Xansa hit by 'tough market conditions'

Shares in Xansa took a battering yesterday after the IT services company warned it expected market conditions to remain tough for the rest of the year, and highlighted a £12.5m charge for settling a dispute with a customer.

The Hemel Hempstead-based firm said the ongoing difficult climate for its services, combined with the completion of certain projects, would hit turnover in the second half. Its shares dropped 14p to close at 107.25p.

Xansa, which has been slashing costs in the face of waning demand, is expected to produce sales of about £225m in the first half of the year and about £445m in the full year. "Because customers are taking longer to close deals, they [Xansa] haven't bagged some contracts they hoped they would have. That means that as some projects come to an end, they haven't got anything of equal size that is starting," said one City source.

Separately, Xansa said it had struck a settlement with a former customer about a dispute over a project it carried out that completed last year.

The company has agreed to pay £12.5m in total - half now and half in May of next year. The settlement is "significantly" less than the overall value of the project.

A spokesman, who refused to be drawn on the details of the dispute, insisted: "This is a one-off incident."