UK managed services firm Phoenix IT issued full year results to the London Stock Exchange and announced a three recovery strategy.
Annual revenues for the year were £233.4m (2013: £250.0m) and underlying profit from operations of £17.7m (2013: £19.0m). Phoenix IT also announced that year-end net debt was now at its lowest level in seven years at £56.1m (2013: £71.3m).
The firm said it had been a challenging year for the business with positive indications being the Group implementation of its new strategy, and a return to profitability in the Group's Managed Services division and the renewal of several of the Group's largest Business Continuity clients.
Steve Vaughan, recently appointed Chief Executive Officer, said: "I joined Phoenix on 12 March this year. In that short time I have uncovered much that we can be proud of, not least our enviable market position and impressive customer base. I have also found much that needs to change. My focus and the focus of everyone at Phoenix now rests firmly on making those changes happen."
George O'Connor, analyst at Panmure Gordon said: "The pleasing note is the confident sleeves rolled up strategy statement by new CEO Steve Vaughan. In essence to "become essential" - it involves merging the mid-market divisions, driving more cloud business (about time), migrate away from T&M services in Partner Services and better account management. Investors might think: "Is that it?""
"We think "Yes" - Phoenix IT has good assets but needs to be better 'geared' to the changed IT Services market, and the business suffered from being overly complicated. The three phased plan borrows from Mr Vaughan's Synstar playbook and while not articulated this morning, after restructure and stability, we would imagine Mr Vaughan carving out and selling some of the parts. The shares are not for widows and orphans, and comfortably wear a label called 'special situations'. We see a longer opportunity of improving earnings, re-rating and trade sale."
Steve Vaughan said: "The large, dynamic middle market that we serve is beginning to adopt Cloud services at a faster pace and this creates very real opportunities for us. Our Partner business gives us great scale. We are well positioned to address these new opportunities through all of our complementary business divisions. We believe there is a real potential to exploit emerging Cloud demand in the UK middle market which is predicted to grow by 20% annually over the next five years (2). If we simplify our service lines, inject greater discipline into the way we manage our client accounts and focus hard on delivering consistent, excellent service to those clients then I am convinced that there is a real opportunity for us to return Phoenix IT to a sustainable growth path."