Phoenix "very cautious" despite £40m outsourcing deal win

IT services heavyweight seals desktop services deal with major outsourcer as it prepares book-cooking investigation update

Phoenix has sealed a five-year, £40m deal with "one of the major global IT services providers" to provide desktop support to its UK clients and staff.

But despite the big win, the IT services heavyweight has warned that it remains "very cautious in relation to its current trading performance".

The contract, which takes effect next month, is designed to "provide a high degree of flexibility" and is expected to be worth about £40m to Phoenix over a five-year period. Some 180 staff will be transferred to the London-listed firm as part of the deal.

The company is publishing its half-yearly results on Thursday, at which time it will also update the market on the progress of the independent investigation into accounting irregularities at its former Servo business. In September Phoenix announced it is expecting to take a £14m hit to its net assets this year after an internal review found that "certain control processes... have been repeatedly and deliberately circumvented".

According to today's update, the external probe by law firm Nabarro and auditor PwC is "nearing completion". The statement sounded a downbeat note in relation to the services outfit's short-term prospects, but displayed a degree of optimism about the future.

"The board is very cautious in relation to its current trading performance, but is encouraged about the company's medium and longer-term prospects in respect of the above-mentioned contract and other positive developments," concluded the statement.