Phoenix maintains gentle ascent

Continuity business

fingers pointing at man

The disaster recovery business has been keeping Phoenix IT Group heading skyward.

Revenues were up overall by 16.3 per cent to £126.7m, which included five months of sales from Servo Computer Services, the SME IT services and product sales business that Phoenix acquired in November 2006.

Excluding the Servo figures, "the like-for-like increase was 1.3 per cent", said the group in results for the year ended 31 March 2007 .

Servo had counterbalanced a 1.5 per cent drop in revenues in its core division, Phoenix IT Services, where sales totalled £91.5m. The group blamed price competition and the loss of two "significant" contracts, which it did not name.

Disregarding the contract losses, the firm said underlying core revenue increased 9.5 per cent to £79.9m, while its order book was up 18.9 per cent to £152.7m.

Network Disaster Recovery Limited (NDR), the SME business continuity arm the group acquired in 2005, had been keeping the wind under Phoenix's wings. Insurers were demanding that companies spent money on business continuity, said the group statement. It noted that the 2005 London terrorist attacks and the Buncefield fuel depot explosion had been good for business as well.

Revenues had increased 17.5 per cent at NDR to £18.8m, though the statement did not break out its contribution to profit. It did say that, excluding caveats, group profit had been comparable to last year, with "strong profit growth" in NDR being offset by "declines in the Phoenix business".

However, counting for the amortisation of acquired intangibles, and including the £1.7m contributed by Servo, profit rose 6.0 per cent to £22.7m.

Counting those same intangibles, the group's operating profit margin fell nearly two points to 17.9 per cent. The group blamed Servo's 10.4 per cent operating margins, which was attributable to its high proportion of low margin product sales. The unit was trying to sell more services.

Profit before tax increased by 7.4 per cent to £19.3m, while the group generated 15.9 per cent cash than it did last year, at £31m. Cash flow was up 8.4 per cent to £23.6m.

The group has made an offer to purchase ICM Computer Group plc since it closed its year end. ®

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