                                            (3.0)              1.5
Total deferred tax                                                                        (3.0)              1.5

Total tax on loss on ordinary activities                                                    1.9             11.7

5  Earnings per share

                                                                                     2003                           2002
                                                                                £ million                      £ million
(Loss) earnings
Loss attributable to shareholders as used to calculate basic and diluted loss     (165.4)                        (528.1)
per share
Profit on sale of own shares                                                            -                          (1.6)
Exceptional items net of tax                                                        163.5                          507.1
Distribution of shares from the trusts net of tax                                     3.6                            2.3
Goodwill amortisation                                                                10.3                           42.6
Before profit on sale of own shares, distribution of shares from the trusts,         12.0                           22.3
reorganisation costs and goodwill amortisation and impairment

                                                                                   Number                         Number
                                                                                     '000                           '000
Number of shares
Average number of shares in issue                                                 332,909                        327,406
Synergy deferred consideration - shares to be issued                                    -                          1,305
Shares held by the employee trusts                                               (43,209)                       (42,663)
Shares used to calculate basic and diluted loss per                               289,700                        286,048
Synergy deferred consideration - contingent shares to                                   -                          2,697
be issued
Effect of dilutive ordinary shares - share options                                  1,160                          5,034
Shares used to calculate diluted earnings per share pre profit on sale of own     290,860                        293,779
shares, distribution of shares from the trusts, reorganisation costs and
goodwill amortisation and impairment

                                                                                      Per                      Per share
                                                                                    share                         amount
                                                                                    pence                          pence
Diluted (loss) earnings per share
Diluted loss per share                                                            (57.09)                       (184.66)
Effect of potential shares                                                           0.23                           4.86
Profit on sale of own shares                                                            -                         (0.55)
Exceptional items net of tax                                                        56.21                         172.62
Distribution of shares from the trusts net of tax                                    1.24                           0.78
Goodwill amortisation                                                                3.54                          14.50
Before profit on sale of own shares, distribution of shares from the trusts,         4.13                           7.55
reorganisation costs and goodwill amortisation and impairment

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

6  Debtors
                                                                                             2003                  2002
                                                                                        £ million             £ million
Trade debtors                                                                                44.9                  62.4
Amounts to be billed on contracts                                                            12.3                  18.0
Other debtors                                                                                 1.3                   1.2
Prepayments                                                                                  11.3                   8.0
Deferred tax asset                                                                            1.8                     -
                                                                                             71.6                  89.6

7  Creditors due within one year
                                                                                             2003                   2002
                                                                                        £ million              £ million
Other creditors
Revenue in advance                                                                           30.3                   22.5
Trade creditors                                                                               8.7                    7.0
Corporation tax                                                                               7.8                    8.1
Other taxes and social security                                                              15.3                   16.1
Other creditors and accruals                                                                 34.6                   32.1
Proposed dividend                                                                             6.5                    7.0
Proposed dividend due to minority interest                                                    3.7                    4.8
                                                                                            106.9                   97.6

  8  Reconciliation of operating profit to net cash inflow from
  operating activities
                                                      2003          2003       2003          2002         2002      2002
                                                    Before                                 Before
                                               exceptional                            exceptional
                                                     items   Exceptional                    items  Exceptional
                                                                   items                                 items
                                                 £ million     £ million  £ million     £ million    £ million £ million

  Group operating profit (loss)                       13.6       (169.6)    (156.0)           5.0      (510.2)   (505.2)
  Depreciation charge                                  7.4           0.9        8.3           8.0            -       8.0
  Loss on sale of tangible assets                      1.5             -        1.5           0.1            -       0.1
  Profit on sale of own shares                           -             -          -         (1.6)            -     (1.6)
  Amortisation of goodwill                            10.3             -       10.3          42.6            -      42.6
  Distribution of shares from the trusts               4.8             -        4.8           3.1            -       3.1
  Goodwill impairment                                    -         144.4      144.4             -        497.0     497.0
  Accrued reorganisation costs                           -          24.3       24.3             -         13.2      13.2
  Reorganisation costs spent                             -        (18.2)     (18.2)             -        (8.1)     (8.1)
  Release of accrual for shares to be                (1.2)             -      (1.2)             -            -         -
  Decrease in debtors                                 19.0             -       19.0           2.1            -       2.1
  Increase in creditors and provisions                13.9             -       13.9           4.8            -       4.8
  Net cash inflow (outflow) from operating            69.3        (18.2)       51.1          64.1        (8.1)      56.0

9  Analysis of changes in net debt

                                                         At 1 May           Cash              Exchange            At 30
                                                             2002           flow              movement            April 
                                                        £ million      £ million             £ million        £ million

Cash at bank and in hand                                     25.7          (4.3)                 (0.5)             20.9
Overdrafts                                                  (4.2)            3.9                   0.3                -

Debt due within one year                                   (16.5)           11.0                   0.2            (5.3)
Debt due after one year                                    (17.7)            6.5                     -           (11.2)
Finance leases                                              (0.8)            0.2                     -            (0.6)

Cash deposits maturing in one                                 2.6          (2.6)                     -                -

                                                           (10.9)           14.7                     -              3.8

10  Reconciliation of net cash flow to movement in net debt
                                                                                            2003            2002
                                                                                       £ million       £ million
(Decrease) in cash in year                                                                 (0.4)           (2.6)
Cash outflow from decrease in debt and lease financing                                      17.7            12.0
Cash (inflow) outflow from (decrease) increase in liquid resources                         (2.6)             2.5
Change in net debt resulting from cash flows                                                14.7            11.9
Translation difference                                                                         -               -
Movement in net debt in year                                                                14.7            11.9
Net funds (debt) at 1 May                                                                 (10.9)          (22.8)
Net funds (debt) at 30 April                                                                 3.8          (10.9)

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