31 July 2009

Phoenix IT Group plc 

Interim Management Statement

Phoenix IT Group plc ('the Group') releases its Interim Management Statement relating to the period from 1 April 2009 up to the latest practicable date prior to the publication of this statement, 30 July 2009. Financial data is for the Group's first quarter (1 April 2009 to 30 June 2009), unless otherwise stated. 

The financial results for the Group for the first quarter are in line with the Board's expectations. 

Through a combination of the ongoing focus on the provision of higher margin services and continuing cost control, the margins in both the Partner and the Business Continuity divisions continued to improve in the quarter. However, excluding the effect of the sale of the Group's French business, on a like-for-like basis revenue for the first quarter of the financial year decreased by 5% compared to the corresponding period last year reflecting the impact of the recession over the last 12 months. The decline was most marked in the Mid-market division, particularly in product sales and associated professional services. Overall the Group achieved an operating profit for the period in line with the same period last year as a result of the higher Group operating margin.

In the preliminary results statement of 1 June 2009, it was explained that in today's challenging market there are fewer large scale multi-million pound, multi-year contract opportunities in the Partner business' market.  Opportunities and contracts in this business currently tend to be for projects of a smaller size.  As at 30 June 2009 this is evidenced in the Group order book at £268.5m, a decrease of 6.6% compared to 30 June 2008 and a decline of 6.4% from 31 March 2009, and in the annualised contract values which decreased by 2.2% compared to 30 June 2008, with a decline of 1.6% since 31 March 2009 to £177.0m.

The Group has continued to reduce net debt, even after a dividend payment of £1.7m in the first quarter. At 30 June 2009 net debt stood at £84.7m, a reduction of £3.7m from 31 March 2009, and the Board remains confident that net debt will continue to be reduced substantially during the remainder of the financial year.  

The recession continues to adversely impact the time new customers are taking to reach purchasing decisions and also increases pricing pressure in each of the markets the Group serves. However, there has been an increase in sales opportunities in each division during the quarter which, together with the Group's good forward visibility from its order book and high levels of recurring revenues from a highly diversified customer base, give the Board increasing confidence in the outlook for the current year and beyond.

Nick Robinson, Chief Executive of Phoenix IT Group plc, commented:

'We have had a solid start to the year and our performance is on track to meet the Board's expectations for the year. Activity levels are high and our pipeline continues to grow as a result of increasing opportunities over recent weeks.'

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