Falling sales, profits and bookings clipped the wings of Phoenix IT (PNX) in the first half. "It is a turnaround," admits chief executive Steve Vaughan, blaming a lack of focus and strategy for the managed IT services group's longstanding troubles.
The leap in Phoenix's statutory profits stems from lower amortisation and non-recurring items. Strip those out and operating profit fell 4 per cent to £7.4m. Indeed, underlying sales and profits fell in both its business continuity division, which backs up and recovers customers' data, and managed services, which runs IT systems for medium-sized businesses. Improved efficiency did allow Phoenix's largest segment, which partners with the likes of IBM to deliver on-site support, to post a 29 per cent increase in underlying operating profit, to £3.1m. But the group outlook remains weak, with forward orders down 12 per cent.
Phoenix's recovery strategy involves ramping up cross-selling between its divisions. It has also shifted the focus of its partner business towards providing high-quality service rather than raw manpower. The strategy seems to be paying off. Phoenix renewed several long-term agreements and landed a five-year contract with an NHS trust in South Yorkshire. It has also been appointed a Microsoft Cloud partner, allowing it to bundle the tech giant's cloud products with its own CloudSure offering.
Broker Panmure Gordon forecasts full-year pre-tax profits of £8.2m, giving EPS of 7.5p, rising to £10m and 9.1p (from £12.6m and 12.1p in 2013-14).
| PHOENIX IT (PNX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 134p | MARKET VALUE: | £111m | |
| TOUCH: | 133-135p | 12-MONTH HIGH: | 147p | LOW: 86p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | NA | |
| NET ASSET VALUE: | 48p* | NET DEBT: | 141% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 117 | 1.2 | 1.2 | 1.6 |
| 2014 | 107 | 4.1 | 3.9 | 0.5 |
| % change | -8 | +242 | +225 | -69 |
Ex-div: 4 Dec Payment: 12 Jan *Includes intangible assets of £82m, or 99p a share | ||||
