Disposal

1 June 2011

Xchanging plc

Disposal of Cambridge Solutions' workers' compensation and third party administration operations in the USA

Xchanging plc ("Xchanging"/XCH.L), the global business processing group ("the Group"), is pleased to announce that Cambridge Integrated Services Group Inc ("CISGI"), the US arm of its 76% owned subsidiary Cambridge Solutions Limited, has sold its US workers' compensation and third party administration operations ("the Operations") to Sedgwick Claims Management Services, Inc ("Sedgwick") for $22.7 million (approximately £13.8 million).

This disposal will free the Group of a loss making and cash absorbing operation and improve the underlying profitability and cash flow, whilst enabling Xchanging to focus on its profitable, growing businesses.

Signing and completion are simultaneous and the consideration has been paid in cash. $3 million of the consideration will be held in escrow for 18 months. The consideration is subject to adjustment by reference to post completion confirmation of the working capital and customer funds accounts as at 31 May 2011.

The Operations include the workers' compensation claims, managed care, consumer claims, professional liability claims and structured settlements operations of CISGI. Virtually all of the contracts, assets, employees, current liabilities and future service obligations have been acquired by Sedgwick, although certain liabilities and non-operational assets have been retained by CISGI. CISGI and Sedgwick have also entered into a transition services agreement to facilitate a smooth handover of the Operations.

In the year ended 31 December 2010, the Operations being disposed of recorded revenue of $113.4 million*, an operating loss before interest and tax after IFRS 3 amortisation of acquired intangibles of $(8.2) million* and an operating loss before interest and tax of $(1.4) million* excluding those charges. The gross assets being transferred have a carrying value at 31 December 2010 of $14.9 million*.

The transaction will be reflected as a discontinued operation in the 2011 half year results and the significant cash flow benefits of the sale will help to fund the Group's future growth.

Ken Lever, Acting Chief Executive Officer and Chief Financial Officer of Xchanging, commented: "This transaction is a key element of the Four Point Action Plan we outlined in our preliminary results. Specifically it creates intrinsic value through the exiting of a business with unsatisfactory returns and significant future commitments. Selling the Operations to Sedgwick, a market leader in the workers' compensation arena, will provide our customers and employees with a good home for the future."

StoneRidge Advisors in the US acted as financial adviser to Xchanging plc on this transaction.

* Based on unaudited information relating to the Operations transferred.

Enquiries:

Conference Call

Ken Lever will host a conference call for analysts and investors to discuss this statement at 0800 BST on Wednesday 1 June 2011. The conference call telephone number is +44 (0) 1452 552 719, conference ID 72277575. For individuals unable to participate in the conference call, a telephone replay will be available until Tuesday 14 June. Please telephone +44 (0) 1452 550 000, conference ID 72277575.

About Xchanging

Xchanging provides business processing services which are applicable across industries, such as procurement, human resources and technology, as well as industry-specific offerings for insurers and financial services companies.

Xchanging also provides a range of advisory services and software products which add value for customers by helping to improve the efficiency and effectiveness of their processes.

www.xchanging.com 

Cautionary Statement

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Xchanging's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approval or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.