9 February 2009

Morse plc

Disposal of UK and Jersey Investment Management Consultancy Business

Ahead of its Interim Results announcement on 11 February 2009, Morse plc, ('Morse', LSE: MOR.L), the IT services and technology company, announces that it is has exchanged contracts on the disposal of the business and assets of the UK and Jersey Investment Management Consultancy business, formerly known as CSTIM ('CSTIM'), to Navigant Consulting (Europe) Limited.

Navigant Consulting (Europe) is the UK subsidiary of Navigant Consulting Inc. ('Navigant Consulting'), the International Management Consulting business listed on the New York Stock Exchange (NYSE:NCI). More information on Navigant Consulting can be found at www.navigantconsulting.com  .

CSTIM provides specialist investment management consulting to the investment management industry and advises on Business and Operational Strategy 

In the year to 30 June 2008 the CSTIM business generated an operating profit of £1.6 million on revenue of £9.3 million. The business has reduced in size considerably since then. In the six months ended 31 December 2008 revenues were £3.2 million and there was a small operating loss of £44,000. 

As result of the deterioration in the financial performance of the business Morse restructured CSTIM in November and December 2008 with two rounds of redundancies at a cost of c £0.25 million. 

The transfer of the business to Navigant Consulting concludes a long sale process which commenced last summer before the onset of the credit crunch and deterioration in financial performance of CSTIM. The Board of Morse has now concluded that it has only two options for the business; (i) pursue the immediate closure of the business, at an approximate cost to Morse of £0.75 million, which would not need shareholder approval or (ii) the sale of the business without shareholder approval on the terms agreed with Navigant Consulting. No other party remains interested in CSTIM and Navigant Consulting have confirmed to Morse that they would not proceed on the agreed terms if there were a delay to obtain shareholder approval. In the above circumstances there is no prospect of shareholder approval being acquired prior to the disposal of the business. As a consequence the UKLA has agreed to waive the technical requirement for shareholder approval in order to avoid the closure of the business and the consequent cost to the company. 

The Board has concluded that it is acting in the best interests of shareholders and CSTIM management and employees by pursuing the agreed transaction with Navigant Consulting without obtaining shareholder approval due to the disposal proceeds exceeding the loss the business will suffer through a closure of CSTIM.

The business and assets transfer will be effected through a Transfer of Undertakings (Protection of Employment) regulations 2006 ('TUPE') consultation process and is conditional upon this transfer to Navigant Consulting (Europe) being completed satisfactorily. A two week TUPE consultation period will commence today for the management and staff of the CSTIM business. 

The maximum consideration for the transaction receivable by Morse is £1.7 million. The initial consideration is £1.3 million payable in cash at completion. Deferred consideration of up to £0.4 million is payable in cash and is dependent upon the operating profit performance of CSTIM in the 12 months ending on 30 June 2009. The gross assets being transferred are £13,000 and the book value of net liabilities being transferred is £0.42 million and Morse will retain and be responsible for the collection of the outstanding trade debtors. The proceeds of the sale will be used for general corporate purposes.

CSTIM forms the largest part of Morse's Investment Management Consultancy ('IMC') business unit. The remaining parts of IMC are operated through majority owned subsidiary undertakings in France and Australia, small operations in South Africa and Luxembourg and a flexible resourcing business in the UK called SkillsHub. The South African and Luxembourg businesses are being closed down and options for the French, Australian and Skillshub businesses are being considered. Consequently, the IMC business unit is considered to be discontinued and will be disclosed as such in the Interim Results for the six months ended 31 December 2008.

As a result of the sale there will be an impairment to goodwill on Morse's consolidated balance sheet, relating to the IMC business units, of £14 million arising from the sale and there will also be a write down of the same amount in the carrying value of the investment in Morse plc's company balance sheet