Phoenix IT Group's share price took a knock this morning after it revealed it would be hit by a number of hefty one-off costs relating to its restructuring, rebranding and a big contract that has turned bad.
In an interim management statement this morning, Phoenix said fiscal third-quarter trading had been in line with expectations, as its order book value dropped four per cent year on year to £309m.
The reorganisation will result in more than 300 job cuts (about 11 per cent of its total headcount), Phoenix revealed, which will lead it to swallow a £10m exceptional charge for its fiscal 2012. Most of the reductions will be in back-office and delivery functions.
Its decision to axe the ICM brand will lead Phoenix to take a further impairment charge of £8.1m in its current financial year, which ends on 31 March 2012.
Finally, Phoenix announced it has set aside a provision of up to £5m for potential lifetime losses relating to a "single specific contract" with an unnamed partner.
The albatross contract in question incurred a loss of £0.9m in the nine months ended 31 December 2011, the firm said.
"Actions to mitigate future losses are currently being investigated and the level of the actual provision required will be determined during the coming months and included in the current-year financial results," stated Phoenix.
The London-listed outfit's share price – which has rallied in recent months – tumbled by nine per cent in early trading before mounting a partial recovery through the course of the morning.
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