Phoenix IT Group has confirmed the merger of its ICM Business Continuity and Servo operating units will cost the best part of £3.5m in restructuring charges.
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The AIM-listed IT services group has completed the process, first mooted last year, bringing together the management structures, technical grouping and facilities staff.
"In combining the businesses we have incurred some one-off restructuring costs which will be offset by synergies and cost savings over the next 18 months," said Phoenix, in an otherwise uneventful trading update today.
"These costs represent the largest element of a number of non-recurring charges for the year, which total approximately £3.5m," it added.
It is not clear the level of redundancies made during the consolidation exercise but MicroScope understands that Andy Jones, former sales and marketing director at ICM and interim boss at Servo has exited the firm.
The reasons for combining DR-led ICM, which peddles services including mobile recovery and data centre co-location, with the classic IT break fix operation at Servo, is to foster cross-selling among each other's customer bases.
Anthony Miller, managing director at industry analyst TechMarketView, agreed with the business logic but pointed out that ICM and Servo operate in different markets, at different margins and with different approaches.
"The challenge is to make [the sale forces] work together as a single mid-market facing entity," he said.
Unlike the last trading statement in February when Phoenix highlighted the impact of Government austerity measures, the firm said today that sales and underlying profit for the year ended 31 March 2011 were in line with Board expectations.
Operating cash flow remains "strong" and in spite of planned rises in capex in ICM and Servo, and the "enhanced dividend payout policy", net debt has declined over the fiscal to £62.4m, from £67.9m a year ago.