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Morse PLC (MOR)

  Print      Mail a friend       Annual reports

Wednesday 13 February, 2008

Morse PLC

Interim Results

Morse PLC
13 February 2008


Wednesday 13 February 2008


                                   Morse plc
                                Interim Results
                       Six months ended 31 December 2007

                 On track to achieve performance objectives and
                   confident of performance for the full year

Morse plc ("Morse" or "the Group"), the advisory & execution professional
services company, announces its interim results for the six months ended 31
December 2007.


Financial Highlights

  • Revenue from continuing operations of £123.8 million (2006: £131.6 million
    *)
  • Operating profit from continuing operations up 10% to £6.9** million
    (2006: £6.3 million*)
  • Operating margin percentage from continuing operations up 0.8% points to
    5.6%** (2006: 4.8%*)
  • Closing net cash balance of £11.4 million showing good cash conversion
  • Basic adjusted earnings per share of 3.9p** (2006: 3.7p*)
  • Interim dividend of 1.30p per share (2006: 1.25p per share)

Statutory

  • Operating profit £6.4 million (2006: £3.9 million)
  • Profit before tax £6.4 million (2006: £3.7 million)
  • Basic earnings per share 3.5p (2006: 2.1p)

* 2006 figures exclude the results of Monitise which was demerged from the Group
in June 2007 and before amortisation

**Before amortisation



Operational Highlights

  • Good progress against our clearly defined medium term performance
    objectives to:

      • Double the operating profit margin to 7.2% (from 3.6% at 30 June 2006)
      • Deliver absolute operating profit of £20.0 million

  • Kevin Loosemore announced as the Chairman of Morse plc (as announced
    separately today)

  • Business has performed in-line with management's expectations in all four
    of the Group's sector verticals:
      • Strong performance in Financial Services vertical further strengthened
        by acquisition of Xayce and continuing into the second half
      • Significant progress in Public Sector vertical market with £23m
        Building Schools for the Future (BSF) project and a pipeline of BSF
        projects worth in excess of £200 million
      • New Media-Comms team established with specialist skills providing the
        foundation for significant growth
      • Increasing the number of advisory led consultancy projects in the
        Commercial sector and developing specialisation in retail

  • Management Consulting - demonstrating good growth in revenues and profits
  • Applications Consulting - positive progress from higher quality business
    across the division and new divisional manager appointed
  • Infrastructure Consulting - demonstrating continued revenue stability,
    with both margins and profits ahead of management's expectations
  • Tight control of overhead costs and improved quality of revenues
    supporting margin growth
  • Confident of the prospects for the current financial year




Commenting on the results Richard Lapthorne, Chairman, said:

"Morse is now a fully integrated professional services business and is focused
on implementing its strategy as a business and IT consultancy company offering
specialist advisory and execution services.  We are pleased with the progress
and the Group remains confident in achieving its medium term performance targets
of doubling operating profit margin to 7.2% (from 3.6% at 30 June 2006) and
delivering absolute operating profit of £20.0 million.  Morse has an excellent
blue chip client base, is building a solid foundation in its chosen vertical
sectors and specialist capabilities areas and is well positioned for growth.  A
strengthened management team is in place and I am proud to announce that I will
be handing the chairmanship to Kevin Loosemore during this exciting period for
the Morse business."


Kevin Alcock, Chief Executive of Morse plc, added:

"It is pleasing to report good progress for the first half with growth in
operating profits, in-line with management's expectations.  As we continue to
build our vertical sector specialisation, it was encouraging to see continued
positive performance in Financial Services in the first half and at the
beginning of the second period, good progress in Media-Comms as well as our
existing strong pipeline of potential BSF projects.  Our continued focus on
managing costs and improving the quality and mix of the business we undertake
has helped build operating margins.  The feeling of confidence within Morse that
we saw at the beginning of the current financial year has remained and, while
mindful of the general market uncertainties, we are confident of the Group's
prospects for the full year."


Contacts:

Morse plc                                                             Tel: 020 8380 8000
Kevin Alcock, Chief Executive Officer
Eric Dodd, Group Finance Director

Financial Dynamics                                                    Tel: 020 7831 3113
Harriet Keen
Haya Chelhot



Chief Executive Officers statement

Overview

Morse is now a professional services business and we have made the changes to
our operating model to ensure we have the capabilities and resources to pursue
our growth strategies, build on our outstanding blue chip client base and
leverage our specialist skills.  The results demonstrate we are making good
progress towards achieving our medium term performance targets and underpin our
belief that we have the right strategy and skills in place.

Results

Operating profit before interest, taxation and exceptional items from continuing
operations was up 10% to £6.9 million** (2006: £6.3 million*).  Operating margin
percentage from continuing operations was up 0.8% points to 5.6%** (2006: 4.8%
*).  The increase in operating profits and margins reflects the continuing
improvement in the underlying quality and mix of our services business and our
tight management of costs.

Revenue from continuing operations was £123.8 million (2006: £131.6 million*)
and represents a solid and stable performance.  A slow first half market in
Spain, which we believe to be a short term issue, has affected revenue by £6
million versus first half FY07.  Two client contracts in Applications Consulting
have impacted revenue and operating profit by £1.5 million versus first half
FY07 and we continue to re-balance the focus on advisory services.  These areas
of under-performance are being resolved and will be closed off in the second
half.

Morse plc announces that the interim dividend of 1.30p (2006: 1.25p) for the six
months ended 31 December 2007 will be paid on 8 April 2008 to shareholders on
the register as at the close of business on 22 February 2008.

All industry sectors have performed in line with management's expectations:

Financial Services has performed very well with good growth in profitability.
Our portfolio of services has some good defensive qualities and we are pleased
with the balance of business with strong performance from management consulting,
skills resourcing, major IT projects and international.  Media-Comms has laid
the foundation for future growth through the acquisition and development of
specialist skills and capabilities.  It achieved a solid result with strong
performances in the UK and Ireland offset by a slower first half market in
Spain.  Commercial has been through another period of satisfactory development
with good progress in advancing advisory consultancy led projects and in the
retail sector.  We continue to take effective steps to manage two client
contract issues.  Public sector has shown consistent performance in line with
our expectation and will accelerate significantly as we roll out Building
Schools for the Future (BSF) projects.  Performance has been impacted by a
slower first half in the Spanish market and we incurred £0.5 million of BSF bid
costs in the period. Our content management solutions remain strong and we move
forward with a BSF contract pipeline of £200 million, making us well placed to
drive future growth.

£ Millions                            Revenue                   Operating Profit              Operating Profit %
                                                               (Pre central costs)
                                  HY 2008        FY 2007         HY 2008         FY 2007        HY 2008        FY 2007
Financial Services                   60.8          116.1             5.7             9.3           9.4%           8.0%
Media-Comms                          23.6           50.4             1.0             3.0           4.2%           6.0%
Commercial Sector                    32.0           73.1             1.7             4.4           5.3%           6.0%
Public Sector                         7.4           16.9             0.2             0.2           2.7%           1.2%
Total                               123.8          256.5             8.6            16.9           6.9%           6.6%


Management Consulting achieved a strong period of growth in revenue and profit
while developing new business streams and solutions skills.  Revenue for the
period increased to £10.4 million (2006: £8.7million) and operating profit
increased to £1.7million (2006: £1.0 million) through both organic growth and
the inclusion of Xayce.  All geographic regions performed well and the
acquisition of Xayce further strengthened the division's specialist consulting
capabilities.

Applications Consulting performed in line with management's expectations.  In
the Enterprise Content Management (ECM), Global Support Services (GSS) and IT
Performance Management (ITPAT) divisions, we are seeing an increasing number of
opportunities arising from operating as one integrated business and having
access to the wider Morse client base.  Some good progress in the international
business and diversification within Enterprise Requirements Planning (ERP)
solutions combined with higher quality advisory consultancy led engagements was
obscured by problems associated with two fixed price client contracts which
continued into the first half of the current financial year.  There has been a
detailed analysis of this business unit and we are confident that our focus in
developing a more advisory led and diversified applications service offering
will lead to improved performance.

To complete the existing action plan and drive the business forward, Morse has
appointed Mike Emmett, a proven leader with extensive experience of the
professional services and IT sectors, as Managing Partner to take this business
to the next stages of its development.  Revenue for the division decreased to
£34.6 million (2006: £38.1 million) with operating profit at £1.8 million (2006:
£2.2 million).

Infrastructure Consulting had an excellent first half.  We continue to develop
and grow our consultancy services capability and a more stable and predictable
revenue platform for product services has been established.  There is ongoing
healthy demand for advisory and execution data centre skills and we are
achieving clear differentiation through the value of the services we deliver.
Our cost base is tightly controlled and has been configured in-line with our
revised operating model.  Revenue is ahead of expectations at £49.8 million
(2006: £49.5 million).  Gross margins are in-line with plan and operating
profits are ahead of target at £3.9 million (2006: £3.4 million).

Spain has had a slower than anticipated first half, driven by a softening of
demand in the Telecoms and Public sector markets, we believe that this will not
have a longer term impact and comes after four years of exceptional revenue
growth.  Encouragingly, Financial Services in Spain has shown strong growth and
we are pleased with the development of a number of our major client
relationships.  Ireland has performed extremely well in the first half and we
have made good progress in the period in developing a better balance between our
consulting and product services.  Revenue for the period in Spain and Ireland
decreased to £29.0 million (2006: £35.3 million) and operating profit to £1.2
million (2006: £1.3 million).

Business structure and strategy

Morse's advisory and execution services are focused on four vertical industry
sectors: Financial Services, Media & Communications, Commercial and Public
Sector and we continue to invest in and develop the level of specialist skills
in these sectors.  Our services and solutions delivery capabilities are
organised into three main areas: Management Consulting, Applications Consulting
and Infrastructure Consulting.  We will continue to manage the business broadly
along these lines in the short term as we transition our relationships with many
strategic clients and over time move to a full client-driven vertical sector
model.

Investment

Morse is continuing to improve the quality and shape of its business in terms of
breadth and depth of client relationships, mix of advisory & execution services
and balance between consultancy-led engagements and product services.  To
support our ability to deliver against our medium term objectives and allow us
to accelerate our specialist capabilities and industry aligned expertise, we
have made further investment in the first half of this year:

•        Xayce, a business and IT consultancy was acquired in September 2007. It
brings complimentary advisory and execution services and management consulting
skills, adding capabilities across the financial services sector and local
government arena.  There is a strong alignment with Morse for business strategy,
focus, culture and style of delivery, and the integration of the business is
going well.

•        Our ongoing investment in the 'Building Schools for the Future' (BSF)
programme has resulted in the first major success at South Tyneside and
Gateshead (STaG) where Morse were awarded preferred bidder status and contracts
were signed in December 2007 for a range of IT services and infrastructure worth
in excess of £23m over five years.

•        We have established a team of management consultants focused on the
Media-Comms sector and have appointed a new sector practice leader.

•        Mike Emmett has been appointed to the executive team to drive the
future development of the Commercial and Applications Consulting sector.

•        In October 2007 Morse appointed a new non-executive director to the plc
board. Paul Shelton brings a wealth of experience from the professional services
sector both with large global consultancy and IT businesses and smaller
specialist companies.  He will provide invaluable expertise and guidance for
Morse.

Morse is delighted to announce Kevin Loosemore as the new chairman of Morse Plc,
his appointment becoming effective tomorrow.  Kevin brings a tremendous breadth
and depth of experience to the role of chairman and with his background in the
technology, IT and services sectors.  We thank Richard Lapthorne for his
tremendous contribution as Chairman of Morse over the last ten years.

Medium term performance targets:

In addition to our stated targets of doubling operating profit margin to 7.2%
(from 3.6% at 30 June 2006*) and delivering absolute operating profit of £20.0
million, the Group remains committed to achieving the following previously
stated operational targets over the medium term:

      • Enhance operating margin by between 0.5% and 1.0% per annum
      • Improve gross margin to between 27% and 30%
      • Enhance the recurring revenue stream from 24% to 30% (based on strong
        progress in this area we will restate the medium term target to 35%)
      • Increase chargeable headcount aligned to our revenue and profit
        targets
      • Develop the balance of One Morse clients to greater than 50% of our
        core relationships

Outlook

Morse has the right strategy, service offering and people in place to exploit
our capabilities and to build on the strong client position we have already
established.  The focus is now on building deeper specialist skills in our
chosen industry sectors and the leading technology solutions used by clients in
those verticals.

As we continue to build our vertical sector specialisation, it is encouraging to
see continued positive progress in Financial Services at the beginning of the
second half, good progress in Media-Comms as well as our existing strong
pipeline of BSF projects.  The underlying performance in business and IT
consulting remains in-line with our expectations and we have taken positive
action to address performance issues.  Our continued focus on managing costs and
improving the quality of our business has helped build operating margins.  Our
ongoing investments offer the opportunity for well managed growth.

The feeling of confidence within Morse that we saw at the beginning of the
current financial year has remained.  While mindful of the general market
uncertainties, we are confident of the Group's prospects for the full year and
remain on track to achieve our goals in the medium-term.

Kevin Alcock
Chief Executive Officer
13 February 2007


Morse plc
Consolidated income statement
For the six months ended 31 December 2007

                                                                          Total, including discontinued
                                                                                   Operations*
                                                                Unaudited         Unaudited      Audited
                                                               Six months        Six months         Year
                                                                    ended             ended        ended
                                                              31 December       31 December      30 June
                                                                     2007              2006         2007
                                                  Note              £'000             £'000        £'000

Group revenue                                      2              123,801           132,213      257,325

Total cost of sales                                              (96,139)         (102,507)    (196,464)

Gross profit                                                       27,662            29,706       60,861
Distribution expenses                                             (8,810)          (13,240)     (20,348)

Administrative expenses before
demerger costs and
exceptional income                                               (12,461)          (13,402)     (34,879)
Demerger costs                                     4                    -                 -      (2,455)
Exceptional income                                 4                    -               802        1,084

Administrative expenses                                          (12,461)          (12,600)     (36,250)

Operating profit before
demerger costs and exceptional
income                                                              6,391             3,064        5,634
Demerger costs                                     4                    -                 -      (2,455)
Exceptional income                                 4                    -               802        1,084

Group operating profit                             2                6,391             3,866        4,263

Financial income                                                      311               300          696
Financial expenses                                                  (315)             (228)        (404)
Net financing (expense)/income                                        (4)                72          292
Share of loss of jointly
controlled entities and associates                                      -             (201)        (709)
Profit before taxation                                              6,387             3,737        3,846
UK taxation                                                       (1,621)             (809)      (1,108)

Overseas taxation                                                   (164)             (236)        (936)
Taxation                                                          (1,785)           (1,045)      (2,044)
Profit for the period                              2                4,602             2,692        1,802

Attributable to:
Equity holders of the parent                                        4,510             2,575        1,605
Minority interests                                                     92               117          197
Profit for the period                                               4,602             2,692        1,802


Dividends                                                           4,428             4,130        6,085
Basic earnings per share                           3                 3.5p              2.1p         1.3p


Diluted earnings per share                         3                 3.3p              2.0p         1.2p



*Refer to the following pages for the analysis of continuing and discontinued
operations



Morse plc
Consolidated income statements
for the six months ended 31 December 2006
and the year ended 30 June 2007

                                         Unaudited six months                      Audited year ended
                                        ended 31 December 2006                        30 June 2007
                                 Continuing    Discontinued       Total   Continuing    Discontinued       Total
                                      £'000           £'000       £'000        £'000           £'000       £'000

Group revenue                       131,598             615     132,213      256,510             815     257,325

Total cost of sales               (102,038)           (469)   (102,507)    (195,807)           (657)   (196,464)
Gross profit                         29,560             146      29,706       60,703             158      60,861
Distribution expenses              (13,240)               -    (13,240)     (19,436)           (912)    (20,348)

Administrative expenses
before exceptional
income and demerger
costs                              (10,567)         (2,835)    (13,402)     (29,046)         (5,833)    (34,879)
Demerger costs                            -               -           -            -         (2,455)     (2,455)
Exceptional
Income                                  802               -         802        1,084               -       1,084

Administrative expenses             (9,765)         (2,835)    (12,600)     (27,962)         (8,288)    (36,250)

Operating profit/(loss)
before exceptional income and
demerger costs                        5,753         (2,689)       3,064       12,221         (6,587)       5,634
Demerger costs                            -               -           -            -         (2,455)     (2,455)
Exceptional
Income                                  802               -         802        1,084               -       1,084

Group operating profit/
(loss)                                6,555         (2,689)       3,866       13,305         (9,042)       4,263

Financial income                        300               -         300          696               -         696
Financial expenses                    (228)               -       (228)        (404)               -       (404)
Net financing income                     72               -          72          292               -         292
Share of loss of
jointly controlled entities
and associates                            -           (201)       (201)            -           (709)       (709)
Profit/(loss) before
taxation                              6,627         (2,890)       3,737       13,597         (9,751)       3,846

UK taxation                         (1,676)             867       (809)      (3,484)           2,376     (1,108)
Overseas taxation                     (236)               -       (236)        (936)               -       (936)
Taxation                            (1,912)             867     (1,045)      (4,420)           2,376     (2,044)

Profit/(loss) for the period          4,715         (2,023)       2,692        9,177         (7,375)       1,802

Attributable to:
Equity holders of
the parent                            4,598         (2,023)       2,575        8,980         (7,375)       1,605
Minority interests                      117               -         117          197               -         197

Profit/(loss) for the period          4,715         (2,023)       2,692        9,177         (7,375)       1,802



Morse plc
Consolidated statement of recognised income and expense
for the six months ended 31 December 2007

                                                                  Unaudited           Unaudited
                                                                 Six months          Six months         Audited
                                                                      ended               ended      Year ended
                                                                31 December         31 December         30 June
                                                                       2007                2006            2007
                                                                      £'000               £'000           £'000

Foreign exchange translation differences                                885               (441)           (449)

Net income and expense recognised directly in equity                    885               (441)           (449)
Profit for the period                                                 4,602               2,692           1,802
Total recognised income and expense                                   5,487               2,251           1,353

Total recognised income and expense for the period is
attributable to:
Equity holders of the parent                                          5,395               2,134           1,156
Minority interest                                                        92                 117             197
Total recognised income and expense                                   5,487               2,251           1,353


Morse plc
Consolidated balance sheet as at 31 December 2007

                                                                 Unaudited       Unaudited          Audited
                                                               31 December     31 December          30 June
                                                  Notes               2007            2006             2007
                                                                     £'000           £'000            £'000
Assets
Non-current assets
Property, plant and equipment                                        2,290           3,473            2,700
Goodwill                                                            55,850          51,345           51,622
Other intangibles                                                    6,662           5,994            6,098
Investments                                                             51              54               51
Other financial assets                                                   -             119                -
Deferred tax assets                                                    531             206              420
Total non-current assets                                            65,384          61,191           60,891

Current assets
Inventory                                                            2,654           4,730            4,287
Trade and other receivables                                         79,571          90,957           77,353
Cash and cash equivalents                           6               12,097          18,106           15,345
Total current assets                                                94,322         113,793           96,985


Total assets                                                       159,706         174,984          157,876

Liabilities
Current liabilities
Interest bearing loans and borrowings               6                (734)               -                -
Trade and other payables                                          (82,224)       (100,731)         (87,579)
Tax payable                                                        (9,319)         (9,206)          (7,796)
Provisions                                                           (843)         (1,154)            (472)
Total current liabilities                                         (93,120)       (111,091)         (95,847)

Non-current liabilities
Deferred tax liability                                               (214)               -            (200)
Provisions                                                           (174)         (1,067)            (949)
Total non-current liabilities                                        (388)         (1,067)          (1,149)
Net assets                                                          66,198          62,826           60,880

Capital and reserves
Called up share capital                             7               15,824          15,345           15,692
Share capital to be issued                          7                2,848           3,803              348
Share premium account                               7               71,968          70,445           70,767
Other reserves                                      7               31,753          26,984           30,868
Retained earnings                                   7             (56,411)        (53,986)         (57,024)
Total equity attributable to equity

shareholders                                                        65,982          62,591           60,651

Minority interest                                   7                  216             235              229
Total equity                                                        66,198          62,826           60,880



Morse plc
Consolidated cash flow statement for the six months ended
31 December 2007

                                                                Unaudited        Unaudited         Audited
                                                               Six months       Six months            Year
                                                                    ended            ended           ended
                                                              31 December      31 December         30 June
                                                                     2007             2006            2007
                                                   Note             £'000            £'000           £'000
Cash flows from operating activities
Profit before tax                                                   6,387            3,737           3,846
Adjustments for:
Depreciation and amortisation                                       1,229            1,245           2,523
Financial income                                                    (311)            (300)           (696)
Financial expenses                                                    315              228             404
Share of loss of jointly controlled
entities and associates                                                 -              201             709
Loss on sale of property, plant and equipment                          71                -             630
Share options charge                                                  450              135             796
Operating profit before changes in working
capital and provisions                                              8,141            5,246           8,212
Decrease in inventory                                               1,644            2,384           2,824
(Increase)/decrease in trade and other                            (1,110)          (8,970)           3,854
receivables
(Decrease)/increase in trade and other
payables                                                          (5,288)            2,635        (10,901)
Decrease in provisions                                              (404)          (2,052)         (2,852)
Cash generated from operations                                      2,983            (757)           1,137

Interest received                                                     311              300             696
Interest paid                                                       (315)            (228)           (404)
Tax paid                                                            (413)             (76)         (1,110)
Net cash from operating activities                                  2,566            (761)             319

Cash flows from investing activities
Acquisition of property, plant and equipment                        (324)            (960)         (1,142)
Proceeds from sale of property, plant
and equipment                                                          10               12              27
Acquisition of intangibles (software and R&D)                        (25)                -           (936)
Acquisitions of subsidiary in the period, net
of cash acquired                                                  (1,677)            (111)           (303)
Investment in joint ventures                                            -                -           (656)
Disposal of subsidiary, net of cash disposed                            -          (3,137)         (3,239)
Net cash from investing activities                                (2,016)          (4,196)         (6,249)

Cash flow from financing activities
Proceeds from issue of shares                                          10               41             166
Repayment of loan notes on previous
acquisitions                                        6                (64)             (50)           (114)
Proceeds from other loans                                               -                -             119
Payment of dividend to minority interest                            (105)             (27)            (27)
Dividends paid                                                    (4,428)          (4,130)         (6,085)
Net cash from financing activities                                (4,587)          (4,166)         (5,941)
Net decrease in cash and cash equivalents                         (4,037)          (9,123)        (11,871)
Opening cash and cash equivalents                                  15,345           27,263          27,263
Effect of exchange rate fluctuations
on cash held                                                           55             (34)            (47)
Closing cash and cash equivalents                                  11,363           18,106          15,345



Notes to the Financial Statements
for the six months ended 31 December 2007

1          Basis of preparation

Morse plc ("the Company") is a company domiciled in the United Kingdom. The
consolidated unaudited interim financial statements of the Company for the six
months ended 31 December 2007 comprise the interim financial statements of the
Company and its subsidiaries (together referred to as the "Group").

These consolidated interim financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU. They do not
include all of the information required for full annual financial statements,
and should be read in conjunction with the consolidated financial statements of
the Group as at and for the year ended 30 June 2007.

The comparative figures for the financial year ended 30 June 2007 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the Group's auditors and delivered to the registrar of companies.
The report of the auditors was (i) unqualified, (ii) did not include a reference
to any matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.

The interim financial statements for the six months ended 31 December 2007 were
approved by the Directors on 13 February 2008.

Accounting policies

The accounting policies applied by the Group in these  consolidated interim
financial statements are the same as those applied by the Group in its
consolidated financial statements as at and for the year ended 30 June 2007.

Application of recently issued International Financial Reporting Standards

New interpretations effective for the Group for the current financial statements
that do not have material impact are as follows: IFRS 7 Financial Instruments
Disclosures, Amendment to IAS 1 Presentation of financial statements, IFRIC 11 -
Group and treasury share transactions.

Seasonality and cyclicality

There is no significant seasonality or cyclicality affecting the interim result
of the operations.

Estimates

The preparation of the consolidated interim financial statements requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these estimates.

In preparing these consolidated interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied to
the consolidated financial statements as at and for the year ended 30 June 2007.

2          Segmental reporting

Segmental reporting is presented in the consolidated interim financial
statements in respect of the Group's business segments.  The business segment
reporting format reflects the Group's management and internal reporting
structure.

Period ended 31 December 2007

                            Infrastructure  Applications   Management                             Total
                                Consulting    Consulting   Consulting  Europe     Central    Continuing
                                     £'000         £'000        £'000     £'000     £'000         £'000
Revenue
Sales to external
customers                           49,764        34,633       10,389    29,015         -       123,801
Inter-segment
sales                                  166           358          142        10         -           676

Segmental
revenue                             49,930        34,991       10,531    29,025         -       124,477

Operating
profit/(loss)                        3,931         1,759        1,677     1,230   (2,206)         6,391

Net finance (expense)                                                                               (4)
Taxation                                                                                        (1,785)

Profit for the period                                                                             4,602


Period ended 31 December 2006 (restated)


                                                                                                Discontinued
                          Infrastructure Applications  Management                         Total   Operations
                              Consulting   Consulting  Consulting    Europe  Central Continuing   (Monitise)    Total
                                   £'000        £'000       £'000     £'000    £'000      £'000        £'000    £'000
Revenue
Sales to external
customers                         49,501       38,096       8,693    35,308        -    131,598          615  132,213
Inter-segment sales                3,004        1,904           -         -        -      4,908            -    4,908
Segmental revenue                 52,505       40,000       8,693    35,308        -    136,506          615  137,121

Operating
profit/(loss) before
exceptional items                  3,375        2,235       1,018     1,339  (2,214)      5,753      (2,689)    3,064
Exceptional
income                               802            -           -         -        -        802            -      802

Operating
profit/(loss)                      4,177        2,235       1,018     1,339  (2,214)      6,555      (2,689)    3,866

Net finance income                                                                           72            -       72
Share of loss of
jointly controlled
entities and
associates                                                                                    -        (201)    (201)
Taxation                                                                                (1,912)          867  (1,045)

Profit/(loss)for the
period                                                                                    4,715      (2,023)    2,692


Year ended 30 June 2007
                                                                                                 Discontinued
                          Infrastructure Applications  Management                          Total   Operations
                              Consulting   Consulting  Consulting    Europe   Central Continuing   (Monitise)    Total
                                   £'000        £'000       £'000     £'000     £'000      £'000        £'000    £'000
Revenue
Sales to external
customers                         97,296       74,876      17,844    66,494         -    256,510          815  257,325
Inter-segment sales                4,313        4,543           -         -         -      8,856            -    8,856
Segmental revenue                101,609       79,419      17,844    66,494         -    265,366          815  266,181

Operating
profit/(loss) before
exceptional items                  5,556        5,494       2,371     3,455   (4,655)     12,221      (6,587)    5,634
Demerger costs                         -            -           -         -         -          -      (2,455)  (2,455)
Exceptional
income                             1,084            -           -         -         -      1,084            -    1,084

Operating
profit/(loss)                      6,640        5,494       2,371     3,455   (4,655)     13,305      (9,042)    4,263

Net finance income                                                                           292            -      292
Share of loss of
jointly controlled
entities and
associates                                                                                     -        (709)    (709)
Taxation                                                                                 (4,420)        2,376  (2,044)

Profit/(loss) for
the year                                                                                   9,177      (7,375)    1,802


The segmental reporting for the period ended 31 December 2006 was restated
following the demerger of Monitise in June 2007.

3          Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to
Ordinary shareholders by the weighted average number of Ordinary shares in issue
during the period.

For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
shares.

Reconciliation of the earnings and weighted average number of shares used in the
calculation are set out below:

                                   Unaudited                      Unaudited                       Audited
                                Six months ended               Six months ended                  Year ended
                                31 December 2007               31 December 2006                 30 June 2007

                                      Weighted                       Weighted                       Weighted
                                       average      Per               average      Per               average      Per
                                     number of    share             number of    share             number of    share
                          Earnings      shares   amount  Earnings      shares   amount  Earnings      shares   amount
                             £'000 (thousands)  (pence)     £'000 (thousands)  (pence)     £'000 (thousands)  (pence)
Basic EPS
Profit attributable to
Ordinary shareholders        4,510     128,510      3.5     2,575     125,022      2.1     1,605     125,976      1.3

Effect of dilutive
securities options               -       5,972        -         -       4,977        -         -       5,684        -
Effect of deferred
consideration                    -         873        -         -       1,745        -         -       1,081        -

Diluted EPS                  4,510     135,355      3.3     2,575     131,744      2.0     1,605     132,741      1.2

To provide a comparable measure of performance per share from the normal
operations of the business, a supplementary EPS has been calculated in addition
to the disclosure required by the listing rules with the following adjustments
to the basic and diluted EPS.

                                     Unaudited                     Unaudited                       Audited
                                Six months ended               Six months ended                  Year ended
                                31 December 2007               31 December 2006                 30 June 2007

                                      Weighted                       Weighted                       Weighted
                                       average      Per               Average      Per               average      Per
                                     number of    share             number of    share             number of    share
                          Earnings      shares   amount  Earnings      shares   amount  Earnings      shares   amount
                             £'000 (thousands)  (pence)     £'000 (thousands)  (pence)     £'000 (thousands)  (pence)
Basic EPS                    4,510     128,510      3.5     2,575     125,022      2.0     1,605     125,976      1.3
Effect of exceptional
items (net of tax)               -           -        -     (802)           -    (0.6)     1,696           -      1.3
Adjusted Basic EPS           4,510     128,510      3.5     1,773     125,022      1.4     3,301     125,976      2.6

Diluted EPS                  4,510     135,355      3.3     2,575     131,744      2.0     1,605     132,741      1.2
Effect of exceptional
items (net of tax)               -           -        -     (802)           -    (0.6)     1,696           -      1.3
Adjusted

Diluted EPS                  4,510     135,355      3.3     1,773     131,744      1.4     3,301     132,741      2.5

The weighted average number of shares has been restated for previous year
comparables to reflect the share consolidation which took place in November
2007.

4          Exceptional items

There were no exceptional items in the period ended 31 December 2007.
Exceptional income of £0.8 million for the period ended 31 December 2006 and
£1.1 million for the period ended 30 June 2007 related to a release of a vacant
property provision.

Demerger costs for the period ended 30 June 2007 of £2.5 million comprised legal
and professional fees incurred as a result of the demerger of Monitise.

5          Taxation

The interim tax charge is based on an estimate of the likely effective tax rate
for the full year expressed as a percentage of the expected result for the year
and then applied to the interim profit before tax. The estimate is 28% for the
year ended 30 June 2008 and the year ended 30 June 2007.

6          Analysis of changes in net funds
                                                     At                                         At
                                                30 June                  Exchange      31 December
                                                   2007    Cash flow         rate             2007
                                                  £'000        £'000        £'000            £'000

Cash at bank                                     15,345      (3,303)           55           12,097
Loan notes                                        (266)           64            -            (202)
Interest bearing loans                                -        (734)            -            (734)
Net funds                                        15,079      (3,973)           55           11,161


7             Capital and reserves

                           Share                                   Foreign
                         capital    Share      Capital            currency             Total
                  Share    to be  Premium   Redemption         translation   Merger    Other Retained Minority
                Capital   issued  account      reserve   Other     reserve  reserve reserves earnings interest   Total
                  £'000    £'000    £'000        £'000   £'000       £'000    £'000    £'000    £'000    £'000   £'000
Group

At 1 July 2007   15,692      348   70,767          168     209       (413)   30,904   30,868 (57,024)      229  60,880

Profit for the 
year                  -        -        -            -       -           -        -        -    4,510        -   4,510

Premium on issue
of shares             -        -       23            -       -           -        -        -        -        -      23

Deferred tax
liability
on additions to
intangibles           -        -        -            -       -           -        -        -      108        -     108

Write off
investment
in own shares         -        -        -            -       -           -        -        -     (27)        -    (27)

Issue of shares on
acquisition of
subsidiaries        129    2,500    1,178            -       -           -        -        -        -        -   3,807

Exercise of share
Options               3        -        -            -       -           -        -        -        -        -       3

Profit on
translation
of foreign
subsidiaries          -        -        -            -       -         885        -      885        -        -     885

Share options
Charge                -        -        -            -       -           -        -        -      450        -     450

Dividends paid        -        -        -            -       -           -        -        -  (4,428)        - (4,428)

Dividend paid to
minority interest     -        -        -            -       -           -        -        -        -    (105)   (105)

Share of profit of
minority interest     -        -        -            -       -           -        -        -        -       92      92

At 31 December
2007             15,824    2,848   71,968          168     209         472   30,904   31,753 (56,411)      216  66,198


8          Acquisitions

On 12 September 2007 the Group acquired 100% of Xayce plc, an advisory and
management consulting business. The transaction is to be satisfied by a net
consideration of £6.1 million (£2.4 million cash paid, £1.3 million shares
issued, £2.5 million shares to be issued over next 3 years). Acquisition costs
of £0.3 million consist mainly of legal fees. The book value of assets and
liabilities has been taken from the management accounts of Xayce as at 31 August
2007. There were no fair value adjustments made to the net assets acquired of
£1.3 million.

                                                                                   Xayce
                                                                           Book and fair
                                                                                   value
                                                                                   £'000
Property, plant and equipment                                                         24
Debtors                                                                              746
Cash & cash equivalents                                                              979
Creditors                                                                          (417)
Tax payable                                                                         (64)
Net assets acquired (100%)                                                         1,268
Intangibles                                                                        1,000
Goodwill                                                                           4,235
Consideration                                                                      6,503


Consideration satisfied by:
Cash                                                                               2,350
Share capital issued                                                               1,310
Share capital to be issued                                                         2,500
Cost of acquisition                                                                  343
                                                                                   6,503

Management has made a provisional estimate of the value of intangibles of £1.0
million.

Net profit before tax since the acquisition of Xayce amounts to £0.4 million.

9          Subsequent events

There have been no material subsequent events between 31 December 2007 and the
approval of these statements by the Board.


INDEPENDENT REVIEW REPORT TO MORSE PLC

Introduction

We have been engaged by the company to review the  set of financial statements
in the half-yearly financial report for the six months ended 31 December 2007
which comprises  consolidated income statement,  consolidated balance sheet,
consolidated statement of recognised income and expense,  consolidated cash flow
statement and the related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the information in
the  set of financial statements.

This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("
the UK FSA"). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this 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 for our review work, for
this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA.

The annual financial statements of the group are prepared in accordance with
IFRS as adopted by the EU. The  set of financial statements included in this
half-yearly financial report has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the  set of
financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe
that the  set of financial statements in the half-yearly financial report for
the six months ended 31 December 2007 is not prepared, in all material respects,
in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.


KPMG Audit Plc                                      8 Salisbury Square
Chartered Accountants                               London
13 February 2007                                    EC4Y 8BB


RESPONSIBILITY STATEMENT

This interim management report is the responsibility of, and has been approved
by, the directors of Morse plc. Accordingly, the directors confirm that to the
best of their knowledge:

  • the  set of financial statements has been prepared in accordance with IAS
    34 Interim Financial Reporting as adopted by the EU;

  • the interim management report includes a fair review of the information
    required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of 
important events     that have occurred during the first six months of the 
financial year and their impact on the  set of financial statements; and a 
description of the principal risks and uncertainties for the remaining six 
months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.

The Directors of Morse plc are listed in the Morse plc Annual Report of 30 June
2007. A list of current Directors is also maintained on the Morse plc website:
www.morse.com

By order of the Board



Richard Lapthorne                                        Eric Dodd
Chairman                                                 Finance Director


13 February 2008




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