Tough market conditions force Xansa to cut 430 jobs

The IT services company Xansa yesterday moved to axe up to 430 jobs worldwide, warning it saw no let-up in the tough market conditions that have already forced it to issue four profit warnings in the past year.

Alistair Cox, its chief executive, said: "The current economic climate suggests that we are unlikely to witness any marked upturn in demand during our financial year 2003-04 and so we are putting in place an organisational structure and cost base appropriate to compete in a market that we assume will be flat."

Shares in Xansa, which said trading since the start of November had been "in line" with expectations, slipped 1.5p to 62.5p.

Its restructuring programme, which will see up to 430 staff leave the business over the next four months, will cost Xansa between £22m and £25m but will save it some £20m to £23m a year.

The move came as Xansa announced a pre-tax loss of £140.7m in the six months to 31 October compared with a £1.7m profit a year before. Sales fell 14 per cent to £232.5m. Stripping out a £1.9m restructuring charge and a £151.6m charge to cover goodwill amortisation and impairment, profits fell 36 per cent to £14.8m.

"Our performance in the half year reflects the impact of the current depressed economic climate," it said. Revenues in Continental Europe plunged 56 per cent and sales in Asia Pacific fell 26.5 per cent, while US sales dropped 17.6 per cent.

Nevertheless, Mr Cox said he was confident Xansa was now taking the right steps. "In effect, we are prepared to tackle a continued tough market but are well positioned for growth," he said.

Analysts at Dresdner Kleinwort Wasserstein were not convinced. "With the prospect of flat revenues and further restructuring, we see no reason to turn more positive," they said.