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phoenix it group plc
technology house hunsbury hill avenue 
northampton nn4 8qs
t 44 0 1604 769000
f 44 0 1604 764323
wwwphoenixitgroupcom
phoenix it group plc
annual report and accounts for 
the year ended 31 march 2011
making it possible
phoenix it group plc  annual report and accounts for the year ended 31 march 2011 2032504 14062011 proof 4 2032504 14062011 proof 4
about us
phoenix it group companies provide managed it infrastructure support 
services including systems management communications remote 
telephone support hightouch field services project and consultancy 
services business continuity and  business availability services
complete solutions our performance corporate governance financial statements company information
phoenix it group plc
annual report and accounts 2011
01
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highlights
financial performance
 
group revenues increased 105 to £2716m  
2010 £2458m
 
underlying profit from operations
1
 increased 46 to 
£360m 2010 £344m
 
underlying profit before tax 
2
 increased by 87 to  
£320m 2010 £295m
 
underlying diluted earnings per share
2
 increased 55  
to 306p 2010 290p
 
proposed final dividend of 700p per share a 628 
increase in total dividend to 1050p per share  
2010 645p reflecting rebasing of dividend policy  
and the boards confidence in the future
 
retirement benefit obligation reduced to £07m  
2010 £51m 
 
good cash generation and further reduction in net  
debt including finance leasing of £55m to £624m  
2010 £679m
statutory performance
 
profit before tax increased to £253m 2010 £252m
 
profit from operations decreased to £296m  
2010 £301m
 
diluted earnings per share decreased to 242p 2010 246p
 
basic earnings per share decreased to 250p 2010 254p
operational highlights
 
integration of three large outsource contracts won  
during 2010 now complete
 
icm and servo divisions merged from 4 april 2011 benefits 
coming through as expected
 
targeted investment in hosting and “cloud” services to 
meet growing demand
 
continuing high demand for managed hosting 
 
new banking facilities materially increase the financial 
resources of the group
 
good cash generation and further reduction in net debt 
including finance leases
 
continuing high demand for managed hosting 35 
increase in annual contract base
 
strong platform for future growth
1  underlying — adjusted for nonrecurring items £33m 2010 £12m and amortisation  
of acquired intangibles
2 underlying — adjusted for nonrecurring items £36m 2010 £12m and amortisation  
of acquired intangibles
corporate governance
board of directors 10
directors’ report 11
corporate governance 14
corporate social responsibility 17
directors’ responsibilities statement 18
audit committee report 19
directors’ remuneration report 20
our perfomance
highlights 01
chairman’s statement 02
business review 03
 chief executive’s review 03
 finance review 06
financial statements
independent auditor’s report 
on the group financial statements 25
consolidated statement of income 26
consolidated statement of comprehensive income 27
consolidated balance sheet 28
consolidated statement of changes in equity 29
consolidated cash flow statement 30
notes to the consolidated financial statements 31
independent auditor’s report  
on the company financial statements 63
company balance sheet 64
notes to the company financial statements 65
five year summary 69
company information
notice of annual general meeting 70
advisers and financial calendar 74 02
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chairman’s statement
peter bertram
“i am pleased to report that 
phoenix it group plc has had a 
successful year with all three 
divisions delivering organic 
growth in both revenue and 
underlying profit from 
operations” 
review of the year
i am pleased to report that phoenix it group plc has had a successful 
year with all three divisions delivering organic growth in both revenue 
and underlying profit
1
 from operations and the group continues to 
be cash generative we have completed the integration of icm and 
servo into a single enduser business and following the investments 
made during the year in increasing hosting capacity and capability 
we are well positioned to take advantage of the market shift towards 
“cloud” computing in both of our enduser and partner services 
divisions the breadth of services that we can offer via the merged 
enduser division leads us to anticipate further growth in managed 
hosting and “cloud” services into the current financial year whilst 
growth predictions are more cautious in respect of the partner services 
division the group has a diverse customer base and retains good 
visibility of forward revenues giving a strong platform on which to 
build for the future
a review of the year’s trading and results is given in the business 
review
results
group revenues increased as expected by 105 to £2716m 2010 
£2458m and profit before tax increased by 07 to £253m 2010 
£252m underlying
2
 profit before tax increased by 87 to £320m 
2010 £295m diluted earnings per share decreased by 16 to 242p 
2010 246p and underlying
2
 diluted earnings per share increased 
by 55 to 306p 2010 290p the group continues to be highly cash 
generative and despite the increase in capital investment during the 
year net debt including finance leases reduced by £55m to £624m 
2010 £679m
dividend
as announced in november 2010 in the interim results after careful 
consideration the board has decided to rebase the group’s dividends 
in light of its continued strong cash generation and the greater 
flexibility afforded by the recent refinancing of its borrowing facilities  
the group has investment opportunities both organic and acquisitive 
within its chosen growing markets and the board believes these can 
be comfortably afforded within a higher dividend payout ratio  the 
board’s objective will be to at least maintain the rebased level of 
dividends in real terms within a payout ratio of between about 35 and 
45 of profit subject to unusual events or circumstances the board 
recommends a proposed final dividend of 700p per share 2010 430p 
which combined with the interim dividend of 350p per share gives a 
total dividend per share for the year of 1050p 2010 645p an increase 
of 628 if approved the final dividend will be paid on 3 august 2011 
to shareholders on the register at 17 june 2011 
board
as previously announced steve clutton was appointed as group 
finance director on 1 march 2011 steve was most recently group 
finance director of ig group holdings plc between 2006 and 2010 he 
brings extensive financial and commercial experience from operating 
within a range of companies having previously held senior finance 
roles within barclays bank interoute telecommunications limited and 
british telecom
 
employees
on behalf of the board and the shareholders i would like to thank all 
our staff for their commitment and hard work during the year
annual general meeting
the annual general meeting will be held at the group’s registered 
office technology house hunsbury hill avenue northampton on  
28 july 2011 at 1030 am
peter bertram
chairman
6 june 2011
1 underlying — adjusted for nonrecurring items £33m 2010 £12m and amortisation of acquired 
intangibles
2 underlying — adjusted for nonrecurring items £36m 2010 £12m and amortisation of acquired 
intangibles phoenix it group plc
annual report and accounts 2011
03
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our performance
“recognising the growth 
opportunity in “cloud” services  
we have continued to invest 
significantly in these areas” 
introduction
the group has had a solid year financially with revenues increasing 
by 105 to £2716m 2010 £2458m and underlying profit before 
tax
2
 increasing by 87 to £320m 2010 £295m there were no 
acquisitions during the year and all three businesses delivered organic 
growth in both revenue and underlying profit from operations
1

we have seen some confidence returning to the it services market 
in the uk with businesses now proceeding with it projects which had 
been deferred and many organisations in both the public and private 
sectors continuing to see outsourcing as a key method of reducing 
their own cost bases although current economic conditions and the 
recent spending review by the government have created a degree of 
uncertainty the overall trend for outsourcing remains promising and 
our phoenix it services partner services division remains well placed 
to support outsourcing companies in delivering essential services at a 
lower cost
the emergence of “cloud” computing marks a major shift in the it 
services market driven by developments in virtualisation webbased 
architecture and improvements in network capacity recognising the 
growth opportunity in “cloud” services we have continued to invest 
significantly in these areas particularly our managed hosting annuity 
contracts business and as a result the group is able to offer customised 
services which have significant business advantages in terms of 
flexibility risk reduction and compliance to its customer base 
growth in these “cloud” services combined with reducing costs 
elsewhere in the group has helped to mitigate revenue declines in 
areas where there is price competition or where we are reducing 
emphasis however this planned transition has had the effect of 
constraining shortterm profitability particularly within the servo 
midmarket services division but we continue to be encouraged 
by improvements in the pipeline and we are currently bidding for a 
number of opportunities with both new and existing customers
1 underlying — adjusted for nonrecurring items £33m 2010 £12m and amortisation of acquired 
intangibles
2 underlying — adjusted for nonrecurring items £36m 2010 £12m and amortisation of acquired 
intangibles
simplified organisational structure
the icm continuous business business continuity and servo mid
market services divisions merged to create a single enduser based 
organisation operating as one business within the phoenix it group 
from 4 april 2011 the combined business which will be reported from 
1 april 2011 in our financial statements as one division will be known 
as icm
the combined business operates from 23 uk locations and offers a full 
breadth of it and business continuity solutions from managed hosting 
and “cloud” services to business continuity and disaster recovery 
as well as a full range of infrastructure management and professional 
services 
in recent years there has been a move away from traditional it disaster 
recovery solutions towards the more holistic allround concept of 
business resilience which encompasses a company’s strategy for 
identifying mitigating and responding to potential business risks the 
merger of the two divisions allows the group to offer an endtoend 
business proposition centred around resilience
the servo midmarket services division brings expertise in the 
design implementation and hosting of resilient solutions while icm 
continuous business business continuity provides business continuity 
services designed around the workings of these solutions whilst other 
organisations offer similar services to our individual component parts our 
combined offering provides customers with a complete service which on 
a standalone basis we believe will be unrivalled in the uk market
icm continuous business business continuity
 year ended  year ended
 31 march 31 march
 2011 2010 change
revenue £555m £531m 44
underlying profit  
from operations £144m £133m 85
underlying operating  
margin 260 250 
order book £1137m £1043m 91
annual contract value £554m £545m 18
revenues for the year were £555m 2010 £531m an increase of 
44 including £21m 2010 £03m in respect of shadow planner 
our business continuity planning tool business which was acquired 
on 23 december 2009 excluding the impact of shadow planner 
divisional revenues increased by 11 with revenue growth held 
back by lower traditional it disaster recovery revenues the growth 
in “cloud” services and in particular virtualisation continues to create 
new solutions for it business continuity as an alternative to traditional 
disaster recovery options 
this modest revenue growth is reflected in the order book and annual 
contract values at 31 march 2011 order book increased by 91 to 
£1137m 2010 £1043m bolstered by a £172m five year extension in 
june 2010 to the division’s largest business continuity contract this 
contract due to expire in march 2011 was extended until march 2016 
the annual contract value increased to £554m as at 31 march 2011  
2010 £545m providing good visibility of future revenues which will 
be recognised during the current financial year
business review
chief executive’s review nick robinson 04
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chief executive’s review continued
underlying profit from operations was £144m 2010 £133m with 
shadow planner contributing £05m 2010 £nil during the second 
half of the year underlying profitability improved as a result of tight 
controls on the cost base and this translated into a year on year 
improvement in operating margin from 250 to 260 
during the year the division has continued to invest for growth 
through expenditure on developing new products and services within 
the “cloud” as well as expanding its infrastructure and business 
continuity capacity upgrades have taken place at the birmingham 
hamilton and farnborough datacentres as well as a power upgrade 
at our wapping facility this capacity expansion programme will 
continue into 2012 and 2013 to meet the increased demand for work
area capacity particularly in the london financial markets
the merger of the icm continuous business business continuity with 
our servo midmarket services division from 4 april 2011 will provide 
further opportunities to sell business continuity services and hosting to 
a significantly wider customer base 
“   our combined offering 
provides customers with a 
complete service which on a 
standalone basis we believe will  
be unrivalled in the uk market”
servo midmarket services
 year ended  year ended
 31 march 31 march
 2011 2010 change
revenue £982m £885m 110
underlying profit  
from operations £83m £80m 26
underlying operating  
margin 84 91
order book £736m £543m 355
annual contract value £491m £479m 26
despite a slow start to the year divisional revenues grew by 110 
mainly due to the acquisition of support contracts from kcom group 
plc during the last quarter of the previous financial year combined 
with an increase in managed hosting activity and stronger project and 
professional services revenues there has been further progress in 
improving the quality of business mix in the division as the proportion 
of nonannuity contract revenue continues to fall and managed 
hosting revenues increase
underlying profit from operations increased to £83m 2010 £80m 
during the year the division continued to strengthen its sales and 
marketing effort and this investment has had the effect of constraining 
profitability in the shortterm and diluting the underlying operating 
margin percentage from 91 to 84 for the year as a whole
despite the loss of £35m of annual contract value announced in our 
q1 ims in august 2010 which resulted from the decision by a customer 
to insource some of the activities provided by the group there has 
been significant growth in the order book driven by new business wins 
during the year the divisional order book grew by 355 to £736m 
at 31 march 2011 2010 £543m and the annualised contract value 
increased by 26 to £491m at 31 march 2011 2010 £479m
the business has continued to extend its presence in the midmarket 
sector and grow its managed hosting annuity business the hosting 
annual contract base increased by 353 to £130m at 31 march 2011 
2010 £96m clearly demonstrating the strength of its service offering 
as customers switch to hosting technology within our business the 
increase in managed hosting business aided by investment in the sales 
force in the first half of the year has been the driving force behind a 
significant increase in underlying operating margin from 71 in the 
first half to 96 during the second half of the year
whilst the focus remains on growing managed hosting annuity 
revenues it has also been encouraging to see stronger year on year 
project and professional services revenues this is a reflection of 
confidence returning to the market as businesses are now willing 
to proceed with projects which had previously been delayed or 
postponed 
the growth in managed hosting supported by a carefully directed 
capacity expansion programme should ensure that higher and more 
sustainable underlying operating margins are achievable in this 
business
business review phoenix it group plc
annual report and accounts 2011
05
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our performance
phoenix it services partner services
 year ended  year ended
 31 march 31 march
 2011 2010 change
revenue £1179m £1042m 131
underlying profit  
from operations £167m £164m 22
underlying operating  
margin 142 157
order book £1407m £1944m 276
annual contract value £953m £1013m 59
divisional revenues increased by 131 to £1179m 2010 £1042m 
partly due to a recovery in project and professional services revenues 
from the low levels reported last financial year combined with the 
year on year benefit of three outsourcing contracts secured during 
the latter part of the previous financial year the integration of these 
contracts into the existing business is now complete and profitability 
is in line with our expectations with the introduction of efficiency 
savings we expect to see improved profitability on these contracts 
moving into low doubledigit margins in the coming financial year 
underlying profit from operations increased to £167m 2010 
£164m despite the continued competitive pricing environment as 
anticipated underlying operating margins were diluted by the lower 
margins achieved on the three outsourcing contracts referred to 
above the underlying operating margin excluding the effect of these 
outsourcing contracts increased from 161 to 167 reflecting in 
part tight control over the cost base during the year
whilst we have seen some improvement in market conditions during 
2011 there was a scarcity of large contract opportunities to be won 
the divisional order book which was boosted at the beginning of the 
year by a number of large contract wins in the previous year reduced 
by £537m to £1407m 2010 £1944m this reduction has in part been 
driven by a structural move in our market to shorter contracts while 
this provides the customer with more flexibility we typically see these 
shorter contracts renew the annual contract value at 31 march 2011 
was £953m 2010 £1013m 
despite a decline in order book and annual contract value there have 
been some encouraging developments within the business this year 
the work performed in integrating the three large contracts has laid 
the platform for further success and brought in considerable retail 
sector expertise in addition towards the end of the financial year 
the division acquired a five year lease on a colocation facility allowing 
the division to increase the breadth of services within its portfolio 
initial takeup has been promising and the expansion of the service 
offering into the provision of hosting services to partners will enable 
the division to take advantage of the increasing shift towards “cloud” 
technology the division’s wide range of service options multiple 
technologies and optimised infrastructure availability leave it well 
positioned to enable its partners’ push into the “cloud” 
whilst we have seen some encouraging activity during the year and 
have a strong pipeline of future prospects we anticipate that future 
new business wins are likely to be offset by pressure on margins 
outlook
following the investments made during the year in increasing hosting 
capacity and capability we are well positioned to take advantage 
of the market shift towards “cloud” computing in both operating 
divisions the breadth of services that we can offer via the merged end 
user division leads us to anticipate further growth in managed hosting 
and “cloud” services into the current financial year whilst growth 
predictions are more cautious in respect of the partner services 
division the group as a whole retains good visibility of forward 
revenues giving a strong platform on which to build for the future
nick robinson
chief executive
6 june 2011
“the division’s wide range of 
service options multiple 
technologies and optimised 
infrastructure availability leave  
it well positioned to enable its 
partners’ push into the “cloud”” 06
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finance review steve clutton
business review
summary of results
the 2011 financial results represent another positive year for the group 
with organic revenue growth in all three divisions underlying profit 
from operations
1
 increased by 46 and underlying profit before tax
2
 
increased by 87 the group continues to enjoy strong operating 
cashflow and is now on a much sounder footing in terms of its banking 
facilities having refinanced in august 2010 net debt including finance 
leases decreased to £624m 2010 £679m at 31 march 2011 
it is pleasing that this performance has been achieved in an 
environment of market competitive pricing and during a period of 
continued economic uncertainty 
the key financial highlights for the year are as follows
 2011 2010  
 £m £m change 
revenue 2716 2458 105 
underlying profit 
from operations
1
 360 344 46 
underlying profit before tax
2
 320 295 87 
net debt including 
finance leases 624 679 55m 
annual contract value 1998 2037 39m 
order book 3280 3530 250m 
diluted earnings per share  242p 246p 16 
underlying diluted earnings 
per share
2
 306p 290p 55 
dividend p 1050p 645p 628 
1 underlying — adjusted for nonrecurring items £33m 2010 £12m and amortisation of acquired 
intangibles
2 underlying — adjusted for nonrecurring items £36m 2010 £12m and amortisation of acquired 
intangibles
revenue and profits
group revenues increased by 105 to £2716m 2010 £2458m with 
organic revenue growth in all three divisions the phoenix it services 
partner services division has seen revenues increase significantly due 
to the full year effect of three large outsourcing contract wins during 
the latter part of the previous financial year in addition there has 
been notable yearonyear revenue growth in the servo midmarket 
services division as it continues to grow its hosting and professional 
services revenues
whilst underlying profit from operations
1
 increased by 46 to 
£360m 2010 £344m the group’s underlying operating margin 
reduced to 132 2010140 reflecting an environment of market 
competitive pricing and the fullyear margin dilutive effect of the 
three large outsourcing contracts won in the latter part of the previous 
financial year excluding the impact of these large outsourcing 
contracts the underlying operating margin for the group was flat year 
on year at 141 
underlying profit before tax
2
 increased in the year by 87 to £320m 
2010 £295m
earnings and dividends
underlying diluted earnings per share
2
 increased by 55 to 306p 
2010 290p diluted earnings per share were 242p 2010 246p and 
basic earnings per share were 250p 2010 254p
the board recommends a proposed final dividend of 700p per share 
2010 430p which combined with the interim dividend of 350p per 
share gives a total dividend per share for the year of 1050p 2010 
645p an increase of 628 if approved the final dividend will be paid 
on 3 august 2011 to shareholders on the register at 17 june 2011
investment income and finance costs
finance costs net of investment income for 2011 were £43m 2010 
£49m included within finance costs is £03m 2010 £nil of un
amortised costs relating to the previous banking facility these costs 
have been shown as nonrecurring unamortised loan costs and loan 
break costs in the consolidated statement of income
excluding nonrecurring unamortised loan costs and loan break 
costs total finance costs net of investment income were £40m 2010 
£49mthe decrease year on year is due to the combined effect of a 
lower level of average net debt and a reduction in the average cost of 
borrowing during the year 
in order to mitigate the risk of a rise in uk interest rates the group 
entered into a three year interest rate swap on 28 september 2007 
at an interest rate of 578 plus applicable margin against 75 of 
the amortising balance of the principal term loan this interest rate 
swap expired on 30 september 2010 given the board’s preference to 
manage risks without the use of derivatives and the recent stable low 
interest rates no further instruments were entered into during the 
second half of the year 
other items included in finance costs are finance lease interest of 
£05m 2010 £07m a net pension charge of £nil 2010 £01m and 
amortisation of loan issue costs of £04m 2010 £03m
the group places surplus cash on deposit this generated investment 
income of £nil in the year 2010 £01m phoenix it group plc
annual report and accounts 2011
07
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our performance
nonrecurring items
including £03m of unamortised loan costs and loan break costs 
in respect of the previous banking facility £36m 2010 £12m of 
nonrecurring items were incurred during the year of which £17m 
relates to restructuring expenses arising from the merger of the icm 
continuous business business continuity and servo midmarket 
services divisions these oneoff restructuring costs will be offset by 
synergies and cost savings over the next 18 months 
the icm computer group pension and assurance scheme was closed to 
future service accrual with an effective date of 30 september 2010 the 
closure of the scheme to future service accrual resulted in a noncash 
curtailment gain of £04m oneoff fees of £04m were incurred in closing 
the scheme to future service accrual and these have been deducted 
from the curtailment gain and disclosed as a nonrecurring cost
during the year we had issues in part beyond our control in delivering 
a specific commitment to a customer which resulted in that customer 
incurring disruption and additional costs as a consequence non
recurring costs also include a oneoff settlement payment of £16m  
to the customer 
taxation
the taxation charge for the year was £66m 2010 £60m a full 
analysis of which is set out in note 12
the effective tax rate for the period was 259 2010 241 the 
increase is due to the rate in 2010 being abnormally low having 
benefitted from some oneoff credits relating to enquiries by hmrc 
that were settled favourably during that year the effective tax rate 
after adjusting for these oneoff items was 259 2010269
the finance act 2010 was enacted during the year and included a 
reduction in the main rate of corporation tax from 28 to 27 with 
effect from 1 april 2011 the budget announcement on 23 march 2011 
further reduced the corporation tax to 26 with effect from 1 april 2011 
the impact on the annual effective tax rate is a reduction 17 the 
underlying effective tax rate for the period was 276 2010 269
borrowing facilities and liquidity
on 20 august 2010 the group signed a new £900m fouryear 
revolving credit facility and renewed its £100m overdraft for a further 
twelve months the new facility was used to refinance the group’s 
existing facility due to expire in may 2012 and significantly increases 
the group’s capacity to invest in its businesses the new facilities are 
provided by barclays bank plc hsbc bank plc the royal bank of 
scotland plc and yorkshire bank 
arrangement and legal fees amounting to £16m in respect of the new 
facility are being amortised straight line over the first 36 months of the 
new facility 
the group’s bank debt carries a variable rate of interest linked to 
prevailing libor rates and the revolving credit facility is subject to 
financial covenants relating to leverage net debt  ebitda and 
interest cover ebitda  net finance costs
during april 2011 the board took the decision to enter into interest 
rate swaps following their expectation of future interest rate rises in 
the uk economy on 28 april 2011 the group entered into an interest 
rate swap to hedge risks associated with interest rate fluctuations on 
variable rates related to its revolving credit facility the combined 
interest rate swaps hedge £300m until 28 april 2014 and £150m 
between 29 april 2014 and 28 april 2016 the interest rate swap settles 
on a quarterly basis and was fixed at 263  2695 plus applicable 
margins based on three months libor 
cash flow and liquidity
the group has continued to enjoy strong operating cashflow and 
exercises tight controls over the working capital and conversion of 
profit to cash yearend net debt including finance leases decreased 
to £624m 2010 £679m and the group remains confident that it 
will continue to see strong cash generation enabling further debt 
reduction 
as at 31 march 2011 the group had total bank borrowings excluding 
finance leases of £530m consisting of £688m drawn down on the 
revolving credit facility and £158m of cash and cash equivalents 
the group’s borrowings are subject to financial covenants set by the 
lenders and covenant compliance is measured quarterly during the 12 
month period to 31 march 2011 there were no breaches of covenants 
in addition to these financial covenants the group’s borrowing 
agreements include general covenants and potential events of default 
the group has complied in all respects with the terms of its borrowing 
agreements at the date of this report and is forecast to do so for the 
foreseeable future 
treasury policies and objectives 
the group operates within policies and guidelines approved by 
the board using conventional financial instruments and specified 
derivatives it is the board’s preference to manage market risks 
without the use of derivatives but they will be used where necessary 
and appropriate to reduce the levels of volatility to both income and 
equity the use of derivatives is strictly controlled and they are not 
permitted to be used for speculative or trading purposes
the group’s main treasury risks relate to the availability of funds 
to meet its future requirements the group’s policy with respect to 
facilities is to ensure that these are sufficient to cover the expected 
needs of the group having reflected the inherent uncertainty of 
projections and forecasts 
whist the group maintains uncommitted facilities to maintain short
term flexibility its principal debt funding comprises committed bank 
facilities which are detailed above 
capital expenditure
total capital expenditure for the year net of proceeds from disposals 
was £167m 2010 £52m this includes expenditure on intangible 
assets of £03m 2010 £02m a further £37m 2010 £19m of capital 
expenditure had been incurred but not paid for at 31 march 2011
capital expenditure has significantly increased compared to the 
previous financial year reflecting in part an element of deferral 
together with substantial investment in the business continuity work 
area it facilities and selective investment in hosting facilities and data 
centre upgrades this targeted investment has created additional 
capacity to meet the high demand for managed hosting services and 
to develop the group’s portfolio of “cloud” services 08
2032504 15062011 proof 5
capital investment and significant disposals are subject to stringent 
levels of authorisation and clearly defined authority levels are in place 
throughout the group whilst the nature of business continuity and 
hosting activities are significantly more capital intensive than the other 
areas of activity additional capital expenditure is only incurred with clear 
visibility of the demand for the services that the group can then provide 
assets held for sale
the group has several freehold properties that continue to be held 
for sale despite ongoing active marketing throughout the year the 
properties remained unsold at 31 march 2011 and so continue to be 
classified as current assets an additional property was added to the 
sale portfolio on 31 march 2011
independent valuations performed on each of the properties at  
31 march 2011 indicated that the current book value of £27m 
2010 £22m was reasonable however given current conditions 
in the property market we cannot discount the possibility of further 
impairment provisions being required in the future
pension scheme
following the acquisition of icm computer group plc on 29 may 2007 
the group continued to operate a defined benefit scheme the “icm 
computer group pension and assurance scheme” or the “scheme” 
for certain of its employees as at 6 april 2009 the date of the last full 
actuarial valuation there were 469 members of the scheme the group 
does not operate any other defined benefit pension schemes
on 6 june 2010 the group reached agreement with the trustees on the 
terms of the triennial valuation as at 6 april 2009 and related funding 
plan on the basis of the assumptions agreed the actuarial deficit as at 
6 april 2009 was £78m this deficit has increased from £26m at 6 april 
2006 primarily due to the valuation date coinciding with a low point 
in asset values under the revised funding plan the group’s annual 
payments increased from £07m to £19m for the year to march 2011 
the annual payments will then reduce to £15m per year for the five 
years to march 2016
following an extensive consultation process the group closed the 
scheme to future accrual on 30 september 2010 all former members 
have been given the opportunity to join the group’s defined 
contribution pension scheme the majority of the active membership 
opted out of the scheme and joined a group selfinvested pension 
plan the closure of the pension scheme to future accrual reduces the 
group’s exposure to increasing gross pension scheme liabilities with 
the potentially uncapped and increasing costs associated with the 
provision of such pensions this step will also reduce the volatility in the 
income statement relating to the operating profit charge for pensions 
the pension deficit at 31 march 2011 was £07m 2010 £51m and 
further details relating to the pension scheme are presented in note 10 
the deficit has decreased significantly during the year principally due 
to better than expected investment returns combined with favourable 
movements in discount rates applied to the scheme’s future liabilities 
in addition following the government announcement in july 2010 and 
the subsequent approval by the house of commons in february 2011 
to allow the change of index link for pensions and with subsequent 
agreement with the trustees the move from the retail price index rpi 
to the consumer price index cpi has reduced the defined benefit 
liability by £12m and during the financial year ended 31 march 2011 
the group made incremental contributions of £12m under the revised 
funding plan agreed with the trustees on 6 june 2010 
going concern 
the group’s business activities together with the factors likely to 
affect its future development performance and position are set out 
in the chief executive’s review on pages 3 to 5 the financial position 
of the group its cash flows liquidity position and borrowing facilities 
are described above in addition notes 18 and 19 to the financial 
statements include the group’s objectives policies and processes for 
managing its capital its financial risk management objectives details 
of its financial instruments and hedging activities and its exposure to 
credit and liquidity risk 
the directors have reviewed the group’s future cash forecasts and 
revenue projections for a period in excess of 12 months from the date 
of signing the accounts which they believe are based on prudent 
market data and past experience they have formed a judgement that 
at the time of approving these financial statements based on those 
forecasts and projections there is a reasonable expectation that the 
group has adequate resources to continue in operational existence for 
the foreseeable future 
although economic conditions continue to be challenging and the 
spending review by the government in october 2010 creates a certain 
degree of uncertainty in terms of public sector spending levels the 
group has a number of long term contracts a range of customers 
across different business sectors high levels of committed income and 
a strong order book as a consequence the directors believe that the 
group is well placed to manage its business risks successfully despite 
the continued period of economic uncertainty
the group is subject to a number of risks and uncertainties which arise 
as a result of the current economic environment in determining that 
the group is a going concern these risks have been considered by the 
directors the directors have determined that the key risks detailed below 
do not currently represent a significant threat to the group
l whilst the directors have considered reasonable changes in market 
conditions and competitive pressures in the current environment 
a further significant downturn could impact group revenues and 
margins to a greater extent than they have currently envisaged
l liquidity risks are greater because of the difficulties within the 
banking sector however the group currently has £900m of rolling 
credit facilities excluding overdraft until august 2014 that provide 
it with sufficient headroom for the foreseeable future 
l interest rate movements present a risk to the group although they 
are reduced through the use of an interest rate swap the group’s 
previous interest rate swap expired on 30 september 2010 and 
the group entered into new swaps on 28 april 2011 the combined 
interest rate swaps hedge £300m until 28 april 2014 and £150m 
between 29 april 2014 and 28 april 2016
finance review continued
business review phoenix it group plc
annual report and accounts 2011
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our performance
l credit risk is heightened as a result of difficulties that might be faced 
by some of the group’s customers in the current climate and also 
because of credit risks associated with other counterparties such as 
banks with which the group has dealings
l the group has a defined benefit pension scheme which has an 
accounting deficit at 31 march 2011 of £07m any deterioration in 
the scheme’s funding position could impact the group’s liquidity 
the scheme was closed to future accrual on 30 september 2010 
which reduces the group exposure to increasing liabilities
taking into account the level of headroom within the existing facilities 
and covenants and the results of the sensitivity testing which assumes 
some of those risks detailed above occur and the mitigating actions 
available to the group the directors have a reasonable expectation 
that the group has adequate resources to continue in operational 
existence for the foreseeable future and therefore they continue to 
adopt the going concern basis in preparing the financial statements
principal risks and uncertainties
as a result of the contracted revenues in the order book the group 
has a high degree of forward visibility of its revenues over the next 
twelve months nonetheless there are a number of potential risks and 
uncertainties in addition to those noted above which could have a 
material impact on the group’s performance over the next financial 
year and which could cause the group’s actual results to materially 
deviate from historical and expected results these principal risks have 
not changed during the year under review and have been analysed as
macroeconomic risk
the group has seen an increase in activity compared to the prior year 
partly due to customer demand to cut costs by outsourcing and the 
undertaking of projects postponed in prior years nonetheless the 
uncertainty in the uk economy creates an increased risk of business 
failures among our key customers resulting in contract cancellations 
as well as a lengthening of the decisionmaking cycle between 
prospect and new contract for the group these risks are mitigated 
by stringent working capital and cash management and by the high 
proportion of longterm contracted annuity business meaning that we 
could withstand a certain level of cancellations
competitor risk
the it services industry is highly competitive several competitors 
including in some cases phoenix’s partners have longer operating 
histories higher brand recognition and greater financial technical 
marketing personnel and other resources than the group the 
group’s competitors have and other potential competitors may have 
well established relationships with current and potential customers of 
the group as a result these competitors may be able to respond more 
quickly to new or emerging technology and changes in customer 
requirements or to devote greater resources to the development 
promotion and sale of their services than the group in addition 
the group may experience increased competition from low cost 
outsourcing centres including offshore centres and new or existing 
niche market participants whose costs may be lower increased 
competition could lead to the loss of market share loss of material 
contracts renegotiation of price levels or a general reduction in 
revenues of the group 
customer risk
the group’s large customer base is a strength but could easily be 
eroded if service levels and value were not maintained a broad spread 
of customers across several market sectors mitigates the risk of adverse 
conditions in any one sector and there are no clients upon which the 
group is critically dependent the high level of recurring revenues and 
repeat business are evidence of the group’s success
loss of key locations
the group’s business continuity business is reliant on a number of 
facilities in strategic locations around the uk close to major business 
centres the loss of access to a key site would present significant 
operational difficulties to the group and could result in a material loss 
of contracts the ‘primary’ sites which are critical to our success have 
been identified and provisions put in place to manage our continued 
access in line with business requirements
key performance indicators ‘kpis’
the group uses a number of kpis to monitor the performance of the 
business the more important kpis are set out below
profitability
the group’s principal profitability kpis are underlying profit from 
operations and underlying diluted earnings per share underlying 
profit from operations increased in the year by 46 to £360m 2010 
£344m while underlying diluted earnings per share have increased by 
55 to 306p 2010 290p
operating margin
this represents the group’s underlying profit from operations 
divided by group revenues for the year ended 31 march 2011 group 
underlying operating profit margin decreased in comparison to the 
prior year prior year to 132 2010 140
annual contract value
this represents the annualised value of the group’s contracted 
revenue in place at any given time annual contract value decreased  
in the year by 19 to £1998m 2010 £2037m  
net debt including finance leases  
the group monitors the net debt position in order to ensure it has 
sufficient facilities to support future growth net debt including 
finance leases reduced by £55m to £624m at 31 march 2011  
2010 £679m 
steve clutton
group finance director
6 june 2011 10
2032504 15062011 proof 5
peter bertram aged 57
executive chairman 
peter became executive chairman on 
22 november 2007 after serving as non
executive chairman since 21 october 
2004 peter was chief executive of azlan 
group plc from 1998 until its takeover 
in 2003 and was previously the non
executive chairman of attentiv systems 
group plc he is also chairman of ten 
alps plc timeweave plc and a non
executive director of microgen plc he 
is a fellow of the institute of chartered 
accountants in england and wales
nick robinson aged 51
deputy chairman and chief 
executive
nick became chief executive on  
21 november 2008 having been non
executive deputy chairman since  
1 january 2008 after serving as chief 
executive officer of phoenix since 
december 1997 nick was previously 
sales director of phoenix then phoenix 
computers limited when he bought 
into the business in 1993 before joining 
phoenix nick spent six years at digital 
computer services limited as sales 
director
brian sellwood aged 63
nonexecutive director 
brian joined phoenix as a nonexecutive 
director on 1 april 2006 after working 
with ibm where he held a variety of 
senior positions and was instrumental 
in establishing ibm’s global services 
business in europe brian is chairman of 
the audit committee and is a member 
of the remuneration and nomination 
committees 
david garman aged 59
nonexecutive director 
david joined phoenix as a nonexecutive 
director on 1 december 2008 david 
is the senior nonexecutive director 
of st modwen properties plc a non
executive director of kewill plc and a 
number of private companies david 
was until october 2008 group chief 
executive of tdg plc which he joined 
in 1999 from associated british foods 
plc where he was an executive director 
having previously held senior positions 
in a number of leading uk food 
companies between 2004 and 2011 he 
was the senior independent director of 
carillion plc david is chairman of 
the remuneration committee and a 
member of the audit and nomination 
committees 
david warnock aged 53
nonexecutive director 
david joined phoenix as a nonexecutive 
director on 23 january 2009  david co
founded aberforth partners llp and was 
a partner for 19 years until he retired 
from the firm in 2008 prior to which 
he was with ivory  sime plc for four 
years and before that with 3i group plc 
for seven years he is a nonexecutive 
director of british polythene industries 
plc standard life european private 
equity trust plc troy income  growth 
trust plc and a number of private 
companies  david is a member of the 
audit nomination and remuneration 
committees
board of directors
steve clutton aged 50
group finance director 
steve joined phoenix as group finance 
director on 1 march 2011 from ig group 
holdings plc where he was group 
finance director for four years he has 
extensive financial and commercial 
management experience having served 
as chief financial officer at the uk 
retail banking division of barclays bank 
interoute telecommunications limited 
and british telecom’s international 
business steve has also held senior roles 
within corporate finance at bzw and 
bt and is a member of the institute of 
chartered accountants in england and 
wales   phoenix it group plc
annual report and accounts 2011
11
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corporate governance
the directors present their report together with the audited financial 
statements for the group and the company for the year ended  
31 march 2011
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 business review
principal risks and uncertainties
the group’s operations expose it to a variety of financial and other 
risks a review of which is provided in the business review and note 19 
to the consolidated financial statements
dividends
the directors propose a final dividend of 700p per ordinary share 
which subject to approval at the annual general meeting will be paid 
on 3 august 2011 to shareholders on the register at 17 june 2011 the 
shares will go exdividend on 15 june 2011 the final dividend together 
with the interim dividend of 350p per ordinary share paid in january 
2011 makes a total dividend per ordinary share of 1050p 2010 645p 
an increase of 628 
capital structure
details of the issued share capital together with details of the 
movements in the company’s issued share capital during the year are 
shown in note 30 the company has one class of ordinary shares which 
carry no right to fixed income each share carries the right to one vote 
at the general meetings of the company
there are no specific restrictions on the size of a holding nor on the 
transfer of shares which are both governed by the company’s articles 
of association and prevailing legislation the directors are not aware 
of any agreements between holders of the company’s shares that may 
result in restrictions on the transfer of securities or on voting rights
details of employee share schemes are set out in note 39 shares held 
by the employee benefit trust do not attract any payment of dividends 
nor do they have any voting rights attached to them
no person has any special rights of control over the company’s share 
capital and all issued shares are fully paid
the directors have authority to allot the company’s ordinary shares 
up to an aggregate nominal amount of £250689 being approximately 
onethird of the company’s issued share capital at 4 june 2010 and 
the power to disapply preemption rights in respect of the allotment 
of shares up to an aggregate nominal value of £37603 representing 
5 of the company’s issued share capital at 4 june 2010 in addition 
the directors have authority on behalf of the company to make 
market purchases of up to 3760343 ordinary shares of the company 
representing 5 of the company’s issued share capital at 4 june 
2010 these authorities were conferred by approval of separate 
resolutions at the company’s last annual general meeting and are 
due to expire at the end of the forthcoming annual general meeting 
separate resolutions to renew these authorities will be proposed at the 
annual general meeting on 28 july 2011 details of these resolutions 
are set out in the notice of annual general meeting which is shown on 
page 70 resolutions 9 10 and 11 
directors
the following directors served during the year and up to the date of 
this report unless otherwise stated
peter bertram
executive chairman
nick robinson
deputy chairman and chief executive 
steve clutton
group finance director since 1 march 2011
brian sellwood
non executive director 
david garman 
non executive director
david warnock 
non executive director
biographies of the directors are set out on page 10 details of the 
directors’ remuneration interests in the shares of the company and 
their share options are given in the directors remuneration report 
on pages 20 to 24 brian sellwood david garman and david warnock 
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 
nick robinson and peter bertram retire by rotation and offer 
themselves for reappointment to the board at the forthcoming annual 
general meeting and also steve clutton who joined the company on  
1 march 2011 offers himself for appointment to the board at the annual 
general meeting the directors recommend their reappointment on 
the grounds of the considerable experience and knowledge that each 
bring to the company 
directors’ indemnities
the company has made qualifying third party indemnity provisions  
for the benefit of its directors which remain in force at the date of  
this report
directors’ report 12
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substantial shareholders
as at 6 june 2011 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
aberforth partners llp    7599737 1010    
axa investment managers   7505979 998    
f  c asset management   5777541 768    
n robinson   472257 4 628    
legal  general investment management  4493957 597    
herald investment management limited 3971898 528    
majedie asset management    3950897 525  
fidelity investments limited  3705383 492
employment policy
as a progressive service organisation employees at every level are 
critical to the group and its future management and professional 
and technical expertise are the group’s major assets investment in 
developing and retaining such skills is ongoing and well established 
and is supported by 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 in the capital of 
the company staff can participate in the financial prosperity of the 
group through share ownership employee incentive arrangements 
include a performance share plan 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 2011 
trade creditors of the group were equivalent to 42 days 2010 37 days 
and in the company 15 days 2010 44 days
charitable donations
the total amount of charitable donations made during the year was 
£17218 2010 £15626 the group has a policy that it does not make 
political donations to or incur political expenditure on behalf of 
political parties or political organisations 
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 llp as auditors of the 
company is to be submitted to the forthcoming annual general meeting
each of the persons who is a director at the date of approval of this 
annual report confirms that
l so far as the director is aware there is no relevant audit information 
of which the company’s auditors are unaware and
l the director has taken all the steps that heshe ought to have taken 
as a director in order to make himselfherself 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 section 418 of the companies act 2006 
annual general meeting
the notice of the annual general meeting to be held on 28 july 
2011 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 9
the directors are seeking authority under section 551 of the 
companies act 2006 ‘the act’ to allot shares up to an aggregate 
nominal value of £250756 this amount represents approximately one 
third of the total ordinary share capital as at 6 june 2011 the authority 
will be in substitution 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 28 october 2012
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 authority by shareholders
as at 6 june 2011 the company held no treasury shares
disapplication of preemptive rights resolution 10
the directors are seeking authority from shareholders to allot ordinary 
shares for cash other than on a preemptive basis as required 
by section 561 of the act in limited circumstances the directors 
recommend that section 561 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 shareholders in accordance with 
normal practice in the uk nor to an issue for cash of shares up to an 
aggregate nominal value of £37613 which is equivalent to 5 of the 
company’s issued share capital as at 6 june 2011 the authority sought 
will expire on the earlier of the conclusion of the next annual general 
meeting or 28 october 2012
directors’ report continued phoenix it group plc
annual report and accounts 2011
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corporate governance
authority to make market purchases of shares  
resolution 11
the directors are seeking authority to make market purchases 
pursuant to section 701 of the act of shares up to 3761344 ordinary 
shares which is equivalent to 5 of the company’s issued share capital 
as at 6 june 2011 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 28 october 2012
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 6 june 2011 there were a total of 2135339 options to subscribe 
for equity shares in the company outstanding representing 28 of 
the company’s issued share capital if the full authority sought by this 
resolution is used this number of outstanding options would represent 
27 of the company’s issued share capital
notice of general meetings resolution 12
it is proposed that the shareholders should approve the continued 
ability of the company to hold general meetings other than the 
annual general meeting on 14 clear days notice in accordance with 
section 307a of the act this provision increases the notice period for 
general meetings of a company to 21 days unless the company has 
approval from its shareholders by resolution in general meeting to call 
such meetings on 14 days’ notice 
the resolution is valid up to the next annual general meeting of the 
company and so will need to be renewed annually
the board of the company recommends that 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
6 june 2011 14
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the board is committed to the principles of corporate governance 
contained in the combined code on corporate governance issued by 
the financial reporting council the “combined code” for which the 
board is accountable to shareholders the board has sought to comply 
with the main and supporting principles with due regard to the size 
and needs of the company and with reference to best practice
statement of compliance
throughout the year ended 31 march 2011 the company has been in 
compliance with the combined code provisions set out in section 1 of 
the 2008 frc combined code 
further explanation of how the main principles including the 
composition and operation of the board the remuneration of the 
directors relations with shareholders and procedures for financial 
reporting and internal control have been applied is set out below and 
in the directors’ remuneration report and audit committee report
the board of directors
the group is controlled by a board of directors which meets regularly 
and currently comprises three executive directors including the 
executive chairman and three nonexecutive directors the non
executive directors are brian sellwood who is the senior independent 
director david garman and david warnock all the nonexecutive 
directors 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 nonexecutive directors regularly meet independently 
of management
the chairman’s other main commitments are disclosed on page 10 
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 the 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 
l changes to the structure size and composition of the board
l consideration of the independence of non executive directors
l review of management structure and senior management 
responsibilities
l with the assistance of the remuneration committee approval of 
remuneration policies across the group
l approval of strategic plans profit plans and budgets and any 
material changes to them
l 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
l final approval of annual accounts and accounting policies 
l approval of the dividend policy
l approval of the acquisition or disposal of subsidiaries and major 
investments and capital projects
l 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
l receiving reports on the views of the company’s shareholders
operational management of the group is delegated to the executive 
chairman and the chief executive officer
the board receives a regular flow of information to enable it to 
discharge its duties including a monthly report detailing current 
and forecasted trading results and treasury positions it also receives 
regular updates on shareholders’ views as part of the monthly report 
and more formal briefings on shareholders’ views are given to the 
board following the presentation of the company’s interim and annual 
results board papers are generally distributed not less than five days in 
advance of the relevant meeting to allow the directors fully to prepare 
for meetings and minutes of committee meetings are circulated the 
board is kept fully informed of developments within the company’s 
businesses through regular presentations by divisional management 
induction programmes for newlyappointed directors are devised to 
ensure that directors spend time with divisional management and can 
visit operational sites 
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
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 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 to 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 brian sellwood who the board considers to have 
recent and relevant financial experience comprises the independent 
nonexecutive directors and meets at least three times a year
a report on its activities is given on page 19
corporate governance phoenix it group plc
annual report and accounts 2011
15
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corporate governance
the remuneration committee which is chaired by david garman 
and comprises the independent nonexecutive 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  
aon hewitt limited have been appointed by the group to assist and 
advise the remuneration committee in the performance of its duties 
aon hewitt limited 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 20 and 24
the nominations committee is chaired by peter bertram and 
comprises brian sellwood david garman and david warnock 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 of 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 
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
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
l ongoing 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
l clearly defined management structure and delegation of authority 
to committees of the board and the executive directors
l clearly documented internal procedures set out in the group’s iso 
9001 accredited quality manual
l high recruitment standards and formal career development and 
training to ensure the integrity and competence of staff
l regular and comprehensive information provided to management 
covering financial performance and key performance indicators 
including nonfinancial measures
l a detailed budgeting process covering budgets for the coming year 
which are approved by the board
l procedures for the approval of capital expenditure investments 
and acquisitions
l monthly monitoring and reforecasting of results against budget 
with major variances followed up and management action taken 
where appropriate
l regular internal audits of key processes and procedures under the 
group’s iso 9001 accredited quality assurance process and
l formal consideration of progress made against significant business 
risks at monthly operating board meetings with quarterly briefings 
to the board
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 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 
whistleblowing the group’s whistleblowing policy allows employees 
in confidence to raise concerns about possible improprieties including 
in financial reporting other operational matters or inappropriate 
personal behaviour in the workplace 
attendance at meetings
the number of board meetings and committee meetings attended by each director in the year to 31 march 2011 was as follows
 board audit committee remuneration committee nomination committee
 held attended held attended held attended held attended
chairman
p bertram 11 11     2 2
executive directors
n robinson  11 11
s clutton
1
 2 2
non executive directors
b sellwood  11 11 4 4 4 4 2 2
d garman  11 11 4 4 4 4 2 2
d warnock  11 11 4 4 4 4 2 2
1
  s clutton joined the board on 1 march 2011  16
2032504 15062011 proof 5
the group’s internal audit function is described in the audit 
committee report
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 8 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 than 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 its 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
provision d11 of the combined code 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 nonexecutive 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
approved by the board and signed on its behalf
w t martin
company secretary
6 june 2011
corporate governance continued phoenix it group plc
annual report and accounts 2011
17
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
corporate governance
the board of directors recognises the importance of high standards of 
corporate social responsibility considers the social environmental and 
ethical implications of the group’s activities and seeks continually to 
improve the policies and practices in place to meet its responsibilities in 
all such matters
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
corporate social responsibility 18
2032504 15062011 proof 5
the directors are responsible for preparing the annual report and the 
financial statements in accordance with applicable law and regulations
company law requires the directors to prepare financial statements 
for each financial year under that law the directors are required 
to prepare the group financial statements in accordance with 
international financial reporting standards ifrss as adopted by the 
european union and article 4 of the ias regulation and have elected 
to prepare the parent company financial statements in accordance 
with united kingdom generally accepted accounting practice united 
kingdom accounting standards and applicable law under company 
law the directors must not approve the accounts unless they are 
satisfied that they 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 the group financial statements international accounting 
standard 1 requires that directors 
l properly select and apply accounting policies
l present information including accounting policies in a manner 
that provides relevant reliable comparable and understandable 
information 
l provide additional disclosures when compliance with the specific 
requirements in ifrss are insufficient to enable users to understand 
the impact of particular transactions other events and conditions 
on the entity’s financial position and financial performance and 
l make an assessment of the group’s ability to continue as a going 
concern
in preparing the parent company financial statements the directors 
are required to 
l select suitable accounting policies and then apply them 
consistently 
l make judgments and accounting estimates that are reasonable and 
prudent 
l state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and 
explained in the financial statements and 
l prepare the financial statements on the going concern basis unless 
it is inappropriate to presume that the company will continue in 
business
the directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the company’s 
transactions and disclose with reasonable accuracy at any time the 
financial position of the company and enable them to ensure that the 
financial statements comply with the companies act 2006 they are 
also responsible for safeguarding the assets of the company and hence 
for taking reasonable steps for the prevention and detection of fraud 
and other irregularities
the directors are responsible for the maintenance and integrity of 
the corporate and financial information included on the company’s 
website legislation in the united kingdom governing the preparation 
and dissemination of financial statements may differ from legislation in 
other jurisdictions
responsibility statement 
we confirm that to the best of our knowledge
l the financial statements prepared in accordance with international 
financial reporting standards give a true and fair view of the 
assets liabilities financial position and profit or loss of the company 
and the undertakings included in the consolidation taken as a 
whole and
l the management report which is incorporated into the directors’ 
report and the business review includes a fair review of the 
development and performance of the business and the position of 
the company and the undertakings included in the consolidation 
taken as a whole together with a description of the principal risks 
and uncertainties that they face
by order of the board
peter bertram
chairman
6 june 2011
directors’ responsibilities statement phoenix it group plc
annual report and accounts 2011
19
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corporate governance
role of the audit committee
the audit committee is a subcommittee of the board whose 
responsibilities include
l reviewing the integrity of the interim and full year financial 
statements of the group and results announcements of the 
company and any other formal announcement relating to the 
group’s financial performance reviewing significant financial 
reporting judgements contained therein and recommending them 
to the board for approval
l reviewing the group’s systems for internal financial control and 
risk management
l monitoring and reviewing the effectiveness of the group’s internal 
audit function 
l considering the appointment of the external auditors overseeing 
the process for their selection and making recommendations to 
the board for a resolution to be put to the shareholders for their 
approval in general meeting in relation to their appointment 
reappointment or removal and the approval of the remuneration 
and terms of engagement of the external auditors
l monitoring and reviewing the effectiveness objectivity and 
independence of the external auditors taking into consideration 
relevant uk professional and regulatory requirements agreeing 
the nature and scope of their audit process and considering their 
reports on the group’s financial statements and systems of internal 
financial control and risk management 
l developing and implementing the policy on using the auditors’ 
services for nonaudit advice taking into account relevant 
guidance regarding the provision of nonaudit services by the 
external audit firm and
l monitoring and reviewing the group’s ‘whistleblowing’ policy
the audit committee is required to report its findings to the 
board identifying any matters on which it considers that action or 
improvement is needed and make recommendations on the steps to 
be taken
composition of the audit committee
the audit committee comprises the independent nonexecutive 
directors biographical details of the independent directors are set out 
on page 10 and their remuneration is set out on page 24 the chairman 
of the audit committee is brian sellwood the audit committee 
invites others including the company’s external auditors 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 
the board believes that the members of the committee have sufficient 
skills qualifications and experience to enable the committee to 
discharge its duties in accordance with the terms of reference the 
board is satisfied that at least one member of the committee has 
relevant and recent financial experience the terms of reference for 
the committee are reviewed annually to ensure that they are in line 
with current best practice
main activities of the audit committee
during the year the audit committee has met four times the audit 
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 march 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
l the qualification expertise and resources of the external auditors 
the effectiveness of the audit process including the external 
auditors’ quality control procedures
l 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
l reviewing and implementing the policy on audit fees and fees for 
other nonaudit services
internal audit function
the audit committee is required to assist the board to fulfil its 
responsibilities relating to the adequacy of the resourcing and plans 
of the internal audit department to fulfil these duties the audit 
committee reviewed
l internal audit’s terms of reference reporting lines and access to the 
audit committee and all members of the board 
l internal audit’s plans and its achievement of the planned activity
l the results of key audits and other significant findings the 
adequacy of management’s response and the timeliness of 
resolution
l the statistics on staff numbers qualifications and experience and 
timeliness of reporting and
l the level and nature of nonaudit activity performed by internal 
audit
brian sellwood
chairman audit committee
6 june 2011
audit committee report 20
2032504 15062011 proof 5
compliance with directors’ remuneration report 
regulations
the directors’ remuneration report has been prepared by the 
remuneration committee the “committee” and approved by the 
board it has been prepared in accordance with the requirements 
set out in schedule 8 to the large and mediumsized companies and 
groups accounts and reports regulations 2008 the “regulations” 
under the companies act 2006 this report also meets the relevant 
requirements of the listing rules of the financial services authority 
the combined code on corporate governance the “code” and will 
going forward seek to comply with the 2010 uk corporate governance 
code in so far as these relate to directors’ remuneration 
the company has applied the principles of good corporate 
governance relating to the remuneration of its directors and this 
report outlines how the company has complied with the provisions of 
the code as well as the guidelines issued by institutional shareholder 
bodies the report has been audited to the extent required by the 
regulations
a resolution to approve the report will be proposed at the annual 
general meeting at which the financial statements will be approved
remuneration committee
the remuneration committee members are appointed by the 
board throughout the year david garman has been chairman of 
the committee with brian sellwood and david warnock serving 
as committee members it is considered that each member of the 
committee has the relevant skills and experience to fulfil their role for 
further details see the directors biographies on page 10 
the board has delegated responsibility to the committee for 
determining the framework and broad policy for the remuneration 
of the executive directors including the executive chairman and 
their senior direct reports as designated and makes recommendations 
thereon to the board within agreed terms of reference the terms of 
reference of the remuneration committee are available on request 
from the company secretary 
the remuneration committee is able to obtain independent 
professional advice from remuneration and other consultants in order 
to carry out its duties during the year hewitt new bridge street a 
brand of aon hewitt limited acted as the independent adviser to the 
committee in the areas of executive remuneration and the monitoring 
of longterm incentive performance targets hewitt new bridge street 
are signatories to the remuneration consultants group’s code of 
conduct which has been considered when drafting this report the 
actuarial division of aon hewitt limited also advised the company 
during the year in relation to certain pension scheme matters
other directors attend meetings when invited by the committee and 
the company secretary acts as secretary to the committee no director 
plays a part in any discussion about his or her own remuneration
remuneration policy
for the following year the group’s remuneration policy is designed 
to ensure that executive directors’ total remuneration is competitive 
and linked to both individual performance and business performance 
in addition the group’s policy is to provide appropriate incentives to 
encourage enhanced performance and to reward contributions to the 
success of the group in a fair and responsible manner this will ensure 
the company is able to attract engage motivate and retain the best 
available people to further the success of the business
in order to achieve this remuneration packages comprise a fixed 
element made up of basic salary benefits in kind and pensions and 
a variable “at risk” element which reflects group performance and 
individual achievement made up of annual performance related bonus 
for some executives and participation in a longterm performance 
share plan the performance related elements form a significant 
proportion of the total executive directors’ remuneration packages
the committee is keen to ensure that risk is taken into account when 
setting the targets and when determining entitlements under variable 
incentive schemes this is done by ensuring that targets whilst 
stretching are realistic attainable for the longterm benefit of the 
company and achievable without taking inappropriate business risks
directors’ remuneration report phoenix it group plc
annual report and accounts 2011
21
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
corporate governance
the chairman of the committee ensures that he is kept abreast of pay 
and conditions in the group as a whole through regular interaction 
with the finance department in determining the remuneration of 
executive directors and other senior executives the committee takes 
into account the general level of remuneration and pay awards to 
employees of the group
the group’s remuneration policy in relation to nonexecutive directors 
is to pay annual fees to reflect responsibilities and duties which are 
determined by the executive directors of the board nonexecutive 
directors are not eligible for any short or longterm incentives or 
pension benefits
directors’ contracts
it is the group’s policy that executive directors’ service contract notice 
periods should not normally exceed 12 months the company may at 
its sole and absolute discretion pay salary and the value of contractual 
benefits in lieu of any unexpired period of notice and the company 
would seek to apply the principles of mitigation following termination 
and it reserves the right to make any termination payments on a 
monthly basis 
the details of the directors’ service contracts are set out below
 contract  notice period notice period
 date by company by director
executive directors
peter bertram november 2007 6 months 6 months
nick robinson november 2008 12 months 12 months
steve clutton 
a
 march 2011 12 months 12 months
nonexecutive directors
brian sellwood  april 2006 3 months 3 months
david garman december 2008 3 months 3 months
david warnock january 2009 3 months 3 months
a in the event that there is a change of control within six month of 1 march 2011 and the company 
terminates steve clutton’s employment other than for cause within the subsequent six month 
period the company shall pay a minimum bonus of 50 of steve clutton’s annual salary 
following the termination date in lieu of any other bonus entitlement 
individual components of remuneration packages are discussed below
basic salary 
basic salaries are determined taking account of advice received from 
independent sources on the rates of salary for similar roles in selected 
groups of comparable companies and reflecting the individual’s 
experience and role within the business the committee’s policy is to 
pay salaries at around the market median level against other similar 
businesses
salaries are reviewed annually with changes effected from 1 april the 
current base salaries of the executive directors are
  base salary from  base salary from
  1 april 2010 1 april 2011
peter bertram  £250000 £250000
nick robinson  £275000 £275000
steve clutton   — £270000
when determining executive director base salary increases the 
committee takes account of reward levels throughout the group 
as well as the general market in the year under review and for the 
second successive year no salary increases were made for executive 
directors and there were no general salary increases for staff across the 
group other than for promotion 
only basic salary is pensionable
benefits in kind 
executive directors receive certain benefits such as a company car or 
equivalent allowance life assurance and private medical insurance
pension arrangements
the executive directors are entitled to receive personal pension 
contributions of 20 of basic salary or salary in lieu 22
2032504 15062011 proof 5
annual bonuses
none of the executive directors participated in the group’s annual 
bonus scheme during the year to 31 march 2011 
for the year ending 31 march 2012 only steve clutton will participate 
in the annual bonus scheme 
the annual bonus performance targets are set and approved annually 
by the remuneration committee and are designed to be challenging 
and aligned to company goals and objectives for the forthcoming 
year steve clutton’s bonus will be determined by reference to 
stretching performance targets set in relation to underlying profit 
before tax 75 and net debt 25 and is set at a maximum of 100 
of salary to be paid in cash
peter bertram and nick robinson will not participate in the annual 
bonus scheme for the year ending 31 march 2012
performance share plan 
the performance share plan “psp” was approved by shareholders 
in 2004 under the psp senior executives are eligible to receive 
awards which vest at nil cost to the executive three years after grant 
subject to the satisfaction of performance conditions and continued 
employment 
the group’s policy is to award share incentives under the performance 
share plan to executive directors and senior management in order 
to align their interests with those of the group’s shareholders peter 
bertram nick robinson and steven clutton received awards under the 
performance share plan during the financial year 
the plan rules allow for awards of up to 175 of salary pa to be 
made in any financial year and 400 of salary pa in exceptional 
circumstances the actual awards granted during the year ended  
31 march 2011 were over 73000 shares 80 of salary for peter 
bertram 80000 shares 80 of salary for nick robinson and 339807 
shares 300 of salary for steve clutton this above ‘normal’ limit 
award was necessary to secure steve clutton’s recruitment and 
to ensure that his interests were immediately and fully aligned to 
shareholders on joining 
awards made in 2010 will vest based on the group’s total shareholder 
return tsr performance over a threeyear performance period 
compared with the constituents of the ftse allshare index excluding 
ftse 100 companies and investment trusts as at the date of grant and 
subject to the executive still being employed by the group at median 
25 of the shares vest and at upper quartile 100 of the shares vest 
if the tsr is between median and upper quartile then the award will 
vest on a straight line basis none of the award will vest if the group’s 
tsr performance is below the median of the tsr comparator group 
in addition awards will only vest if the committee is satisfied that the 
underlying financial performance of the group over the threeyear 
performance period has been satisfactory the monitoring of the 
group’s performance against the tsr condition is performed by hewitt 
new bridge street
the committee believes that tsr a shareprice based measure is 
appropriate for the company because it aligns management’s reward 
with returns to investors and therefore the condition will continue to 
apply to awards made in the year ended 31 march 2012
awards made in 2009 are subject to the same tsr conditions as awards 
made in 2010 as described above for awards made in 2008 and earlier 
these 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 
and the executive is still employed by the group 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 on a progressive scale the award 
will not vest at all if the average earnings per share growth is less than 
5 per annum
directors’ remuneration report continued phoenix it group plc
annual report and accounts 2011
23
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
corporate governance
share incentive plan sip
the company operated a share incentive plan in the year under the 
sip employees including executive directors 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
nonexecutive directors
the fees of nonexecutive directors are reviewed by the board 
excluding nonexecutive directors nonexecutive directors only 
receive fees and they do not participate in any bonus or share 
incentive schemes enjoy any pension benefits or receive any other 
benefits
share ownership guidelines
within a reasonable time of their appointment the company expects 
executive directors to purchase and maintain such number of shares in 
the company as is broadly equivalent in total value to their base salary 
dilution 
at the end of the financial year the total number of awards granted 
less lapsed over new issuable shares under the share schemes since 
listing was 38 of the issued share capital
performance graph
the graph below shows phoenix’s total shareholder return 
performance compared to the ftse small cap and the ftse all share 
indices of which phoenix is a constituent the graph covers the period 
from the 31 march 2006 to 31 march 2011 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
the ftse small cap index has been selected as a comparator because 
the group believes it is the most meaningful market index of which the 
company is a member
directors’ interests
directors had the following beneficial and family interests in the issued 
share capital of the company as at 31 march 2011 there have been 
no changes between the end of the financial year and the date of this 
report other than as indicated
  2011 2010
  ordinary shares ordinary shares
  of 1p each of 1p each
peter bertram  20000 20000
nick robinson  4722574 4722574
brian sellwood   4932 4932
david garman  20000 20000
david warnock  100000 100000
this graph looks at the value by 31 march 2011 of £100 invested in phoenix 
it group on 31 march 2006 compared with the value of £100 invested in the 
ftse small cap index and ftse all share index the other points plotted 
are the values at intervening financial yearends 
total shareholder return
31 march 06 31 march 07 31 march 08 31 march 09 31 march 10 31 march 11
140
120
100
80
60
40
20
0
source datastream
ftse small cap index ftse all share index phoenix 24
2032504 15062011 proof 5
audited section
directors’ emoluments 
the remuneration of the directors for the year to 31 march 2011 is comprised as follows
   2011 2011 2011 2011 2011 2010
   salaryfees bonus benefits pensions
4
 total total
   £’000 £’000 £’000 £’000 £’000 £’000
executive directors
peter bertram
1
   250 — 32 50 332 330
nick robinson
2
   316 — 33 10 359 358
steve clutton
3
   23 — 2 4 29 —
nonexecutive directors
brian sellwood   42 — — — 42 42
david garman   42 — — — 42 42
david warnock   37 — — — 37 37
1
  peter bertram is the chairman of ten alps plc timeweave plc and a nonexecutive director of microgen plc and retains the fees paid in respect of those positions 
2
  from september 2010 nick robinson elected to have all of his pension entitlement as salary in lieu of pension contributions of the £316000 salary reported in the table above £275000 is basic salary and 
£41000 is salary taken in lieu of pension contributions share awards are based on basic salary
3
  steve clutton joined the board on 1 march 2011 as group finance director 
4
  executive directors receive pension contributions of 20 of salary 
new directors
steve clutton joined the board on 1 march 2011 as group finance director and will be standing for reappointment at the 2011 annual general 
meeting the company is disclosing details of his remuneration so that shareholders can make an informed decision
steve clutton is entitled to a basic salary of £270000 per annum plus annual bonus and company car in addition he will be entitled to similar 
benefits as other executive directors as described on pages 21 and 22 
share awards 
the interests of the directors in awards over ordinary shares under the performance share plan were as follows there have been no changes 
between the end of the financial year and the date of this report
  earliest  share price awards held granted lapsed awards held
 grant exercise expiry  at date of at 31 march  during  during at 31 march 
 date date date grant 2010 year the year 2011
peter bertram
 7 july 09 7 july 12 6 july 19 210p 118000 — — 118000
 7 june 10 7 june 13 6 june 20 275p — 73000 — 73000
     118000 73000 — 191000
nick robinson
 7 july 09 7 july 12 6 july 19 210p 196000 — — 196000
 7 june 10 7 june 13 6 june 20 275p — 80000 — 80000
     196000 80000 — 276000
steve clutton
 24 march 11 24 march 14 23 march 21 238p — 339807 — 339807
     — 339807 — 339807
the psp awards detailed above are subject to a relative tsr performance condition
the exercise price on all awards is nil p
during the year to 31 march 2011 the company’s share price varied between 189p and 290p and ended the year at 200p
david garman
chairman remuneration committee
6 june 2011
directors’ remuneration report continued phoenix it group plc
annual report and accounts 2011
25
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
financial statements
independent auditor’s report to the members of phoenix it group plc
we have audited the financial statements of phoenix it group plc for the 
year ended 31 march 2011 which comprise the consolidated statement 
of income the consolidated statement of comprehensive income the 
consolidated balance sheet the consolidated cash flow statements the 
consolidated statements of changes in equity and the related notes 1 
to 40 the financial reporting framework that has been applied in their 
preparation is applicable law and international financial reporting 
standards ifrss as adopted by the european union
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 2006 
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 auditor’s 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 auditor
as explained more fully in the directors’ responsibilities statement 
the directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view 
our responsibility is to audit and express an opinion on the financial 
statements in accordance with applicable law and international standards 
on auditing uk and ireland those standards require us to comply with 
the auditing practices board’s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate to 
the group’s circumstances and have been consistently applied and 
adequately disclosed the reasonableness of significant accounting 
estimates made by the directors and the overall presentation of 
the financial statements in addition we read all the financial and 
nonfinancial information in the annual report to identify material 
inconsistences with the audited financial statements if we become 
aware of any apparent material misstatements or inconsistences we 
consider the implications for our report
opinion on financial statements
in our opinion
l the financial statements give a true and fair view of the state of the 
group’s affairs as at 31 march 2011 and of the group’s profit for the 
year then ended
l the group financial statements have been properly prepared in 
accordance with ifrss as adopted by the european union and
l the financial statements have been prepared in accordance with 
the requirements of the companies act 2006 and article 4 of the ias 
regulation
separate opinion in relation to ifrss as issued by the iasb
as explained in note 3 to the group financial statements the group 
in addition to complying with its legal obligation to apply ifrss as 
adopted by the european union has also applied ifrss as issued by the 
international accounting standards board iasb
in our opinion the group financial statements comply with ifrss as 
issued by the iasb
opinion on other matters prescribed by the companies act 
2006
in our opinion the information given in the directors’ report for the 
financial year for which the group financial statements are prepared is 
consistent with the group financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you if in 
our opinion
l certain disclosures of directors’ remuneration specified by law are 
not made or
l we have not received all the information and explanations we 
require for our audit
under the listing rules we are required to review
l the directors’ statement contained within the business review in 
relation to going concern 
l the part of the corporate governance statement relating to the 
company’s compliance with the nine provisions of the june 2008 
combined code specified for our review and
l certain elements of the report to shareholders by the board on 
directors’ remuneration
other matter
we have reported separately on the parent company financial 
statements of phoenix it group plc for the year ended 31 march 2011 
and on the information in the directors’ remuneration report that is 
described as having been audited
anthony morris senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor 
london
united kingdom
6 june 2011 26
2032504 15062011 proof 5
consolidated statement of income 
for the year ended 31 march 2011
     2011   2010
    before amortisation  before amortisation
    amortisation  nonrecurring  amortisation  nonrecurring
     nonrecurring items   nonrecurring items
    items note 7 total items note 7 total
   note £m £m £m £m £m £m
continuing operations
revenue  5 2716 – 2716 2458 – 2458
profit from operations before 
amortisation of intangibles  360 33 327 344 12 332
amortisation of intangibles   16 – 31 31 – 31 31
profit from operations  8 360 64 296 344 43 301
investment income  511 12 – 12 09 – 09
finance costs  11 52 03 55 58 – 58
profit before tax   320 67 253 295 43 252
tax  12 83 17 66 70 10 60
profit for the period   34 237 50 187 225 33 192
earnings per share
basic  13 316p  250p 300p  254p
diluted  13 306p  242p 290p  246p phoenix it group plc
annual report and accounts 2011
27
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stock code pnx
2032504 15062011 proof 5
financial statements
consolidated statement of comprehensive income
for the year ended 31 march 2011
        2011 2010
       note £m £m
gain taken to equity in respect of cash flow hedges    18 11 17
actuarial gainloss on defined benefit pension scheme    10 20 50
tax on items taken directly to equity     12 08 09
other comprehensive income for the period net of tax     23 24
profit for the period      34 187 192
total comprehensive income for the period      210 168 28
2032504 15062011 proof 5
consolidated balance sheet 
as at 31 march 2011
        2011 2010
       note £m £m
noncurrent assets
goodwill      15 1814 1802
intangible assets      16 158 181
property plant and equipment     17 659 621
        2631 2604
current assets
inventories      22 134 130
trade and other receivables     23 565 541
cash and cash equivalents      24 158 103
        857 774
assets held for sale      20 27 22
        884 796
total assets       3515 3400
current liabilities
trade and other payables      26 473 393
current tax liabilities       40 49
obligations under finance leases and hire purchase contracts    27 49 50
bank loans      25 – 157
provisions      28 13 08
derivative financial instruments     18 – 11
deferred revenue       505 557
        1080 1225
net current liabilities       196 429
noncurrent liabilities
obligations under finance leases and hire purchase contracts    27 45 76
bank loans      25 688 499
provisions      28 52 44
deferred tax liabilities      29 44 43
deferred revenue       08 07
other noncurrent liabilities      26 58 65
retirement benefit obligations     10 07 51
        902 785
total liabilities       1982 2010
net assets       1533 1390
equity
share capital      30 08 08
share premium account      31 375 375
merger reserve      32 575 575
other reserves      33 14 –
retained earnings      34 561 432
total equity       1533 1390
the financial statements were approved by the board of directors and authorised for issue on 6 june 2011 they were signed on its behalf by
steve clutton
group finance director phoenix it group plc
annual report and accounts 2011
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financial statements
consolidated statement of changes in equity 
for the year ended 31 march 2011
     share
    share premium merger other retained total
    capital account reserve reserves earnings equity 
   note £m £m £m £m £m £m
at 1 april 2009   08 374 575 13 320 1264
profit for the period   – – – – 192 192
gain recognised on cash flow hedge  – – – 17 – 17
actuarial loss on defined benefit
pension scheme   – – – – 50 50
tax on items taken directly to equity 12 – – – 05 14 09
total comprehensive income   – – – 12 156 168
exercise of share options  31 – 01 – – – 01
share option expense  39 – – – 04 – 04
dividends  14 – – – – 47 47
transfer to retained earnings on 
exercise of share options   – – – 03 03 –
total transactions with owners  – 01 – 01 44 42
at 1 april 2010   08 375 575 – 432 1390
profit for the period   – – – – 187 187
gain recognised on cash flow hedge  – – – 11 – 11
actuarial gain on defined benefit 
pension scheme  10 – – – – 20 20
tax on items taken directly to equity 12 – – – 03 05 08
total comprehensive income   – – – 08 202 210
exercise of share options  31 – – – – – –
share option expense  39 – – – 07 – 07
dividends  14 – – – – 74 74
transfer to retained earnings on 
exercise of share options   – – – 01 01 –
total transactions with owners  – – – 06 73 67
at 31 march 2011   08 375 575 14 561 1533 30
2032504 15062011 proof 5
consolidated cash flow statement 
for the year ended 31 march 2011
        2011 2010
       note £m £m
net cash from operating activities     36 288 331
investing activities
purchases of property plant and equipment      165 54
proceeds on disposal of property plant and equipment     01 04
purchases of intangible assets      03 02
acquisition of subsidiary undertaking
 – cash consideration       – 22
 – costs of acquisition       – 02
net cash used in investing activities      167 76
financing activities
dividends paid       74 47
repayments of borrowings       660 130
new bank loans raised       700 –
decrease in net obligations under finance leases and hire purchase contracts    32 34
net cash used in financing activities      66 211
net increase in cash and cash equivalents      55 44
cash and cash equivalents at beginning of period     103 59
cash and cash equivalents at end of period      158 103 phoenix it group plc
annual report and accounts 2011
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financial statements
notes to the consolidated financial statements
for the year ended 31 march 2011
1 general information
phoenix it group plc is a company incorporated in the united kingdom under the companies act 2006 the address of the registered office  
is given on page 74 the nature of the group’s operations and its principal activities are set out in note 6 and in the business review on  
pages 3 to 9
these financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the 
group operates 
2  adoption of new and revised standards 
the accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 march 2010
the following new standards amendments to standards or interpretations are mandatory for the first time for the year ending 31 march 
2011 but have no material impact on the group’s financial statements
l ifrs 2 ‘sharebased payment’ amended – amended to clarify the accounting treatment for group share based payment transactions 
effective for accounting periods beginning on or after 1 january 2010
l ifrs 3 ‘business combinations’ revised  ias 27 ‘consolidated and separate financial statements’ amended – effective for 
accounting periods beginning on or after 1 july 2009 the revised standard introduces significant changes in the accounting for business 
combinations it requires that all acquisition related costs are expensed in the period incurred rather than included in the cost of the 
investment that changes to the contingent consideration following a business combination are shown in the statement of comprehensive 
income instead of adjusting goodwill and that changes to deferred tax assets relating to business combinations are only reflected within 
goodwill if they occur within the measurement period
l ifrs 5 ‘noncurrent assets held for sale and discontinued operations’ amended – amended to state that the required disclosures for 
noncurrent assets classified as held for sale or discontinued operations are specified in that standard effective for accounting periods 
beginning on or after 1 january 2010 also amended to clarify that assets and liabilities of a subsidiary should be classified as held for sale 
if the parent is committed to a plan involving loss of control of the subsidiary regardless of whether the entity will retain a noncontrolling 
interest after the sale effective for accounting periods beginning on or after 1 july 2009
l ifrs 8 ‘operating segments’ amended – amended to state that segment information with respect to total assets is required only if  
such information is regularly reported to the chief operating decision maker effective for accounting periods beginning on or after  
1 january 2010
l ias 7 ‘statement of cash flows’ amended – amended to state explicitly that only expenditures that result in the recognition of an asset 
can be classified as a cash flow from investing activities effective for accounting periods beginning on or after 1 january 2010
l ias 17 ‘leases’ amended – the amendment clarifies the classification of leases of land and buildings effective for accounting periods 
beginning on or after 1 january 2010
l ias 32 ‘financial instruments presentation’ amended – amendment addressing accounting for rights issues effective for accounting 
periods beginning on or after 1 february 2010
l ias 36 ‘impairment of assets’ amended – amendment to state the unit of accounting for goodwill impairment test effective for 
accounting periods beginning on or after 1 january 2010
l ias 38 ‘intangible assets’ amended – the amendments clarify the description of valuation techniques commonly used by entities 
when measuring the fair value of intangible assets acquired in a business combination for which no active market exists effective for 
accounting periods beginning on or after 1 july 2009
l ias 39 ‘financial instruments recognition and measurement’ amended – amended for embedded derivatives when reclassifying 
financial instruments effective for accounting periods beginning on or after 30 june 2009 also amended to clarify how existing principles 
should be applied in respect of a onesided risk in a hedged item and inflation in a financial hedged item effective for accounting periods 
beginning on or after 1 july 2009 
l ifric 16 ‘hedges of a net investment in a foreign operation’ amended – amendment to the restriction on the entity that can hold 
hedging instruments effective for accounting periods beginning on or after 1 july 2009
l ifric 17 ‘distributions of noncash assets to owners’ – clarifies the accounting where assets other than cash are distributed to 
shareholders effective for accounting periods beginning on or after 1 july 2009
l ifric 18 ‘transfers of assets from customers’ – the interpretation clarifies the requirements of ifrs for agreements in which an entity 
receives from a customer an item of property plant and equipment that the entity must then use either to connect the customer to a 
network or to provide the customer with ongoing access to a supply of goods or services in some cases the entity receives cash from a 
customer that must be used only to acquire or construct the items of property plant and equipment in order to connect the customer 
to a network or provide the customer with ongoing access to a supply of goods or services effective for transfers of assets received on or 
after 1 july 2009 32
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notes to the consolidated financial statements continued
for the year ended 31 march 2011
2  adoption of new and revised standards continued
at the date of authorisation of these financial statements certain new standards interpretations and amendments to existing standards 
are not yet effective and have not been early adopted by the group those which are considered relevant to the group’s operations are as 
follows
ifrs 3 business combinations amended
 transition requirements for contingent consideration from a business combination that  
 occurred before the effective date of the revised ifrs 1 july 2010
 measurement of noncontrolling interests 1 july 2010
ifrs 7 financial instruments disclosures amended
 clarification of disclosures  1 january 2011
 amendments enhancing disclosures about transfers of financial assets 1 july 2011
ifrs 9 financial instruments classification and measurement amended
 simplifies the mixed measurement model and establishes primary measurement categories  
 for financial assets  1 january 2013
ias 1 presentation of financial statements amended
 clarifies the presentation of items of other comprehensive income 1 january 2011
ias 24 related party disclosures revised
 revised definition of related parties 1 january 2011
ias 27 consolidated and separate financial statements revised
 transition requirements for amendments arising as a result of ias 27 1 july 2010
ias 34 interim financial reporting amended
 significant events and transactions 1 january 2011
ifric 14 prepayments of a minimum funding requirement amended
 amendment removed unintended consequences arising from the treatment of
 prepayments when there is a minimum funding requirement 1 january 2011
the adoption of these standards is not expected to have a material impact on the reported results or financial statements
3  significant accounting policies
basis of accounting
the financial statements have been prepared in accordance with international financial reporting standards ifrss the financial 
statements have also been prepared in accordance with ifrss adopted by the european union and therefore the group financial statements 
comply with article 4 of the eu ias regulation
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 the results of subsidiaries acquired or disposed of during the year are included from the effective 
date of acquisition or up to the effective date of disposal as appropriate
all intragroup transactions balances income and expenses are eliminated on consolidation
going concern
the directors have at the time of approving the financial statements a reasonable expectation that the group has adequate resources to 
continue in operational existence for the foreseeable future thus they continue to adopt the going concern basis of accounting in preparing 
the financial statements further detail is contained in the business review on page 8
discontinued operations and assets held for sale
cashflows and operations that relate to a major component of the business or geographical region that has been sold or is classified as held 
for sale are shown separately from continuing operations phoenix it group plc
annual report and accounts 2011
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financial statements
3  significant accounting policies continued
assets and businesses classified as held for sale are measured at the lower of carrying value and fair value less costs to sell no depreciation is 
charged on assets and businesses classified as held for sale
assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use 
this condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition 
management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from 
the date of classification
where an asset held for sale has not sold within one year the asset may remain classified as held for sale provided that the delay is caused by 
events or circumstances beyond the group’s control and management are still committed to the sale and the above criteria are still met
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 with cash generating units assessed by segment see note 
15 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 as adopted by the european union 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
product
revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer usually on delivery  
of goods
maintenance contracts
for fixedfee maintenance contracts the revenue arising is spread evenly over the term of the contract costs related to the delivery of 
services under these contracts are charged to the income statement as they arise typically these contracts are annual and costs arise evenly 
over the contract term an element of costs incurred in the initial set up transition or transformation phase of the contract are deferred 
and recorded within current assets these costs are then recognised in the income statement on a straight line basis over the remaining 
contractual term these costs are directly attributable to specific contracts relate to future activity will generate future economic benefits 
and are assessed for recoverability on a regular basis
other contract revenues
other contract revenues are recorded according to the stage of completion of the contract by reference to the value of work performed
the amount by which revenue differs from payments on account is shown under receivables as accrued income or under payables as 
deferred revenue as appropriate
provision is made for all anticipated contract losses as soon as they are identified
where a contract contains several service elements the individual elements are accounted for separately at fair value
interest income
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
dividend income from investments is recognised when the shareholders’ rights to receive payment have been established  34
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
3  significant accounting policies continued
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
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
borrowing costs directly attributable to the acquisition construction or production of qualifying assets which are assets that necessarily take 
a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are 
substantially ready for their intended use or sale
all other borrowing costs are recognised in the income statement in the period in which they are incurred
retirement benefit costs 
defined contribution pension schemes
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
defined benefit pension scheme
the group operates a defined benefit funded pension scheme which is closed to future service accrual
the costs of providing pensions under the defined benefit funded pension scheme are estimated on the basis of independent actuarial 
advice with full actuarial valuations carried out on a triennial basis and updated at each balance sheet date
the operating and finance costs of the scheme are recognised separately within the statement of income actuarial gains and losses are 
recognised in full in the period in which they occur and are presented in the statement of recognised income and expense 
the retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted 
for unrecognised past service costs and as reduced by the fair value of scheme assets
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
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 phoenix it group plc
annual report and accounts 2011
35
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2032504 15062011 proof 5
financial statements
3  significant accounting policies continued
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
investments
investments are included at cost less provisions for impairment
property plant and equipment 
property plant 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 stated at cost less accumulated amortisation and any accumulated impairment losses
development costs
expenditure incurred in the development of software products or enhancements and their related intellectual property rights is 
capitalised as an intangible asset only when the future economic benefits expected to arise are deemed probable and the costs can be 
reliably measured development costs not meeting these criteria and all research costs are expensed in the income statement as incurred 
capitalised development costs are amortised on a straight line basis over five years being their useful economic lives once the related 
software product or enhancement is available for use
other intangible assets
intangible assets acquired through a business combination are initially measured at fair value and are amortised on a systematic basis over 
their estimated useful lives on the following bases
value of trade name  15 years
customer contracts and relationships 5 to 10 years 36
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
3  significant accounting policies continued
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 an intangible asset with an 
indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired
the 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 on assets other than goodwill 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 is immediately recognised as income
inventories
inventories are stated at the lower of cost and net realisable value
service stocks other than consumable stocks are systematically amortised 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
financial assets
trade receivables are recognised initially at fair value which is usually the original invoiced amount and are subsequently measured at 
amortised cost using the effective interest method less provision for impairment a provision for impairment is established when there is 
evidence of a risk of nonpayment taking into account ageing previous losses experienced and general economic conditions
cash and cash equivalents comprise cash on hand and demand deposits and other shortterm highly liquid investments that are readily 
convertible to a known amount of cash and are subject to an insignificant risk of changes in value 
financial liabilities and equity
financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into
trade payables are recognised initially at fair value which is usually the original invoiced amount and are subsequently measured at 
amortised cost using the effective interest method
borrowings 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
equity instruments are any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities equity 
instruments issued by the company are recorded at the proceeds received net of direct issue costs 
derivative financial instruments and hedge accounting
the group uses derivative financial instruments such as interest rate swaps to hedge risks associated with interest rate fluctuations such 
derivative financial instruments are stated at fair value the fair values of interest rate swaps are determined by reference to market rates for 
similar instruments phoenix it group plc
annual report and accounts 2011
37
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2032504 15062011 proof 5
financial statements
3  significant accounting policies continued
in order to qualify for hedge accounting the group is required to document from inception the relationship between the item being hedged 
and the hedging instrument the group is also required to document and demonstrate an assessment of the relationship between the 
hedged item and the hedging instrument which shows that the hedge will be highly effective on an ongoing basis this effectiveness testing 
is performed at each period end to ensure that the hedge remains highly effective
hedge accounting is discontinued when the hedging instrument expires or is sold terminated or exercised or no longer qualifies for hedge 
accounting at that time any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the highly 
probable forecast transaction occurs if a hedged transaction is no longer expected to occur the net cumulative gain or loss recognised in 
equity is transferred to the consolidated statement of income for the period
cash flow hedges 
changes in the effective portion of the fair value of derivative financial instruments that are designated as hedges of future cash flows are 
recognised directly in equity and the ineffective portion is recognised immediately in the statement of income where relevant if the cash 
flow hedge of a firm commitment or forecast transaction results in the recognition of a nonfinancial asset or liability then at the time 
it is recognised the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial 
measurement for hedges that result in the recognition of a financial asset or liability amounts deferred in equity are recognised in the 
statement of income in the same period in which the hedged item affects net profit or loss
provisions
provisions relate to the obligation to reinstate certain properties to their former condition at the end of their leases provisions are measured 
at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present 
value where the effect is material
nonrecurring items
nonrecurring items are items of income or expenditure that in management’s judgement should be disclosed separately on the basis that 
they are material either by their nature or their size such items are included within the income statement caption to which they relate and 
are separately disclosed either in the notes to the consolidated financial statements or on the face of the consolidated income statement
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
the fair value of the sharebased payments except for the total shareholder return scheme is measured by the use of the black–scholes 
model the fair value of the total shareholder return tsr sharebased payment scheme is measured by the use of a stochastic model the 
expected life used in these models have been adjusted based on management’s best estimate for the effects of nontransferability exercise 
restrictions and behavioural considerations 
shares purchased through the employee benefit trust ebt are held at cost and are deducted from shareholders equity the right to a 
dividend on these shares has been waived  38
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
4  critical accounting judgements and key sources of estimation uncertainty
the preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of 
assets and liabilities disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting 
period actual results could differ from these estimates information about such judgements and estimation is contained in the accounting 
policies or the notes to the accounts and the key areas are summarised below
areas of judgement that have the most significant effect on the amounts recognised in the financial statements are
nonrecurring items
nonrecurring items are items of income or expenditure that in management’s judgement should be disclosed separately on the basis that 
they are material either by their nature or their size to an understanding of the group’s financial performance and significantly distort the 
comparability of financial performance between periods items of income or expense that are considered by management for designation as 
nonrecurring items include such items as significant restructuring impairments of assets integration of acquired businesses and gains and 
losses on disposals of noncurrent assets details of nonrecurring items are included in note 7
assets held for sale
assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use 
this condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition 
management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from 
the date of classification however an asset may remain in this categorisation for longer than one year if it remains unsold due to events or 
circumstances beyond the group’s control in making this judgement impairment losses of £nil 2010 £12m have been reflected in the 
income statement as nonrecurring items details of the losses are disclosed in note 20
valuation of intangible assets and useful life
the group has made assumptions in relation to the potential future cash flows to be determined from separable intangible assets acquired 
as part of business combinations this assessment involves assumptions relating to potential future revenues appropriate discount rates and 
the useful life of such assets these assumptions impact the income statement over the useful life of the intangible asset these assumptions 
are discussed further below 
key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and 
liabilities within the next financial year are
retirement benefits
the group operates a defined benefit pension scheme which has been accounted for in accordance with ias 19 – employee benefits the 
scheme has been closed to future service accrual application of ias 19 requires the exercise of judgement in relation to various assumptions 
including future pay rises in excess of inflation employer and pensioner demographics and the future expected returns on assets phoenix 
it group determines the assumptions to be adopted in discussion with its actuaries and believes these assumptions to be in line with uk 
practice generally but the application of different assumptions could have a significant effect on the amounts reflected in the financial 
statements further details can be found in note 10
impairment of goodwill and intangible assets
determining whether goodwill and intangible assets have been impaired requires an estimation of the value in use of the cashgenerating 
units to which they have been allocated the value in use calculation requires the entity to estimate the future cash flows expected to arise 
from the cashgenerating unit and a suitable discount rate in order to calculate present value details of the carrying amount of goodwill  
and intangible assets are shown in notes 15 and 16 respectively
sharebased payments
in valuing the sharebased payments recognised in the group’s accounts the company has used the blackscholes calculation model and a 
stochastic model which makes various assumptions on factors outside the group’s control such as share price volatility and riskfree interest 
rates details of the options and assumptions used in deriving the sharebased payments are disclosed in note 39
dilapidation provisions
dilapidation provisions have been derived on the basis of the most recent assessment of likely cost many of these obligations will not arise for 
a number of years and the costs are difficult to predict accurately in making these assessments the group has sought the aid of independent 
experts where appropriate the total provisions are disclosed in note 28 phoenix it group plc
annual report and accounts 2011
39
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stock code pnx
2032504 15062011 proof 5
financial statements
5  revenue
an analysis of the group’s revenue is as follows
        2011 2010
        £m £m
revenue – continuing operations
product       347 314
maintenance contracts       302 351
other contract revenues      2067 1793
        2716 2458
investment income        12 09
        2728 2467
6  segmental reporting
the board has determined its operating segments by business line based on the group’s management and internal reporting structure 
the group’s operations are based entirely in the uk the group has no significant concentration of sales to a particular individual external 
customer
principal activities are as follows
business continuity provision of business continuity and it disaster recovery services
partner services  provision of information technology services networking support and infrastructure services
midmarket services provision of information technology services and systems
segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis corporate costs 
relate to central group costs including finance legal and employee costs that are not directly attributable to the operating segments 
inter segment turnover has been eliminated
     business partner midmarket
     continuity services services corporate total
year ended 31 march 2011   £m £m £m £m £m
revenue    555 1179 982 – 2716
profit from operations before amortisation of 
intangibles and nonrecurring items   144 167 83 34 360
amortisation of intangibles       31
nonrecurring items        33
profit from operations        296
investment income        12
finance costs including nonrecurring item      55
profit before tax        253
capital expenditure on segment assets   112 23 43 – 178
depreciation and amortisation in period   100 11 55 – 166
balance sheet
segment assets    1383 708 1266 – 3357
unallocated assets        158
total assets        3515
segment liabilities    560 401 249 01 1209
unallocated liabilities        773
total liabilities        1982 40
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
6  segmental reporting continued
     business partner midmarket
     continuity services services corporate total
year ended 31 march 2010    £m £m £m £m £m
revenue    531 1042 885 – 2458
profit from operations before amortisation of intangibles 
and nonrecurring items   133 164 80 33 344
amortisation of intangibles       31
nonrecurring items        12
profit from operations        301
investment income        09
finance costs        58
profit before tax        252
capital expenditure on segment assets   45 08 22 – 75
depreciation and amortisation in period   105 07 50 – 162
impairment losses recognised in period   – – 12 – 12
balance sheet
segment assets    1389 675 1232 01 3297
unallocated assets        103
total assets        3400
segment liabilities    553 380 329 10 1252
unallocated liabilities        758
total liabilities        2010
the analysis of total assets and liabilities excludes intersegment balances unallocated assets comprise of cash and cash equivalents and 
unallocated liabilities comprise of bank loans and overdrafts taxation and derivative financial liabilities
7  nonrecurring items
         2011  2010
        £m £m
impairment loss on property held for sale note 20     – 12
curtailment gain in defined benefit pension scheme a     04 –
legal and professional fees incurred in relation to the closure of the defined benefit pension scheme a  04 –
writeoff of unamortised loan costs following the arrangement of new bank facilities b   03 –
costs of reorganisation following the merger of two divisions c    17 
oneoff compensation payment d      16 
        36 12
nonrecurring items in the period ending 31 march 2011 comprise
a during the year the defined benefit pension plan was closed to future service accrual beyond 30 september 2010 this cessation of future 
service accrual resulted in an exceptional curtailment gain of £04m additionally legal and professional fees of £04m were incurred in 
order to effect this change
b on 20 august 2010 the group successfully refinanced its debt facilities and repaid its existing facility in full in advance of its due date 
resulting in the writeoff of unamortised loan costs of £03m
c  from 1 april 2011 a singleuser based organisation has been created by merging the icm continuous business business continuity and 
servo midmarket services divisions there were £17m of costs associated with the restructuring
d £16m in respect of a oneoff compensation payment made to a partner for not delivering an agreed upon service phoenix it group plc
annual report and accounts 2011
41
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financial statements
8  profit from operations
        2011 2010
        £m £m
revenue       2716 2458
raw materials and consumables      80 65
staff costs note 9       1045 990
depreciation of property plant and equipment     135 131
amortisation of intangibles      31 31
other operating charges       1129 940
        296 301
the analysis of auditors’ remuneration is as follows
        2011 2010
        £m £m
fees payable to deloitte llp for the audit of the company’s annual financial statements   – –
fees payable to deloitte llp for other services to the group
 audit of the company’s subsidiaries pursuant to legislation    02 02
        02 02
other services pursuant to legislation       –
tax services        01 01
        01 01
        03 03
9  staff costs
        2011 2010
        £m £m
their aggregate remuneration comprised
wages and salaries       912 874
social security costs       102 93
other pension costs note 10      24 19
sharebased payments note 39      07 04
        1045 990
the average monthly number of employees including directors was
        number number
business continuity       230 205
partner services       1983 1902
midmarket services       499 451
central administration       16 16
        2728 2574
the remuneration of 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 on page 24
        2011 2010
        £m £m
directors
shortterm employee benefits      08 10
postemployment benefits      01 01
        09 11 42
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
10 retirement benefit schemes
defined contribution scheme
the group operates a defined contribution retirement benefit scheme the assets of this scheme are held separately from those of the group
pension costs for defined contribution schemes are as follows
        2011 2010
        £m £m
defined contribution scheme      21 17
defined benefit scheme
the group has a defined benefit pension scheme for certain of its employees during the period to 31 march 2011 the defined benefit pension 
scheme was closed to future service accrual with an effective date of 30 september 2010 members of the scheme have been invited to make 
contributions into the defined contribution plan
under the scheme the employees are entitled to retirement benefits varying between 125 and 167 of final salary multiplied by number 
of years of pensionable service on attainment of a retirement age of 65 no other post retirement benefits are provided the scheme is a 
funded scheme
the most recent full actuarial valuation of the scheme’s defined benefit obligation was carried out at 6 april 2009 and updated to 31 march 
2011 by a qualified independent actuary for ias 19 purposes the projected unit method was used in all valuations and assets were taken into 
account using market values
the major assumptions used by the actuary were
        2011 2010
         
discount rate       555 550
expected return on equities bonds and cash     641 654
expected rate of salary increases      430 445
future pension increases      335 345
inflation rpi       365 380
inflation cpi       315 –
mortality tables used       pcxa00yob pcxa00yob
        males 08l c males 08lc
        females 06l c females 06l c
in july 2010 the government announced a proposal to replace the retail price index rpi with the consumer price index cpi on the basis 
that cpi is a more appropriate measure of the change in cost of living for pensioners than rpi the proposal implied that private sector 
pension schemes should be indexed in the same way as public sector pension schemes on 17 february 2011 the house of commons 
approved the move from rpi to cpi index linking for public sector pensions following a review of the scheme rules and in consultation with 
the trustees the group has moved to cpi as the measure for inflation in increasing deferred pensions prior to retirement which has reduced 
its defined benefit liability by £12m
in calculating the defined benefit obligation under ias19 the actuary has assumed that equalisation of retirement benefits between men 
and women was effective from 1997 this assumption has been challenged by the trustees of the scheme who believe that the effective date 
of equalisation may be 2005 the group has not yet been able to agree a definitive position with the trustees of the scheme and it may be 
necessary for the group to seek direction from the courts to resolve this issue taking into account the legal advice received by the group 
this possible change has not been reflected in the ias19 assumptions used at 31 march 2011 if such a change in assumptions were to be made 
the effect would be an increase in the present value of the defined benefit obligation as at 31 march 2011 of approximately £18m – £22m
the current life expectancies post retirement in years underlying the value of the accrued liabilities for defined benefit pension scheme are
 2011 2010
      male female male female
member currently age 65    230 245 228 244
member currently age 40    254 268 253 267
  phoenix it group plc
annual report and accounts 2011
43
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2032504 15062011 proof 5
financial statements
10 retirement benefit schemes continued
amounts recognised in income in respect of the defined benefit scheme are as follows
        2011 2010
        £m £m
current service cost       03 03
interest cost       12 09
effect of curtailment       04 –
expected return on scheme assets      12 08
        01 04
the current service cost for the period has been included in staff costs actuarial gains of £20m 2010 losses of £50m have been reported in 
the consolidated statement of comprehensive income
during the year the defined benefit pension plan was closed to future service accrual beyond 30 september 2010 this cessation of future 
service accrual resulted in an exceptional curtailment gain of £04m which has been included within nonrecurring items note 7 
the amount included in the balance sheet arising from the group’s obligations in respect of its defined benefit scheme is as follows
        2011 2010
        £m £m
present value of defined benefit obligations     207 220
fair value of scheme assets      200 169
deficit in scheme and liability recognised in the balance sheet     07 51
movements in the present value of defined benefit obligations were as follows
         2011
         £m
at 1 april 2010        220
current service cost        12
interest cost        03
benefits paid        06
members’ contributions       02
curtailment gain        04
actuarial losses on defined benefit obligation      20
at 31 march 2011        207
movements in the fair value of scheme assets were as follows
         2011
         £m
at 1 april 2010        169
expected return on scheme assets       12
contributions by employer       23
members’ contributions       02
benefits paid        06
actuarial gains on scheme assets       –
at 31 march 2011        200
the fair value of the scheme assets at the balance sheet date is analysed as follows
        2011 2010
        £m £m
equities       122 105
bonds       78 64
        200 169
the scheme assets do not include any of the group’s own financial instruments nor any property occupied or other assets used by  
the group 44
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
10 retirement benefit schemes continued
the expected rate of return on the equities was determined by reference to long term historic out performance of this asset class over 
bonds so a view was taken that it was appropriate to take a future return rate on equities of 735 2010 750 pa the investment return 
in relation to these assets is variable and as such they are considered riskier investments this results in ‘the equity risk premium’ which is 
included in the yield on the equity investment and compensates investors for the additional risk of holding this type of investment there is 
significant uncertainty about the expected size of this risk premium and this risk is managed by holding assets which are less risky in nature 
but have a corresponding lower return
the expected rate of return on bonds was determined by taking a blend between the gross redemption yields on corporate and government 
bonds which were the two types of bonds held within the scheme at 31 march 2011 resulting in a return rate on bonds of 495 2010 
500 the risk of default on these assets is considered to be small 
the expected rate of return on cash was determined by reference to the level of bank base rate of 050 2010 050 pa
the overall expected rate of return is calculated by weighting the individual rates in accordance with how the plan assets are invested
the actual return on scheme assets was a gain of £12m 2010 £40m
the history of the group’s defined benefit arrangement is as follows
      2011 2010 2009 2008
      £m £m £m £m
present value of defined benefit obligation    207 220 126 132
fair value of scheme assets    200 169 115 121
deficit     07 51 11 11
experience adjustments on scheme liabilities   – 01 – –
percentage of scheme liabilities    00 06 00 00
experience adjustments on scheme assets    – 32 30 10
percentage of scheme assets    00 192 259 79
following the last triennial actuarial review in april 2009 the group agreed with the trustees that it will aim to eliminate the deficit over a 
three year period the group expects to contribute £15m to the defined benefit pension scheme in the next financial year
the sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below
   impact on 
   scheme liabilities 
assumption change in assumption  £m
discount rate decrease by 05ppts  increase by 26
inflation increase by 025ppts   increase by 10
mortality improved life expectancy by using 100 of long cohort increase by 06
11  finance costs and investment income
        2011 2010
        £m £m
finance costs
interest on bank overdrafts and loans      28 37
interest on obligations under finance leases and hire purchase contracts    05 07
amortisation of loan issue costs      04 03
other interest       03 03
interest cost on defined benefit scheme      12 09
nonrecurring finance costs      03 –
total interest expense       55 59
less amounts included in the cost of qualifying assets     – 01
        55 58
investment income
expected return on defined benefit pension scheme assets     12 08
interest on bank deposits      – 01
        12 09
net finance costs       43 49
borrowing costs included in the cost of qualifying assets during the year arose on the general borrowing pool and are calculated by applying 
a capitalisation rate of 4684 2010 5430 to expenditure on such assets phoenix it group plc
annual report and accounts 2011
45
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2032504 15062011 proof 5
financial statements
12  taxation
the tax charge on profit from operations for the year was as follows
        2011 2010
        £m £m
current tax
uk corporation tax       80 84
adjustment in respect of prior periods      08 10
        72 74
deferred tax note 29
current year       08 11
adjustment in respect of prior periods      07 03
change of rate       05 —
        66 60
corporation tax is calculated at 28 2010 28 of the estimated assessable profit for the year 
the charge for the year can be reconciled to the profit per the income statement as follows
 2011 2010
      £m  £m 
profit before tax     253  252
tax at the uk corporation tax rate of 28    71 280 70 280
effects of
expenses that are not deductible in determining taxable profit  01 02 05 22
tax adjustments relating to share options    01 03 02 07
adjustments in respect of prior periods    01 05 13 54
change in tax rate     04 17
tax expense and effective tax rate for the year   66 259 60 241
the effective tax rate for the period was 259 2010 241 the finance act 2010 was enacted in the year and included a reduction in 
the main rate of corporation tax from 28 to 27 the budget announcement on 23 march 2011 further reduced the corporation tax to 
26 with effect from 1 april 2011 this has reduced the deferred tax liability by £04m represented by an increase in the income statement 
deferred tax credit of £05m and an increase in the reserves deferred tax charge of £01m the impact on the effective tax rate is a reduction 
of 17
the government has also indicated that it intends to enact further reductions in the corporation tax rate of 1 per annum reducing the rate 
to 23 by 1 april 2014 this decrease had not been substantively enacted at the balance sheet date and therefore has not been reflected in 
the financial statements
in addition to the amount charged to the income statement the following amounts have been chargedcredited directly to equity
        2011 2010
        £m £m
deferred tax note 29
tax on actuarial losses       05 14
tax on cash flow hedge      03 05
        08 09 46
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
13  earnings per share
        2011 2010
underlying earnings per share excluding amortisation of intangibles and nonrecurring items
 basic       316p 300p
 diluted       306p 290p
the calculation of the basic and diluted earnings per share is based on the following data
earnings
        2011 2010
        £m £m
earnings for the purposes of basic earnings per share and diluted earnings per share being 
net profit attributable to equity holders of the parent     187 192
amortisation of intangibles      31 31
nonrecurring items       36 12
tax on amortisation of intangibles and nonrecurring items    17 10
earnings for the purposes of underlying earnings per share being net profit attributable to equity 
holders of the parent excluding amortisation of intangibles and nonrecurring items   237 225
number of shares
        2011 2010
        m m
weighted average number of ordinary shares for the purposes of basic earnings per share   752 752
effect of dilutive potential ordinary shares
share options       24 24
weighted average number of ordinary shares for the purposes of diluted earnings per share  776 776
14  dividends
        2011 2010
        £m £m
amounts recognised as distributions to shareholders in the year
interim dividend for the year ended 31 march 2010 of 215p 2009 210p per share   16 16
final dividend for the year ended 31 march 2010 of 430p 2009 420p per share   32 31
interim dividend for the year ended 31 march 2011 of 350p per share    26 –
        74 47
proposed interim dividend for the year ended 31 march 2010 of 215p per share    – 16
proposed final dividend for the year ended 31 march 2011 of 700p 2010 430p per share   53 36
the interim dividend was recommended by the board on 25 november 2010 and was paid on 17 january 2011
the proposed final dividend was recommended by the board on 27 may 2011 and if approved will be paid on 3 august 2011 
the proposed final dividend is subject to approval by shareholders at the annual general meeting and accordingly has not been included as 
a liability in these financial statements phoenix it group plc
annual report and accounts 2011
47
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2032504 15062011 proof 5
financial statements
15  goodwill
         £m
cost and carrying amount
at 1 april 2009        1788
additions arising from revisions to provisional fair values      14
at 1 april 2010        1802
additions note 35        12
at 31 march 2011        1814
goodwill acquired in a business combination is allocated at acquisition to the cash generating units cgus that are expected to benefit  
from that business combination before recognition of impairment losses the carrying amount of goodwill has been allocated as follows
        2011 2010
        £m £m
business continuity       812 804
partner services       330 326
midmarket services       672 672
        1814 1802
impairment
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired the 
recoverable amounts of the cgus are determined from value in use calculations and from time to time the group may also obtain 
independent appraisals of fair values to determine recoverable amounts
the recoverable amounts of the cgus are determined from value in use calculations based on the 3 year detailed financial budget approved 
by the directors the main assumptions within the budget operating cash flows include the directors conservative estimates of revenue 
growth future profitability and ongoing levels of working capital and capital expenditure to support growth 
the key assumptions used in determining the value in use calculations are set out below and these assumptions have been revised in the 
year in light of the current economic environment which has resulted in more conservative estimates about the future 
cash flow projections
the group prepares riskadjusted cash flow forecasts derived from the most recent annual financial budgets approved by the directors with 
an extrapolation of these cash flows beyond a 3 year horizon to perpetuity applying an assumed annual growth rate of 225 
discount rate
the directors have used discount rates ranging from 1012 2010 1012 which represents the group pretax weighted average cost of 
capital adjusted for the risk profiles of the individual cgus
growth rates
growth rates are determined with reference to current market conditions external forecasts and historical trends for the group’s key 
end markets cash flow growth rates are derived from the directors latest estimates of forecast revenues taking into consideration past 
experience of operating margins achieved in the cgu historically such forecasts have been reasonably accurate to forecast beyond three 
years a longterm average growth rate of 225 has been used to calculate a terminal value the directors have made the judgement that 
this longterm growth rate does not exceed the longterm average growth rate for the industry the terminal value represents the value of 
cash flows beyond the third year to perpetuity in the shortterm up to 3 years growth rates of between 0 and 237 have been used
in assessing goodwill for impairment as at 31 march 2011 the directors made use of the most recent detailed calculations of the recoverable 
amount of the group’s cgus prepared at 31 march 2011 those calculations resulted in recoverable amounts exceeding the carrying values 
for each of the group’s three cgus despite the weaker markets currently being experienced 
sensitivity to changes in assumptions 
whilst the directors consider that their assumptions are realistic it is possible that an impairment would be identified if any of the above key 
assumptions were changed significantly the group’s impairment review is sensitive to a change in the key assumptions used most notably 
the discount rates based on the group’s sensitivity analysis an increase in the discount rate in any of the cgus of 30 or a decrease in 
forecast cash flows of 272 in isolation would lead to an impairment  48
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
15  goodwill continued
using a discounted cash flow methodology necessarily involves making numerous estimates and assumptions regarding revenue growth 
operating margins tax rates appropriate discount rates capital expenditure levels and working capital requirements these estimates will 
likely differ from future actual results of operations and cash flows and it is possible that these differences could be material in addition 
judgements are applied by the directors in determining the level of cashgenerating unit identified for impairment testing and the criteria 
used to determine which assets should be aggregated a difference in assumptions could affect whether an impairment is recorded and the 
extent of impairment loss 
changes in business activities or structure may also result in changes to the level of testing in future periods further future events could 
cause the group to conclude that impairment indicators exist and that the asset values associated with a given operation have become 
impaired any resulting impairment loss could have a material impact on the group’s financial condition and results of operations 
16  intangible assets
       customer computer
       contracts  software
      brand name relationships development total
      £m £m £m £m
cost
at 1 april 2009     116 182 – 298
acquired with subsidiary undertaking note 35   – 22 – 22
additions     – – 02 02
at 1 april 2010     116 204 02 322
additions     – – 08 08
at 31 march 2011     116 204 10 330
accumulated amortisation
at 1 april 2009     14 96 – 110
charge for the year     08 23 – 31
at 1 april 2010     22 119 – 141
charge for the year     08 23 – 31
at 31 march 2011     30 142 – 172
net book value
at 31 march 2011     86 62 10 158
at 31 march 2010     94 85 02 181
computer software development additions represent assets purchased from third parties phoenix it group plc
annual report and accounts 2011
49
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2032504 15062011 proof 5
financial statements
17  property plant and equipment
      short fixtures
     freehold leasehold and motor
     property properties equipment vehicles total
     £m £m £m £m £m
cost
at 1 april 2009    215 78 673 15 981
reclassifications    – 22 22 – –
additions    01 03 69 – 73
disposals    02 – 05 04 11
at 1 april 2010    214 59 759 11 1043
reclassifications    – 01 03 04 –
reclassified as held for sale note 20   07 – 02 – 09
additions    01 17 160 – 178
disposals    – – 88 09 97
at 31 march 2011    208 75 826 06 1115
accumulated depreciation
at 1 april 2009    12 23 254 10 299
reclassifications    – 02 02 – –
charge for the year    04 07 118 02 131
disposals    – – 04 04 08
at 1 april 2010    16 32 366 08 422
reclassifications    – – 03 03 –
reclassified as held for sale note 20   02 – 02 – 04
charge for the year    04 07 122 02 135
disposals    – – 88 09 97
at 31 march 2011    18 39 395 04 456
net book value
at 31 march 2011    190 36 431 02 659
at 31 march 2010    198 27 393 03 621
the current year reclassifications to cost and depreciation are to reanalyse construction in progress between asset classes when they are 
brought into use
included in the above is land at cost of £55m 2010 £58m which is not depreciated 
the net book value of fixed assets includes £109m 2010 £119m in respect of assets held under finance leases and hire purchase contracts
at 31 march 2011 the group had entered into contractual capital commitments amounting to £05m 2010 £10m
18  derivative financial instruments
 2011 2010
 liability liability
      fair value notional fair value notional
      £m £m £m £m
cash flow hedges
interest rate swaps     – – 11 420
the interest rate swap matured on 30 september 2010 there were no derivative financial instruments at 31 march 2011 50
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
19  financial risk management
the group’s activities expose it to a variety of financial risks market risk including currency risk and interest rate risk credit risk and 
liquidity risk
funding and treasury risk management is carried out under a framework of policies and guidelines approved by the board the board is 
responsible for regular review and monitoring of treasury activity and for approval of specific transactions the authority of which may be 
delegated the group accounting function provides regular update reports of treasury activity to the board of directors 
the group does not enter into or trade financial instruments including derivative financial instruments for speculative purposes
capital risk management
the group seeks to match long term assets with long term funding and short term assets with short term funding 
equity retained profits and long term fixed interest debt are used primarily to finance intangible assets and fixed assets short term 
borrowings are required primarily to finance current assets
the group capitalisation policy seeks to maintain a strong credit rating and an appropriate funding structure whilst safeguarding group 
ability to continue as a going concern
market risk
a foreign exchange risk
the group publishes its consolidated financial statements in sterling but also conducts some business in foreign currencies mainly  
the us dollar as a result it is subject to foreign exchange currency risk due to exchange rate movements which will affect the group’s 
transaction costs 
the board periodically reviews the net exchange risk and implements strategies as appropriate due to the relative stability of the foreign 
currencies in which the group deal and size of the foreign exchange transactions the group does not hedge the foreign exchange risk as the 
potential exposure is considered not to be material to the group’s results
the carrying amounts of the group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows
 assets liabilities
      2011 2010 2011 2010
      £m £m £m £m
us dollar     18 05 09 02
euro     – 01 01 01
norwegian kroner     02 01 – –
      20 07 10 03
b interest rate risk
the group’s policy aims to manage the interest cost of the group within the constraints of its budget and its financial covenants at the year 
end the group’s borrowings were subject to a floating rate the group monitors movements in the swap market and since the year end the 
group took out an interest rate swap to hedge risks associated with interest rate fluctuations on £30m of the rolling credit facility
the table below sets out the carrying amount of borrowings that are exposed to interest rate risk
        2011 2010
        £m £m
fixed interest rate borrowings      – 420
floating interest rate borrowings      700 240
total borrowings       700 660
the contractual maturity of these borrowings can be found in note 25 phoenix it group plc
annual report and accounts 2011
51
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2032504 15062011 proof 5
financial statements
19  financial risk management continued
credit risk
credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group the group 
monitors its credit exposures to its counterparties via their credit rating where applicable or through other publicly available financial 
information and its own trading records
the group does not have any significant credit risk exposure to any single counterparty or group of counterparties having similar 
characteristics the group defines counterparties as having similar characteristics if they are connected entities concentration of credit risk 
with respect to trade receivables is limited due to the group’s customer base being large and unrelated the credit risk on liquid funds and 
derivative financial instruments is limited because the counterparties are banks with high creditratings assigned by international credit 
rating agencies
the carrying amounts of financial assets recorded in the financial statements which is net of impairment losses represents the group’s 
maximum exposure to credit risk
liquidity risk
the group manages its liquidity requirements by maintaining adequate reserves banking facilities and reserve borrowing facilities by 
continuously monitoring forecast and actual cash flows all borrowing is agreed and monitored by the board of directors the group’s 
undrawn committed borrowing facilities are shown in note 25 the group has a policy of pooling group cash flows in order to maximise the 
return on surplus cash and also utilise cash within the group surplus cash is placed on shortterm deposits
the following is an analysis of the contractual undiscounted cash flows payable under financial liabilities and derivative financial instruments 
as at the balance sheet date the table includes both interest and principal cash flows
      due between due between
     due within  one and two and due in over
     one year two years three years three years total
     £m £m £m £m £m
non derivative financial liabilities
bank loans    – – – 700 700
finance lease liabilities    52 30 13 05 100
other non interestbearing liabilities   396 – – – 396
     448 30 13 705 1196
derivative financial instruments
net settled interest rate swaps   – – – – –
total as at 31 march 2011   448 30 13 705 1196
non derivative financial liabilities
bank loans    160 160 340 – 660
finance lease liabilities    54 47 23 10 134
other non interestbearing liabilities   301 – – – 301
     515 207 363 10 1095
derivative financial instruments
net settled interest rate swaps   11 – – – 11
total as at 31 march 2010   526 207 363 10 1106
floating rate interest has been estimated using a future interest rate curve as at 31 march  52
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
19  financial risk management continued
sensitivity analysis
financial instruments affected by market risk include borrowings deposits and derivative financial instruments the following analysis 
required by ifrs 7 is intended to illustrate the sensitivity to changes in market variables being uk interest rates and the us dollar to sterling 
exchange rate on the group’s financial instruments
the analysis excludes the impact of movements in market variables on the carrying value of pension and other postretirement benefits 
obligations and provisions
the sensitivity analysis has been prepared on the basis that the amount of net debt the ratio of fixed to floating interest rates of the debt and 
the derivative portfolio and the proportion of financial instruments in foreign currencies are all constant
the following table shows the illustrative effect on the income statement and items that are recognised directly in equity that would result 
from reasonably possible movements in changes in uk interest rates and in the us dollar to sterling exchange rate before the effects of tax
 2011 2010
      income   income
      statement equity statement equity
      – £m – £m – £m – £m
uk interest rates –050ppts    04 – 01 –
us dollar exchange rate –10    01 – – –
20  assets held for sale
assets held for sale of £27m 2010 £22m consist of properties held in the midmarket services division
an additional property within the midmarket division was added to the sale portfolio on 31 march 2011 with the sale expected to occur in 
the next financial year the remainder of the assets were classed as held for sale at 31 march 2008 however due to market conditions outside 
of the group’s control they remained unsold at 31 march 2011 management are still committed to the sale of these assets are actively 
marketing them at a price reasonable given the change in market conditions and anticipate the sale will occur in the next financial year 
ending 31 march 2012
an impairment loss of £nil 2010 £12m has been recognised in the year on properties held for sale and reflects the difference between their 
carrying value and their estimated fair value in the market less costs of sale 
21  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 4 to the individual company financial statements on page 66
22  inventories
        2011 2010
        £m £m
service stocks       134 130 phoenix it group plc
annual report and accounts 2011
53
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financial statements
23 trade and other receiv ables
trade and other receivables at the balance sheet date comprise
        2011 2010
        £m £m
included within current assets
trade debtors       366 378
other debtors       51 39
prepayments and accrued income      148 124
        565 541
the group’s trade receivables are stated after allowances for bad and doubtful debts based on managements’ assessment of 
creditworthiness an analysis of which is as follows
        2011 2010
        £m £m
balance at the beginning of the period      04 08
increase in provision        04 03
amounts utilised        03 07
balance at the end of the period      05 04
as at 31 march 2011 trade receivables of £32m 2010 £27m were past due but not impaired the ageing of these trade receivables from 
due date is as follows
        2011 2010
        £m £m
under 30 days       23 16
30–60 days       03 09
60–90 days       03 02
90–120 days       01 –
over 120 days       02 –
total       32 27
concentration of credit risk with respect to trade receivables is limited due to the group’s customer base being large and unrelated due to 
this the directors believe there is no further credit risk provision required in excess of the allowance for bad and doubtful debts
the directors consider that the carrying amount of trade and other receivables approximates their fair value due to their short maturities
24 cash and cash equiv alents
        2011 2010
        £m £m
cash and cash equivalents      158 103
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 
net cash and cash equivalents are held in the following currencies those held in currencies other than sterling have been converted into 
sterling at yearend exchange rates
        2011 2010
        £m £m
sterling       145 101
euro       – 01
us dollar       11 –
norwegian kroner       02 01
        158 103 54
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
25 bank l oans
the following table analyses bank borrowings excluding bank overdrafts 
        2011 2010
        £m £m
current
bank loans       – 157
noncurrent 
bank loans       688 499
total borrowings       688 656
total borrowings are repayable as follows
        2011 2010
        £m £m
within one year       – 157
in more than one year but not more than two years     – 158
in more than two years but not more than five years     688 341
        688 656
all bank borrowings are denominated in sterling and are stated net of unamortised issue costs
on 20 august 2010 the group successfully refinanced its debt facilities and entered into a £900m fouryear syndicated rolling credit facility 
the new facility is provided by barclays bank plc hsbc bank plc the royal bank of scotland plc and yorkshire bank the facility is due for 
repayment in full in august 2014 interest is charged at libor plus margin where the margin is dependent upon the group’s covenants 
ranging from 200 to 300 the company and certain subsidiaries as guarantor have entered into a composite guarantee in favour of the 
syndicated lenders on account of the company and certain subsidiaries as principal
the directors estimate the fair value of the group’s bank borrowings to be equivalent to its book value at 31 march 2011 of the total 
committed borrowing facilities of £900m 2010 £860m the group had available £200m 2010 £200m of undrawn facilities
in addition the group has an uncommitted overdraft facility of £100m which is renewable annually and was undrawn at 31 march 2011
26 trade and other payables
trade and other payables principally comprise the following amounts 
        2011 2010
        £m £m
included within noncurrent liabilities
other creditors       58 65
included within current liabilities
trade creditors       196 126
other creditors       52 37
social security and other taxes      79 88
accruals       146 142
        473 393
as at 31 march 2011 trade creditors of the group were equivalent to 42 days 2010 37 days
the directors consider that the carrying amount of trade payables approximates their fair value phoenix it group plc
annual report and accounts 2011
55
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
financial statements
27 obligations under finance leases and hire purchase contracts
  present value
 minimum lease  of minimum
 payments lease payments
      2011 2010 2011 2010
      £m £m £m £m
amounts payable under finance leases and hire purchase contracts
within one year     52 54 49 50
in the second to fifth years inclusive    48 80 45 76
      100 134 94 126
less future finance charges    06 08
present value of lease obligations    94 126
less amounts due for settlement within 12 months   49 50
amounts due for settlement after 12 months   45 76
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 5 years 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
28 provisions
        2011 2010
        £m £m
balance at the start of the period      52 46
additional provision in the year      19 10
utilisation of provision       06 04
balance at the end of the period      65 52
included in current liabilities      13 08
included in noncurrent liabilities      52 44
        65 52
the provision relates to the obligation to reinstate certain properties to their former condition at the end of their leases which end between 
2011 and 2021 56
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
29 deferred tax
the following are the major deferred tax liabilities and assets recognised by the group and movements thereon during the current and  
prior year
     accelerated share  retirement
    intangible tax option  benefit
   hedging assets depreciation costs provisions obligations total
   £m £m £m £m £m £m £m
at 1 april 2009  08 52 44 01 14 03 70
acquisition of subsidiary note 35 – 04 – – – – 04
charge to income  – 09 10 02 04 03 14
charge to equity  05 – – – – 14 09
at 1 april 2010  03 39 34 03 10 14 43
charge to income  – 06 04 01 02 06 03
charge to equity  03 – – – – 05 08
effect of change in tax rate       
 – income statement  – 03 03 – 01 – 05
 – equity  – – – – – 01 01
at 31 march 2011  – 30 27 04 07 02 44
30 share capital
 authorised allotted and fully paid
      number £m number £m
ordinary shares of 1p each
at 1 april 2009     100000000 10 75141134 08
exercise of share options    – – 41199 –
shares transferred to the employee benefit trust   – – 24541 –
at 1 april 2010     100000000 10 75206874 08
exercise of share options    – – 15000 –
at 31 march 2011     100000000 10 75221874 08
during the year options were exercised on 15000 ordinary shares at prices varying from 96p to 200p and that number of shares was issued 
for a total gross consideration of £24800 comprising £24650 of share premium and £150 of capital 
a total of 23845 ordinary shares are held by the employee benefit trust 2010 39873 for which the right to receive dividends has been 
waived
the company has one class of ordinary share capital which carries no right to fixed income
31 share premium account
         £m
at 1 april 2009        374
premium on issue of shares       01
at 1 april 2010 and 31 march 2011       375
32 merger reserve 
         £m
at 1 april 2009 1 april 2010 and 31 march 2011      575
in accordance with section 612 of the companies act 2006 the premium on ordinary shares issued in relation to acquisitions is recorded as a 
merger reserve the reserve is not distributable but can be used to make a bonus issue on fully paid shares or to make a transfer to the profit 
and loss reserve an amount equal to the amount that has become realised on either the disposal or write down of the related investment phoenix it group plc
annual report and accounts 2011
57
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2032504 15062011 proof 5
financial statements
33 other reserves
       hedging shares to
       reserve be issued total
       £m £m £m
at 1 april 2009      20 07 13
share option expense      – 04 04
transfer to retained earnings on exercise of share options    – 03 03
loss recognised on cash flow hedges     12 – 12
at 1 april 2010      08 08 –
share option expense      – 07 07
transfer to retained earnings on exercise of share options    – 01 01
gain recognised on cash flow hedges     08 – 08
at 31 march 2011      – 14 14
other reserves are shown net of taxation as appropriate
hedging reserve
the hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges the cumulative deferred 
gain or loss on the hedge is recognised in profit or loss when the hedged transaction impacts the profit or loss or is included as a basis 
adjustment to the nonfinancial hedged item consistent with the applicable accounting policy
shares to be issued
shares to be issued represents amounts expensed in the income statement in connection with awards made under the group’s share option 
scheme less any exercises or lapses of such awards
34 retained earnings
         £m
at 1 april 2009        320
movement on pension deficit       50
deferred tax on pension reserve       14
exercise of share options       03
retained profit for the year       192
dividends        47
at 1 april 2010        432
movement on pension deficit       20
deferred tax on pension reserve       05
exercise of share options       01
retained profit for the year       187
dividends        74
at 31 march 2011        561 58
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
35 acquisition of subsidiar y undertaking
aghoco 1000 limited
on 26 february 2010 the group acquired control of aghoco 1000 limited aghoco as at 31 march 2010 the fair values assigned to the assets 
and liabilities acquired were provisional a full review of the provisional fair values of the group was performed by the first anniversary of the 
acquisition and adjusted as necessary these adjustments are set out in the following table
       provisional  revised
       fair value   fair value
       to group revaluation to group
       £m £m £m
fixed assets
intangible asset arising on acquisition     09 – 09
current assets
inventories      05 04 01
trade and other receivables     29 – 29
deferred tax asset      04 – 04
total assets      47 04 43
liabilities
trade and other payables     12 – 12
deferred revenue      25 – 25
total liabilities      37 – 37
net assets      10 04 06
goodwill      09 04 13
       19 – 19
satisfied by
cash      18 – 18
cash – costs of acquisition     01 – 01
       19 – 19
the goodwill recognised of £13m is attributable to the value of the established workforce the future growth potential and the anticipated 
synergies arising from the acquisition
office shadow
on 23 december 2009 the group acquired the trade and certain assets and liabilities of office shadow limited as at 31 march 2010 the fair 
values assigned to the assets and liabilities acquired were provisional a full review of the provisional fair values of the group was performed 
by the first anniversary of the acquisition and adjusted as necessary these adjustments are set out in the following table
 
       provisional  revised
       fair value  fair value
       to group revaluation to group
       £m £m £m
fixed assets
intangible asset arising on acquisition     13 – 13
total assets      13 – 13
liabilities
trade and other payables      01 – 01
deferred revenue      12 08 20
total liabilities      13 08 21
net liabilities      – 08 08
goodwill      05 08 13
       05 – 05
satisfied by
cash      04 – 04
cash – costs of acquisition     01 – 01
       05 – 05
the goodwill recognised of £13m is attributable to the value of the established workforce and the future anticipated profitability of selling 
the acquired product into the markets the group serves phoenix it group plc
annual report and accounts 2011
59
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stock code pnx
2032504 15062011 proof 5
financial statements
36 notes to the cash fl ow statement
        2011 2010
        £m £m
profit from operations       296 301
adjustments for
depreciation of property plant and equipment     135 131
impairment of property      – 12
profit on disposal of property plant and equipment     01 01
amortisation of intangibles      31 31
share option costs       07 04
retirement benefit – difference between contribution and amounts charged   24 10
operating cash flows before movements in working capital    444 468
increase in stocks       07 14
increasedecrease in receivables      24 45
increasedecrease in payables      61 49
decrease in deferred income      59 10
cash generated by operations      415 440
income taxes paid       81 61
interest received       01 01
interest paid       47 49
net cash from operating activities      288 331
additions to fixtures and equipment during the year amounting to £13m 2010 £15m were financed by new finance leases
37 reconciliation of net borrowings
        2011 2010
        £m £m
increase in cash and cash equivalents during the period     55 44
movement in borrowings      – 161
movement in net borrowings during the period     55 205
net borrowings brought forward      679 884
net borrowings carried forward      624 679
cash and cash equivalents      158 103
other current borrowings      49 207
noncurrent borrowings      733 575
net borrowings carried forward      624 679
38 operating lease arrangements
the group as lessee
        2011 2010
        £m £m
minimum lease payments under operating leases recognised in income for the year   95 79
at the balance sheet date the group had outstanding commitments for future minimum lease payments under noncancellable operating 
leases which fall due as follows
        2011 2010
        £m £m
within one year       98 94
in the second to fifth years inclusive      257 269
after five years       69 113
        424 476
operating lease payments represent rentals payable by the group for land and buildings fixtures and fittings equipment and motor 
vehicles 60
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
39 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 ten years from ten years from the date of grant 
 of seven years from the date of the date of grant furthermore futhermore 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 none none i scheme 1 eps
conditions   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
   ii scheme 2 tsr
   the extent to which options vest depend on the  
   group’s performance over the threeyear period  
   following the award date the psp awards are  
   subject to the group’s total shareholder return  
   tsr performance which will be measured  
   against the companies comprising the ftse all  
   share index excluding ftse 100 index and  
   investment trust companies phoenix it group plc
annual report and accounts 2011
61
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stock code pnx
2032504 15062011 proof 5
financial statements
39 sharebased payments continued
esp
 2011 2010
       weighted  weighted
       average  average
       exercise  exercise
      options price options price
balance at the start of the period    72500 197p 107500 197p
exercised during the period    10000 200p 35000 200p
outstanding at the end of the period    62500 194p 72500 195p
exercisable at the end of the period    62500 194p 72500 195p
emi
 2011 2010
       weighted  weighted
       average  average
       exercise  exercise
      options price  options price 
balance at the start of the period    116000 80p 118000 81p
exercised during the period    5000 96p 2000 96p
expired during the period    1000 80p – –
outstanding at the end of the period    110000 80p 116000 80p
exercisable at the end of the period    110000 80p 116000 80p
psp
 2011 2010
       weighted  weighted
       average  average
       exercise  exercise
      options price  options price 
balance at the start of the period    2392793 – 2369867 –
granted during the period    970307 – 1068000 –
exercised during the period    28779 – 106075 –
forfeited during the period    496800 – 381508 –
expired during the period    599875 – 557491 –
outstanding at the end of the period    2237646 – 2392793 –
exercisable at the end of the period    23830 – 52608 –
the weighted average share price at the date of exercise for share options exercised during the period was
esp 241p
emi 245p
psp 241p
the options outstanding at 31 march 2011 had a weighted average exercise price of 9p and a weighted average remaining contractual life 
of eight years in 2010 options were granted on 7 july 2009 and 30 september 2009 the aggregate of the estimated fair values of the options 
granted on those dates is £32m in 2011 options were granted on 7 june 2010 and 24 march 2011 the aggregate of the estimated fair values 
of the options granted on those dates is £15m 62
2032504 15062011 proof 5
notes to the consolidated financial statements continued
for the year ended 31 march 2011
39 sharebased payments continued
the weighted average fair value of the share options granted during the year was calculated using a stochastic model with the following 
assumptions and inputs
        2011 2010
weighted average share price      £237 £211
weighted average exercise price      nil nil
expected volatility       45 43
expected life       3 years 3 years
weighted average riskfree rate      na na
weighted average dividend yield      292 299
expected volatility was determined by calculating the historical volatility of the group’s share price over the previous three years and by 
comparison with comparable companies 
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 expense of £07m relating to equitysettled sharebased payment transactions in 2011 2010 £04m
40 related party transactions
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are disclosed 
in note 16 to the individual company financial statements transactions with directors who are the key management personnel are disclosed 
in the remuneration report phoenix it group plc
annual report and accounts 2011
63
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
financial statements
we have audited the parent company financial statements of phoenix 
it group plc for the year ended 31 march 2011 which comprise the 
balance sheet and the related notes 1 to 16 the financial reporting 
framework that has been applied in their preparation is applicable 
law and united kingdom accounting standards united kingdom 
generally accepted accounting policies
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 2006 
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 auditor’s 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 auditor
as explained more fully in the directors’ responsibilities statement the 
directors are responsible for the preparation of the parent company 
financial statements and for being satisfied that they give a true and 
fair view our responsibility is to audit and express an opinion on the 
parent company financial statements in accordance with applicable 
law and international standards on auditing uk and ireland those 
standards require us to comply with the auditing practices board’s 
ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate to the 
parent company’s circumstances and have been consistently applied 
and adequately disclosed the reasonableness of significant accounting 
estimates made by the directors and the overall presentation of the 
financial statements 
opinion on financial statements
in our opinion the parent company financial statements
l give a true and fair view of the state of the company’s affairs as at 
31 march 2011 
l have been properly prepared in accordance with united kingdom 
generally accepted accounting practice and
l have been prepared in accordance with the requirements of the 
companies act 2006
opinion on other matters prescribed by the  
companies act 2006
in our opinion
l the part of the directors’ remuneration report to be audited has 
been properly prepared in accordance with the companies act 
2006 and
l the information given in the directors’ report for the financial year 
for which the financial statements are prepared is consistent with 
the parent company financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters where 
the companies act 2006 requires us to report to you if in our opinion
l adequate accounting records have not been kept by the parent 
company or returns adequate for our audit have not been received 
from branches not visited by us or
l the parent company financial statements and the part of the 
directors’ remuneration report to be audited are not in agreement 
with the accounting records and returns or
l certain disclosures of directors’ remuneration specified by law are 
not made or
l we have not received all the information and explanations we 
require for our audit
other matter
we have reported separately on the group financial statements of 
phoenix it group plc for the year ended 31 march 2011 
anthony morris senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london
united kingdom
6 june 2011
independent auditor’s report to the members of phoenix it group plc 64
2032504 15062011 proof 5
company balance sheet 
as at 31 march 2011
        2011 2010 
       note £m £m
fixed assets
investments      4 1833 1807
current assets
debtors      5 446 288
cash       02 03
        448 291
creditors amounts falling due in one year     6 396 430
net current liabilities       52 139
total assets less current liabilities      1885 1668
creditors amounts falling due after more than one year    7 688 499
net assets       1197 1169
capital and reserves
share capital      8 08 08
share premium account      9 375 375
merger reserve      10 575 575
hedging reserve      11 – 11
shares to be issued reserve      12 14 08
profit and loss account      13 225 214
shareholders’ funds      14 1197 1169
the financial statements of phoenix it group plc registered number 03476115 were approved by the board of directors and authorised for issue 
on 6 june 2011 they were signed on its behalf by
steve clutton
group finance director phoenix it group plc
annual report and accounts 2011
65
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
financial statements
notes to the company financial statements
for the year ended 31 march 2011
1  accounting policies
basis of accounting
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 2006 the company has not presented its own profit and loss 
account
the directors have presented the financial statements on a going concern basis which assumes that the company and group will have 
sufficient resources to meet liabilities as they fall due for at least the next 12 months
in forming their view the directors have considered the forecasts prepared and the facilities available from the group’s bankers for a period 
in excess of 12 months from the date of these accounts based on these forecasts and after taking into consideration all relevant matters 
that should be taken into consideration the directors have concluded that it is appropriate to present the financial statements on a going 
concern basis
the principal accounting policies adopted are set out below they have all been applied consistently throughout the year and the  
preceding year
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 
taxation
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 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 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
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 asset is realised deferred tax is credited in the 
income statement except when it relates to items credited directly to equity in which case the deferred tax is also dealt with in equity
investments
investments are included in the balance sheet at cost less any provision for permanent diminution in value
financial instruments
financial assets and financial liabilities are recognised on the company’s balance sheet when the company becomes a party to the 
contractual provisions of the instrument
financial assets
cash and cash equivalents comprise cash on hand and demand deposits and other shortterm highly liquid investments that are readily 
convertible to a known amount of cash and are subject to an insignificant risk of changes in value 
financial liabilities 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 are recorded at the proceeds received less any direct issue costs finance charges and direct issue costs are 
accounted for on an accruals basis in the profit and loss 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 66
2032504 15062011 proof 5
notes to the company financial statements continued
for the year ended 31 march 2011
1  accounting policies continued
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
at each reporting date estimates regarding the future probability of service and nonmarket performance conditions being met are revised 
on a basis consistent with recent experience any resultant revisions of original estimates are recorded as an adjustment to the cost of 
investments in employing group entities or in the income statement as appropriate and the sharebased payments reserve
derivative financial instruments and hedge accounting
the company uses derivative financial instruments to reduce exposure to interest rate movements the company does not hold or issue 
derivative financial instruments for speculative purposes
for an interest rate swap to be treated as a hedge the instrument must be related to actual assets or liabilities or a probable commitment 
and must change the nature of the interest rate by converting variable rate to fixed rate or vice versa interest differentials under these 
swaps are recognised by adjusting new interest payable over the period of the contracts
if an instrument ceases to be a hedge for example because the underlying hedged position is eliminated the instrument is marked to 
market and any resulting profit or loss recognised at that time 
2  staff costs
the directors were the only employees during the period and they received all of their remuneration as disclosed in the directors’ 
remuneration report on page 24 from phoenix it services limited a subsidiary entity
3  profit of parent company
as permitted by section 408 of the companies act 2006 the profit and loss account of the parent company is not presented as part of these 
accounts the parent company’s profit after tax for the financial year amounted to £84m 2010 £58m
4  investments
         total
         £m
cost
at 1 april 2010        1819
additions in respect of sharebased payments      26
at 31 march 2011        1845
accumulated impairment
at 1 april 2010 and 31 march 2011       12
net book value
at 31 march 2011        1833
at 31 march 2010        1807
at 31 march 2011 the company held directly or indirectly 100 of the allotted share capital of the following principal undertakings which are 
all included in the consolidation
 country of class of share  
name of subsidiary registration capital held nature of business
phoenix it services limited england and wales ordinary provision of information technology services
trend network services england and wales ordinary provision of information technology  
   networking support 
   and infrastructure services
icm business continuity services limited england and wales ordinary provision of business continuity and  
   it disaster recovery services
icm continuity consulting limited england and wales ordinary software development and support
servo limited england and wales ordinary provision of information technology  
   services and systems
aghoco 1000 limited england and wales ordinary provision of information technology services phoenix it group plc
annual report and accounts 2011
67
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
financial statements
5 debtors amounts falling due within one year
        2011 2010
        £m £m
amounts owed by group undertakings note 16     425 267
prepayments       19 19
deferred tax asset       02 02
        446 288
the deferred tax asset relates to accelerated capital allowances
6 creditors amounts falling due within one year
        2011 2010
        £m £m
amounts owed to group undertakings note 16     378 253
trade creditors       01 02
accruals       17 07
bank loans       – 157
hedging liability       – 11
        396 430
7 creditors amounts falling due after more than one year
        2011 2010
        £m £m
bank loans       688 499
the borrowings are repayable as follows
in more than one year but not more than two years     – 158
in more than two years but not more than five years     688 341
        688 499
8 share capital
 authorised allotted and fully paid
      number £m number £m
ordinary shares of 1p each
at 1 april 2010     100000000 10 75206874 08
exercise of share options    – – 15000 –
at 31 march 2011     100000000 10 75221874 08
9  share premium account
         £m
at 1 april 2010 and 31 march 2011       375
10  merger reserve
         £m
at 1 april 2010 and 31 march 2011       575
11 hedging reserve
         £m
at 1 april 2010        11
gain recognised on cash flow hedge       11
at 31 march 2011        –
12 shares to be issued reserve
         £m
at 1 april 2010        08
share option expense        07
transfer to retained earnings on exercise of share options      01
at 31 march 2011        14 68
2032504 15062011 proof 5
notes to the company financial statements continued
for the year ended 31 march 2011
13  profit and l oss account
         £m
at 1 april 2010        214
retained profit for the year       84
transfer from shares to be issued reserve on exercise of share options     01
dividends        74
at 31 march 2011        225
14  reconciliation of mo vements in shareholders’ funds
        2011 2010
        £m £m
opening shareholders’ funds      1169 1136
profit for the financial year      84 58
dividends       74 47
        1179 1147
gain recognised on cash flow hedge      11 17
share option expense       07 04
premium on issue of shares      – 01
closing shareholders’ funds      1197 1169
15  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 39 to the phoenix it group plc consolidated financial statements on pages 60 to 62 the company recognised a charge of £03m to the 
profit and loss account relating to equitysettled sharebased payment transactions in 2011 2010 credit of £01m
16  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 
        £m £m
phoenix it services limited      71 –
trend network services      – 164
phoenix international holdings limited      – 06
icm business continuity services limited      – 208
icm computer group limited      147 –
servo limited       207 –
at 31 march 2011       425 378
the transactions with related parties include the receipt of dividends from subsidiaries totalling £160m and loans as above both payable 
by the company to subsidiaries and repayable to the company by subsidiaries which carry no interest and are repayable on demand 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 phoenix it group plc
annual report and accounts 2011
69
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2032504 15062011 proof 5
financial statements
five year summary 
for the year ended 31 march 2011
     2011 2010 2009 2008 2007
     £m £m £m £m £m
results
revenue    2716 2458 2532 2308 1267
profit from operations excluding
amortisation of intangibles and nonrecurring items  360 344 357 330 227
amortisation of intangibles    31 31 34 36 20
nonrecurring items    33 12 93 60 –
profit from operations    296 301 230 234 207
net interest payable including nonrecurring finance costs  43 49 74 79 14
profit before tax     253 252 156 155 193
key statistics
earnings per ordinary share   250p 254p 147p 150p 230p
diluted earnings per ordinary share   242p 246p 142p 146p 222p
adjusted earnings per ordinary share   316p 300p 271p 248p 253p
underlying diluted earning per ordinary share   306p 290p 263p 241p 244p
  underlying earnings per ordinary share and underlying diluted earnings per ordinary share excludes the effect of amortisation of intangibles 
and nonrecurring items 70
2032504 15062011 proof 5
notice of annual general meeting
this document is important and requires your immediate attention if you are in any doubt as to what action you should take you 
should consult your stockbroker bank manager solicitor accountant or other professional adviser if you have sold or transferred all your 
shares in phoenix it group plc please pass this document and the accompanying form of proxy to the stockbroker bank or other agent 
through whom you made the sale or transfer for transmission to the purchaser or transferee
notice is hereby given that the annual general meeting of phoenix it group plc the “company” will be held at technology 
house hunsbury hill avenue northampton northamptonshire nn4 8qs on thursday 28 july 2011 at 1030 am for the following 
purposes resolutions 1 to 9 will be proposed as ordinary resolutions resolutions 10 to 12 will be proposed as special resolutions
1  to receive and adopt the accounts for the year ended 31 march 2011 together with the directors’ report the auditor’s report and the 
auditable part of the remuneration report
2 to declare a final dividend for the year ended 31 march 2011 of 70p per ordinary share to be paid on 3 august 2011 to shareholders on the 
register at the close of business on 17 june 2011
3  to reappoint deloitte llp as auditors to the company to hold office until the conclusion of the next general meeting at which accounts are 
laid before the company
4  to authorise the directors to determine the remuneration of the auditors of the company 
5  to reelect as a director peter bertram who retires by rotation in accordance with article 78 of the company’s articles of association
6  to reelect as a director nick robinson who retires by rotation in accordance with article 78 of the company’s articles of association 
7 to elect as a director steve clutton who was appointed to the board during the year 
8  to approve the directors’ remuneration report for the year ended 31 march 2011
9  that the directors be generally and unconditionally authorised in accordance with section 551 of the companies act 2006 in substitution 
for any existing authority to exercise all the powers of the company to allot shares in the company or to grant rights to subscribe for or to 
convert any security into shares in the company together “relevant securities” or otherwise deal with or dispose of relevant securities 
up to a maximum nominal amount of £250756 being approximately onethird of the company’s issued share capital provided that such 
authority shall expire on the conclusion of the annual general meeting of the company to be held in 2012 or 28 october 2012 whichever is 
earlier but so that the company may before such expiry make an offer or agreement which would or might require relevant securities to be 
allotted after such expiry and the directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred 
by this resolution had not expired
10  that subject to the passing of resolution 9 as set out in the notice of this meeting the directors be empowered pursuant to section 570 of the 
companies act 2006 to allot equity securities as defined in section 560 of the companies act 2006 for cash pursuant to the general authority 
conferred by resolution 9 as set out in the notice of this meeting as if section 5611 of the companies act 2006 did not apply to such allotment 
provided that this power shall be limited to allotments of equity securities 
a in connection with or pursuant to an offer by way of rights open offer or other preemptive offer to the holders of shares in the company 
and other persons entitled to participate therein in proportion as nearly as practicable to their respective holdings subject to such 
exclusions or other arrangements as the directors may consider necessary or expedient to deal with fractional entitlements or legal or 
practical problems under the laws of any territory or the regulations or requirements of any regulatory authority or any stock exchange 
in any territory 
b  otherwise than pursuant to subparagraph a above up to an aggregate nominal amount of £37613 
 and such power shall expire on the conclusion of the annual general meeting of the company to be held in 2012 or on 28 october 2012 
whichever is earlier but so that the company may before such expiry make an offer or agreement which would or might require equity 
securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the 
power conferred by this resolution had not expired  phoenix it group plc
annual report and accounts 2011
71
wwwphoenixitgroupcom
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2032504 15062011 proof 5
company information
11  that the company be generally and unconditionally authorised pursuant to section 701 of the companies act 2006 to make market 
purchases as defined in section 6934 of the companies act 2006 of up to 3761344 ordinary shares of 1p each in the capital of the company 
being approximately five per cent of the company’s issued share capital as at 3 june 2011 on such terms and in such manner as the 
directors of the company may from time to time determine provided that
a the amount paid for each share exclusive of expenses shall not be more than the higher of 1 five per cent above the average of the 
middle market quotation for the company’s ordinary shares as derived from the daily official list of london stock exchange plc for the 
five business days before the date on which the contract for the purchase is made and 2 an amount equal to the higher of the price of 
the last independent trade and the highest current independent bid as derived from the london stock exchange trading system and in 
any event not less than 1p per ordinary share and 
b the authority herein contained shall expire at the conclusion of the annual general meeting of the company to be held in 2012 or on 28 
october 2012 whichever is earlier provided that the company may before such expiry make a contract to purchase its own shares which 
would or might be executed wholly or partly after such expiry and the company may make a purchase of its own shares in pursuance of 
such contract as if the authority conferred by this resolution had not expired
12  that the company be authorised pursuant to section 307a of the companies act 2006 to call any general meeting of the company other 
than the annual general meeting of the company by notice of at least 14 clear days provided that the authority of this resolution shall expire 
on the conclusion of the annual general meeting of the company to be held in 2012
dated 6 june 2011 
registered office  by order of the board
technology house william martin
hunsbury hill avenue secretary
northampton
northamptonshire
nn4 8qs 72
2032504 15062011 proof 5
notice of annual general meeting
notes
1  any member entitled to attend and vote at the annual general meeting is entitled to appoint one or more proxies who need not be a 
member of the company to attend and on a poll to vote instead of the member completion and return of a form of proxy will not preclude 
a member from attending and voting at the meeting in person should he subsequently decide to do so a member can appoint more than 
one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attaching to different shares held by him 
2  your proxy could be the chairman another director of the company or another person who has agreed to attend to represent you your 
proxy will vote as you instruct and must attend the meeting for your vote to be counted details of how to appoint the chairman or another 
person as your proxy using the proxy form are set out in the notes to the proxy form
3  in order to be valid any form of proxy and power of attorney or other authority under which it is signed or a notarially certified or office 
copy of such power or authority must reach the company’s registrars equiniti ltd aspect house spencer road lancing bn99 6zl not less 
than 48 hours before the time of the meeting or of any adjournment of the meeting 
4  to change your proxy instructions you may return a new proxy appointment using the methods set out above where you have appointed 
a proxy using the hard copy proxy form and would like to change the instructions using another hard copy proxy form please contact 
the company’s registrars see note 3 the deadline for receipt of proxy appointments see above also applies in relation to amended 
instructions any attempt to terminate or amend a proxy appointment received after the relevant deadline will be disregarded where two 
or more valid separate appointments of proxy are received in respect of the same share in respect of the same meeting the one which is last 
sent shall be treated as replacing and revoking the other or others
5  crest shareholders who wish to appoint a proxy or proxies by utilising the crest electronic proxy appointment service may do so by utilising 
the procedures described in the crest manual available via wwweuroclearcomcrest crest personal shareholders or other crest 
sponsored shareholders and those crest shareholders who have appointed a voting service providers should refer to their crest sponsor 
or voting service providers who will be able to take the appropriate action on their behalf
6  in order for a proxy appointment made by means of crest to be valid the appropriate crest message a “crest proxy instruction” 
must be properly authenticated in accordance with euroclear uk  ireland’s specifications and must contain the information required for 
such instructions as described in the crest manual the message regardless of whether it constitutes the appointment of a proxy or an 
amendment to the instruction given to a previously appointed proxy must in order to be valid be transmitted so as to be received by the 
issuer’s agent id ra 19 by the latest times for receipt of proxy appointments specified in the notice of meeting for this purpose the time of 
receipt will be taken to be the time as determined by the timestamp applied to the message by the crest applications host from which the 
issuer’s agent is able to retrieve the message by enquiry to crest in the manner prescribed by crest
7  the company may treat as invalid a crest proxy instruction in the circumstances set out in regulation 355a of the uncertificated securities 
regulations 2001
8  crest shareholders and where applicable their crest sponsors or voting service providers should note that euroclear uk  ireland does 
not make available special procedures in crest for any particular messages normal system timings and limitations will therefore apply in 
relation to the input of crest proxy instructions it is the responsibility of the crest member concerned to take or if the crest member is 
a crest personal member or sponsored member or has appointed a voting service providers to procure that his crest sponsor or voting 
service providers takes such action as shall be necessary to ensure that a message is transmitted by means of the crest system by any 
particular time in this connection crest shareholders and where applicable their crest sponsors or voting service providers are referred in 
particular to those sections of the crest manual concerning practical limitations of the crest system and timings
9  as permitted by regulation 41 of the uncertificated securities regulations 2001 shareholders who hold shares in uncertificated form must be 
entered on the company’s share register at 600 pm on 26 july 2011 in order to be entitled to attend and vote at the annual general meeting 
such shareholders may only cast votes in respect of shares held at such time changes to entries on the relevant register after that time shall 
be disregarded in determining the rights of any person to attend or vote at the meeting
10  the total number of ordinary shares of 1p in issue as at 6 june 2011 the last practicable day before printing this document was 75226874 
ordinary shares and the total level of voting rights was 75226874 none of which were attached to shares held in treasury by the company
11  shareholders satisfying the thresholds in section 527 of the companies act 2006 can require the company to publish a statement on its 
website setting out any matter relating to phoenix it group plc
annual report and accounts 2011
73
wwwphoenixitgroupcom
stock code pnx
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company information
111 the audit of the company’s accounts including the auditor’s report and the conduct of the audit that are to be laid before the meeting 
or
112 any circumstances connected with an auditor of the company ceasing to hold office since the last annual general meeting that the 
shareholders propose to raise at the meeting
 the company cannot require the shareholders requesting the publication to pay its expenses any statement placed on the website must also 
be sent to the company’s auditors no later than the time it makes its statement available on the website the business which may be dealt 
with at the meeting includes any statement that the company has been required to publish on its website
12  copies of the service contracts of each of the directors and the articles of association of the company will be available for inspection at the 
registered office of the company during usual business hours on any weekday saturdays and public holidays excluded from the date of this 
notice until the date of the annual general meeting and at the place of the annual general meeting from at least 15 minutes prior to and until 
the conclusion of the annual general meeting
13  any member attending the meeting has the right to ask questions the company must cause to be answered any such question relating to 
the business being dealt with at the meeting but no such answer need be given if to do so would interfere unduly with the preparation for 
the meeting or involve the disclosure of confidential information or the answer has already been given on a website in the form of an answer 
to a question or it is undesirable in the interests of the company or the good order of the meeting that the question be answered
14  a copy of this notice and other information required by section 311a of the companies act 2006 can be found on the company’s website 
wwwphoenixitgroupcom
15  you must not use any electronic address provided either in the notice of meeting or any related documents including the form of proxy to 
communicate with the company for any purposes other than those expressly stated
16  a person who is not a member of the company but has been nominated by a member of the company the ‘relevant member’ to enjoy 
information rights the ’nominated person’ does not have a right to appoint any proxies under note 1 above however a nominated person 
may have a right under an agreement with the relevant member to be appointed or to have somebody else appointed as a proxy for the 
meeting if a nominated person does not have such a right or has such a right and does not wish to exercise it he may have a right under an 
agreement with the relevant member to give instructions as to the exercise of voting rights 74
2032504 15062011 proof 5
advisers
phoenix it group plc financial advisers  stockbrokers  principal bankers
registered in england 03476115 investec investment banking  royal bank of scotland
 2 gresham street  152 silbury boulevard
registered office london  milton keynes
technology house ec2v 7qp  mk9 1lt
hunsbury hill avenue
northampton numis securities limited  solicitors
nn4 8qs the london stock exchange building  nabarro llp
  10 paternoster square  lacon house
 london  84 theobalds road
 ec4m 7lt  london
   wc1x 8rw
 auditors
 deloitte llp financial public relations
 2 new street square  financial dynamics limited 
 london  holborn gate
 ec4a 3bz 26  southampton buildings
   london
 registrars  wc2a 1pb
 equiniti limited 
  aspect house  remuneration consultants
 spencer road  aon hewitt limited 
 lancing  6 more london place 
 west sussex london
 bn99 6da  se1 2da 
financial calendar
annual general meeting 28 july 2011
ex dividend date 15 june 2011
record date for dividend 17 june 2011
dividend payment date  3 august 2011 phoenix it group plc
annual report and accounts 2011
75
wwwphoenixitgroupcom
stock code pnx
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company information
shareholder notes 76
2032504 15062011 proof 5 2032504 14062011 proof 4 2032504 14062011 proof 4
phoenix it group plc
technology house hunsbury hill avenue 
northampton nn4 8qs
t 44 0 1604 769000
f 44 0 1604 764323
wwwphoenixitgroupcom
phoenix it group plc
annual report and accounts for 
the year ended 31 march 2011
making it possible
phoenix it group plc  annual report and accounts for the year ended 31 march 2011


Summary:
 phoenix it group plc
annual report and accounts 2011
03
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
our performance
“recognising the growth 
opportunity in “cloud” services  
we have continued to invest 
significantly in these areas” 
introduction
the group has had a solid year financially with revenues increasing 
by 105 to £2716m 2010 £2458m and underlying profit before 
tax
2
 increasing by 87 to £320m 2010 £295m there were no 
acquisitions during the year and all three businesses delivered organic 
growth in both revenue and underlying profit from operations
1

we have seen some confidence returning to the it services market 
in the uk with businesses now proceeding with it projects which had 
been deferred and many organisations in both the public and private 
sectors continuing to see outsourcing as a key method of reducing 
their own cost bases although current economic conditions and the 
recent spending review by the government have created a degree of 
uncertainty the overall trend for outsourcing remains promising and 
our phoenix it services partner services division remains well placed 
to support outsourcing companies in delivering essential services at a 
lower cost
the emergence of “cloud” computing marks a major shift in the it 
services market driven by developments in virtualisation webbased 
architecture and improvements in network capacity recognising the 
growth opportunity in “cloud” services we have continued to invest 
significantly in these areas particularly our managed hosting annuity 
contracts business and as a result the group is able to offer customised 
services which have significant business advantages in terms of 
flexibility risk reduction and compliance to its customer base 
growth in these “cloud” services combined with reducing costs 
elsewhere in the group has helped to mitigate revenue declines in 
areas where there is price competition or where we are reducing 
emphasis however this planned transition has had the effect of 
constraining shortterm profitability particularly within the servo 
midmarket services division but we continue to be encouraged 
by improvements in the pipeline and we are currently bidding for a 
number of opportunities with both new and existing customers
1 underlying — adjusted for nonrecurring items £33m 2010 £12m and amortisation of acquired 
intangibles
2 underlying — adjusted for nonrecurring items £36m 2010 £12m and amortisation of acquired 
intangibles
simplified organisational structure
the icm continuous business business continuity and servo mid
market services divisions merged to create a single enduser based 
organisation operating as one business within the phoenix it group 
from 4 april 2011 the combined business which will be reported from 
1 april 2011 in our financial statements as one division will be known 
as icm
the combined business operates from 23 uk locations and offers a full 
breadth of it and business continuity solutions from managed hosting 
and “cloud” services to business continuity and disaster recovery 
as well as a full range of infrastructure management and professional 
services 
in recent years there has been a move away from traditional it disaster 
recovery solutions towards the more holistic allround concept of 
business resilience which encompasses a company’s strategy for 
identifying mitigating and responding to potential business risks the 
merger of the two divisions allows the group to offer an endtoend 
business proposition centred around resilience
the servo midmarket services division brings expertise in the 
design implementation and hosting of resilient solutions while icm 
continuous business business continuity provides business continuity 
services designed around the workings of these solutions whilst other 
organisations offer similar services to our individual component parts our 
combined offering provides customers with a complete service which on 
a standalone basis we believe will be unrivalled in the uk market
icm continuous business business continuity
 year ended  year ended
 31 march 31 march
 2011 2010 change
revenue £555m £531m 44
underlying profit  
from operations £144m £133m 85
underlying operating  
margin 260 250 
order book £1137m £1043m 91
annual contract value £554m £545m 18
revenues for the year were £555m 2010 £531m an increase of 
44 including £21m 2010 £03m in respect of shadow planner 
our business continuity planning tool business which was acquired 
on 23 december 2009 excluding the impact of shadow planner 
divisional revenues increased by 11 with revenue growth held 
back by lower traditional it disaster recovery revenues the growth 
in “cloud” services and in particular virtualisation continues to create 
new solutions for it business continuity as an alternative to traditional 
disaster recovery options 
this modest revenue growth is reflected in the order book and annual 
contract values at 31 march 2011 order book increased by 91 to 
£1137m 2010 £1043m bolstered by a £172m five year extension in 
june 2010 to the division’s largest business continuity contract this 
contract due to expire in march 2011 was extended until march 2016 
the annual contract value increased to £554m as at 31 march 2011  
2010 £545m providing good visibility of future revenues which will 
be recognised during the current financial year
business review
chief executive’s review nick robinson 04
2032504 15062011 proof 5
chief executive’s review continued
underlying profit from operations was £144m 2010 £133m with 
shadow planner contributing £05m 2010 £nil during the second 
half of the year underlying profitability improved as a result of tight 
controls on the cost base and this translated into a year on year 
improvement in operating margin from 250 to 260 
during the year the division has continued to invest for growth 
through expenditure on developing new products and services within 
the “cloud” as well as expanding its infrastructure and business 
continuity capacity upgrades have taken place at the birmingham 
hamilton and farnborough datacentres as well as a power upgrade 
at our wapping facility this capacity expansion programme will 
continue into 2012 and 2013 to meet the increased demand for work
area capacity particularly in the london financial markets
the merger of the icm continuous business business continuity with 
our servo midmarket services division from 4 april 2011 will provide 
further opportunities to sell business continuity services and hosting to 
a significantly wider customer base 
“   our combined offering 
provides customers with a 
complete service which on a 
standalone basis we believe will  
be unrivalled in the uk market”
servo midmarket services
 year ended  year ended
 31 march 31 march
 2011 2010 change
revenue £982m £885m 110
underlying profit  
from operations £83m £80m 26
underlying operating  
margin 84 91
order book £736m £543m 355
annual contract value £491m £479m 26
despite a slow start to the year divisional revenues grew by 110 
mainly due to the acquisition of support contracts from kcom group 
plc during the last quarter of the previous financial year combined 
with an increase in managed hosting activity and stronger project and 
professional services revenues there has been further progress in 
improving the quality of business mix in the division as the proportion 
of nonannuity contract revenue continues to fall and managed 
hosting revenues increase
underlying profit from operations increased to £83m 2010 £80m 
during the year the division continued to strengthen its sales and 
marketing effort and this investment has had the effect of constraining 
profitability in the shortterm and diluting the underlying operating 
margin percentage from 91 to 84 for the year as a whole
despite the loss of £35m of annual contract value announced in our 
q1 ims in august 2010 which resulted from the decision by a customer 
to insource some of the activities provided by the group there has 
been significant growth in the order book driven by new business wins 
during the year the divisional order book grew by 355 to £736m 
at 31 march 2011 2010 £543m and the annualised contract value 
increased by 26 to £491m at 31 march 2011 2010 £479m
the business has continued to extend its presence in the midmarket 
sector and grow its managed hosting annuity business the hosting 
annual contract base increased by 353 to £130m at 31 march 2011 
2010 £96m clearly demonstrating the strength of its service offering 
as customers switch to hosting technology within our business the 
increase in managed hosting business aided by investment in the sales 
force in the first half of the year has been the driving force behind a 
significant increase in underlying operating margin from 71 in the 
first half to 96 during the second half of the year
whilst the focus remains on growing managed hosting annuity 
revenues it has also been encouraging to see stronger year on year 
project and professional services revenues this is a reflection of 
confidence returning to the market as businesses are now willing 
to proceed with projects which had previously been delayed or 
postponed 
the growth in managed hosting supported by a carefully directed 
capacity expansion programme should ensure that higher and more 
sustainable underlying operating margins are achievable in this 
business
business review phoenix it group plc
annual report and accounts 2011
05
wwwphoenixitgroupcom
stock code pnx
2032504 15062011 proof 5
our performance
phoenix it services partner services
 year ended  year ended
 31 march 31 march
 2011 2010 change
revenue £1179m £1042m 131
underlying profit  
from operations £167m £164m 22
underlying operating  
margin 142 157
order book £1407m £1944m 276
annual contract value £953m £1013m 59
divisional revenues increased by 131 to £1179m 2010 £1042m 
partly due to a recovery in project and professional services revenues 
from the low levels reported last financial year combined with the 
year on year benefit of three outsourcing contracts secured during 
the latter part of the previous financial year the integration of these 
contracts into the existing business is now complete and profitability 
is in line with our expectations with the introduction of efficiency 
savings we expect to see improved profitability on these contracts 
moving into low doubledigit margins in the coming financial year 
underlying profit from operations increased to £167m 2010 
£164m despite the continued competitive pricing environment as 
anticipated underlying operating margins were diluted by the lower 
margins achieved on the three outsourcing contracts referred to 
above the underlying operating margin excluding the effect of these 
outsourcing contracts increased from 161 to 167 reflecting in 
part tight control over the cost base during the year
whilst we have seen some improvement in market conditions during 
2011 there was a scarcity of large contract opportunities to be won 
the divisional order book which was boosted at the beginning of the 
year by a number of large contract wins in the previous year reduced 
by £537m to £1407m 2010 £1944m this reduction has in part been 
driven by a structural move in our market to shorter contracts while 
this provides the customer with more flexibility we typically see these 
shorter contracts renew the annual contract value at 31 march 2011 
was £953m 2010 £1013m 
despite a decline in order book and annual contract value there have 
been some encouraging developments within the business this year 
the work performed in integrating the three large contracts has laid 
the platform for further success and brought in considerable retail 
sector expertise in addition towards the end of the financial year 
the division acquired a five year lease on a colocation facility allowing 
the division to increase the breadth of services within its portfolio 
initial takeup has been promising and the expansion of the service 
offering into the provision of hosting services to partners will enable 
the division to take advantage of the increasing shift towards “cloud” 
technology the division’s wide range of service options multiple 
technologies and optimised infrastructure availability leave it well 
positioned to enable its partners’ push into the “cloud” 
whilst we have seen some encouraging activity during the year and 
have a strong pipeline of future prospects we anticipate that future 
new business wins are likely to be offset by pressure on margins 
outlook
following the investments made during the year in increasing hosting 
capacity and capability we are well positioned to take advantage 
of the market shift towards “cloud” computing in both operating 
divisions the breadth of services that we can offer via the merged end 
user division leads us to anticipate further growth in managed hosting 
and “cloud” services into the current financial year whilst growth 
predictions are more cautious in respect of the partner services 
division the group as a whole retains good visibility of forward 
revenues giving a strong platform on which to build for the future
nick robinson
chief executive
6 june 2011
“the division’s wide range of 
service options multiple 
technologies and optimised 
infrastructure availability leave  
it well positioned to enable its 
partners’ push into the “cloud””