Group operating profit* from continuing operations up 34%
Transition of core business nearing completion
Secure mobile banking business set for commercial roll-out

Morse plc (‘the Group’ or ‘the Company’) announces its results for the twelve months ended 30 June 2006.

Over the last few years, core Morse has transitioned its business away from being a pure IT hardware reseller into a consulting, technology and support company. This transition has meant reductions in revenue with increasing gross margin from services. Today, 66% of gross profit is generated from services, in line with the target we set ourselves a year ago.

As the Group’s transition nears completion, it is evolving into two separate operating businesses: Morse’s core activities, which have been considerably developed and enhanced in recent years and which will operate as an advisory & execution professional services firm, and its secure mobile banking applications business, Monitise.

Financial Highlights

• Group revenue from continuing operations down 4% to £297.0 million (2005: £309.2 million)
• Operating profit* from continuing operations up 34% to £7.4 million (2005: £5.5 million), with operating profit from services up 14% on the prior year period
• Profit before tax** for continuing operations up 17% to £8.0 million (2005: £6.8 million)
• Profit after tax of £4.2 million (2005: £1.2 million)
• Net funds balance at 30 June 2006 of £25.7 million (2005: £36.3 million)
• Adjusted basic earnings per share* of 5.0p (2005: 4.2p)
• Proposed final dividend of 2.7p per share (2005: 2.6p per share) resulting in a total dividend for the year up 4% at 3.9p per share (2005: 3.75p per share)

Statutory

• Operating profit £12.8 million (2005: £2.2 million)
• Profit before tax £6.0 million (2005: £2.9 million)
• Basic EPS 2.6p (2005: 0.8p)

* Excluding all exceptional items but includes share of JV loss of £0.4 million for 2006
** Includes total net financing income of £0.6 million for 2006

Business Highlights

• Transformation of the Group creates the opportunity for a new structure where Morse plc now oversees the operating businesses of:
• Morse’s core operations: forming a single advisory & execution professional services firm and targeting a doubling of percentage operating margin in the medium term
• Monitise, Morse’s secure mobile banking applications business: also to operate as stand-alone business with the potential to generate significant revenues and operating profits within the medium term

Richard Lapthorne, Chairman of Morse plc, commented:

"In parallel with managing the steps required to reposition Morse from a pure reseller to an advisory & execution professional services company, we have leveraged our intellectual property resulting in our secure mobile banking applications business, Monitise. This has now been developed to the point of commercial roll-out and justifies its own separate business organisation. Each of the two businesses, Morse and Monitise, have quite different characteristics and it is appropriate that each operates separately under the Morse Group umbrella.

We firmly believe that there is a significant market opportunity for Morse’s advisory & execution business and are targeting a doubling of percentage operating margin in the medium term. In addition, we believe Monitise has the potential to generate significant revenues and operating profits within the medium term.

The current financial year has started satisfactorily and, with the focus on delivering the final pieces in establishing Morse as an advisory & execution business, together with the developments at Monitise, we are confident of good progress both in the current financial year and in the years ahead. This is reflected by the increase in dividend being restricted to 4%, as we are aiming to resume capital growth as the primary driver of shareholder value."

Contacts:

Duncan McIntyre, Chief Executive Officer
Eric Dodd, Finance Director
Morse plc Tel: 020 8380 8000

Giles Sanderson
Harriet Keen
Haya Chelhot
Financial Dynamics Tel: 020 7831 3113