Phoenix IT to rise again

The £14.9m cost of this reorganisation and a further £7.1m of exceptional items explains the plunge in reported profits in the 12 months to end-March, but even if you strip these charges out underlying operating profits still slumped 10 per cent. Moreover, ongoing cost pressures mean that performance is only expected to improve in the second half of the year, so analysts at Investec Securities have cut their current year pre-tax profit forecasts by 7 per cent to £28.4m, giving EPS of 27.3p (£28.7m and 27.8p in 2012).

In the latest trading period, revenues in the group's business continuity unit, which includes disaster recovery, edged up to £56.3m, but revenues from mid-market clients slumped over 7 per cent to £91.1m. Margins in both also contracted, but not as much as in the larger partner services business providing IT support and hosting services, and it was the combination of lower revenues and declining margins that led to the profit shortfall. On a positive note, although the year-end order book contracted by £13.3m to £314m, there was a £5m uptick in the final quarter.