End user brands shore up Phoenix in mixed H1

Services player confirms imminent rebranding and operational overhaul as order book for third-party services suffers big contraction

Phoenix's end user-focused units delivered a resilient performance during the firm's fiscal first half, but its third-party services order-book value suffered a sharp decline.

The IT services company also confirmed it will reorganise under one brand and implement a new operational structure, the details of which were exclusively revealed by ChannelWeb last week.

For the six months to the end of September, total group revenue was down 4.4 per cent year on year to £132.3m. Underlying operating profit stood at £16.3m, a £1m drop on last year's figure.

The group's Phoenix IT Services division, which delivers support services through the channel, saw half-year turnover decline 5.7 per cent annually to £57.5m. Operational profit shrank 9.7 per cent to £7.8m. The division's order-book value, which stood at £178.2m a year ago, has now been reduced by almost £40m to £138.6m.

At the start of the year Phoenix merged its two end-user brands: business continuity outfit ICM and mid-market player Servo. The combined entity delivered a solid set of H1 results, with sales down 3.4 per cent to £74.8m, but operating profit rising slightly to £10.6m.

Sales of business continuity offerings spiked 3.1 per cent annually to £29.4m, with operating profit up 2.6 per cent to £7m. However, an order-book value of £108.5m represents an £8.4m decline on last year.

Phoenix's mid-market services operations saw first-half sales drop 7.3 per cent annually to £45.4m. But operating profit was up slightly to £3.6m as margins have swelled from 7.2 per cent to eight per cent over the past year. The order book for the former Servo business is also looking in rude health, with its value growing almost £10m to £75.3m in the past 12 months.

Phoenix chief executive David Courtley said: "The group has delivered a satisfactory set of results, in line with the board's expectations, against a background of challenging economic conditions. This has been achieved through sustaining gross margins and tightly controlling costs.

"Operationally we will remain focused on improving service to our customers, increasing our share of target markets and growing our base in hosting and cloud services."

In today's statement to the markets, Phoenix claims its upcoming restructure "is intended to simplify our operations and clarify our market positioning".

Looking ahead to the rest of the year, the firm states that it expects H2 trading to roughly mirror its first-half performance.

"While the overall sales pipeline has improved recently, longer sales cycles and the challenging macroeconomic environment will continue to impact the rate of new business wins in the shorter term," said Phoenix.