Beating market expectations provided a welcome fillip for Xchanging as the outsourcing group narrowed pre-tax losses in 2011.

The group is in a transformational period, in which it restructured and prioritised cost-cutting after a profit warning12 months ago caused shares to plunge. However, such adjustment comes at a price. Restructuring costs and goodwill impairments underpinned the £2.5m loss, and there is still a lossmaking contract in Italy to address.

With a forward price/earnings ratio of 9.7 times, the group trades at a large discount to the 18 times for the sector overall. This partly reflects its smaller size but, given the turnround, the shares look fairly priced.

Full-year results to December 31
SalesPre-tax profitEarnings per shareDividend

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