RNS Number : 4050F
  Phoenix IT Group PLC
  09 October 2008
   

    
    Thursday 9 October 2008 

    Phoenix IT Group plc 
    Period-end trading update and notice of investor day 
    (Unaudited)

    Phoenix IT Group plc ("Phoenix" or the "Group"), the UK IT services company, is today providing an update on trading for the six months
to 30 September 2008.  Ahead of hosting an investor day tomorrow, Friday 10 October 2008, and given the current economic environment, the
Group has chosen to provide more detailed information than it usually provides in its period-end updates.  No further new material
information will be disclosed at tomorrow's investor day.


    Financial Highlights - strong revenue and profit growth

    *     Revenue growth in all divisions and Group revenues expected to be circa �126m (2007: �101.9m), up circa 24%.

    *     On a pro-forma basis assuming that ICM had been acquired on the first day of the comparative period, Group revenues are expected
to increase by circa 10%.

    *     Profit from operations* is expected to increase by circa 19% to circa �17m 
(2007: �14.3m). 

    *     Profit before tax* expected to increase by circa 18% to circa �13m (2007: �11.0m).

    *     Non-recurring costs for the period of circa �4m. Total non-recurring costs expected to be as previously forecast at �11m.

    *     Net debt (excluding finance leases) at 30 September 2008 as anticipated of �85.9m, (2007: �98.3m). At 30 September 2008 the Group
had bank facilities of �128.5m which periodically amortise over four years through to expiry in May 2012.

    *     Net debt (inclusive of finance leases) at 30 September 2008 as anticipated at �100.5m (2007: �106.3m). 

    *     Capital expenditure for the first half of the year is expected to be circa �9.0m, including expenditure on the hosting centres at
the existing Birstall and Aston facilities and completion of the fit-out of the Farnborough business continuity and hosting facilities.
Planned capital expenditure for the year as a whole of approximately �14m is circa �3m lower than previously forecast.

        * before non recurring items and amortisation of acquired intangibles


    Operational Highlights - Group integration complete with a good pipeline and high recurring revenues in all divisions

    *     Group order book increased to �291m at 30 September 2008 compared to 30 September 2007 (�288.2m). ICM Continuous Business
(Business Continuity) achieved an order book of over �100m for the first time at 31 August 2008. 

    *     Good sales pipeline in all divisions with good forward visibility coupled with high levels of recurring revenues. 

    *     Group integration plan is complete.

    *     Continuing inflationary pressures, particularly vehicle fuels and electricity costs.

    ICM Continuous Business (Business Continuity) - 25% operating margin achieved six months ahead of plan

    The Business Continuity division has grown strongly in the period and is anticipated to deliver revenues of circa �25.5m (2007: �17.5m),
an increase of circa 46%. On a pro-forma basis assuming that ICM had been acquired on the first day of the comparative period, revenues are
expected to increase by circa 21%. 

    Operating margins have continued to improve as the division has increased the utilisation of its syndicated and dedicated seats,
together with its recently increased hosting capacity. The divisional operating profit margin is expected to increase to circa 25% for the
first half (2007: 22.4%), achieving the Group's 2009 target of 25% margin for the division six months earlier than anticipated. 

    The utilisation rate for syndicated seats has increased to approximately 46% at the period end (31 March 2008: 42%).

    With reference to the announcement made on 15 September 2008 there is no further update on that contract at this time.

    Phoenix IT Services and Operational Shared Services (Partner Services) - strong market position of Phoenix IT Services maintained,
despite tough market conditions

    The Operational Shared Services (OSS) unit, now fully operational, employs over 1,550 people and is currently managed within Phoenix IT
Services (UK). 

    In its Q1 IMS, the Group stated that it had seen some softening in the market for Partner Services and this has continued into Q2. In
the competitive market in which Phoenix IT Services (UK) operates, new business wins in the period have been of smaller size with continuing
margin pressure.  However, there are some good opportunities and since the period end we have been awarded a significant contract worth �6m
over a 21 month period from early 2009. Revenues for Phoenix IT Services (UK) for the first half are expected to be circa �52.3m (2007:
�47.3m) generating an operating profit margin of circa 15% (2007: 19.1%) compared with an underlying margin of 16.9% for the year ended 31
March 2008. 

    The Group's integration plan is complete but certain additional costs have been incurred to assure the appropriate service levels to
Group customers through the post-integration period. These costs will delay circa �1m of synergy benefits that were anticipated during the
current financial year.  It is anticipated that these costs will be phased out by September 2009. These costs have been retained within
Phoenix IT Services (UK) because the OSS unit is currently managed within this business. 

    Servo (Mid-Market) - 10% operating margin achieved in line with plan

    The Mid-Market division, Servo, has performed well in the period, achieving the Group's target of double digit operating profit margins
for this division. Revenue for the period is expected to be circa �47m (2007: �35.9m), with an operating margin of circa 10% (2007: 7.6%).
On a pro-forma basis assuming that ICM had been acquired on the first day of the comparative period, revenues are expected to increase by
circa 4%.

    The division has continued to focus on services rather than product in the period with the proportion of services revenue increasing to
circa 66% (2007: 61%). 

    Other 

    As stated at the 2008 preliminary results, a further �4.6m of the non-recurring items relating to the integration programme are expected
to be incurred in the financial year ended 31 March 2009. This is in addition to the �6.4m of non-recurring items reported in the financial
year ended 31 March 2008, giving total expected non-recurring costs, as previously forecast, of �11m.  Included within this total non
recurring cost is �0.5m of provisions for impairment losses on freehold properties held for resale. In the event that these properties
remain unsold at 31 March 2009, their carrying values will be reviewed again. In the current economic environment these valuations may
result in additional impairment provisions being required. Of the �4.6m expected to be incurred in the financial year ending 31 March 2009
circa �4.0m (of which circa �3.6m is expected to be a cash cost) was incurred in the 6 month period to 30 September 2008.

    The search for additional Non Executive Directors is progressing as planned and the Board will be able to make a further announcement in
due course. 

    The Group will announce its interim results for the six months ended 30 September 2008 on 24 November 2008.


    Enquiries:

    
 Phoenix          Tel: +44 (0)1604 769000
 Peter Bertram         Executive Chairman
 Jeremy Stafford  Chief Executive Officer
 David Simpson    Chief Financial Officer

    
 Financial Dynamics  Tel: +44 (0)20 7831 3113
 Harriet Keen                                
 Giles Sanderson                             
 Haya Chelhot                                




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