Trading Statement

TRADING UPDATE AND BOARD CHANGE

Ahead of the announcement of the financial results for the year to 31 December 2010 on 1 March 2011, Xchanging plc is today announcing a trading update and a Board change.

Trading Update

Year ended 31 December 2010

On 1 March, Xchanging plc expects to report that, subject to auditI, the revenue and underlying operating profitII for 2010 will be in line with market expectationsIII as indicated in the Interim Management Statement dated 1 November 2010.

It is in the nature of our business that there are one-off items included each year in reported underlying operating profit. In this respect, for 2010, our reported underlying operating profit will include an amount of £6.9 million relating to contract settlements arising in the second half of the year. In addition, as previously indicated, the reported underlying operating profit will include consulting income from the Compagnie Pour Assistance Technique et Investissements S.A. (CATISA) arrangement of £4.9 million. Net cash improved slightly during the year and as at 31 December 2010 stood at £24.8 million (2009: £22.1 million).

The 2010 results will also include, subject to audit, impairment charges to the carrying values of intangible and other assets of around £12.0 million, and to goodwill, relating primarily to the Cambridge business, of around £100.0 million.

Year ended 31 December 2011

In finalising the results for 2010 and assessing the outlook, it is now anticipated that revenue in 2011 will be within the current range of analysts' 2011 estimatesIV. It is anticipated that 2011 underlying operating profit will be below the lower end of the current range of analysts' estimates for 2011 of £55.5 million to £80.2 million.

The expected reduction in operating profit in 2011 compared to 2010 will be primarily due to the absence of the contract settlements and consulting income which benefited 2010 results, the reduction in profits of the order of £2.0 million as a result of a contract termination, a deterioration of performance in the US Claims business of around £4.0 million and a higher level of business development investment in the Americas of around £4.0 million. In addition, in the Financial Services business margins will be challenged by the pressure for further price discounts.

Actions are being taken to mitigate the impact on operating profits in 2011 which include restructuring and cost reduction initiatives. Further details of these actions together with the audited financial information and further comments about the outlook for the 2011 financial year will be made available, as planned, with the Preliminary Results' announcement on 1 March 2011.

Dividend

In these circumstances the Board has decided not to pay a dividend for 2010. Going forward the Board will keep payment of a dividend under review.

Board Change

Xchanging plc is announcing today that David Andrews has decided to step down from the Board and from the role of Chief Executive Officer with immediate effect. David has agreed to take on a new role as Senior Adviser to the Chairman to support the company's business development initiatives. David has made a significant and invaluable contribution to the growth and success of Xchanging since he founded the business in 1999 and led the successful flotation of the company in 2007.

A search for a successor to David in the role of Chief Executive Officer will commence immediately. During the period of the search, Ken Lever, the Chief Financial Officer, will assume the role of Acting Chief Executive Officer in addition to his responsibilities as Chief Financial Officer, and Nigel Rich will become Executive Chairman.

Xchanging Chairman, Nigel Rich said: "We are very grateful to David for his role in founding Xchanging and building the business. I am delighted he has agreed to take a new role as Senior Adviser supporting our business development initiatives. 2011 will be a year of transition for Xchanging as we re-align the cost base and focus on revenue growth to deliver sustainable profit for shareholders."

David Andrews, Chief Executive Officer, said: "After 11 years building Xchanging from its inception, it is time for me to hand over the leadership role for the next stage of the company's development. I believe in the future success of Xchanging and that I can now best contribute to the company's future by supporting its business development initiatives."

I All financial information in this announcement is unaudited

II "Underlying operating profit" excludes exceptional items, costs of acquisition and amortisation of intangible assets previously unrecognised by acquired entities

III Source: Reuters (1 February 2011) - 2010 revenues £757.6 - £800.0 million (average: £782.4 million); operating profit £47.4 - £74.9 million (average: £67.1 million)

IV Source: Reuters (1 February 2011) - 2011 revenues £782.1- £870.0 million (average: £827.3 million)

9 February 2011

For further information contact:

About Xchanging

Xchanging is a global business processer. We serve a wide range of multinational customers in 42 countries and employ over 8,000 people. Xchanging provides procurement, accounting, human resources and technology services across industries. These include banking, insurance, manufacturing, retail and real estate among others. We combine functional expertise with deep industry domain knowledge to provide specific outcomes for our customers. Our aim is simply to provide business processing services better, cheaper and faster.

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.