Phoenix IT Group plc
Technology House, Hunsbury Hill
Avenue, Northampton NN4 8QS
Tel: +44 (0) 1604 769000 
Fax: +44 (0) 1604 764323
www.phoenixitgroup.com
INSPIRING
PARTNERSHIP
Annual report 
and accounts 2006
Phoenix IT Group plc Annual report and accounts 2006 INSPIRING PARTNERSHIP Phoenix is a leading provider of a range of high
quality IT support services, including network and
systems management, network services, service
desks, field services, professional services, and
business continuity . 
These services are frequently sold and 
delivered as a managed service where Phoenix,
in conjunction with a partner, manages the 
end user’s entire IT infrastructure rather 
than providing individual support services. 
During the year the Company added business
continuity services including disaster recovery 
to its portfolio and continues to seek further
selective acquisitions to expand the range of
services to provide to customers.
Our services
Network and systems management
Monitoring, managing and administering local
and wide-area voice and data networks
through Remote Management Centres.
Network services
Design, configuration, installation and support
of voice and data networks in complex multi-
vendor environments.
Service desks
Dedicated call teams deliver first line customer
support and guidance for end users, 24 hours
a day, seven days a week.
Field services
Over 500 permanently employed service
engineers provide support of desktop and
server infrastructure, 24 hours a day, seven
days a week.
Professional services
Management and delivery of project
implementation, configuration and roll-out 
of partner-developed information technology
solutions.
Business continuity
Business continuity and disaster recovery
services and facilities covering all major
platforms across a wide range of vendors.
Contents
01 Financial highlights 
and Operational highlights
02 Chairman’s statement
04 Chief executive’s review
07 Financial review
08 Corporate social responsibility
10 Board of Directors
11 Directors’ Report
13 Corporate governance
15 Audit Committee report
16 Directors’ Remuneration Report
18 Independent auditors’ report 
on the Group financial statements
19 Consolidated statement of income
19 Consolidated statement of changes 
in Shareholders’ equity
20 Consolidated balance sheet
21 Consolidated cash flow statement
22 Notes to the consolidated 
financial statements
42 Independent auditors’ report 
on the Company financial statements
43 Company balance sheet
44 Notes to the Company financial statements
48 Five year summary
IBC Advisers and Shareholder information
PHOENIX IT GROUP plc
Registered In England 3476115
Registered Office
Technology House
Hunsbury Hill Avenue
Northampton
NN4 8QS
ADVISERS
Financial Advisers & Stockbrokers
UBS Limited
1 Finsbury Avenue
London
EC2M 2PP
Auditors
Deloitte & Touche LLP
Four Brindleyplace
Birmingham
B1 2HZ
Registrars
Lloyds TSB Registars
The Causeway
Worthing
West Sussex
BN99 9DA
Principal bankers
Bank of Scotland
249 Silbury Boulevard
Milton Keynes
MK9 1NA
Solicitors
Eversheds LLP
115 Colmore Row
Birmingham
B3 3AL
Financial public relations
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London
WC2A 1PB
Remuneration consultants
New Bridge Street Consultants LLP
20 Little Britain
London
EC1A 7DH
Financial calendar
Annual General Meeting 3 August 2006
Ex dividend date 16 August 2006
Record date for dividend 18 August 2006
Dividend payment date 8 September 2006
ADVISERS AND SHAREHOLDER 
INFORMA TION 01 Phoenix IT Group plc
Annual report and accounts 2006
£1 08. 9m
Revenues up 23.3% (2005: £88.3m)
£22. 0m
Operating profit before share option
charges, amortisation of acquired intangibles 
and flotation expenses up 38.3% 
(2005: £15.9m)
£21.4m
Operating profit before amortisation
of acquired intangibles and flotation 
expenses up 42.6% (2005: £15.0m)
£1 9.4m
Profit from operations up 48.9%
(2005: £13.0m)
20.8p
Diluted earnings per share up 35.1% 
(2005: 15.4p)
£2 6.8m
Cash generated by operations up 183% 
to £26.8m (2005: £9.5m)
1
, representing 
138% of profit from operations (2005: 73%)
2. 76p
Proposed final dividend per share up 15% 
(2005: 2.4p)
OPERA TIONAL
HIGHLIGHTS
NDR performing ahead of
expectations, contributing
£16.0m of revenues since
completion of the acquisition
in April 2005.
Contracted order book
increased 19% to £148.7m,
with a major five-year contract
win since the period end.
FINANCIAL
HIGHLIGHTS
97 98 99 00 01 02 03 04 05 06
100
120
80
60
40
20
0
97 98 99 00 01 02 03 04 05 06
20
25
15
10
5
0
UK GAAP
IFRS
1
See page 34
10 YEAR TRACK RECORD 
TURNOVER (£M)
OPERATING PROFIT 
(£M) 02 Phoenix IT Group plc
Annual report and accounts 2006
CHAIRMAN’S
ST A TEMENT
Peter Bertram
Chairman
We are also delighted that David Simpson has joined the
Board as Group Finance Director. David had been the Group
Financial Controller at Phoenix since 2001. David replaces
David Taylor who, since 2004, was the Group Finance
Director and had been instrumental in the Group’s
development and its successful listing on the London Stock
Exchange. The contribution he made to the Group is greatly
appreciated and he leaves Phoenix with our best wishes.
In addition, Steve Neville was promoted to Managing Director 
of Phoenix IT Services in January 2006, having been with the
Company since 1998 in a variety of senior management roles.
Steve previously held senior positions in Olivetti UK. Dennis
Thomas joined NDR as Managing Director in August 2005,
having previously been a senior executive at Synstar Group.
EMPLOYEES
The Group’s progress made this year could not have been
achieved without the excellent efforts of all our staff. Phoenix 
is a service business and so commitment to our customers 
is key to the Group’s success. I would like to thank all of our
staff for their dedication and efforts during the year.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at the Group’s head
office, Technology House, Hunsbury Hill Avenue, Northampton
on Thursday 3 August 2006 at 10.30 am. Formal notice of
the meeting together with the necessary proxy forms is
enclosed with these financial statements.
OUTLOOK
Market conditions remain competitive with customers
demanding a high standard of service with a keen focus 
on price. This is particularly the case in the increasingly
commoditised desktop services market.
We continue to deliver a high quality of service as evidenced
by the renewal of our largest contract in January 2006. 
The effect of the reduction in revenues and returns from 
this contract will take full effect in the current financial year. 
There are no major contract renewals scheduled for the next
three years.
We are also pleased to see the benefits of our strategy of
focusing on niche markets coming through in these results, 
in particular from the focus on smaller, more complex, and
higher margin IT service contracts and our NDR business
which continues to perform strongly.
The Board is confident of the continuing long-term organic
growth of the Group. In addition, we will continue to explore
opportunities to expand the Group’s range of services and
markets via selective acquisitions.
Peter Bertram
Chairman
17 May 2006
REVIEW OF THE YEAR
I am very pleased to report an excellent set of results. The Group
has made significant progress during the year, has benefited
from the acquisition of NDR (Holdings) Limited (NDR) in April
2005, and is well positioned to take advantage of the large and
growing IT services market.
Revenue grew by £20.6m (23.3%) to £108.9m (2005:
£88.3m) and operating profit before share option charges,
amortisation of acquired intangibles and flotation expenses
(see page 19) grew by 38.3% to £22.0m (2005: £15.9m).
Profit from operations (after share option charges, amortisation
of acquired intangibles and flotation expenses) increased by
48.9% to £19.4m (2005: £13.0m) and profit before tax
increased by 61.9% to £17.9m (2005: £11.1m).
A review of the year’s trading and results is given in the 
Chief Executive’s review and in the Financial review.
DIVIDEND
The Board recommends a final dividend of 2.76p per share
which, together with the interim dividend of 1.38p per share
paid in February 2006, makes a total dividend of 4.14p 
(2005: 2.4p). If authorised at the Annual General Meeting, 
the dividend will be paid on 8 September 2006 to
Shareholders on the register at the close of business on 
18 August 2006.
BOARD AND SENIOR MANAGEMENT CHANGES 
During the year we announced a number of Board changes
which, together with senior management changes, have
strengthened the management team to help drive the 
business forward.
The Board was very pleased to welcome Brian Sellwood as 
a Non Executive Director on 1 April 2006. Brian brings a
wealth of experience to Phoenix after a successful career at
IBM where he held a range of senior mangement positions. NDR 
MARKET SHARE
£1 6million
BUSINESS 
CONTINUITY MARKET
£300 million*
UK IT SUPPORT SERVICES MARKET 
(INCLUDING BUSINESS CONTINUITY)
£21.1billion**
03 Phoenix IT Group plc
Annual report and accounts 2006
A GROWING 
MARKETPLACE
PHOENIX IT GROUP
MARKET SHARE
£1 08.9 million
* Source: Holway@Ovum: 
Market Trends Preview 2006 
** The UK IT Services market 
is currently worth €30.2bn
(£21.1bn).
Source: European Information 
Technology Observatory 2006.
MARKET SHARE
‘The Group has made significant
progress during the year, has benefited
from the acquisition of NDR in April
2005, and is well positioned to take
advantage of the large and growing IT
services market.’ PHOENIX ACCENTURE
Phoenix is working with Accenture
providing technical deployment
personnel in support of the NHS’
Choose & Book programme. Phoenix
provides project management,
scheduling and deployment of a 
range of expert technical resources.
By supplying a full back office facility,
Phoenix provides a single point 
of contact for Accenture. This ensures
a streamlined and flexible process 
for the request and allocation of
resources, scaled to match varying
demand by each health authority.
Under an agreement with the UK
Department of Health, Accenture 
is the Local Service Provider for two 
of five geographically based clusters.
Accenture is designing, building,
deploying and operating key
information systems to support the
delivery of world-class patient care
and services. Accenture is also
working with health care applications
companies to develop and deploy 
a new suite of tools that includes
electronic appointment booking 
and transmission of prescriptions.
04 Phoenix IT Group plc
Annual report and accounts 2006
CHIEF 
EXECUTIVE’S
REVIEW
Nick Robinson
Chief Executive
In order to increase the added value we generate, we are
continually seeking to increase both the range and the depth 
of the services we provide to existing customers, in addition 
to attracting new customers or addressing new sectors. 
This continuous development into new services has been 
one of the key success factors for Phoenix historically and 
we believe it will continue to be so in the future.
Alongside large outsourcing contracts, the Group’s strategy 
is to develop niche services, commanding high margins, and
to sell these services into niche markets, and this is proving
successful. The large and growing UK market offers significant
opportunities for the Group and the Board believes that a
continuing focus on the UK in the foreseeable future will best
maximise the growth potential of the Group.
PHOENIX IT SERVICES
During the year Phoenix IT Services has continued to broaden
its range of services, with midrange support and remote
management being substantially upgraded. Phoenix now 
offers its own ‘NetControl’ remote network management, 
and in the course of the year, a key partner commenced 
selling our solution to their end users.
The Phoenix IT Services contracted order book was stable 
year on year at £125m. Since the year end the order book 
has benefited from a major contract win. The pipeline of new
business opportunities and bid activity has increased from 
the levels seen in the last year. If successful, the length of the
sales cycle on these sales bids means that revenues would
commence in the second half of the new financial year.
During the year Service Delivery Quality achieved increased to
98%. This exceptionally high level of service provides a solid
platform for growing our business with existing customers.
Increasingly, telecommunications providers and vendors,
together with software companies, are being driven into the 
IT services market by the forces of convergence and the need 
to maintain margins. We are also seeing Business Process
Outsourcing (BPO) businesses competing against IT outsourcers
and integrators and there continues to be an increasing number
of offshore entrants into the UK IT services market. 
SUMMARY OF THE GROUP’S ACTIVITIES
Phoenix IT Group is one of the UK’s leading IT service
providers. We provide a wide range of services including
remote network and systems management, network services,
technical help desks, field services and professional services.
Often these services are sold and delivered as a managed
service where we manage complex IT infrastructures to 
agreed levels of service under long-term contracts.
The key differentiator for Phoenix within the IT services market 
is our focus on providing services through major IT service
organisations (‘partners’) in support of their customers (‘end
users’). We have developed long-term relationships with many 
of our partners, providing ongoing services with a high level 
of service quality, and we have had relationships with many 
of our major partners for over five years. This allows us access
to the largest proportion of spending on IT services in the UK
which we believe could not be achieved as efficiently if selling
directly to the largest end users.
Through NDR, the Group also provides a range of business
continuity services primarily to the small and medium-size
enterprise (SME) market, and can also access SME customers
with other IT services. 05 Phoenix IT Group plc
Annual report and accounts 2006
AVERAGE LENGTH OF 
CUSTOMER RELATIONSHIP
The average length of our top 10
partner relationships is over six years,
demonstrating our understanding of 
our customers’ evolving needs and the
quality of the service Phoenix provides.
STRONG 
RELA TIONSHIPS NDR EPSON
NDR’s flexible recovery service
enabled Epson to choose the type 
of recovery they needed at the time
the disaster occurred.
NDR staff were on site at Uxbridge 
on the Sunday morning ensuring 
that everything was set up to the
customer’s specification. Work also
began immediately on the VPN link 
to Holland. This ensured that Epson
could continue operating as if in their
own building, with access to e-mail
and business systems as normal. 
Epson’s Sales and Marketing
operation based in Hemel 
Hempstead suffered partial 
building damage as a result of the
Buncefield Fuel Depot explosion.
150 Epson employees were 
relocated to NDR’s Uxbridge business
recovery centre to continue operating.
This allowed Epson to maintain
business activities and reputation
during a peak sales period.
Epson’s sales and marketing
department operated successfully 
out of NDR Uxbridge for several
weeks spanning the peak Christmas
sales period.
‘We are really grateful for their
support.’ – Nick Harwood, Inventory
and Planning Manager – Epson.
06 Phoenix IT Group plc
Annual report and accounts 2006
CHIEF 
EXECUTIVE’S 
REVIEW
CONTINUED
Each of these market trends creates more potential 
partners and provides us with further revenue opportunities.
During the last year Phoenix IT Services has reinvigorated
relationships and developed new partner relationships with 
a number of telecommunications providers and vendors, 
BPO businesses and offshore providers. We are confident 
that these relationships will provide long-term benefits.
NDR
NDR provides consultancy advice, real time data backup, 
office and mobile facilities, computer equipment and 
support for customers in case of disaster or major business
interruption. The business was purchased in April 2005 and
has performed strongly in the year, exceeding our financial
expectations.
Developments initiated in the year were a new Business
Continuity Centre with 120 positions utilising space at 
Phoenix’s offices in Northampton and the extension of the 
City of London Business Continuity Centre. In addition, we 
are in the process of extending our fleet of disaster recovery 
units with a new mobile office which can be taken anywhere 
in the UK and includes 25 seats offering our customers total
flexibility in the location of these facilities.
There is significant potential for selling NDR’s services to
Phoenix’s partners and this is an opportunity that increases 
as NDR’s range of services is expanded.
The fire at the Hemel Hempstead fuel depot in December
2005 clearly demonstrated the need for disaster planning and
the value of NDR’s business continuity services. Epson (UK)
Ltd was able to move its head office team into our Uxbridge
facility after their offices were damaged in the initial explosion.
The incident happened on a Sunday morning and NDR were
able to provide the required 150 fully operating work stations,
set up to Epson’s specification to enable Epson to continue to
operate, within 24 hours of the disaster. Commenting on the
quality of service received, Nick Harwood of Epson said, ‘The
flexibility of the NDR site and the helpful attitude of the NDR
staff who genuinely wanted us to be operating at full capacity
as soon as possible, really helped us to put our Business
Continuity Plan in place immediately. We are really grateful 
for their support.’
Business continuity is a growing market driven by regulations
and events such as the July 2005 bombings in London and 
the Hemel Hempstead fire. NDR has benefited from market
expansion and contract wins from competitors during the year.
NDR currently has over 900 disaster recovery positions in
various locations around the country and we believe that this
market offers Phoenix very considerable opportunities for
expansion and growth.
THE FUTURE
In this financial year, we will continue to drive Phoenix IT
Services’ revenues and build growth momentum in NDR. 
We continue to focus on both organic growth and acquisition
opportunities, looking to expand the range of services we offer
and diversify the markets in which we operate.
Nick Robinson
Chief Executive
17 May 2006 07 Phoenix IT Group plc
Annual report and accounts 2006
01 02 03 04 05 06
150
120
90
60
30
0
REVENUE AND PROFITS 
Group revenue for the year increased by 23.3% to £108.9m
(2005: £88.3m), with the acquisition of NDR contributing
£16.0m since the completion of the purchase on 19 April 2005.
Excluding NDR, the underlying organic growth in revenues in
the year was 5.2% (£88.3m to £92.9m).
Operating profit, before share option charges, amortisation 
of the acquired intangible asset arising on the NDR acquisition 
and flotation expenses (see page 19) increased by 38.3% to
£22.0m (2005: £15.9m). This includes £4.1m contributed by
NDR, giving an underlying growth rate excluding NDR of 12.5%
(£15.9m to £17.9m).
Operating margins within the Group have remained strong. Group
operating profit margin before share option charges, amortisation
of the acquired intangible asset and flotation expenses increased
to 20.2% from 18.0%. NDR has performed well and has
generated an operating profit margin of 25.7%. The focus on
seeking profitable revenue growth and operational efficiencies
throughout the Group is reflected in the increase in the operating
profit margin of the Phoenix businesses excluding NDR to 19.3%
(2005: 18.0%).
Profit from operations increased by 48.9% to £19.4m (2005:
£13.0m). In accordance with the requirements of IFRS 3 a
customer relationships intangible asset arising on the NDR
acquisition has been identified and a valuation of £9.0m has
been attributed to this intangible asset out of the total goodwill
arising on the acquisition. This has resulted in an amortisation
charge of £2.0m in the period. Share option charges of £0.6m
(2005: £0.9m) comprise £0.4m of charges under IFRS 2 and
a £0.2m provision in respect of National Insurance contributions
that will be payable on the options expected to be exercised. 
Profit before tax increased by 61.9% to £17.9m (2005: £11.1m).
INVESTMENT INCOME AND FINANCE COSTS
The Group incurred interest charges on its borrowings and
overdrafts of £1.4m during the financial year (2005: £1.5m).
Other finance costs incurred during the financial year relate
primarily to finance leases for computer equipment. The Group
places cash surpluses on overnight deposit as appropriate in
order to maximise the short-term return on cash balances. Net
of this investment income, the Group’s finance costs reduced 
by 25.3% to £1.45m (2005: £1.95m). A full analysis is set 
out in Notes 7 and 8 to the consolidated financial statements.
TAXATION
The Group’s effective tax rate for the year was 29.9% 
(2005: 30.9%) of profit before tax. A full analysis of the taxation
charge for the year is set out in Note 9 to the consolidated
financial statements.
BALANCE SHEET AND CASH FLOW
The Group continues to have a close focus on working capital
management and the conversion of profit into cash and has
continued to be highly cash generative. The cash generated 
by operations was up 183% to £26.8m (2005: £9.5m)
2
,
representing 138% of profit from operations (2005: 73%).
Prior to the acquisition of NDR, the Company arranged new
bank facilities with Bank of Scotland totalling £40.0m. These
comprised a term loan of £20.0m (see Note 20), a £15.0m
revolving credit facility and a £5.0m bank overdraft. Net of
investing and financing activities and the NDR acquisition, the
Group generated £16.1m
3
of net cash during the year. Together
with the acquisition of NDR for £37.4m (including net bank and
other borrowings of NDR assumed at the time of the acquisition
of £7.9m – see Note 27), this has changed the Group’s cash
position (excluding finance leases) from £8.1m at the start of
the year to net bank borrowings of £13.2m at 31 March 2006.
Information about the Group’s financial assets and liabilities,
including details of the Group’s exposure to credit risk, 
is provided in Notes 17, 18 and 32 of the consolidated 
financial statements.
SHAREHOLDERS’ RETURNS
Earnings per share
Diluted earnings per share increased by 35.1% to 20.8p 
(2005: 15.4p). Comparable basic earnings per share were 21.3p,
36% higher than 2005 (15.7p). Adjusted diluted earnings per
FINANCIAL 
REVIEW
ORDER BOOK 
(£MILLION)
ANNUAL CONTRACT 
VALUE (£MILLION)
AVERAGE NUMBER 
OF EMPLOYEES
David Simpson
Group Finance Director
01 02 03 04 05 06 
100 
80 
60 
40 
20 
0 
01 02 03 04 05 06
1500
1200
900
600
300
0
2 
See page 34
3
£’000
Net cash from operating activities 21,726
Purchases of property, plant and equipment (3,622)
Dividends paid (2,239)
Repayment of obligations under finance leases (59)
Issue of share capital 297
16,103 PHOENIX TCS
Phoenix provides Tata Consultancy
Services Limited (TCS) with a full
range of onshore infrastructure
services in support of its managed
services offer. This enables TCS 
to comply with onshore service
requirements and offer local 
services during the transition 
to offshore with confidence. 
Phoenix and TCS work in close
harmony to ensure that the 
combined offer delivers clear value 
to the end user, providing an offshore
transition roadmap appropriate to
their business requirements.
Tata Consultancy Services Limited
(TCS), part of the US$17bn
TATA Group, is the world-leading
information technology consulting,
services, and business process
outsourcing organisation. TCS has 
a presence in 34 countries and 
offers a range of services across
diverse industries. 
TCS needed an onshore IT
infrastructure service provider 
to cover its local contractual
commitments in the UK. Phoenix 
was chosen because of its 
non-competitive go-to-market 
strategy and its established 
delivery performance reputation.
08 Phoenix IT Group plc
Annual report and accounts 2006
FINANCIAL 
REVIEW 
CONTINUED
CORPORATE SOCIAL
RESPONSIBILITY
share excluding share option charges, amortisation of the
acquired intangible asset and flotation expenses, increased 
by 20.2% to 23.8p (2005: 19.8p)
4
.
Dividend
The Board is recommending a final dividend of 2.76p per share
which, if approved, will give a total dividend for the year of
4.14p per share (including the interim dividend of 1.38p 
paid to Shareholders on 3 February 2006), compared to 2.4p
for 2005. The total dividend for the year is covered 5.1 times 
by basic earnings per share, and Shareholders’ funds at the 
end of the financial year were £41.8m (2005: £30.7m).
INTERNATIONAL FINANCIAL REPORTING STANDARDS
The results for the Group for the year and the comparative year
have been stated in accordance with International Financial
Reporting Standards (IFRS). The effects of the restatement of 
the Group’s 2005 financial statements were communicated to
Shareholders via an announcement on 4 August 2005 and full
reconciliations from UK Generally Accepted Accounting Practice
(UK GAAP) to IFRS were published in November 2005 on the
Company’s website at www.phoenixitgroup.com. Following the
publication of these reconciliations it was decided that the Phoenix
IT Group plc (holding company) financial statements would
continue to be prepared under UK GAAP . The final reconciliations
are included at Note 33 to the consolidated financial statements.
As a result of the adoption of IFRS we have been required to:
• Recalculate share-based payment transactions;
• Recognise intangible assets arising on acquisition 
and amortise them over their expected useful life;
• Review goodwill for impairment annually rather 
than amortising it;
• Recognise liabilities on interim equity dividends when 
paid and on final equity dividends only when approved 
by Shareholders; and
• Recognise a holiday pay accrual.
The change to IFRS has had no material impact on the 
Group’s distributable reserves or ability to pay dividends.
David Simpson
Group Finance Director
17 May 2006
The Board of Phoenix IT Group plc recognises the importance 
of social, environmental and ethical matters in the conduct of
the Group’s business. The Group carries out its activities
responsibly in respect of the health and safety of its employees,
suppliers and customers. The technology aspect of the business
also brings with it environmental protection obligations.
Employees are provided with a challenging yet rewarding
working environment and are regarded as fundamental to the
future success of the Group.
Health and Safety
The Group strives to provide and maintain a safe environment
for all employees, customers and visitors to its premises and to
comply with relevant health and safety legislation. In addition,
the Group aims to protect the health of employees with suitable,
specific work-based strategies, seeking to minimise the risk of
injury from Group activity and ensuring that systems are in 
place to address health and safety matters. The Group also
encourages the involvement of employees and aims for continual
improvement in health and safety matters through a formal
structure with a reporting and review process.
Employees
The welfare and safety of employees is a key priority and the
Group actively encourages staff involvement in the development
of the Group’s business activities. Employees are treated with
fairness and respect and are encouraged and supported in the
development of their careers and the Group continues to share
its success with them.
The Environment
The Group recognises that it is part of a wider community 
of employees, Shareholders, customers, suppliers and others, 
and recognises that Group companies have a responsibility 
to act in a way that respects the environment. The Group 
seeks to encourage staff to act in an environmentally responsible
manner, particularly in the development of recycling and 
energy conservation policies to ensure that finite resources 
are not depleted.
Nick Robinson
Chief Executive
17 May 2006
4 
See page 27 09 Phoenix IT Group plc
Annual report and accounts 2006
THE
FUTURE
LONG TERM GROWTH
‘We are pleased to see the benefits 
of our strategy of focusing on niche
markets coming through. The Board 
is confident of the continuing 
long-term organic growth of the
Group. In addition, we will continue 
to explore opportunities to expand the
Group’s range of services and markets
via selective acquisitions.’ 10 Phoenix IT Group plc
Annual report and accounts 2006
David Simpson
Group Finance Director
BOARD OF
DIRECTORS
Peter Bertram
Non Executive Chairman
Nick Robinson
Chief Executive
John Sussens
Non Executive Director
Brian Sellwood
Non Executive Director
PETER BERTRAM 
Non Executive Chairman, aged 52.
Peter joined Phoenix as Non Executive Chairman in October
2004. He is also a non executive director of Anite Group plc 
and office2office plc. Previously, he was non executive chairman
of AttentiV Systems Group plc and chief executive of Azlan
Group plc. He is also a fellow of the Institute of Chartered
Accountants in England and Wales.
NICK ROBINSON 
Chief Executive, aged 46.
Nick became Sales Director of Phoenix when he bought into 
the business in 1993. In December 1997, Nick became 
Chief Executive of Phoenix. Before joining Phoenix he spent 
six years at Digital Computer Services Limited, as sales director.
DAVID SIMPSON
Group Finance Director, aged 45.
David was appointed to the Board on 1 April 2006 having been
group financial controller since November 2001. Prior to joining
Phoenix David was a divisional finance director of QinetiQ plc.
Between 1990 and 2000 he held a number of senior financial
positions at Misys plc. David is a member of the Institute of
Chartered Accountants in England and Wales. 
JOHN SUSSENS 
Non Executive Director, aged 60.
John joined Phoenix as a Non Executive Director in October
2004. John was an executive director of Misys plc, from July
1989 and group managing director from 1998 until May 2004.
He is a non executive director of Cookson Group plc and Admiral
plc and was previously a non executive director of Chubb plc
(now Chubb Limited). John is also a non executive director of
Anglo & Overseas plc.
BRIAN SELLWOOD
Non Executive Director, aged 58.
Brian joined Phoenix as a Non Executive Director on 1 April
2006 after a career of over 30 years with IBM where he 
held a variety of senior positions and was instrumental in
establishing IBM’s Global Services business in Europe. SUBSTANTIAL SHAREHOLDERS
As at 17 May 2006 the Company had been notified that the
following Shareholders had an interest of 3% or more in the 
issued Ordinary Share capital of the Company.
Ordinary Shares % of issued 
of 1p each share capital
N Robinson 6,163,803 10.4%
Goldman Sachs Group, Inc 2,834,371 4.8%
Legal & General Group plc 2,483,341 4.2%
UBS Global Asset Management Life Ltd 1,798,494 3.0%
F&C Asset Management plc 1,794,436 3.0%
EMPLOYMENT POLICY AND INVESTMENT
As a progressive service organisation, employees at every level 
are critical to the Company and its future. Management and
professional and technical expertise are the Group’s major assets.
Investment in developing and retaining such skills is on going and
well established, and is supported by extensive use of in-house and
external training programmes.
The Board recognises the value of effective communication and
consultation with all employees and informing them of the progress
and policies of the Group. This is achieved through formal and
informal meetings, briefing groups and internal newsletters.
It is the Group’s policy to encourage the recruitment, training and
development of disabled persons on the basis of their aptitude and ability,
and the retention and retraining of employees who become disabled.
Consistent with the Group’s human resources policies, the Board
encourages staff to identify with the financial success of the business
through the opportunity to acquire Ordinary Shares. Staff can
participate in the financial prosperity of the Group through share
ownership. Employee incentive arrangements include a Performance
Share Plan, Share Option Schemes, and Share Incentive Plan.
PAYMENTS TO SUPPLIERS
The Group’s operating companies determine terms and conditions 
of payment for the supply of capital and revenue items by agreement
with suppliers. Payment is then made on these terms, subject to the
terms and conditions being met by the suppliers. As at 31 March 2006,
trade creditors of the Group were equivalent to 41 days (2005: 37 days)
and in the Company nil (2005: nil).
CHARITABLE DONATIONS
The total amount of charitable donations made during the year 
was £13,006 (2005: £10,349). There were no political donations.
GOING CONCERN
The Directors have considered detailed profit and cash flow forecasts
and have a reasonable expectation that the Group has adequate
resources to continue as an operational business for the foreseeable
future. The financial statements have therefore been prepared on 
a going concern basis.
AUDITORS
An ordinary resolution to re-appoint Deloitte & Touche LLP as 
auditors of the Company is to be submitted to the forthcoming 
Annual General Meeting.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements. The Directors are required to prepare accounts
for the Group in accordance with International Financial Reporting
Standards (IFRS) and have chosen to prepare the Company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (UK GAAP). 
11 Phoenix IT Group plc
Annual report and accounts 2006
The Directors present their report together with the audited financial
statements for the Group and the Company for the year ended
31 March 2006.
PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS
The Group’s principal activity is the provision of information
technology and business continuity services. A review of the Group’s
performance and future prospects is provided in the Chief Executive’s
review and the Financial review.
DIVIDENDS
The Directors propose a final dividend of 2.76p per Ordinary Share
which, subject to approval at the Annual General Meeting, will be
paid on 8 September 2006 to Shareholders on the register at
18 August 2006. The shares will go ex-dividend on 16 August 2006.
The final dividend together with the interim dividend of 1.38p 
per Ordinary Share paid in February 2006 makes a total dividend 
of 4.14p (2005: 2.4p), an increase of 72%.
SHARE CAPITAL
Details of changes in the share capital of the Company during the
year are given in Note 23 to the consolidated financial statements.
DIRECTORS
The following Directors served during the year and up to the date 
of this report unless otherwise stated:
PETER BERTRAM
Non Executive Chairman
NICK ROBINSON
Chief Executive
DAVID TAYLOR
Group Finance Director
Resigned 31 March 2006
DAVID SIMPSON
Group Finance Director
Appointed 1 April 2006
JOHN SUSSENS
Non Executive Director
BRIAN SELLWOOD
Non Executive Director
Appointed 1 April 2006
Biographies of the Directors are set out on page 10. Brian Sellwood
and David Simpson were appointed by the Board on 1 April 2006.
Details of the Directors’ remuneration, interests in the shares of the
Company and their share options are given in the Remuneration
Committee report on pages 16 to 17. Peter Bertram, John Sussens
and Brian Sellwood have letters of appointment for an initial term of
three years unless terminated by either party on three months’ notice.
Copies of their letters of appointment are available on request.
In accordance with the Company’s Articles of Association Brian
Sellwood and David Simpson offer themselves for re-appointment to the
Board at the forthcoming Annual General Meeting and the Directors
recommend their re-appointment on the grounds of the considerable
experience and extensive knowledge of the IT Services market that
both bring to the Company.
DIRECTORS’ INDEMNITIES
The Company has made qualifying third party indemnity provisions 
for the benefit of its Directors which were made during the year and
remain in force at the date of this report.
DIRECTORS’ REPORT  12 Phoenix IT Group plc
Annual report and accounts 2006
In the case of UK GAAP accounts, the Directors are required to
prepare financial statements for each financial year which give a true
and fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period. In preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent; and
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
In the case of IFRS accounts, International Accounting Standard 1
requires that financial statements present fairly for each financial year
the Group’s financial position, financial performance and cash flows.
This requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses set out
in the International Accounting Standards Board’s ‘Framework for the
preparation and Presentation of Financial Statements’. In virtually all
circumstances, a fair presentation will be achieved by compliance
with all applicable International Financial Reporting Standards.
Directors are also required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information; and
• provide additional disclosures when compliance with the specific
requirements in International Financial Reporting Standards is
insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial
position and financial performance.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company, for safeguarding the assets, for taking
reasonable steps for the prevention and detection of fraud and other
irregularities and for the preparation of a Directors’ Report and
Directors’ Remuneration Report which comply with the requirements 
of the Companies Act 1985.
Each of the persons who is a Director at the date of approval of this
report confirms that: 
(1) so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
(2) the Director has taken all the steps that he ought to have taken
as a Director in order to make himself aware of any relevant audit
information and to establish that the Company’s auditors are aware
of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of s234ZA of the Companies Act 1985.
ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting to be held on 3 August
2006 (together with explanatory notes) is sent to Shareholders with
this annual report. The special business of the meeting includes the
following resolutions:
AUTHORITY TO ALLOT SHARES (RESOLUTION 7)
The Directors are seeking authority under Section 80 of the
Companies Act 1985 (‘the Act’) to allot shares up to an aggregate
nominal value of £198,220. This amount represents approximately
one third of the total ordinary share capital as at 17 May 2006
(being the latest practicable date before publication of this report).
The authority will be a substitute for the previous authority taken at
last year’s Annual General Meeting and will expire on the earlier of the
conclusion of the next Annual General Meeting or 3 November 2007.
The Directors have no present intention to make any such issue of
shares, other than in respect of shares that may be issued pursuant
to the Company’s share option schemes, but consider it is desirable
for them to be given this opportunity by Shareholders.
As at 17 May 2006, the Company holds no treasury shares.
DISAPPLICATION OF PRE-EMPTION RIGHTS (RESOLUTION 8)
The Directors are seeking authority from Shareholders to allot Ordinary
Shares for cash other than on a pre-emptive basis (as required by
Section 89 of the Act) in limited circumstances. The Directors
recommend that Section 89 of the Act should not apply to any
allotment of shares in connection with a rights issue, open offer 
or other pre-emptive offer in favour of ordinary Shareholders in
accordance with normal practice in the UK, nor to an issue for cash
of shares up to an aggregate nominal value of £29,733, which is
equivalent to 5% of the Company’s issued share capital as at
17 May 2006 (being the latest practicable date prior to publication 
of this report). The authority sought will expire on the earlier of the
conclusion of the next Annual General Meeting or 3 November 2007.
AUTHORITY TO MAKE MARKET PURCHASES OF SHARES
(RESOLUTION 9)
The Directors are seeking authority to make market purchases of
shares up to an aggregate nominal value of £29,733, which is
equivalent to 5% of the current issued share capital of the Company,
at 17 May 2006 (being the latest practicable date prior to publication
of this report) on such terms and in such manner as the Directors
may determine, provided that the amount paid for each share
(exclusive of expenses) will not be more than 5% above the average
middle market quotation for Ordinary Shares as derived from the
Daily Official List of the London Stock Exchange plc for the five
business days before the date on which the contract for the purchase
is made and in any event not less than 1p per ordinary share. 
The authority sought will expire on the earlier of the conclusion 
of the next Annual General Meeting or 3 November 2007.
The Directors have no present intention to make any such market
purchases but consider it is desirable for them to be given this
opportunity by Shareholders. The authority will only be exercised 
if to do so would result in an increase in earnings per share and 
is in the best interests of Shareholders generally.
As at 17 May 2006 (being the latest practicable date before
publication of this report), there were a total of 1,915,473 options 
to subscribe for equity shares in the Company outstanding,
representing 3.24% of the Company’s issued share capital. If the full
authority sought by this resolution is used, this number of outstanding
options would represent 3.4% of the Company’s issued share capital.
The Board of the Company recommends that ordinary Shareholders
vote in favour of the resolutions to be proposed at the Annual General
Meeting and is of the opinion that they are in the best interests of
security holders as a whole.
By order of the Board.
W T Martin
Company Secretary
17 May 2006
DIRECTORS’ REPORT 
CONTINUED All Directors are required to submit themselves for re-election at regular
intervals and at least every three years.
During the year the Board undertook an evaluation of its performance
and that of its committees. Detailed questionnaires were used for the
performance evaluation process. The Board concluded that overall the
Board and its committees operated effectively. The performance of each
of the Directors was evaluated while the Senior Independent Director
evaluated the performance of the Chairman. The Board considered
that the evaluation process was satisfactory and that the use of an
external third party to assist in such evaluation was not necessary.
COMMITTEES OF THE BOARD
The following formally constituted Committees deal with specific
aspects of the Group’s affairs in accordance with their written terms
of reference, which have been reviewed in the light of the Combined
Code and are available on request and on the Group’s website. 
The Company Secretary also acts as secretary of each Committee.
The Audit Committee’s purpose is to assist the Board in the
discharge of its responsibilities for financial reporting and corporate
control and to provide a forum for reporting by the external auditors.
The Committee, chaired by Peter Bertram, who is a Chartered
Accountant, comprises the Non Executive Directors and meets at least
three times a year. It is envisaged, subject to the formal re-appointment
of Brian Sellwood to the Board at the Annual General Meeting, that
Brian Sellwood should become Chairman of the Audit Committee in
due course. 
A report on its activities is given on page 15.
The Remuneration Committee, which is chaired by John Sussens 
and comprises the Non Executive Directors, meets at least twice 
a year and additionally as required. It is responsible for reviewing
remuneration arrangements for members of the Board, and all senior
reports of the Chief Executive and Group Finance Director, for
providing general guidance on aspects of remuneration policy
throughout the Group and for the Group’s Share Incentive Plans. 
New Bridge Street Consultants have been appointed by the Group 
to assist and advise the Remuneration Committee in the performance 
of its duties. New Bridge Street Consultants do not provide any other
service to the Group and are independent of the Group’s auditors.
A report on its activities is given on pages 16 and 17.
The Nominations Committee is chaired by Peter Bertram and
comprises the Non Executive Directors. The Committee is responsible
for effective succession planning and proposes candidates to the
Board, having regard to the balance and structure of the Board. 
The Committee determines the terms of reference for new
appointments and uses external advisers to identify suitable
candidates. The process is for the Committee to interview each
candidate with a view to preparing a shortlist for the Board, for
further interviews to take place as appropriate and for the Chairman
to consult with the Chief Executive and any external advisors before
any appointment is made. During the year the principal activities of
the Committee were the consideration of candidates for the role of
Group Finance Director and also the appointment of an additional 
Non Executive Director. Both appointments have been made.
INTERNAL CONTROL
The Board is responsible for establishing and maintaining the Group’s
system of internal control. Internal control systems are designed to
meet the particular needs of the Group and the risks to which it is
exposed. By their nature, however, internal control systems are
designed to manage rather than eliminate the risk of failure to
achieve business objectives and can provide only reasonable and 
not absolute assurance against material mis-statement or loss.
13 Phoenix IT Group plc
Annual report and accounts 2006
The Directors consider that throughout the year ended 31 March
2006, the Company has been in compliance with the provisions
set out in Section 1 of the revised Combined Code on Corporate
Governance issued by the Financial Reporting Council in July 2003,
subject to the explanation of the composition of the Audit Committee
set out below. The application of the principles of the Code, in the
composition and operation of the Board, the remuneration of the
Directors, relations with Shareholders and procedures for financial
reporting and internal control are described below.
THE BOARD OF DIRECTORS
The Group is controlled by a Board of Directors which meets regularly
and currently comprises two Executive and three Non Executive
Directors. The Non Executive Directors are Peter Bertram who is
Chairman, John Sussens who is the Senior Independent Director
and Brian Sellwood all of whom are considered by the Board to be
independent of management and free from any business or other
relationship which could materially interfere with the exercise of their
independent judgement. The Non Executive Directors regularly meet
independently of management.
The Chairman’s other main commitments are disclosed on page 10.
The roles of Chairman and Chief Executive are separate. The Chairman
is responsible for leadership of the Board, ensuring its effectiveness
and setting its agenda.
In advance of each meeting the Directors are provided with or have
full and timely access to information in relation to the matters to
be discussed.
At Board meetings, the Directors receive presentations from the senior
executives on the implementation of the Company’s strategies and the
Board receives regular updates on changes to the business, legislative
and regulatory environments.
The Board is responsible to Shareholders for the proper management
of the Group and for its system of corporate governance. It receives
information on a monthly basis to enable it to review trading
performance, forecasts and strategy and it has a schedule of matters
specifically reserved for its decision. The most significant of these are: 
• Changes to the structure, size and composition of the Board;
• Consideration of the independence of Non Executive Directors;
• Review of management structure and senior management
responsibilities;
• With the assistance of the Remuneration Committee, approval 
of remuneration policies across the Group;
• Approval of strategic plans, profit plans and budgets and any
material changes to them;
• Oversight of the Group’s operations ensuring competent and
prudent management, sound planning, an adequate system 
of internal control and adequate accounting and other records;
• Final approval of annual accounts and accounting policies; 
• Approval of the dividend policy;
• Approval of the acquisition or disposal of subsidiaries and major
investments and capital projects;
• Delegation of the Board’s powers and authorities, including
the division of responsibilities between the Chairman and the
Chief Executive and other Executive Directors; and
• Receiving reports on the views of the Company’s Shareholders.
Operational management of the Group is delegated to the Chief
Executive and Group Finance Director.
Procedures exist to allow the Directors to seek independent legal
advice in respect of their duties at the Company’s expense where 
the circumstances are appropriate. All Directors have access to the
Company Secretary who is a qualified solicitor.
CORPORATE GOVERNANCE 14 Phoenix IT Group plc
Annual report and accounts 2006
Key elements of the internal control system are described below.
These have all been in place throughout the year and up to the date
of this report and are considered and monitored regularly by the
Board (and once during the year):
• On going procedures to identify, evaluate and manage significant
risks faced by the business in accordance with the guidance of
the Turnbull Committee on Internal Controls and procedures to
monitor the control systems in place to reduce these risks to an
acceptable level;
• Clearly defined management structure and delegation of authority
to Committees of the Board and the Executive Directors;
• Clearly documented internal procedures set out in the Group’s 
ISO 9001 accredited quality manual;
• High recruitment standards and formal career development and
training to ensure the integrity and competence of staff;
• Regular and comprehensive information provided to management,
covering financial performance and key performance indicators,
including non-financial measures;
• A detailed budgeting process covering budgets for the coming
year which are approved by the Board;
• Procedures for the approval of capital expenditure, investments
and acquisitions;
• Monthly monitoring and reforecasting of results against budget,
with major variances followed up and management action taken
where appropriate;
• Regular internal audits of key processes and procedures under 
the Group’s ISO 9001 accredited quality assurance process; and
• Formal consideration of progress made against significant business
risks at monthly Operating Board meetings, with quarterly briefings
to the Board.
Each year the Audit Committee and the Group Finance Director
formally review the need for an internal audit function. At the current
time a formal internal audit function is not considered necessary for a
number of reasons: the small size of the Group; the internal controls
currently in place; the relative simplicity of the nature and type of
transactions entered into by the Group; and the significant executive
involvement in the Group’s day-to-day business. The Board, with the
assistance of the Audit Committee, is responsible for reviewing the
effectiveness of the Group’s systems of internal control. During the
year, the Board has reviewed the effectiveness of the systems of
internal control and risk management based on a review of significant
risks identified and the results of quality and other reports from
management. Following the review the Board concluded that the
systems were satisfactory and in accordance with the Turnbull
guidance. The Board seeks to ensure that steps continue to be taken
to try to embed internal control and risk management further into the
operations of the Group’s business and to deal with any areas of
improvement which come to its attention.
AUDITOR INDEPENDENCE
The Company has a formal policy designed to ensure that the auditors’
independence is not compromised by their undertaking inappropriate
non-audit work. All significant non-audit work commissioned from the
external auditors requires the Audit Committee’s formal approval. The
external auditors are only selected to undertake non-audit work where
the nature of the advice makes it more timely and cost effective to
select advisers who already have a good understanding of the Group.
The Audit Committee has undertaken a review of the nature and
amount of non-audit work undertaken by the external auditors to
satisfy itself that there is no effect on their independence. The split
between audit and non-audit fees is shown in Note 5 to the
consolidated financial statements.
GOING CONCERN
The Directors are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future, a period
of not less that twelve months from the date of this report. For this
reason, they continue to adopt the going concern basis in preparing
the financial statements.
COMMUNICATION WITH SHAREHOLDERS
The Company values the views of Shareholders and recognises their
interests in the Group’s strategy and performance. It holds briefings
with institutional fund managers, analysts and other investors, primarily
following the announcement of interim and preliminary results, 
as well as at other times during the year as may be appropriate. 
The Company’s programme of investor relations activities is designed
to ensure that the investing community receives a balanced and
consistent view of the Group’s performance. All Shareholders are
welcome to attend the Annual General Meeting, at which the Board
of Directors will be available to answer questions from Shareholders. 
Code Provision D.1.1 requires the Senior Non Executive Director to
meet with major Shareholders. During the year, this requirement has
been undertaken by the Chairman, who has met with a range of
major Shareholders to discuss governance and strategy. The Senior
Non Executive Director has been available for all such meetings if
requested. The views of major Shareholders are communicated to the
Board as a whole by the Chairman. In addition, the Board receives
reports from the Company’s broker twice a year that communicate
feedback from major Shareholders. The Board also reviews analyst
coverage of the Company every month.
CORPORATE GOVERNANCE
CONTINUED
ATTENDANCE AT MEETINGS
The number of Board meetings and Committee meetings attended by each Director in the year to 31 March 2006 was as follows:
Board Audit Committee Remuneration Committee Nomination Committee
Held Attended Held Attended Held Attended Held Attended
CHAIRMAN
P Bertram 7 7 5 5 2 2 3 3
EXECUTIVE DIRECTORS
N Robinson 7 5
D Taylor 7 6
NON EXECUTIVE DIRECTOR
J Sussens 7 7 5 5 2 2 3 3
Approved by the Board and signed on its behalf.
W T Martin
Company Secretary
17 May 2006 MAIN ACTIVITIES OF THE AUDIT COMMITTEE
During the year the Audit Committee has met five times. The Committee
reviewed the half-year interim results and presentation of results to
investors, and received reports from the external auditors on their review
and subsequently met in January to receive a presentation by the
external auditors setting out their audit approach and procedures,
including matters relating to scope, auditor independence and audit fees.
The Audit Committee keeps under review the relationship with
external auditors including:
• The qualification, expertise and resources of the external auditors,
the effectiveness of the audit process including the external
auditors’ quality control procedures;
• The independence and objectivity of the external auditors taking
into account relevant UK professional and regulatory requirements
and the relationship with the audit firm as a whole, including the
provision of non-audit services; and
• Reviewing and implementing the policy on audit fees and fees for
other non-audit services.
Peter Bertram
Chairman, Audit Committee
17 May 2006
15 Phoenix IT Group plc
Annual report and accounts 2006
ROLE OF THE AUDIT COMMITTEE
The Audit Committee is a sub-committee of the Board whose
responsibilities include:
• Reviewing the interim and full year financial statements and
results announcements of the Company and any other formal
announcement relating to the Group’s financial performance and
recommending them to the Board for approval;
• Reviewing the Group’s systems for internal financial control and
risk management;
• Monitoring and reviewing the requirement for an internal audit
function; 
• Considering the appointment of the external auditors; overseeing
the process for their selection; and making recommendations to
the Board in relation to their appointment, re-appointment or
removal;
• Monitoring and reviewing the effectiveness and independence
of the external auditors, agreeing the nature and scope of their
audit, their remuneration, and considering their reports on the
Group’s financial statements and systems of internal financial
control and risk management; 
• Reviewing and implementing the policy on using the auditors
services for non-audit advice, and
• The ‘whistleblowing’ policy that has been implemented during
the year.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee comprises the independent Non Executive
Directors. Biographical details of the independent Directors are 
set out on page 10 and their remuneration is set out on page 17. 
The Chairman of the Audit Committee is Peter Bertram. As previously
mentioned it is envisaged, subject to the formal re-appointment of
Brian Sellwood to the Board at the Annual General Meeting that 
Brian becomes Chairman of the Audit Committee in due course. The
Committee invites others, including the Company’s external auditors
and the Group Finance Director, to attend as appropriate. At least
once each year representatives of the Company’s external auditors
meet the Audit Committee without any Executive Directors present.
AUDIT COMMITTEE REPORT 16 Phoenix IT Group plc
Annual report and accounts 2006
INFORMATION NOT SUBJECT TO AUDIT
THE REMUNERATION COMMITTEE
The Remuneration Committee comprises the Non Executive Directors
and is chaired by John Sussens.
The Committee determines the remuneration packages of the Executive
Directors and their direct reports and makes recommendations thereon
to the Board within agreed terms of reference.
The Remuneration Committee has access to executive remuneration
consultants, New Bridge Street Consultants, to assess comparability to
the IT services marketplace and in particular the remuneration policies
of the Group’s peer companies. 
REMUNERATION POLICY
The policy of the Group on Directors’ remuneration is to provide
competitive market-based packages which reward Group and
individual performance and align the interests of Directors and
Shareholders. Remuneration packages comprise a basic salary,
annual performance related bonus, pensions and other benefits and,
where appropriate, participation in the share incentive plans set out
below. Salaries and bonuses are reviewed annually and any changes
effected from 1 April. 
The Group introduced a number of share incentive schemes on
flotation, of which all members of staff, including the Executive
Directors, are potential beneficiaries. These include an Employee
Share Option Scheme, a Performance Share Plan (PSP) for senior
managers and an All-Employee Share Incentive Plan (SIP). Since
flotation, no further awards have been granted under the Group’s
pre-flotation share schemes.
The Board determines the remuneration of the Chairman and the
other Non Executive Directors. Directors are not involved in decisions
about their own remuneration.
Individual components of remuneration packages and service
contracts are discussed below.
BASIC SALARY
Basic salary for each Executive Director is based on externally
benchmarked market data for comparable companies operating in 
IT services, experience and achievement of objectives. In addition to
basic salary, the Executive Directors receive certain benefits such as a
company car (or equivalent allowance) and private medical insurance.
The salaries of the Executive Directors who served during the year
(and David Simpson who was appointed on 1 April 2006) are given
on page 17. Nick Robinson and David Simpson both have service
agreements subject to a twelve-month notice period and both include
the right for the Company to make a payment in lieu of salary and
benefits for any unexpired period of notice. No further amounts have
been paid or are payable to David Taylor save as stated in the
Remuneration Report on page 17.
Details of the dates of appointment of Directors appointed during the
year and contract terms are given in the Directors’ Report on page 11.
PERFORMANCE RELATED BONUSES
For Executive Directors, amounts available for bonuses are based 
on financial performance targets defined and agreed by the
Remuneration Committee.
For the year ending 31 March 2006 the target for the payment of the
maximum bonuses for the Executive Directors was to increase profit
to £20.5m before tax, pre share scheme charges and amortisation of
acquired intangibles. This target included the acquisition of NDR.
The actual profit before tax, pre share scheme charges and
amortisation of acquired intangibles was £20.564m.
The bonuses earned for the year ended 31 March 2006 were
£350,000 for Nick Robinson and £100,000 for David Taylor. 
The maximum potential bonus levels for the year ending 31 March
2007 are capped at 100% of basic salary for Nick Robinson and at
50% of basic salary for David Simpson. Similar provisions are applied
to other members of the senior management team.
PENSION ARRANGEMENTS
The Executive Directors are also entitled to receive personal pension
contributions of 20% of basic salary for Nick Robinson and 10% of
basic salary per annum for David Simpson.
SHARE INCENTIVES
The Group’s policy is to award share incentives to Executive Directors
in order to align their interests with those of the Company’s
Shareholders. The Executive Directors have participated in the
Performance Share Plan during the financial year. The performance
conditions were selected after consulting independent share
incentive advisers.
PERFORMANCE SHARE PLAN
During the year the Company granted awards over 766,855 shares
under the PSP . Nick Robinson was granted awards over 191,606
shares and David Taylor was granted 72,993.
The awards will vest fully if the Group’s average annual earnings per
share growth over the three years from grant (measured by reference
to EPS in the year immediately prior to grant) exceeds 20% per
annum. If the average annual growth is 5% per annum, the award will
vest as to 20% of the maximum. If average annual earnings per share
grow between 5% and 20%, then the award will vest proportionately.
The award will not vest at all if average earnings per share growth is
less than 5% per annum.
SHARE INCENTIVE PLAN (SIP)
Under the Share Incentive Plan employees are able to buy shares by
deduction of up to £1,500 from their pre-tax salary in each tax year
or, if less, 10% of salary.
PERFORMANCE GRAPH
The following graph shows Phoenix’s total Shareholder return
performance compared to the FTSE Small Cap index of which Phoenix
is a constituent. The graph covers the period from the date of flotation
to 31 March 2006 and the values show the share price growth plus
reinvested dividends from a hypothetical £100 holding of Ordinary
Shares in Phoenix and in the index at the start of the period.
TOTAL SHAREHOLDER RETURN 
(FROM LISTING DATE TO 31 MARCH 2006)
DIRECTORS’ REMUNERATION REPORT
Phoenix FTSE Smallcap
90
102
114
126
138
150
31/3/06
16/3/06
16/2/06
16/1/06
16/12/05
16/11/05
17/10/05
16/9/05
16/8/05
15/7/05
16/6/05
16/5/05
15/4/05
16/3/05
16/2/05
17/1/05
16/12/04
16/11/04 17 Phoenix IT Group plc
Annual report and accounts 2006
THE FOLLOWING SECTIONS HAVE BEEN SUBJECT TO AUDIT
DIRECTORS’ SHAREHOLDINGS
Directors had the following beneficial and family interests in the issued share capital of the Company as at 31 March 2006. There have been no
changes between the end of the financial year and the date of this report other than as indicated.
2006 2005
Ordinary Shares Ordinary Shares
At 31 March of 1p each of 1p each
Peter Bertram 10,000 10,000
Nick Robinson 6,163,803 10,812,745
John Sussens 8,500 8,500
David Taylor 15,000 40,000
REMUNERATION
The remuneration of the Directors for the year to 31 March is comprised as follows:
2005
Total excl. Total excl. 
Salary/fees Bonus Benefits Pension Pension Pension
Year ended 31 March 2006 £’000 £’000 £’000 £’000 £’000 £’000
Nick Robinson 350 350 34 734 70 426
Peter Bertram 50 – – 50 – 22
John Sussens 30 – – 30 – 16
David Taylor 206 100 18 324 20 273
TOTALS 636 450 52 1,138 90 737
NEW DIRECTORS
David Simpson and Brian Sellwood joined the Board on 1 April 2006 as Group Finance Director and independent Non Executive Director
respectively. Both will be standing for re-appointment at the 2006 Annual General Meeting. The Company is disclosing details of their remuneration
so that Shareholders can make an informed decision.
David Simpson is entitled to a basic salary of £175,000 per annum together with a car allowance of £18,000 per annum (subject to tax and
national insurance). In addition, he will be entitled to similar benefits as other Executive Directors as described on page 16.
Brian Sellwood is entitled to Director’s fees of £32,000 per annum.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The Group has a number of share option schemes whereby Directors and staff are able to subscribe for Ordinary Shares in the Company. 
The interests of the Directors in options to subscribe for Ordinary Shares were as follows. There have been no changes between the end of the
financial year and the date of this report.
Lapsed/
Options held Granted Exercised surrendered Options held Earliest
at 1 April during during during at 31 March Exercise Performance exercise Expiry 
Director 2005 year year the year 2006 price conditions date date
Nick Robinson 190,909 – 190,909 nil p (i) 12/2007 12/2014
Nick Robinson – 191,606 – 191,606 nil p (ii) 05/2008 05/2015
David Taylor 250,000 – – (125,000) 125,000* 200p (iii)
David Taylor 72,727 – – (72,727) – – –
David Taylor – 72,993 – (72,993) – – –
*Exercised on 6 April 2006 when the price was 306p.
PERFORMANCE CONDITIONS
(i) Award granted under PSP . The market value at the date of grant was 275p.
(ii) Award granted under PSP . The market value at the date of grant was 274p.
(iii) In common with all options granted by the Company prior to its flotation, these options had no performance conditions attached.
The PSP awards are subject to achieving a performance condition related to average annual growth in earnings per share over a three-year
period of between 5% and 20% per annum. This results in an award of between 20% and 100% with performance between these points 
being on a progressive scale.
During the year to 31 March 2006, the Company’s share price varied between 257p and 335p and ended the year at 306p.
Approved by the Board and signed on its behalf by
John Sussens
Chairman, Remuneration Committee
17 May 2006 18 Phoenix IT Group plc
Annual report and accounts 2006
We have audited the Group financial statements (the ‘financial
statements’) of Phoenix IT Group plc for the year ended 31 March
2006 which comprise the consolidated statement of income, the
consolidated statement of changes in Shareholders’ equity, the
consolidated balance sheet, the consolidated cash flow statement and
the related Notes 1 to 34. These financial statements have been
prepared under the accounting policies set out therein. We have also
audited the information in the Directors’ Remuneration Report that is
described as having been audited. 
We have reported separately on the individual Company financial
statements of Phoenix IT Group plc for the year ended 31 March 2006.
This report is made solely to the Company’s members, as a body, 
in accordance with section 235 of the Companies Act 1985. 
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, 
for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors’ responsibilities for preparing the annual report, 
the Directors’ Remuneration Report and the financial statements in
accordance with applicable law and International Financial Reporting
Standards (IFRS) as adopted for use in the European Union are set
out in the statement of Directors’ responsibilities.
Our responsibility is to audit the financial statements and the part of
the Directors’ Remuneration Report described as having been audited
in accordance with relevant United Kingdom legal and regulatory
requirements and International Standards on Auditing (UK and Ireland). 
We report to you our opinion as to whether the financial statements
give a true and fair view in accordance with the relevant financial
reporting framework and whether the financial statements and the
part of the Directors’ Remuneration Report described as having 
been audited have been properly prepared in accordance with the
Companies Act 1985 and Article 4 of the IAS Regulation. We report
to you whether in our opinion the information given in the Directors’
Report is consistent with the Group financial statements. We also
report to you if the Company has not kept proper accounting records,
if we have not received all the information and explanations we
require for our audit, or if information specified by law regarding
Directors’ remuneration and other transactions is not disclosed.
We also report to you if, in our opinion, the Company has not
complied with any of the four Directors’ remuneration disclosure
requirements specified for our review by the Listing Rules of the
Financial Services Authority. These comprise the amount of each
element in the remuneration package and information on share
options, details of long-term incentive schemes, and money purchase
and defined benefit schemes. We give a statement, to the extent
possible, of details of any non-compliance.
We review whether the corporate governance statement reflects the
Company’s compliance with the nine provisions of the 2003 FRC
Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are 
not required to consider whether the Board’s statements on internal
control cover all risks and controls, or form an opinion on the
effectiveness of the Group’s corporate governance procedures or
its risk and control procedures.
We read the other information contained in the annual report
including the unaudited part of the Directors’ Remuneration Report
and we consider the implications for our report if we become aware
of any apparent mis-statements or material inconsistencies with the
financial statements. 
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the financial statements and the
part of the Directors’ Remuneration Report described as having been
audited. It also includes an assessment of the significant estimates
and judgements made by the Directors in the preparation of the
financial statements, and of whether the accounting policies are
appropriate to the Company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the financial
statements and the part of the Directors’ Remuneration Report
described as having been audited are free from material mis-statement,
whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of
information in the financial statements and the part of the Directors’
Remuneration Report described as having been audited.
OPINION
In our opinion:
• the Group financial statements give a true and fair view, in
accordance with IFRS as adopted for use in the European Union,
of the state of the Group’s affairs as at 31 March 2006 and of its
profit for the year then ended;
• the financial statements and the part of the Directors’
Remuneration Report described as having been audited have
been properly prepared in accordance with the Companies Act
1985 and Article 4 of the IAS Regulation; and
• the information given in the Directors’ Report is consistent with
the Group financial statements. 
SEPARATE OPINION IN RELATION TO IFRS
As explained in Note 2 to the financial statements, the Group, in
addition to complying with its legal obligation to comply with IFRS 
as adopted for use in the European Union, has also complied with the
IFRS as issued by the International Accounting Standards Board.
Accordingly, in our opinion the financial statements give a true and
fair view, in accordance with IFRS, of the state of the Group’s affairs
as at 31 March 2006 and of its profit for the year then ended. 
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Birmingham
United Kingdom
17 May 2006
INDEPENDENT AUDITORS’ REPORT 
ON THE GROUP FINANCIAL STATEMENTS 19 Phoenix IT Group plc
Annual report and accounts 2006
2006 2005
Note £’000 £’000
CONTINUING OPERATIONS
Revenue 3 108,919 88,331
Cost of sales (18,507) (16,167)
GROSS PROFIT 90,412 72,164
Distribution costs (56,926) (47,653)
Administrative expenses (14,083) (11,481)
OPERATING PROFIT BEFORE SHARE OPTION CHARGES, 
AMORTISATION OF ACQUIRED INTANGIBLES AND FLOTATION EXPENSES 22,018 15,920
Share option charges (617) (911)
OPERATING PROFIT BEFORE AMORTISATION OF 
ACQUIRED INTANGIBLES AND FLOTATION EXPENSES 21,401 15,009
Amortisation of acquired intangibles (1,998) –
Flotation expenses – (1,979)
PROFIT FROM OPERATIONS 5 19,403 13,030
Investment income 3,7 217 249
Finance costs 8 (1,671) (2,195)
PROFIT BEFORE TAX 17,949 11,084
Tax 9 (5,365) (3,428)
PROFIT FOR THE PERIOD 12,584 7,656
EARNINGS PER SHARE 
Basic 10 21.3p 15.7p
Diluted 10 20.8p 15.4p
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 
FOR THE YEAR ENDED 31 MARCH 2006
2006 2005
£’000 £’000
Profit for the period 12,584 7,656
Exchange differences on translation of foreign operations recognised directly in equity 2 4
Total recognised income for the period 12,586 7,660
New share capital issued 4 503
Employee share options – shares to be issued 437 218
Premium on issue of shares 292 35,341
Share issue costs – (1,409)
Share-based payments deferred tax reserve (308) 328
Share-based payments corporation tax reserve 313 –
Final dividend for year ended 31 March 2005 (2.4p per share) (1,421) –
Interim dividend for the year ended 31 March 2006 (1.38p per share) (818) –
NET INCREASE IN SHAREHOLDERS’ EQUITY 11,085 42,641
BALANCE AT START OF THE PERIOD 30,723 (11,918)
BALANCE AT END OF THE PERIOD 41,808 30,723
CONSOLIDATED STATEMENT OF INCOME 
FOR THE YEAR ENDED 31 MARCH 2006 20 Phoenix IT Group plc
Annual report and accounts 2006
2006 2005
Note £’000 £’000
NON-CURRENT ASSETS
Goodwill 12 57,820 21,745
Intangible assets 13 7,015 –
Property, plant and equipment 14 12,327 4,380
Deferred tax assets 22 – 1,191
77,162 27,316
CURRENT ASSETS
Inventories 16 6,334 6,271
Trade and other receivables 17 21,618 18,949
Cash and cash equivalents 2,760 8,099
30,712 33,319
TOTAL ASSETS 107,874 60,635
CURRENT LIABILITIES
Trade and other payables 18 (17,129) (13,479)
Current tax liabilities (3,638) (1,248)
Obligations under finance leases and hire purchase contracts 19 (1,619) (30)
Bank loans 20 (4,000) –
Provisions 21 (496) (500)
(26,882) (15,257)
NET CURRENT ASSETS 3,830 18,062
NON-CURRENT LIABILITIES
Obligations under finance leases and hire purchase contracts 19 (3,381) (58)
Bank overdrafts and loans 20 (11,932) –
Provisions 21 (741) –
Deferred tax liabilities 22 (1,123) –
(17,177) (58)
DEFERRED INCOME
Due in less than one year (21,832) (14,452)
Due after one year (175) (145)
(22,007) (14,597)
TOTAL LIABILITIES (66,066) (29,912)
NET ASSETS 41,808 30,723
EQUITY
Share capital 23 593 589
Share premium account 24 36,800 36,508
Other reserves 25 661 222
Retained earnings 26 3,754 (6,596)
TOTAL EQUITY 41,808 30,723
The financial statements were approved by the Board of Directors and authorised for issue on 17 May 2006. They were signed on its behalf by:
Nick Robinson David Simpson
Chief Executive Group Finance Director
CONSOLIDATED BALANCE SHEET 
AS AT 31 MARCH 2006 21 Phoenix IT Group plc
Annual report and accounts 2006
2006 2005
Note £’000 £’000
NET CASH FROM OPERATING ACTIVITIES 28 21,726 5,004
INVESTING ACTIVITIES
Purchases of property, plant and equipment (3,622) (1,730)
Acquisition of subsidiary undertaking:
– Cash consideration (28,825) –
– Costs of acquisition (760) –
– Cash and cash equivalents acquired 2,018 –
NET CASH USED IN INVESTING ACTIVITIES (31,189) (1,730)
FINANCING ACTIVITIES
Dividends paid (2,239) –
Repayments of borrowings (23,875) (33,604)
Repayments of obligations under finance leases and hire purchase contracts (59) (2)
New bank loans raised 30,000 –
Issue of share capital 297 34,435
NET CASH FROM FINANCING ACTIVITIES 4,124 829
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (5,339) 4,103
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,099 3,996
CASH AND CASH EQUIVALENTS AT END OF PERIOD 2,760 8,099
CONSOLIDATED CASH FLOW STATEMENT 
FOR THE YEAR ENDED 31 MARCH 2006 22 Phoenix IT Group plc
Annual report and accounts 2006
1. GENERAL INFORMATION
Phoenix IT Group plc is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office 
is given on the inside back cover. The nature of the Group’s operations and its principal activities are set out in the Chief Executive’s review.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the
Group operates. Foreign operations are included in accordance with the policies set out in Note 2.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with International Financial Reporting Standards and International Accounting
Standards (IFRS) as adopted for use in the European Union and as issued by the International Accounting Standards Board. The disclosures
required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in Note 33.
The financial statements have been prepared on the historical cost basis except where stated below. The principal accounting policies adopted
are set out below.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries)
made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
On acquisition, the assets (including identifiable intangible assets, excluding goodwill) and liabilities and contingent liabilities of a subsidiary are
measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
GOODWILL
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit for the
period and is not subsequently reversed.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date. Goodwill written off to reserves under UK GAAP in the year ended 31 March 1999 and earlier periods 
has not been reinstated and is not included in determining any subsequent profit or loss on disposal. 
REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts, VAT and other sales-related taxes.
Sales of goods are recognised when goods are delivered and title has passed. Other revenues, apart from those falling under maintenance
contracts (shown below), are recorded as earned or as the services are performed after provision for estimated customer credits.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
Dividend income from investments is recognised when the Shareholders’ rights to receive payment have been established. 
MAINTENANCE CONTRACTS
For fixed-fee maintenance contracts the revenue arising is spread evenly over the term of the contract. Costs incurred under these contracts are
charged to the income statement as they arise.
LEASING
Assets held under finance leases and hire purchase contracts are recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so
as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 23 Phoenix IT Group plc
Annual report and accounts 2006
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FOREIGN CURRENCIES 
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rate prevailing
at the date when the fair value was determined. Gains and losses arising on retranslation are included in net profit or loss for the period.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet
date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified
as equity and transferred to the Group’s profit and loss reserve. Such translation differences will be recognised as income or as expenses in the
period in which the operation is disposed of.
BORROWING COSTS
All borrowing costs are recognised in the income statement in the period in which they are incurred.
RETIREMENT BENEFIT COSTS 
The principal subsidiary undertakings contribute to a number of Group personal pension plans in respect of certain employees. These plans 
are defined contribution plans and the annual charge to the income statement is the contributions payable in the year. Differences between
contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.
SHORT-TERM EMPLOYEE BENEFITS
The cost of short-term accumulating balances is charged to the income statement over the period during which the entitlement is earned, 
at an average pay rate plus social security costs. Differences between the entitlement earned and the entitlement actually paid is shown as
either accruals or prepayments in the balance sheet.
IMPAIRMENT POLICY
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated 
in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is immediately recognised as an expense.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate 
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss (other than
goodwill) is immediately recognised as income.
TAXATION
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable
or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the Group is able
to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred
tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity. 24 Phoenix IT Group plc
Annual report and accounts 2006
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
INVESTMENTS
Investments are included at cost less provisions for impairment.
PROPERTY , PLANT AND EQUIPMENT
Land and buildings, fixtures and equipment are stated at cost less accumulated depreciation and recognised impairment.
Depreciation is charged so as to write off the cost of assets, other than freehold land, over their estimated useful lives, using the straight-line
method, on the following bases:
Freehold buildings 50 years
Leasehold property Period of lease
Fixtures and equipment 2 to 5 years
Motor Vehicles 4 years
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the
term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in income.
INTANGIBLE ASSETS
Intangible assets are measured initially at fair value and are amortised on a straight-line basis over their estimated useful lives.
RESEARCH AND DEVELOPMENT
All expenditure on research and development activities is recognised as an expense in the period in which it is incurred.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value.
Service stocks, other than consumable stocks, are systematically provided against over four years so as to reduce their value to nil at the end 
of the period. Consumable stocks are expensed as they are purchased.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
TRADE RECEIVABLES
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts. 
FINANCIAL LIABILITY AND EQUITY
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
BANK BORROWINGS
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums
payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis to the income statement using the effective
interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
TRADE PAYABLES
Trade payables are not interest-bearing and are stated at their nominal value.
EQUITY INSTRUMENTS
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
PROVISIONS
Provisions relate to the obligation to reinstate certain properties to their former condition at the end of their leases.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 25 Phoenix IT Group plc
Annual report and accounts 2006
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
SHARE-BASED PAYMENTS
The Group has applied the requirements of IFRS 2 Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005.
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value 
at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of options that will eventually vest.
Fair value is measured by use of a Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. 
3. REVENUE
An analysis of the Group’s revenue is as follows:
2006 2005
£’000 £’000
Existing operations 92,508 87,499
Acquisition in year – NDR 16,031 –
108,539 87,499
Incidental product resale 380 832
108,919 88,331
Investment income 217 249
109,136 88,580
4. GEOGRAPHICAL ANALYSIS
Essentially the entire Group’s operations are based in the UK. There is only one class of business activity undertaken by the Group, being the
provision of information technology services.
5. PROFIT FROM OPERATIONS
Profit from operations has been arrived at after charging:
2006 2005
£’000 £’000
Non recurring costs:
Flotation expenses – professional fees – 1,979
Flotation share award – 675
– 2,654
Depreciation of property, plant and equipment 4,044 1,236
Amortisation of acquired intangibles 1,998 –
Cost of inventories recognised as expense 4,698 5,865
Research and development expenditure 122 –
Auditors’ remuneration for audit services (see below) 140 116
Flotation expenses primarily relate to legal and professional fees incurred on the flotation of the Group.
The share award relates to free shares issued to employees on flotation under the Share Incentive Plan.
Amounts payable to Deloitte & Touche LLP and their associates by the Company and its UK subsidiary undertakings in respect of non-audit
services were £233,000 (2005: £470,000). 26 Phoenix IT Group plc
Annual report and accounts 2006
5. PROFIT FROM OPERATIONS CONTINUED
2006 2005
£’000 % £’000 %
Audit services:
Recurring – statutory audit 112 30 116 20
Non-recurring – IFRS restatement audit 28 8 ––
140 38 116 20
Tax services:
compliance and advisory services 57 15 55 9
Other services:
acquisition of subsidiary 160 43 ––
share option planning 41 32 6
flotation –– 383 65
other 12 3 ––
176 47 415 71
373 100 586 100
6. STAFF COSTS
The average monthly number of employees (including Directors) was:
2006 2005
Number Number
Distribution staff 1,189 1,071
Administration staff 82 50
Directors 4 4
1,275 1,125
£’000 £’000
Their aggregate remuneration comprised:
Wages and salaries 41,327 33,961
Social security costs 4,986 4,132
Other pension costs 633 496
46,946 38,589
7. INVESTMENT INCOME
2006 2005
£’000 £’000
Interest on bank deposits 167 249
Other interest 50 –
217 249
8. FINANCE COSTS
2006 2005
£’000 £’000
Interest on bank overdrafts and loans 1,365 1,546
Interest on obligations under finance leases and hire purchase contracts 271 –
Amortisation of loan issue costs 32 626
Other interest 3 23
1,671 2,195
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 27 Phoenix IT Group plc
Annual report and accounts 2006
9. TAXATION
The tax charge on profit from operations for the year was as follows:
2006 2005
£’000 £’000
Current tax:
UK corporation tax 6,112 3,003
Adjustment in respect of prior periods (68) –
Foreign tax 77 31
6,121 3,034
Deferred tax (Note 22):
Current year (805) 394
Adjustment in respect of prior periods 49 –
5,365 3,428
Corporation tax is calculated at 30% of the estimated assessable profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The charge for the year can be reconciled to the profit per the income statement as follows:
2006 2005
£’000 % £’000 %
Profit before tax 17,949 11,084
Tax at the UK corporation tax rate of 30% 5,385 30.0 3,325 30.0
Effects of:
Expenses that are not deductible in determining taxable profit 44 0.2 107 1.0
Tax adjustments relating to share options (41) (0.2) ––
Adjustments in respect of prior periods (19) (0.1) ––
Different tax rates of subsidiaries operating in other jurisdictions (4) (0.0) (4) (0.1)
Tax expense and effective tax rate for the year 5,365 29.9 3,428 30.9
In addition to the amount charged to the income statement, deferred tax of £308,000 and current tax of £313,000, relating to share option
charges has been taken directly to equity.
10. EARNINGS PER SHARE
2006 2005
Adjusted earnings per share excluding share option charges, flotation expenses and 
amortisation of acquired intangibles
Basic 24.4p 20.2p
Diluted 23.8p 19.8p
The calculation of the basic and diluted earnings per share is based on the following data:
EARNINGS
2006 2005
£’000 £’000
Earnings for the purposes of basic earnings per share and diluted earnings 
per share being net profit attributable to equity holders of the parent 12,584 7,656
Flotation expenses – 1,979
Share option charges 617 911
Amortisation of acquired intangibles 1,998 –
Tax on flotation expenses, share option charges and amortisation of acquired intangibles (785) (696)
Earnings for the purposes of adjusted earnings per share being net profit attributable to equity holders of the 
parent excluding flotation expenses, share option charges and amortisation of acquired intangibles 14,414 9,850
NUMBER OF SHARES
Number Number
‘000 ‘000
Weighted average number of Ordinary Shares for the purposes of basic earnings per share 59,078 48,708
Effect of dilutive potential Ordinary Shares:
Share options 1,378 1,136
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share 60,456 49,844 28 Phoenix IT Group plc
Annual report and accounts 2006
11. DIVIDENDS
2006 2005
£’000 £’000
Amounts recognised as distributions to Shareholders in the year:
Final dividend for the year ended 31 March 2005 of 2.4p (2004: nil) per share 1,421 –
Interim dividend for the year ended 31 March 2006 of 1.38p (2005: nil) per share 818 –
2,239 –
Proposed final dividend for the year ended 31 March 2006 of 2.76p (2005: 2.4p) per share 1,638 1,421
The proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in
these financial statements.
12. GOODWILL
£’000
COST AND CARRYING AMOUNT
At 1 April 2004 22,942
Adjustment to fair values (1,197)
At 31 March 2005 21,745
Additions 36,075
At 31 March 2006 57,820
Goodwill of £21.7m (2005: £21.7m) is allocated to Trend Network Services. The recoverable amount has been determined on the basis of the
current business plan which extends until March 2007.
Key assumptions are:
(i) Trend Network Services and Phoenix IT Services are treated as a single cash generating unit.
(ii) Operating profit has been converted into cash flows by using the cash generating units budgeted cash conversion rate. 
(iii) Discount rate of 10% based on the Group’s weighted average cost of capital.
(iv) Long-term growth rate of 2.25% per annum.
The fair value of net liabilities acquired on the Trend Network Services acquisition was revised in 2005 from £559,000 to net assets of
£638,000. This was due to the following changes:
£’000
Reduction on stock valuation following a further review (250)
Bad debt provision not required 526
Corporation tax provision not required 53
Deferred tax asset on provisions 567
Provision for liabilities and charges not required 132
Other cost provisions not required 169
1,197
Goodwill of £36.1m arose on the acquisition of NDR (Holdings) Limited. The recoverable amount has been determined on the basis of the current
business plan which extends until March 2009.
Key assumptions are:
(i) Long-term growth rate of 2.25% per annum.
(ii) Operating profit has been converted into cash flows by using the cash generating units budgeted cash conversion rate. 
(iii) Discount rate of 10% based on the Group’s weighted average cost of capital.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 29 Phoenix IT Group plc
Annual report and accounts 2006
13. INTANGIBLE ASSETS
£’000
COST
At 1 April 2005 –
Additions 9,013
At 31 March 2006 9,013
ACCUMULATED AMORTISATION
At 1 April 2005 –
Charge for the year 1,998
At 31 March 2006 1,998
NET BOOK VALUE
At 31 March 2006 7,015
At 31 March 2005 –
Intangible assets arose on the acquisition of NDR (Holdings) Limited and relate to the valuation of the acquired customer relationships expected
to endure beyond the minimum contracted order terms.
14. PROPERTY , PLANT AND EQUIPMENT
Short Fixtures
Freehold leasehold and Motor
property properties equipment vehicles Total
£’000 £’000 £’000 £’000 £’000
COST
At 1 April 2004 1,407 525 5,865 – 7,797
Additions – 257 1,473 90 1,820
Disposals – – (98) – (98)
At 31 March 2005 1,407 782 7,240 90 9,519
Acquired with subsidiary undertaking (Note 27) – 1,646 6,574 223 8,443
Additions – 145 3,389 131 3,665
Disposals – – (1,560) (55) (1,615)
At 31 March 2006 1,407 2,573 15,643 389 20,012
ACCUMULATED DEPRECIATION
At 1 April 2004 146 72 3,739 – 3,957
Charge for the year 24 63 1,143 6 1,236
Disposals – – (54) – (54)
At 31 March 2005 170 135 4,828 6 5,139
Charge for the year 24 346 3,561 113 4,044
Disposals – – (1,487) (11) (1,498)
At 31 March 2006 194 481 6,902 108 7,685
NET BOOK VALUE
At 31 March 2006 1,213 2,092 8,741 281 12,327
At 31 March 2005 1,237 647 2,412 84 4,380
Included in the above is land at cost of £206,000 which is not depreciated.
The net book value of fixed assets includes £4,750,000 (2005: £84,407) in respect of assets held under finance leases and hire purchase contracts.
15. SUBSIDIARIES
A list of the significant subsidiaries included within the Group accounts, including the name, country of incorporation and proportion of
ownership interest, is given in Note 5 to the individual Company financial statements on page 45.
16. INVENTORIES
2006 2005
£’000 £’000
Service stocks 6,334 6,271 30 Phoenix IT Group plc
Annual report and accounts 2006
17. OTHER FINANCIAL ASSETS
TRADE AND OTHER RECEIVABLES at the balance sheet date comprise:
2006 2005
£’000 £’000
Trade debtors 17,164 15,224
Other debtors 8 41
Prepayments and accrued income 4,446 3,684
21,618 18,949
The average credit period taken on sales is 42 days (2005: 40 days). An allowance has been made for estimated irrecoverable amounts from
trade receivables of £25,000. This allowance has been determined by reference to past default experience.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
CASH AND CASH EQUIVALENTS comprise cash held by the Group and short-term bank deposits with an original maturity of three months or
less. The carrying amount of these assets approximates their fair value. 
18. OTHER FINANCIAL LIABILITIES
TRADE AND OTHER PAYABLES principally comprise the following amounts: 
2006 2005
£’000 £’000
Trade creditors 6,522 3,606
Other creditors 118 223
Social security and other taxes 4,236 4,000
Accruals 6,253 5,650
17,129 13,479
As at 31 March 2006, trade creditors of the Group were equivalent to 41 days (2005: 37 days).
The Directors consider that the carrying amount of trade payables approximates their fair value.
19. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
Present value of
Minimum lease payments minimum lease payments
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Amounts payable under finance leases and hire purchase contracts:
Within one year 1,890 30 1,619 30
In the second to fifth years inclusive 3,577 58 3,381 58
After five years – – – –
5,467 88 5,000 88
Less: future finance charges (467) – N/A N/A
Present value of lease obligations 5,000 88
Less: amounts due for settlement within 12 months (1,619) (30)
Amounts due for settlement after 12 months 3,381 58
It is the Group’s policy to lease certain of its fixtures, fittings and equipment under finance leases and hire purchase contracts. The average term
is four years. For the year ended 31 March 2006, the effective borrowing rate was 6.4% (2005: 6.5%). Interest rates are fixed at the contract
date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. 
All lease and hire purchase obligations are denominated in sterling.
There is no material difference between the minimum lease payments and the present value of the minimum lease payments.
The fair value of the Group’s lease and hire purchase obligations approximates their carrying amount.
The Group’s obligations under finance leases and hire purchase contracts are secured by the lessors’ charges over the leased assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 31 Phoenix IT Group plc
Annual report and accounts 2006
20. BANK LOANS
2006 2005
£’000 £’000
Bank loans 15,932 –
The borrowings are repayable as follows:
Within one year 4,000 –
In more than one year but not more than two years 4,000 –
In more than two years but not more than five years 7,932 –
15,932 –
Less: Amounts due for settlement within 12 months (4,000) –
Amounts due for settlement after 12 months 11,932 –
On 19 April 2005, the Group took out a loan for £20m. Repayments commenced in March 2006 and will continue until March 2010. 
The Company and certain subsidiaries (as guarantor) have entered into a composite guarantee in favour of Bank of Scotland on account of the
Company and certain subsidiaries (as principal). The loan carries an interest rate of 0.813% above LIBOR.
The Directors estimate the fair value of the Group’s bank borrowings to be equivalent to its book value. At 31 March 2006, the Group had
available £20m of undrawn committed borrowing facilities.
21. PROVISIONS
2006 2005
£’000 £’000
Balance at the start of the period 500 654
Additional provision in the year 741 –
Utilisation of provision (4) (22)
Adjustment to fair values of subsidiary undertaking – (132)
Balance at the end of the period 1,237 500
Included in current liabilities 496 500
Included in non-current liabilities 741 –
1,237 500
The provision relates to the obligation to reinstate certain properties to their former condition at the end of their leases.
22. DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior
reporting period.
Accelerated Share
Intangible tax option
assets depreciation costs Provisions Total
£’000 £’000 £’000 £’000 £’000
At 1 April 2004 – 410 88 193 691
Charge to income – 56 68 (518) (394)
Charge to equity – – 327 – 327
Adjustments to fair values – – – 567 567
At 31 March 2005 – 466 483 242 1,191
Acquisition of subsidiary (Note 27) (2,704) (473) – 415 (2,762)
Charge to income 600 112 199 (155) 756
Charge to equity – – (308) – (308)
At 31 March 2006 (2,104) 105 374 502 (1,123)
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which
deferred tax liabilities have not been recognised was £24,429,510 (2005: £3,877,589). No liability has been recognised in respect of these
differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such
differences will not reverse in the foreseeable future. 32 Phoenix IT Group plc
Annual report and accounts 2006
23. SHARE CAPITAL
Authorised Allotted and Fully Paid
Number £’000 Number £’000
Ordinary shares of 1p each
At 1 April 2004
1
15,000,000 150 8,580,000 86
Increase in authorised share capital immediately prior to admission 85,000,000 850 – –
Bonus issue immediately prior to admission – – 34,320,000 343
New shares issued on admission – – 12,765,957 128
Over-allotment shares issued – – 1,968,617 20
Allotment of shares under the Share Incentive Plann – – 259,558 2
Exercise of share options – – 1,001,724 10
At 31 March 2005 100,000,000 1,000 58,895,856 589
Exercise of share options – – 445,176 4
At 31 March 2006 100,000,000 1,000 59,341,032 593
During the year, options were exercised on 445,176 Ordinary Shares at prices varying from 37.8p to 96p and that number of shares was
issued for a total gross consideration of £296,402 comprising £291,950 of share premium and £4,452 of capital. 
The Company has one class of ordinary share capital which carry no right to fixed income.
1
Authorised: 12,848,000 ordinary voting; 2,152,000 non-voting. Allotted and fully paid: 6,428,000 ordinary voting; 2,152,000 non-voting. The authorised and the allotted 
and fully paid non-voting Ordinary Shares were converted to voting Ordinary Shares immediately prior to flotation.
24. SHARE PREMIUM ACCOUNT
£’000
At 1 April 2004 2,576
Bonus issue immediately prior to admission (343)
Premium on issue of shares 35,684
Share issue costs (1,409)
At 31 March 2005 36,508
Premium on issue of shares 292
At 31 March 2006 36,800
25. OTHER RESERVES
Total
Translation Shares to Other
Reserve be Issued Reserves
£’000 £’000 £’000
At 1 April 2004 –––
Exchange difference arising on the restatement of net assets of overseas subsidiaries 4 – 4
IFRS 2 share option expense – 218 218
At 31 March 2005 4 218 222
Exchange difference arising on the restatement of net assets of overseas subsidiaries 2 – 2
IFRS 2 share option expense – 437 437
At 31 March 2006 6 655 661
26. RETAINED EARNINGS
£’000
At 1 April 2004 (14,580)
Share-based payment transaction deferred tax reserve 328
Retained profit for the year 7,656
At 31 March 2005 (6,596)
Share-based payment transaction deferred tax reserve (308)
Share-based payment transaction corporation tax reserve 313
Retained profit for the year 12,584
Dividends (2,239)
At 31 March 2006 3,754
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 33 Phoenix IT Group plc
Annual report and accounts 2006
27. ACQUISITION OF SUBSIDIARY UNDERTAKING
On 19 April 2005 the Company acquired 100% of the issued share capital of NDR (Holdings) Limited for cash consideration of £28,825,000.
The costs of acquisition amounted to £760,000. NDR (Holdings) Limited is the parent company of a group of companies involved in business
continuity services including disaster recovery services for computer systems and networks. This transaction has been accounted for by the
purchase method of accounting.
The following table sets out the book values of the identifiable assets and liabilities acquired and their fair values to the Group:
Fair value
Book value Revaluation to Group
£’000 £’000 £’000
FIXED ASSETS
Tangible 9,321 (878) 8,443
Intangible asset arising on acquisition – 9,013 9,013
CURRENT ASSETS
Trade and other receivables 5,127 1 5,128
Cash and cash equivalents 2,018 – 2,018
TOTAL ASSETS 16,466 8,136 24,602
CREDITORS
Bank and other loans 9,875 – 9,875
Trade and other payables 8,367 202 8,569
Tax liabilities 115 – 115
Provisions – 295 295
Deferred tax liabilities 470 2,292 2,762
Deferred income 9,476 – 9,476
TOTAL LIABILITIES 28,303 2,789 31,092
NET LIABILITIES (11,837) 5,347 (6,490)
Goodwill 36,075
29,585
Satisfied by:
Cash 28,825
Cash – costs of acquisition 760
29,585
Details of the fair value adjustments to the book values of the acquired identifiable assets and liabilities are as follows:
(a) Tangible fixed assets were revalued in order to reflect their fair value to the Group.
(b) Intangible assets arising on the acquisition relate to the valuation of the acquired customer relationships expected to endure beyond the
minimum contracted order terms. The intangible asset valuation has been derived using the estimated net present value of the net future
after tax cash flows which are expected to arise from the customer relationships.
(c) Trade debtors were revalued by £18,000 to take account of irrecoverable amounts. Specific provisions were established after making due
allowance for cash received since the acquisition.
(d) Other debtors were revalued for bank interest receivable of £19,000.
(e) Creditors were adjusted to take account of additional liabilities on the date of acquisition.
(f) Provision fair value adjustments comprise dilapidation provisions of £295,000.
(g) Deferred tax liabilities were revalued to take account of the deferred tax liability that arises from the fair value adjustments.
(h) The goodwill recognised of £36.1m is attributable to the value of the established workforce and infrastructure; the future growth potential 
of the business continuity and disaster recovery market; and the anticipated synergies arising from the acquisition.
If the acquisition of NDR (Holdings) Limited had been on the first day of the financial year, Group revenues for the year would have been
£109,746,000 and the Group profit attributable to equity holders of the parent would have been £12,650,000. 34 Phoenix IT Group plc
Annual report and accounts 2006
28. NOTES TO THE CASH FLOW STATEMENT
2006 2005
£’000 £’000
Profit from operations 19,403 13,030
Adjustments for:
Depreciation of property, plant and equipment 4,044 1,236
Loss on disposal of property, plant and equipment 74 44
Amortisation of acquired intangibles 1,998 –
Share option costs 437 218
Exchange difference 2 4
Operating cash flows before movements in working capital 25,958 14,532
(Increase)/decrease in stocks (63) 73
Decrease/(Increase) in receivables 2,459 (5,619)
Increase in payables 494 767
Decrease in deferred income (2,066) (299)
Cash generated by operations 26,782 9,454
Income taxes paid (3,534) (3,130)
Interest received 217 249
Interest paid (1,739) (1,569)
Net cash from operating activities 21,726 5,004
Additions to fixtures and equipment during the year amounting to £1,774,000 were financed by new finance leases.
29. OPERATING LEASE ARRANGEMENTS
THE GROUP AS LESSEE
2006 2005
£’000 £’000
Minimum lease payments under operating leases recognised in income for the year 2,431 1,922
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases,
which fall due as follows:
2006 2005
£’000 £’000
Within one year 2,097 1,242
In the second to fifth years inclusive 6,385 2,631
After five years 3,891 1,846
12,373 5,719
Operating lease payments represent rentals payable by the Group for land and buildings, fixtures and fittings, equipment and motor vehicles.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 35 Phoenix IT Group plc
Annual report and accounts 2006
30. SHARE-BASED PAYMENTS
EQUITY-SETTLED SHARE OPTION PLANS
The Company has operated the following equity-settled share option plans during the period:
Employee Share Plan (ESP)
Enterprise Management Incentive Plan (EMI)
Performance Share Plan (PSP)
Post flotation, no further awards will be made under the ESP or the EMI plan.
The general terms and conditions of each plan are as follows:
ESP EMI PSP
Exercise price: Agreed market price of the All grants under the EMI plan All awards made under the PSP
Company’s shares at date of grant. were made at prices higher than have a nil exercise price. The
the agreed market price of the number of options granted to
Company’s shares at the date of eligible Group employees is
grant. The grant prices reflected determined as a proportion of
the grant prices of option rights base salary using the average of
under the ESP waived by option the middle market quotes for the
holders prior to the adoption of Company’s shares for the three
the EMI plan. days immediately prior to grant. 
Vesting period: Generally three years from the Vesting of all EMI plan options Three years from the date of grant.
date of grant. was conditional upon the flotation 
of the Company. Consequently, 
all the EMI plan options vested 
in November 2004.
Lapse date: Generally options granted under All EMI plan options automatically PSP options lapse if they remain
the ESP automatically lapse if they lapse if they remain unexercised unexercised after a period of 
remain unexercised after a period after a period of 10 years from 10 years from the date of grant. 
of seven years from the date of the date of grant. Furthermore, Furthermore, options are 
grant. Furthermore, generally options are forfeited if the option forfeited if the option holder 
options granted under the ESP holder ceases to be a Group ceases to be a Group employee 
are forfeited if the option holder employee before exercising before exercising the option.
ceases to be a Group employee the option.
before exercising the option.
Performance conditions: None. None. The PSP awards are subject 
to achieving a performance
condition related to average
annual growth in either EPS or
profit growth over a three-year
period of between 5% and 20%
per annum. This results in
between 20% and 100% 
of the options granted vesting.
Performance between these
points is on a progressive scale.
ESP
2006 2005
Weighted Weighted
average average
exercise exercise
Options price Options price
Balance at the start of the period 767,250 173p 579,000 77p
Granted during the period –– 575,000 190p
Exercised during the period 14,250 52p 322,750 42p
Expired during the period 148,500 194p 64,000 126p
Outstanding at the end of the period 604,500 170p 767,250 173p
Exercisable at the end of the period 22,000 170p 22,250 65p 36 Phoenix IT Group plc
Annual report and accounts 2006
30. SHARE-BASED PAYMENTS CONTINUED
EMI
2006 2005
Weighted Weighted
average average
exercise exercise
Options price Options price 
Balance at the start of the period 625,776 71p 1,353,250 65p
Granted during the period –– ––
Exercised during the period 430,926 67p 678,974 60p
Expired during the period 500 96p 48,500 59p
Outstanding at the end of the period 194,350 81p 625,776 71p
Exercisable at the end of the period 194,350 81p 625,776 71p
PSP
2006 2005
Weighted Weighted
average average
exercise exercise
Options price Options price 
Balance at the start of the period 669,305 – ––
Granted during the period 766,855 – 674,760 –
Exercised during the period –– ––
Expired during the period 194,537 – 5,455 –
Outstanding at the end of the period 1,241,623 – 669,305 –
Exercisable at the end of the period –– ––
The weighted average share price at the date of exercise for share options exercised during the period was:
ESP 260p
EMI 289p
The inputs into the Black-Scholes model are as follows:
ESP PSP
Weighted average share price £1.74 £2.75
Weighted average exercise price £1.74 Nil
Expected volatility 35% 32%
Expected life 5 years 4 years
Weighted average risk-free rate 4.83% 4.38%
Weighted average dividend yield 2.16% 1.11%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous six months and by
comparison with comparable companies, due to the limited data available for the Group. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
OTHER SHARE-BASED PLANS
The Company introduced a Share Incentive Plan on flotation. All employees were entitled to apply for free shares up to a value of £1,250
depending on their period of service. The Company issued 259,558 shares in connection with this award.
In addition, employees are able to buy shares by deduction from their pre-tax salary. Under the current SIP legislation this is restricted to 
a maximum of £1,500 in each tax year or, if less, 10% of salary.
The Group recognised total expenses of £617,000 relating to equity-settled share-based payment transactions in 2006 (2005: £911,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 37 Phoenix IT Group plc
Annual report and accounts 2006
31. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are disclosed in
Note 15 to the individual Company financial statements.
During the year the Group sold a motor vehicle to David Taylor, Group Finance Director, for £32,500. The sale was at open market value and
there were no outstanding amounts relating to this transaction at the year end.
REMUNERATION OF KEY MANAGEMENT PERSONNEL
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is provided in the audited part
of the Directors’ Remuneration Report.
2006 2005
£’000 £’000
Short-term employee benefits 1,138 768
Post-employment benefits 90 67
Share-based payment 204 103
1,432 938
32. FINANCIAL RISK MANAGEMENT
The main risks arising from the Group’s financial instruments are foreign exchange risk, interest rate risk, credit risk and liquidity risk. 
The Group’s policies for these risks are set out below:
(a) Foreign exchange risk
The Group manages currency exposures by maintaining, where possible, a broadly equivalent revenue and expense stream in the relevant
currency. The Board periodically reviews the net risk and implements strategies as appropriate. During the year the Group has not entered into
any derivatives.
(b) Interest rate risk
The Group is funded by equity, bank loans and hire purchase agreements. All borrowing is agreed and monitored by the Board. The Group seeks
to maximise its interest return on surplus funds by investing in short-term deposits at the relevant national bank’s commercial interest rate.
(c) Credit risk
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for
doubtful debts, estimated by the Group’s management based on prior experience and their assessment of the current economic environment.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating
agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
(d) Liquidity risk
The Group monitors its liquidity requirements and places surplus funds on short-term deposits. All borrowing is agreed and monitored by the Board. 38 Phoenix IT Group plc
Annual report and accounts 2006
33. EXPLANATION OF TRANSITION TO IFRS
This is the first year that the Group has presented its consolidated financial statements under IFRS. The following disclosures are required in the
year of transition. The last consolidated financial statements under UK GAAP were for the year ended 31 March 2005 and the date of transition
to IFRS was therefore 1 April 2004.
RECONCILIATION OF EQUITY AT 1 APRIL 2004 (DATE OF TRANSITION TO IFRS)
Effect of
transition
UK GAAP to IFRS IFRS
Note £’000 £’000 £’000
Goodwill 22,942 – 22,942
Property, plant and equipment 3,840 – 3,840
1 Deferred tax asset 410 281 691
Total non-current assets 27,192 281 27,473
Trade and other receivables 12,851 – 12,851
Stocks 6,594 – 6,594
Current tax asset 158 – 158
1 Deferred tax asset 191 (191) –
Cash and cash equivalents 3,996 – 3,996
Total current assets 23,790 (191) 23,599
Total assets 50,982 90 51,072
Interest-bearing loans 32,978 – 32,978
Trade and other payables 12,770 – 12,770
2 Employee benefits – 136 136
Dilapidation provision 654 – 654
3 Current tax liability 1,597 (41) 1,556
Deferred income: less than one year 14,746 – 14,746
Deferred income: after one year 150 – 150
Total liabilities 62,895 95 62,990
Total assets less total liabilities (11,913) (5) (11,918)
Share capital 86 – 86
Share premium 2,576 – 2,576
4 Retained earnings (14,575) (5) (14,580)
Total equity (11,913) (5) (11,918)
NOTES TO THE RECONCILIATION OF EQUITY AT 1 APRIL 2004
1. The application of IAS 12 requires the recognition of all deferred tax assets and liabilities regardless of whether the originating entry passes
through the profit and loss account. The Company has deferred tax assets in respect of historic share options which have not passed through
the profit and loss account. Under IFRS, deferred tax assets and liabilities should be shown as non-current.
2. Short-term accumulated compensated balances relating to holiday pay were previously expensed as incurred under UK GAAP . Under IFRS 
a liability is recognised for all entitlements for holiday at each balance sheet date.
3. The adjustment in Note 2 above leads to a reduction in current tax of £41,000 (at 30%).
4. The adjustments to retained earnings are as follows:
£
Short-term accumulated compensated balances (Note 2) 136,000
Tax effect of the above (Note 3) (41,000)
Deferred tax asset on historic share option charges (Note 1) (90,000)
5,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 39 Phoenix IT Group plc
Annual report and accounts 2006
33. EXPLANATION OF TRANSITION TO IFRS CONTINUED
RECONCILIATION OF EQUITY AT 31 MARCH 2005
Effect of
transition
UK GAAP to IFRS IFRS
Note £’000 £’000 £’000
1 Goodwill 20,684 1,061 21,745
Property, plant and equipment 4,380 – 4,380
2 Deferred tax asset 667 524 1,191
Total non-current assets 25,731 1,585 27,316
Trade and other receivables 18,949 – 18,949
Stocks 6,271 – 6,271
2 Deferred tax asset 74 (74) –
Cash and cash equivalents 8,099 – 8,099
Total current assets 33,393 (74) 33,319
Total assets 59,124 1,511 60,635
3 Proposed dividends 1,414 (1,414) –
4 Trade and other payables 13,487 3 13,490
5 Employee benefits –7777
Dilapidation provision 500 – 500
Current tax liability 1,271 (23) 1,248
Deferred income: less than one year 14,452 – 14,452
Deferred income: after one year 145 – 145
Total liabilities 31,269 (1,357) 29,912
Total assets less total liabilities 27,855 2,868 30,723
Share capital 589 – 589
Share premium 36,508 – 36,508
Translation reserve 4– 4
4 Shares to be issued 115 103 218
6 Profit and loss account (9,361) 2,765 (6,596)
Total equity 27,855 2,868 30,723
NOTES TO THE RECONCILIATION OF EQUITY AT 31 MARCH 2005
1. Amortisation charged on goodwill under UK GAAP during the year ended 31 March 2005 has been reversed as it is not required under IFRS.
2. The application of IAS 12 requires the recognition of all deferred tax assets and liabilities regardless of whether the originating entry passes
through the profit and loss account. The Company has deferred tax assets in respect of historic share options which have not passed through
the profit and loss account as well as those that have passed through the profit and loss account. £32,000 relates to the IFRS 2 adjustments
made in the profit and loss account (see Note 4), the remainder relates to options that became exercisable on flotation of the Company
(£418,000) and are credited directly to equity. Under IFRS, deferred tax assets and liabilities should be shown as non-current.
3. Under UK GAAP dividends proposed after the balance sheet date but before the signing of the financial statements were recognised as 
a liability and expense. Under IFRS this treatment is not allowed, the dividend must be approved by the Shareholders before it can be
recognised in the financial statements.
4. IFRS requires employee share-based payment transactions to be valued at fair value whereas current UK GAAP requires the payments to 
be valued by reference to intrinsic value. This results in an increased charge to the profit and loss account of £106,000, less deferred tax
on the charge of £32,000 (at 30%). NIC on the transaction is included within trade and other payables, with the remainder of £103,000
being an adjustment to reserves (shares to be issued).
5. Short-term accumulated compensated balances relating to holiday pay were previously expensed as incurred under UK GAAP . Under IFRS 
a liability is recognised for all entitlements for holiday at each balance sheet date.
6. The adjustments to retained earnings are as follows:
£
Goodwill amortisation (Note 1) 1,061,000
Dividends proposed (Note 3) 1,414,000
Share-based payment transactions (Note 4) (106,000)
Deferred tax on share-based payment transaction (Note 2/4) 32,000
Short-term accumulated balances (Note 5) (77,000)
Current tax on short-term accumulated balances (Note 5) 23,000
Deferred tax on historic share options (Note 2) 418,000
2,765,000 40 Phoenix IT Group plc
Annual report and accounts 2006
33. EXPLANATION OF TRANSITION TO IFRS CONTINUED
RECONCILIATION OF PROFIT OR LOSS FOR 2005
Effect of
transition
UK GAAP to IFRS IFRS
Note £’000 £’000 £’000
Revenue 88,331 – 88,331
Cost of sales (16,167) – (16,167)
Gross profit 72,164 – 72,164
Distribution costs (47,653) (47,653)
1 Administrative expenses (12,495) 1,014 (11,481)
Finance income 249 – 249
Finance costs (2,195) – (2,195)
(62,094) 1,014 (61,080)
Profit before tax 10,070 1,014 11,084
2 Tax expense (3,442) 14 (3,428)
Net profit 6,628 1,028 7,656
NOTES TO THE RECONCILIATION OF PROFIT OR LOSS FOR 2005
1. The following adjustments have been made which were not recognised under UK GAAP:
£
Reversal of goodwill amortisation 1,061,000
Short-term accumulated compensated balances 59,000
Share-based payment transactions (106,000)
1,014,000
2. The above transactions have had the following effect on the current tax charge:
Short-term accumulated compensated balances (18,000)
Share-based payment transactions 32,000
14,000
EXPLANATION OF MATERIAL ADJUSTMENTS TO THE CASH FLOW STATEMENT FOR 2005
Income taxes of £3.13m paid during the year ended 31 March 2005 are classified as part of the operating cash flows under IFRS, but were
included in a separate category of tax cash flows under UK GAAP . There are no other material differences between the cash flow statement
presented under IFRS and the cash flow statement presented under UK GAAP .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 41 Phoenix IT Group plc
Annual report and accounts 2006
34. STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE
At the date of authorisation of these financial statements, the following relevant Standards and Interpretations which have not been applied 
in these financial statements were in issue but not yet effective:
IFRS 7 Financial Instruments: Disclosures, and the related amendment to IAS 1 on capital disclosures
IFRIC 4 Determining whether an Arrangement contains a Lease
IFRIC 8 Scope of IFRS 2
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial
statements of the Group except for additional disclosures on financial instruments when the relevant Standard comes into effect for periods
commencing on or after 1 January 2007. 42 Phoenix IT Group plc
Annual report and accounts 2006
We have audited the individual Company financial statements of
Phoenix IT Group plc for the year ended 31 March 2006 which
comprise the balance sheet and the related Notes 1 to 15. These
individual Company financial statements have been prepared under
the accounting policies set out therein.
The corporate governance statement and the Directors’ Remuneration
Report are included in the Group annual report of Phoenix IT Group
plc for the year ended 31 March 2006. We have reported separately
on the Group financial statements of Phoenix IT Group plc for the
year ended 31 March 2006 and on the information in the Directors’
Remuneration Report that is described as having been audited.
This report is made solely to the Company’s members, as a body, 
in accordance with section 235 of the Companies Act 1985. 
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditors’ report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as 
a body, for our audit work, for this report, or for the opinions we
have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS 
AND AUDITORS
The Directors’ responsibilities for preparing the annual report and
the individual Company financial statements in accordance with
applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) are set out in the
statement of Directors’ responsibilities.
Our responsibility is to audit the individual Company financial
statements in accordance with relevant United Kingdom legal and
regulatory requirements and International Standards on Auditing
(UK and Ireland). 
We report to you our opinion as to whether the individual Company
financial statements give a true and fair view in accordance with the
relevant financial reporting framework and whether the individual
Company financial statements have been properly prepared in
accordance with the Companies Act 1985. We report to you
whether in our opinion the information given in the Directors’ Report
is consistent with the individual Company financial statements. We
also report to you if the Company has not kept proper accounting
records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
Directors’ remuneration and other transactions is not disclosed.
We read the other information contained in the annual report for 
the above year as described in the contents section and consider 
the implications for our report if we become aware of any apparent
mis-statements or material inconsistencies with the individual
Company financial statements. 
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the individual Company
financial statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the
preparation of the individual Company financial statements, and of
whether the accounting policies are appropriate to the Company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the individual Company financial statements are free
from material mis-statement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the individual
Company financial statements.
OPINION
In our opinion:
• the individual Company financial statements give a true and fair
view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the Company’s affairs as at
31 March 2006; 
• the individual Company financial statements have been properly
prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with
the financial statements. 
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Birmingham
United Kingdom
17 May 2006
INDEPENDENT AUDITORS’ REPORT 
ON THE COMPANY FINANCIAL STATEMENTS 43 Phoenix IT Group plc
Annual report and accounts 2006
COMPANY BALANCE SHEET 
AS AT 31 MARCH 2006
2005
As restated
2006 (Note 3)
Note £’000 £’000
FIXED ASSETS
Investments 5 78,970 49,385
CURRENT ASSETS
Debtors 6 9,940 3,964
CREDITORS: AMOUNTS FALLING DUE IN ONE YEAR 7 (26,299) (8,225)
NET CURRENT LIABILITIES (16,359) (4,261)
Total assets less current liabilities 62,611 45,124
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 8 (11,932) –
NET ASSETS 50,679 45,124
CAPITAL AND RESERVES
Share capital 9 593 589
Share premium account 10 36,801 36,508
Shares to be issued reserve 11 482 115
Profit and loss account 12 12,803 7,912
SHAREHOLDERS’ FUNDS 13 50,679 45,124
The financial statements were approved by the Board of Directors and authorised for issue on 17 May 2006. They were signed on its behalf by:
Nick Robinson David Simpson
Chief Executive Group Finance Director 44 Phoenix IT Group plc
Annual report and accounts 2006
1. ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention and have been prepared in accordance with the applicable United
Kingdom accounting standards. As permitted by the Companies Act 1985 the Company has not presented its own profit and loss account.
The principal accounting policies adopted are set out below.
DEFERRED TAX
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions
or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet
date. Timing differences are differences between the Group’s taxable profits and its results as stated in the financial statements that arise from
the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of all available evidence, it can
be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences
can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to
reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured 
on a non-discounted basis.
FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions 
in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into
account in arriving at the operating result. 
GROUP UNDERTAKINGS
Investments are included in the balance sheet at cost less any provision for permanent diminution in value.
SHARE-BASED PAYMENTS
The Company has applied the requirements of FRS 20 ‘Share-based payments’. In accordance with the transitional provisions, FRS 20 has been
applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005.
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will
eventually vest.
2. STAFF COSTS
The Directors received all of their remuneration, as disclosed in the Remuneration Report on page 17, from Phoenix IT Services Limited.
3. PRIOR YEAR ADJUSTMENT
Following the adoption of FRS 21 ‘Events after the balance sheet date’, dividends declared after the balance sheet date are no longer recognised
as a liability at the balance sheet date. Comparative figures for 2005 have been restated accordingly.
The adoption of FRS 21 led to an increase of £1,414,000 in retained profit and net assets for the year ended 31 March 2005.
The effect of the prior year adjustment on the current year has been an increase of £224,000 in retained profit.
4. PROFIT OF PARENT COMPANY
As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the Parent Company is not presented as part of these
accounts. The Parent Company’s profit before dividends for the financial year amounted to £7,130,000 (2005: £3,527,000)
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 45 Phoenix IT Group plc
Annual report and accounts 2006
5. INVESTMENTS
Shares in Loans to
Group Group
undertakings undertakings Total
£’000 £’000 £’000
COST
At 1 April 2005 28,385 22,000 50,385
Additions 29,585 – 29,585
At 31 March 2006 57,970 22,000 79,970
ACCUMULATED IMPAIRMENT
At 1 April 2005 and 31 March 2006 1,000 – 1,000
NET BOOK VALUE
At 31 March 2006 56,970 22,000 78,970
At 31 March 2005 27,385 22,000 49,385
Difficult trading conditions in France continued. As a result, the Directors have reviewed the carrying value of the Company’s investments and
retained the provision for impairment of £1,000,000.
At 31 March 2006 the Company held directly or indirectly 100% of the allotted share capital of the following principal undertakings:
Name of subsidiary Country of registration Class of share capital held Nature of business
Phoenix IT Services Limited England and Wales Ordinary Provision of information technology services
Phoenix IT Services SA France Ordinary Provision of information technology services
Trend Network Services England and Wales Ordinary Provision of information technology, networking support 
and infrastructure services
Network Disaster Recovery Limited England and Wales Ordinary Provision of business continuity and IT disaster 
recovery services 
6. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2006 2005
£’000 £’000
Amounts owed by Group undertakings 9,940 3,964
7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2005
As restated
2006 (Notes 3)
£’000 £’000
Amounts owed to Group undertakings 22,294 8,127
Accruals 5 98
Bank loans 4,000 –
26,299 8,225
8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2006 2005
£’000 £’000
Bank loans 11,932 –
The borrowings are repayable as follows:
In more than one year but not more than two years 4,000 –
In more than two years but not more than five years 7,932 –
11,932 –
9. SHARE CAPITAL
Authorised Allotted and Fully Paid
Number £’000 Number £’000
Ordinary shares of 1p each
At 1 April 2005 100,000,000 1,000 58,895,856 589
Options exercised – – 445,176 4
At 31 March 2006 100,000,000 1,000 59,341,032 593 46 Phoenix IT Group plc
Annual report and accounts 2006
10. SHARE PREMIUM ACCOUNT
£’000
At 1 April 2005 36,508
Premium on issue of shares 293
At 31 March 2006 36,801
11. SHARES TO BE ISSUED RESERVE
£’000
At 1 April 2005 115
FRS 20 share option expense 367
At 31 March 2006 482
12. PROFIT AND LOSS ACCOUNT
£’000
At 31 March 2005 as previously stated 6,498
Prior year adjustment (Note 3) 1,414
At 31 March 2005 as restated 7,912
Retained profit for the year 7,130
Dividends (2,239)
At 31 March 2006 12,803
13. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
2006 2005
£’000 £’000
Opening Shareholders’ funds as previously stated 43,710 7,047
Prior year adjustment (Note 3) 1,414 –
45,124 7,047
Profit for the financial year 7,130 3,527
Dividends (2,239) –
4,891 10,574
Share-based payment 367 115
Share capital issue 4 503
Premium on issue of shares 293 33,932
Closing Shareholders’ funds 50,679 45,124
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006 47 Phoenix IT Group plc
Annual report and accounts 2006
14. SHARE-BASED PAYMENTS
Details of share options granted by Group companies to employees, and that remain outstanding, over the Company’s shares are set out in Note 30
to the Phoenix IT Group plc consolidated financial statements on pages 35 and 36. The Company did not recognise any expense related to
equity-settled share-based payment transactions in the current or preceding year.
15. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are below.
Amounts owed Amounts owed
by related to related
parties parties 
£’000 £’000
Phoenix IT Services Limited – 10,145
Phoenix IT Services SA –4
Trend Network Services – 2,322
Phoenix Systems Management Limited – 2,875
Phoenix Computer Group Limited – 3,288
Phoenix IT Services (Europe) Limited – 1,000
Phoenix International Holdings Limited 64 –
Network Disaster Recovery Limited – 2,660
NDR (Holdings) Limited 9,876 –
At 31 March 2006 9,940 22,294
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for
doubtful debts in respect of the amounts owed by related parties. 48 Phoenix IT Group plc
Annual report and accounts 2006
IFRS IFRS UK GAAP UK GAAP UK GAAP UK GAAP
2006 2005 2005 2004 2003 2002
£’000 £’000 £’000 £’000 £’000 £’000
RESULTS
Revenue 108,919 88,331 88,331 58,311 52,730 51,370
Profit from operations excluding goodwill amortisation, 
amortisation of acquired intangibles, non recurring costs 
and share option costs 22,018 15,920 15,861 10,818 9,020 4,696
Goodwill amortisation – – (1,061) – (2,091) (482)
Amortisation of acquired intangibles (1,998) – ––––
Non recurring costs – (2,654) (2,654) – (362) (1,049)
Share option costs (617) (236) (130) – – –
Profit from operations 19,403 13,030 12,016 10,818 6,567 3,165
Net interest payable (1,454) (1,946) (1,946) (1,501) (778) (450)
Profit before tax 17,949 11,084 10,070 9,317 5,789 2,715
KEY STATISTICS
Earnings per ordinary share 21.3p 15.7p 13.6p 15.5p 8.4p 2.2p
Diluted earnings per ordinary share 20.8p 15.4p 13.3p 15.0p 8.1p 2.1p
Adjusted earnings per ordinary share* 24.4p 20.2p 19.7p 15.5p 14.1p 5.6p
*Adjusted earnings per Ordinary Share excludes the effect of goodwill amortisation, amortisation of acquired intangibles, non recurring costs and share option costs.
The amounts disclosed for 2004 and earlier periods are stated on the basis of UK GAAP because it is not practicable to restate amounts for
periods prior to the date of transition to IFRS. The principal differences between UK GAAP and IFRS are explained in Note 33 to the consolidated
financial statements which provides an explanation of the transition to IFRS.
FIVE YEAR SUMMARY 
FOR THE YEAR ENDED 31 MARCH 2006 PHOENIX IT GROUP plc
Registered In England 3476115
Registered Office
Technology House
Hunsbury Hill Avenue
Northampton
NN4 8QS
ADVISERS
Financial Advisers & Stockbrokers
UBS Limited
1 Finsbury Avenue
London
EC2M 2PP
Auditors
Deloitte & Touche LLP
Four Brindleyplace
Birmingham
B1 2HZ
Registrars
Lloyds TSB Registars
The Causeway
Worthing
West Sussex
BN99 9DA
Principal bankers
Bank of Scotland
249 Silbury Boulevard
Milton Keynes
MK9 1NA
Solicitors
Eversheds LLP
115 Colmore Row
Birmingham
B3 3AL
Financial public relations
Financial Dynamics
Holborn Gate
26 Southampton Buildings
London
WC2A 1PB
Remuneration consultants
New Bridge Street Consultants LLP
20 Little Britain
London
EC1A 7DH
Financial calendar
Annual General Meeting 3 August 2006
Ex dividend date 16 August 2006
Record date for dividend 18 August 2006
Dividend payment date 8 September 2006
ADVISERS AND SHAREHOLDER 
INFORMA TION Phoenix IT Group plc
Technology House, Hunsbury Hill
Avenue, Northampton NN4 8QS
Tel: +44 (0) 1604 769000 
Fax: +44 (0) 1604 764323
www.phoenixitgroup.com
INSPIRING
PARTNERSHIP
Annual report 
and accounts 2006
Phoenix IT Group plc Annual report and accounts 2006 INSPIRING PARTNERSHIP