Embargoed for release 7.00am, Tuesday 9 September 2008
Morse plc
Full Year Results
Twelve months ended 30 June 2008
Morse plc ("the Group" or "the Company"), the IT services and technology company, announces its full year results for the twelve months ended 30 June 2008.
In July 2008, the structure of the business was simplified and now operates around five independent business units reporting directly into Executive Chairman, Kevin Loosemore. They are:
- Infrastructure Services & Technology – UK (formerly Infrastructure Consulting)
- Infrastructure Services & Technology – Spain
- Infrastructure Services & Technology – Ireland
- Business Applications Services (formerly Applications Consulting)
- Investment Management Consulting (formerly Management Consulting)
Financial Highlights
- Revenue £253.3 million (2007: £256.5 million*)
- Operating profit before exceptional+ items £11.1 million (2007: £12.2 million*)
- Operating profit has been impacted by trading balance credits of £4.2 million (2007: £4.4 million)
- Operating margin percentage before exceptional+ items 4.4% (2007: 4.8%*)
- Profit before tax before exceptional+ items £11.1 million (2007: £12.5 million*)
- Cash at year end of £11.1 million (2007: £15.3 million)
- Proforma basic earnings per share** before exceptional+ items of 6.0p (2007: 6.8p*)
- Proposed final dividend of 1.30p per share (2007: 2.80p per share) resulting in a total dividend for the year at 2.60p per share (2007: 4.05p per share)
* Excludes discontinued operations in 2007
** The proforma earnings per share figure is based on profit before tax from continuing operations before goodwill impairment (2008: £11.1 million, 2007: £12.5 million) less tax at a normalised effective group rate of 29.5% (2007: 30%), less profit attributed to minority interests. The calculated profit after tax and minority interests is then divided by the weighted average number of shares (2008: 128,742,000; 2007: 125,976,000)
+ Refer to exceptionals section of the Financial Review
Statutory results
- Revenue £253.3 million (2007: £257.3 million)
- Operating loss £2.3 million (2007: profit £4.3 million)
- Loss before tax £2.3 million (2007: profit £3.8 million)
- Basic loss per share 3.5p (2007: earnings per share 1.3p)
- Exceptional charge before tax of £13.4 million (2007: £1.4m net charge)
Operational highlights
- Progress against the medium term operating margin target of 7.2% was disappointing
- Operating profit and margin has been impacted by continuing project issues in Business Applications Services, and a weaker performance in Spain
- The expected growth in services was not achieved in the period. As a result the balance between the technology and services businesses has remained consistent
- UK Infrastructure Services and Technology
- The Technology business grew revenue by 10% with growth primarily from product sales
- Morse in Education has implemented the initial phases of the South Tyneside and Gateshead (STaG) ‘Building Schools for the Future’ (BSF) project
- Business Applications Services
- The Enterprise Content Management (ECM) and Global Support Services (GSS) practices continue to deliver good growth
- The Business Change and Transformation (BC&T) consultancy, formerly the Xayce business acquired in September 2007, performed in–line with management expectations
- Investment Management Consulting - Consulting services in Investment Management achieved modest growth in a tightening market
Review of the business structure completed
- Simplified structure and re-focused resources to:
- Allow the individual business units to concentrate on their core competencies
- Improve profitability
- Improve operational management
Cost reduction programme implemented
- Designed to improve overall returns while maintaining the fabric of the business and its sales and delivery capability
- Announced 25 July 2008 and is expected to result in a charge of approximately £4m - £4.5m which will be recorded in the financial year ending 30 June 2009
Commenting on the results, Kevin Loosemore, Executive Chairman of Morse plc, said:
"This was a disappointing year for Morse. Growth in services was not achieved, leaving revenue broadly flat year on year and profit before exceptionals+ down 9%. This reduced profitability, poor underlying quality of earnings and poor cash conversion resulted from inadequate operational performance and execution in a number of areas. In particular losses were recorded on a number of fixed price contracts in Business Applications Services, gross margins reduced across most of the business, and there was continued poor performance in Spain in the second half.
While we expect the market for IT services and technology to remain difficult, we anticipate that changes to Morse’s operating model and focus, together with its ongoing strong client relationships, will deliver improved underlying profitability and cash generation in the current year. We continue to believe that once operational issues are fixed, strong execution of our current combination of business should be able to produce our target of 7.2% operating margin in the medium term."
