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The increasing popularity of “cloud computing” has boosted revenues at Phoenix IT, prompting the information technology services group to increase its interim dividend by more than 60 per cent.
But the move towards cloud computing – in which IT operations are hosted on the internet rather than by physical hardware – failed to flow through to the bottom line, with pre-tax profits holding steady at £13.3m.
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The Northampton-based group said on Monday that revenues in all divisions had risen in the first half and that the trend for small businesses and local government to outsource complex IT operations would continue.
“While pressures on public spending may impact growth in the short term, the requirement for the public sector to achieve cost efficiencies offers opportunities for the group. We continue to see outsourcing opportunities in both the public and private sector as customers seek to reduce their cost base,” Phoenix IT said.
Although a relatively late convert to the benefits of cloud computing, Phoenix IT said it was “well positioned to take advantage of the move to a new era in IT infrastructure”. It said it had seen “significant growth in its data centre and hosting related businesses”.
Phoenix, which operates out of 17 locations across the UK, also said it would merge its ICM Continuous Business and Servo mid-market services divisions in April next year in order to further focus its cloud computing operations.
For the six months to September 30, group revenues grew by 13 per cent to £138.4m, while pre-tax profit was unchanged at £13.3m. Diluted earnings per share rose to 12.5p (12.3p) and the interim dividend was boosted to 3.5p (2.15p).
Analysts at Execution Noble said some investors might be disappointed that Phoenix IT was stalling in its appointment of a new chief financial officer.
“Having previously announced that the appointment of a new group finance director was ‘well advanced’, those contractual negotiations ended in late August 2010 when the selected candidate accepted another position. A new executive search company has been appointed and further candidates are currently being interviewed,” Execution Noble said.
Analysts at Singer, Numis and Investec reiterated their “buy” recommendation on the stock. Phoenix IT shares were flat on Monday at 228¾p, valuing the group’s equity at £172m.
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