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Restructuring costs wipe out Phoenix profits

Alex Scroxton

Full year pre-tax profit at IT services provider Phoenix IT Group has plunged 85% after the firm booked non-recurring costs of £14.9m relating to its ongoing re-organisation programme and £8.1m relating to the end of the ICM brand. Sales declined 2.6% to £264.6m.

Phoenix is currently attempting to take out costs of up to £4m per annum out of its business and has already re-organised itself into a single integrated structure as of 1 April this year, focused around five key customer-facing business units.

These business units are, Systems Integrators, providing desktop support and services to SIs and other outsourcers; Communications, providing network services to telcos and other firms with networking requirements; Hosting, which will deal with Phoenix's cloud propiosition; Managed Services, which will be focused primarily on the midmarket, and Business Continuity.

Meanwhile, its Service Delivery has been integrated into a series of what Phoenix now terms Capability Units. These also comprise five units, Distributed Services, dealing with field and mobile engineering and network support; Service Management, providing service desk and network operations; Professional Services, providing technical project management, consultancy and design and deployment; Data Centre and Business Continuity Services, which will deal with operational managament of business continuity and hosting centres, and Procurement and Vendor Services, procurement and management of software and hardware vendor relationships.

It is this focus that chief exec David Courtley is counting will give the firm "a strong platform to grow this business by offering a more cohesive range of complementary services."

In Phoenix' preliminary year-end statement, Courtley said: "The transition to our new structure has been well organised and controlled. However, it has inevitably led to some disruption with a consequential impact on short term results."

Courtley sounded a cautious note as to future performance, saying that the business environment for Phoenix still remained challenging, and the firm expected inflationary cost pressures to offset some of the cost benefits of the restructuring process, at least during the first half of fiscal 2013.

He added: "As the new business structure beds in we hope to see a positive improvement in the order book and the pipeline of opportunities over time."


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