phoenix it group plc
technology house hunsbury hill
avenue northampton nn4 8qs
tel 44 0 1604 769000 
fax 44 0 1604 764323
wwwphoenixitgroupcom
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 widearea 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 rollout 
of partnerdeveloped 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 233 2005 £883m
£22 0m
operating profit before share option
charges amortisation of acquired intangibles 
and flotation expenses up 383 
2005 £159m
£214m
operating profit before amortisation
of acquired intangibles and flotation 
expenses up 426 2005 £150m
£1 94m
profit from operations up 489
2005 £130m
208p
diluted earnings per share up 351 
2005 154p
£2 68m
cash generated by operations up 183 
to £268m 2005 £95m
1
 representing 
138 of profit from operations 2005 73
2 76p
proposed final dividend per share up 15 
2005 24p
opera tional
highlights
ndr performing ahead of
expectations contributing
£160m of revenues since
completion of the acquisition
in april 2005
contracted order book
increased 19 to £1487m
with a major fiveyear 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 1030 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 longterm 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 £206m 233 to £1089m 2005
£883m and operating profit before share option charges
amortisation of acquired intangibles and flotation expenses
see page 19 grew by 383 to £220m 2005 £159m
profit from operations after share option charges amortisation
of acquired intangibles and flotation expenses increased by
489 to £194m 2005 £130m and profit before tax
increased by 619 to £179m 2005 £111m
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 276p per share
which together with the interim dividend of 138p per share
paid in february 2006 makes a total dividend of 414p 
2005 24p 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
£211billion
03 phoenix it group plc
annual report and accounts 2006
a growing 
marketplace
phoenix it group
market share
£1 089 million
 source holwayovum 
market trends preview 2006 
 the uk it services market 
is currently worth €302bn
£211bn
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 worldclass 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 longterm 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 longterm 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 mediumsize
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 email
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 longterm 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 233 to £1089m
2005 £883m with the acquisition of ndr contributing
£160m since the completion of the purchase on 19 april 2005
excluding ndr the underlying organic growth in revenues in
the year was 52 £883m to £929m
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 383 to
£220m 2005 £159m this includes £41m contributed by
ndr giving an underlying growth rate excluding ndr of 125
£159m to £179m
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 202 from 180 ndr has performed well and has
generated an operating profit margin of 257 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 193
2005 180
profit from operations increased by 489 to £194m 2005
£130m 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 £90m has
been attributed to this intangible asset out of the total goodwill
arising on the acquisition this has resulted in an amortisation
charge of £20m in the period share option charges of £06m
2005 £09m comprise £04m of charges under ifrs 2 and
a £02m provision in respect of national insurance contributions
that will be payable on the options expected to be exercised 
profit before tax increased by 619 to £179m 2005 £111m
investment income and finance costs
the group incurred interest charges on its borrowings and
overdrafts of £14m during the financial year 2005 £15m
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 shortterm return on cash balances net
of this investment income the group’s finance costs reduced 
by 253 to £145m 2005 £195m 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 299 
2005 309 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 £268m 2005 £95m
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 £400m these
comprised a term loan of £200m see note 20 a £150m
revolving credit facility and a £50m bank overdraft net of
investing and financing activities and the ndr acquisition the
group generated £161m
3
of net cash during the year together
with the acquisition of ndr for £374m including net bank and
other borrowings of ndr assumed at the time of the acquisition
of £79m – see note 27 this has changed the group’s cash
position excluding finance leases from £81m at the start of
the year to net bank borrowings of £132m 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 351 to 208p 
2005 154p comparable basic earnings per share were 213p
36 higher than 2005 157p 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 21726
purchases of property plant and equipment 3622
dividends paid 2239
repayment of obligations under finance leases 59
issue of share capital 297
16103 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 us17bn
tata group is the worldleading
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 
noncompetitive gotomarket 
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 202 to 238p 2005 198p
4

dividend
the board is recommending a final dividend of 276p per share
which if approved will give a total dividend for the year of
414p per share including the interim dividend of 138p 
paid to shareholders on 3 february 2006 compared to 24p
for 2005 the total dividend for the year is covered 51 times 
by basic earnings per share and shareholders’ funds at the 
end of the financial year were £418m 2005 £307m
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 wwwphoenixitgroupcom 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 sharebased 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 workbased 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 
longterm 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 6163803 104
goldman sachs group inc 2834371 48
legal  general group plc 2483341 42
ubs global asset management life ltd 1798494 30
fc asset management plc 1794436 30
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 inhouse 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 £13006 2005 £10349 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 reappoint 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 276p 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 exdividend on 16 august 2006
the final dividend together with the interim dividend of 138p 
per ordinary share paid in february 2006 makes a total dividend 
of 414p 2005 24p 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 reappointment to the
board at the forthcoming annual general meeting and the directors
recommend their reappointment 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 £198220 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 preemption rights resolution 8
the directors are seeking authority from shareholders to allot ordinary
shares for cash other than on a preemptive 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 preemptive 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 £29733 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 £29733 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 1915473 options 
to subscribe for equity shares in the company outstanding
representing 324 of the company’s issued share capital if the full
authority sought by this resolution is used this number of outstanding
options would represent 34 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 reelection 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 reappointment
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 misstatement 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 nonfinancial 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 daytoday 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
nonaudit work all significant nonaudit work commissioned from the
external auditors requires the audit committee’s formal approval the
external auditors are only selected to undertake nonaudit 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 nonaudit work undertaken by the external auditors to
satisfy itself that there is no effect on their independence the split
between audit and nonaudit 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 d11 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 halfyear 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 nonaudit services and
• reviewing and implementing the policy on audit fees and fees for
other nonaudit 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 subcommittee 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 reappointment 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 nonaudit 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 reappointment 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 marketbased 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 allemployee share incentive plan sip since
flotation no further awards have been granted under the group’s
preflotation 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 twelvemonth 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 £205m 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 £20564m
the bonuses earned for the year ended 31 march 2006 were
£350000 for nick robinson and £100000 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 766855 shares
under the psp  nick robinson was granted awards over 191606
shares and david taylor was granted 72993
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 £1500 from their pretax 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
31306
16306
16206
16106
161205
161105
171005
16905
16805
15705
16605
16505
15405
16305
16205
17105
161204
161104 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 10000 10000
nick robinson 6163803 10812745
john sussens 8500 8500
david taylor 15000 40000
remuneration
the remuneration of the directors for the year to 31 march is comprised as follows
2005
total excl total excl 
salaryfees 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 1138 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 reappointment 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 £175000 per annum together with a car allowance of £18000 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 £32000 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 190909 – 190909 nil p i 122007 122014
nick robinson – 191606 – 191606 nil p ii 052008 052015
david taylor 250000 – – 125000 125000 200p iii
david taylor 72727 – – 72727 – – –
david taylor – 72993 – 72993 – – –
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 threeyear
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 longterm incentive schemes and money purchase
and defined benefit schemes we give a statement to the extent
possible of details of any noncompliance
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 misstatements 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 misstatement
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 108919 88331
cost of sales 18507 16167
gross profit 90412 72164
distribution costs 56926 47653
administrative expenses 14083 11481
operating profit before share option charges 
amortisation of acquired intangibles and flotation expenses 22018 15920
share option charges 617 911
operating profit before amortisation of 
acquired intangibles and flotation expenses 21401 15009
amortisation of acquired intangibles 1998 –
flotation expenses – 1979
profit from operations 5 19403 13030
investment income 37 217 249
finance costs 8 1671 2195
profit before tax 17949 11084
tax 9 5365 3428
profit for the period 12584 7656
earnings per share 
basic 10 213p 157p
diluted 10 208p 154p
consolidated statement of changes in shareholders’ equity 
for the year ended 31 march 2006
2006 2005
£’000 £’000
profit for the period 12584 7656
exchange differences on translation of foreign operations recognised directly in equity 2 4
total recognised income for the period 12586 7660
new share capital issued 4 503
employee share options – shares to be issued 437 218
premium on issue of shares 292 35341
share issue costs – 1409
sharebased payments deferred tax reserve 308 328
sharebased payments corporation tax reserve 313 –
final dividend for year ended 31 march 2005 24p per share 1421 –
interim dividend for the year ended 31 march 2006 138p per share 818 –
net increase in shareholders’ equity 11085 42641
balance at start of the period 30723 11918
balance at end of the period 41808 30723
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
noncurrent assets
goodwill 12 57820 21745
intangible assets 13 7015 –
property plant and equipment 14 12327 4380
deferred tax assets 22 – 1191
77162 27316
current assets
inventories 16 6334 6271
trade and other receivables 17 21618 18949
cash and cash equivalents 2760 8099
30712 33319
total assets 107874 60635
current liabilities
trade and other payables 18 17129 13479
current tax liabilities 3638 1248
obligations under finance leases and hire purchase contracts 19 1619 30
bank loans 20 4000 –
provisions 21 496 500
26882 15257
net current assets 3830 18062
noncurrent liabilities
obligations under finance leases and hire purchase contracts 19 3381 58
bank overdrafts and loans 20 11932 –
provisions 21 741 –
deferred tax liabilities 22 1123 –
17177 58
deferred income
due in less than one year 21832 14452
due after one year 175 145
22007 14597
total liabilities 66066 29912
net assets 41808 30723
equity
share capital 23 593 589
share premium account 24 36800 36508
other reserves 25 661 222
retained earnings 26 3754 6596
total equity 41808 30723
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 21726 5004
investing activities
purchases of property plant and equipment 3622 1730
acquisition of subsidiary undertaking
– cash consideration 28825 –
– costs of acquisition 760 –
– cash and cash equivalents acquired 2018 –
net cash used in investing activities 31189 1730
financing activities
dividends paid 2239 –
repayments of borrowings 23875 33604
repayments of obligations under finance leases and hire purchase contracts 59 2
new bank loans raised 30000 –
issue of share capital 297 34435
net cash from financing activities 4124 829
net decreaseincrease in cash and cash equivalents 5339 4103
cash and cash equivalents at beginning of period 8099 3996
cash and cash equivalents at end of period 2760 8099
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 intragroup 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 salesrelated 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 fixedfee 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 straightline 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 straightline 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 nonmonetary 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
shortterm employee benefits
the cost of shortterm 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 cashgenerating 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 pretax 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 cashgenerating unit is estimated to be less than its carrying amount the carrying amount of the
asset cashgenerating 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 cashgenerating 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 cashgenerating 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 straightline
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 straightline 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
interestbearing 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 interestbearing 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
sharebased payments
the group has applied the requirements of ifrs 2 sharebased 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 equitysettled sharebased payments to certain employees equitysettled sharebased payments are measured at fair value 
at the date of grant the fair value determined at the grant date of the equitysettled sharebased payments is expensed on a straightline 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 blackscholes model the expected life used in the model has been adjusted based on management’s best
estimate for the effects of nontransferability exercise restrictions and behavioural considerations 
3 revenue
an analysis of the group’s revenue is as follows
2006 2005
£’000 £’000
existing operations 92508 87499
acquisition in year – ndr 16031 –
108539 87499
incidental product resale 380 832
108919 88331
investment income 217 249
109136 88580
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 – 1979
flotation share award – 675
– 2654
depreciation of property plant and equipment 4044 1236
amortisation of acquired intangibles 1998 –
cost of inventories recognised as expense 4698 5865
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 nonaudit
services were £233000 2005 £470000 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
nonrecurring – 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 1189 1071
administration staff 82 50
directors 4 4
1275 1125
£’000 £’000
their aggregate remuneration comprised
wages and salaries 41327 33961
social security costs 4986 4132
other pension costs 633 496
46946 38589
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 1365 1546
interest on obligations under finance leases and hire purchase contracts 271 –
amortisation of loan issue costs 32 626
other interest 3 23
1671 2195
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 6112 3003
adjustment in respect of prior periods 68 –
foreign tax 77 31
6121 3034
deferred tax note 22
current year 805 394
adjustment in respect of prior periods 49 –
5365 3428
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 17949 11084
tax at the uk corporation tax rate of 30 5385 300 3325 300
effects of
expenses that are not deductible in determining taxable profit 44 02 107 10
tax adjustments relating to share options 41 02 ––
adjustments in respect of prior periods 19 01 ––
different tax rates of subsidiaries operating in other jurisdictions 4 00 4 01
tax expense and effective tax rate for the year 5365 299 3428 309
in addition to the amount charged to the income statement deferred tax of £308000 and current tax of £313000 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 244p 202p
diluted 238p 198p
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 12584 7656
flotation expenses – 1979
share option charges 617 911
amortisation of acquired intangibles 1998 –
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 14414 9850
number of shares
number number
‘000 ‘000
weighted average number of ordinary shares for the purposes of basic earnings per share 59078 48708
effect of dilutive potential ordinary shares
share options 1378 1136
weighted average number of ordinary shares for the purposes of diluted earnings per share 60456 49844 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 24p 2004 nil per share 1421 –
interim dividend for the year ended 31 march 2006 of 138p 2005 nil per share 818 –
2239 –
proposed final dividend for the year ended 31 march 2006 of 276p 2005 24p per share 1638 1421
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 22942
adjustment to fair values 1197
at 31 march 2005 21745
additions 36075
at 31 march 2006 57820
goodwill of £217m 2005 £217m 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 longterm growth rate of 225 per annum
the fair value of net liabilities acquired on the trend network services acquisition was revised in 2005 from £559000 to net assets of
£638000 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
1197
goodwill of £361m 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 longterm growth rate of 225 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 9013
at 31 march 2006 9013
accumulated amortisation
at 1 april 2005 –
charge for the year 1998
at 31 march 2006 1998
net book value
at 31 march 2006 7015
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 1407 525 5865 – 7797
additions – 257 1473 90 1820
disposals – – 98 – 98
at 31 march 2005 1407 782 7240 90 9519
acquired with subsidiary undertaking note 27 – 1646 6574 223 8443
additions – 145 3389 131 3665
disposals – – 1560 55 1615
at 31 march 2006 1407 2573 15643 389 20012
accumulated depreciation
at 1 april 2004 146 72 3739 – 3957
charge for the year 24 63 1143 6 1236
disposals – – 54 – 54
at 31 march 2005 170 135 4828 6 5139
charge for the year 24 346 3561 113 4044
disposals – – 1487 11 1498
at 31 march 2006 194 481 6902 108 7685
net book value
at 31 march 2006 1213 2092 8741 281 12327
at 31 march 2005 1237 647 2412 84 4380
included in the above is land at cost of £206000 which is not depreciated
the net book value of fixed assets includes £4750000 2005 £84407 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 6334 6271 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 17164 15224
other debtors 8 41
prepayments and accrued income 4446 3684
21618 18949
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 £25000 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 shortterm 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 6522 3606
other creditors 118 223
social security and other taxes 4236 4000
accruals 6253 5650
17129 13479
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 1890 30 1619 30
in the second to fifth years inclusive 3577 58 3381 58
after five years – – – –
5467 88 5000 88
less future finance charges 467 – na na
present value of lease obligations 5000 88
less amounts due for settlement within 12 months 1619 30
amounts due for settlement after 12 months 3381 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 64 2005 65 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 15932 –
the borrowings are repayable as follows
within one year 4000 –
in more than one year but not more than two years 4000 –
in more than two years but not more than five years 7932 –
15932 –
less amounts due for settlement within 12 months 4000 –
amounts due for settlement after 12 months 11932 –
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 0813 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 1237 500
included in current liabilities 496 500
included in noncurrent liabilities 741 –
1237 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 1191
acquisition of subsidiary note 27 2704 473 – 415 2762
charge to income 600 112 199 155 756
charge to equity – – 308 – 308
at 31 march 2006 2104 105 374 502 1123
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 £24429510 2005 £3877589 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
15000000 150 8580000 86
increase in authorised share capital immediately prior to admission 85000000 850 – –
bonus issue immediately prior to admission – – 34320000 343
new shares issued on admission – – 12765957 128
overallotment shares issued – – 1968617 20
allotment of shares under the share incentive plann – – 259558 2
exercise of share options – – 1001724 10
at 31 march 2005 100000000 1000 58895856 589
exercise of share options – – 445176 4
at 31 march 2006 100000000 1000 59341032 593
during the year options were exercised on 445176 ordinary shares at prices varying from 378p to 96p and that number of shares was
issued for a total gross consideration of £296402 comprising £291950 of share premium and £4452 of capital 
the company has one class of ordinary share capital which carry no right to fixed income
1
authorised 12848000 ordinary voting 2152000 nonvoting allotted and fully paid 6428000 ordinary voting 2152000 nonvoting the authorised and the allotted 
and fully paid nonvoting ordinary shares were converted to voting ordinary shares immediately prior to flotation
24 share premium account
£’000
at 1 april 2004 2576
bonus issue immediately prior to admission 343
premium on issue of shares 35684
share issue costs 1409
at 31 march 2005 36508
premium on issue of shares 292
at 31 march 2006 36800
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 14580
sharebased payment transaction deferred tax reserve 328
retained profit for the year 7656
at 31 march 2005 6596
sharebased payment transaction deferred tax reserve 308
sharebased payment transaction corporation tax reserve 313
retained profit for the year 12584
dividends 2239
at 31 march 2006 3754
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 £28825000
the costs of acquisition amounted to £760000 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 9321 878 8443
intangible asset arising on acquisition – 9013 9013
current assets
trade and other receivables 5127 1 5128
cash and cash equivalents 2018 – 2018
total assets 16466 8136 24602
creditors
bank and other loans 9875 – 9875
trade and other payables 8367 202 8569
tax liabilities 115 – 115
provisions – 295 295
deferred tax liabilities 470 2292 2762
deferred income 9476 – 9476
total liabilities 28303 2789 31092
net liabilities 11837 5347 6490
goodwill 36075
29585
satisfied by
cash 28825
cash – costs of acquisition 760
29585
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 £18000 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 £19000
e creditors were adjusted to take account of additional liabilities on the date of acquisition
f provision fair value adjustments comprise dilapidation provisions of £295000
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 £361m 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
£109746000 and the group profit attributable to equity holders of the parent would have been £12650000 34 phoenix it group plc
annual report and accounts 2006
28 notes to the cash flow statement
2006 2005
£’000 £’000
profit from operations 19403 13030
adjustments for
depreciation of property plant and equipment 4044 1236
loss on disposal of property plant and equipment 74 44
amortisation of acquired intangibles 1998 –
share option costs 437 218
exchange difference 2 4
operating cash flows before movements in working capital 25958 14532
increasedecrease in stocks 63 73
decreaseincrease in receivables 2459 5619
increase in payables 494 767
decrease in deferred income 2066 299
cash generated by operations 26782 9454
income taxes paid 3534 3130
interest received 217 249
interest paid 1739 1569
net cash from operating activities 21726 5004
additions to fixtures and equipment during the year amounting to £1774000 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 2431 1922
at the balance sheet date the group had outstanding commitments for future minimum lease payments under noncancellable operating leases
which fall due as follows
2006 2005
£’000 £’000
within one year 2097 1242
in the second to fifth years inclusive 6385 2631
after five years 3891 1846
12373 5719
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 sharebased payments
equitysettled share option plans
the company has operated the following equitysettled 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 threeyear
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 767250 173p 579000 77p
granted during the period –– 575000 190p
exercised during the period 14250 52p 322750 42p
expired during the period 148500 194p 64000 126p
outstanding at the end of the period 604500 170p 767250 173p
exercisable at the end of the period 22000 170p 22250 65p 36 phoenix it group plc
annual report and accounts 2006
30 sharebased payments continued
emi
2006 2005
weighted weighted
average average
exercise exercise
options price options price 
balance at the start of the period 625776 71p 1353250 65p
granted during the period –– ––
exercised during the period 430926 67p 678974 60p
expired during the period 500 96p 48500 59p
outstanding at the end of the period 194350 81p 625776 71p
exercisable at the end of the period 194350 81p 625776 71p
psp
2006 2005
weighted weighted
average average
exercise exercise
options price options price 
balance at the start of the period 669305 – ––
granted during the period 766855 – 674760 –
exercised during the period –– ––
expired during the period 194537 – 5455 –
outstanding at the end of the period 1241623 – 669305 –
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 blackscholes model are as follows
esp psp
weighted average share price £174 £275
weighted average exercise price £174 nil
expected volatility 35 32
expected life 5 years 4 years
weighted average riskfree rate 483 438
weighted average dividend yield 216 111
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 nontransferability exercise restrictions and behavioural considerations
other sharebased plans
the company introduced a share incentive plan on flotation all employees were entitled to apply for free shares up to a value of £1250
depending on their period of service the company issued 259558 shares in connection with this award
in addition employees are able to buy shares by deduction from their pretax salary under the current sip legislation this is restricted to 
a maximum of £1500 in each tax year or if less 10 of salary
the group recognised total expenses of £617000 relating to equitysettled sharebased payment transactions in 2006 2005 £911000
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 £32500 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
shortterm employee benefits 1138 768
postemployment benefits 90 67
sharebased payment 204 103
1432 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 shortterm 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 creditratings assigned by international creditrating
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 shortterm 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 22942 – 22942
property plant and equipment 3840 – 3840
1 deferred tax asset 410 281 691
total noncurrent assets 27192 281 27473
trade and other receivables 12851 – 12851
stocks 6594 – 6594
current tax asset 158 – 158
1 deferred tax asset 191 191 –
cash and cash equivalents 3996 – 3996
total current assets 23790 191 23599
total assets 50982 90 51072
interestbearing loans 32978 – 32978
trade and other payables 12770 – 12770
2 employee benefits – 136 136
dilapidation provision 654 – 654
3 current tax liability 1597 41 1556
deferred income less than one year 14746 – 14746
deferred income after one year 150 – 150
total liabilities 62895 95 62990
total assets less total liabilities 11913 5 11918
share capital 86 – 86
share premium 2576 – 2576
4 retained earnings 14575 5 14580
total equity 11913 5 11918
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 noncurrent
2 shortterm 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 £41000 at 30
4 the adjustments to retained earnings are as follows
£
shortterm accumulated compensated balances note 2 136000
tax effect of the above note 3 41000
deferred tax asset on historic share option charges note 1 90000
5000
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 20684 1061 21745
property plant and equipment 4380 – 4380
2 deferred tax asset 667 524 1191
total noncurrent assets 25731 1585 27316
trade and other receivables 18949 – 18949
stocks 6271 – 6271
2 deferred tax asset 74 74 –
cash and cash equivalents 8099 – 8099
total current assets 33393 74 33319
total assets 59124 1511 60635
3 proposed dividends 1414 1414 –
4 trade and other payables 13487 3 13490
5 employee benefits –7777
dilapidation provision 500 – 500
current tax liability 1271 23 1248
deferred income less than one year 14452 – 14452
deferred income after one year 145 – 145
total liabilities 31269 1357 29912
total assets less total liabilities 27855 2868 30723
share capital 589 – 589
share premium 36508 – 36508
translation reserve 4– 4
4 shares to be issued 115 103 218
6 profit and loss account 9361 2765 6596
total equity 27855 2868 30723
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 £32000 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
£418000 and are credited directly to equity under ifrs deferred tax assets and liabilities should be shown as noncurrent
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 sharebased 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 £106000 less deferred tax
on the charge of £32000 at 30 nic on the transaction is included within trade and other payables with the remainder of £103000
being an adjustment to reserves shares to be issued
5 shortterm 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 1061000
dividends proposed note 3 1414000
sharebased payment transactions note 4 106000
deferred tax on sharebased payment transaction note 24 32000
shortterm accumulated balances note 5 77000
current tax on shortterm accumulated balances note 5 23000
deferred tax on historic share options note 2 418000
2765000 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 88331 – 88331
cost of sales 16167 – 16167
gross profit 72164 – 72164
distribution costs 47653 47653
1 administrative expenses 12495 1014 11481
finance income 249 – 249
finance costs 2195 – 2195
62094 1014 61080
profit before tax 10070 1014 11084
2 tax expense 3442 14 3428
net profit 6628 1028 7656
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 1061000
shortterm accumulated compensated balances 59000
sharebased payment transactions 106000
1014000
2 the above transactions have had the following effect on the current tax charge
shortterm accumulated compensated balances 18000
sharebased payment transactions 32000
14000
explanation of material adjustments to the cash flow statement for 2005
income taxes of £313m 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
misstatements 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 misstatement 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 78970 49385
current assets
debtors 6 9940 3964
creditors amounts falling due in one year 7 26299 8225
net current liabilities 16359 4261
total assets less current liabilities 62611 45124
creditors amounts falling due after more than one year 8 11932 –
net assets 50679 45124
capital and reserves
share capital 9 593 589
share premium account 10 36801 36508
shares to be issued reserve 11 482 115
profit and loss account 12 12803 7912
shareholders’ funds 13 50679 45124
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 nondiscounted 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
sharebased payments
the company has applied the requirements of frs 20 ‘sharebased 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 equitysettled sharebased payments to certain employees equitysettled sharebased payments are measured at fair value
at the date of grant the fair value is expensed on a straightline 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 £1414000 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 £224000 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 £7130000 2005 £3527000
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 28385 22000 50385
additions 29585 – 29585
at 31 march 2006 57970 22000 79970
accumulated impairment
at 1 april 2005 and 31 march 2006 1000 – 1000
net book value
at 31 march 2006 56970 22000 78970
at 31 march 2005 27385 22000 49385
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 £1000000
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 9940 3964
7 creditors amounts falling due within one year
2005
as restated
2006 notes 3
£’000 £’000
amounts owed to group undertakings 22294 8127
accruals 5 98
bank loans 4000 –
26299 8225
8 creditors amounts falling due after more than one year
2006 2005
£’000 £’000
bank loans 11932 –
the borrowings are repayable as follows
in more than one year but not more than two years 4000 –
in more than two years but not more than five years 7932 –
11932 –
9 share capital
authorised allotted and fully paid
number £’000 number £’000
ordinary shares of 1p each
at 1 april 2005 100000000 1000 58895856 589
options exercised – – 445176 4
at 31 march 2006 100000000 1000 59341032 593 46 phoenix it group plc
annual report and accounts 2006
10 share premium account
£’000
at 1 april 2005 36508
premium on issue of shares 293
at 31 march 2006 36801
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 6498
prior year adjustment note 3 1414
at 31 march 2005 as restated 7912
retained profit for the year 7130
dividends 2239
at 31 march 2006 12803
13 reconciliation of movements in shareholders’ funds
2006 2005
£’000 £’000
opening shareholders’ funds as previously stated 43710 7047
prior year adjustment note 3 1414 –
45124 7047
profit for the financial year 7130 3527
dividends 2239 –
4891 10574
sharebased payment 367 115
share capital issue 4 503
premium on issue of shares 293 33932
closing shareholders’ funds 50679 45124
notes to the company financial statements
for the year ended 31 march 2006 47 phoenix it group plc
annual report and accounts 2006
14 sharebased 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
equitysettled sharebased 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 – 10145
phoenix it services sa –4
trend network services – 2322
phoenix systems management limited – 2875
phoenix computer group limited – 3288
phoenix it services europe limited – 1000
phoenix international holdings limited 64 –
network disaster recovery limited – 2660
ndr holdings limited 9876 –
at 31 march 2006 9940 22294
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 108919 88331 88331 58311 52730 51370
profit from operations excluding goodwill amortisation 
amortisation of acquired intangibles non recurring costs 
and share option costs 22018 15920 15861 10818 9020 4696
goodwill amortisation – – 1061 – 2091 482
amortisation of acquired intangibles 1998 – ––––
non recurring costs – 2654 2654 – 362 1049
share option costs 617 236 130 – – –
profit from operations 19403 13030 12016 10818 6567 3165
net interest payable 1454 1946 1946 1501 778 450
profit before tax 17949 11084 10070 9317 5789 2715
key statistics
earnings per ordinary share 213p 157p 136p 155p 84p 22p
diluted earnings per ordinary share 208p 154p 133p 150p 81p 21p
adjusted earnings per ordinary share 244p 202p 197p 155p 141p 56p
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
wwwphoenixitgroupcom
inspiring
partnership
annual report 
and accounts 2006
phoenix it group plc annual report and accounts 2006 inspiring partnership


Summary:
 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 1030 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 longterm 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 £206m 233 to £1089m 2005
£883m and operating profit before share option charges
amortisation of acquired intangibles and flotation expenses
see page 19 grew by 383 to £220m 2005 £159m
profit from operations after share option charges amortisation
of acquired intangibles and flotation expenses increased by
489 to £194m 2005 £130m and profit before tax
increased by 619 to £179m 2005 £111m
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 276p per share
which together with the interim dividend of 138p per share
paid in february 2006 makes a total dividend of 414p 
2005 24p 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
£211billion
03 phoenix it group plc
annual report and accounts 2006
a growing 
marketplace
phoenix it group
market share
£1 089 million
 source holwayovum 
market trends preview 2006 
 the uk it services market 
is currently worth €302bn
£211bn
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’