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Morse PLC (MOR)

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Friday 08 June, 2007

Morse PLC

Proposed Demerger of Monitise

Morse PLC
08 June 2007

Embargoed for release 7.00am, Friday 8 June 2007

    THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND NOT FOR
PUBLICATION, DISTRIBUTION OR RELEASE IN AUSTRALIA, CANADA, JAPAN, OR THE UNITED
                               STATES OF AMERICA

                                   Morse plc

       Proposed Demerger of Morse's Mobile Banking and Payments Business

Summary

•         Proposed Demerger of the Monitise business

•         Monitise  to seek admission to AIM

•         Morse shareholders to receive one Monitise share for each Morse share
          held at the Demerger Record Time

•         Placing of further Monitise shares to raise circa £20m  to fund
          Monitise's ongoing investment and working capital requirements

•         Key dates:

          o        EGM to approve Demerger to be held on 25 June 2007 at 10.00am

          o        Demerger due to become effective on 28 June 2007

          o        Unconditional dealings in Monitise Demerger shares expected 
                   commence at 8.00am on 28 June 2007

          o        Unconditional dealings in Monitise Placing shares expected to 
                   commence at 8.00am on 29 June 2007


Morse plc ('Morse' or 'the Company') announces further details of its proposal
to demerge the Company's Monitise business ('Monitise') and seek a separate
listing for Monitise on AIM and that today it expects to send a notice to its
shareholders that an Extraordinary General Meeting (EGM) will be convened on 25
June 2007 at which Morse shareholders will be asked to vote in favour of the
Demerger.


The Board believes that the time is now right to demerge the Monitise business
from Morse in order to demonstrate the value of both Morse and Monitise and
allow each to pursue its own independent strategy. It believes that the Demerger
could crystallise significant additional value and that seeking admission of
Monitise to AIM is the most appropriate route to pursue in order to provide
choice for and maximise value for all shareholders.


The Board anticipates an increasing level of required investment in the Monitise
business over the next 18 months and has determined that this investment will be
most appropriately provided by external sources via a placing.  The Directors
currently expect the placing to raise approximately £20 million.


The Demerger

The Board believes that the Demerger will:

•   allow both businesses to pursue their own independent strategies;

•   give shareholders, and other market participants, attractive and focused 
    investments in two separate companies, each with its own market determined 
    valuation;

•   bring greater transparency to the activities of the core Morse consultancy 
    business, which the Board believes will allow the stock market better to 
    assess the value of the Morse going forward;

•   allow the continuing Morse group more flexibility in actively pursuing and 
    funding growth opportunities for the Morse consultancy business;

•   create a separate AIM quoted holding company for the Monitise business with 
    a clear and independent strategy and a strong board; and

•   allow the Monitise business to respond with more flexibility to changing 
    market conditions and to take advantage of future opportunities for 
    development and growth.


The Demerger will be effected by Morse declaring a special dividend, equal to
the book value of its shareholding in Monitise Group Limited, subsidiary which
currently operates the Monitise business, which will be satisfied, in specie, by
the allotment and issue by Monitise of shares, credited as fully paid, to Morse
shareholders. Morse shareholders on the register at the close of business on 27
June 2007 will receive one ordinary share in Monitise plc for each Morse share
held by them.


As at close of business on 6 June, there were 156,551,455 Morse Shares in issue.
It is therefore expected that, immediately following completion of the Demerger,
there will be 156,551,455 Monitise Shares in issue.


Following the Demerger, Morse will remain the ultimate holding company for its
advisory and execution professional services business, and its shares will
remain on the Official List and will continue to trade on the London Stock
Exchange's market for listed securities The Monitise business will be owned by a
new entity called Monitise plc, and application will be made for this company to
be admitted to AIM. Admission of the shares issued by Monitise on demerger to
AIM is expected at 8.00 a.m. on 28 June 2007.


The Placing

The Board anticipates that an increasing level of investment in the Monitise
business will be required during the next 18 months, amounting to approximately
£20 million in total, which should be partially offset by expected revenues from
a number of overseas sales opportunities together with revenues beginning to
build from the Monitise business's operations. The Board has determined that
this investment will be most appropriately provided by external sources and
consequently it is anticipated that a placing of further Monitise shares will be
undertaken on the Business Day following the Demerger.


Information on Monitise

The Monitise business, which was founded four years ago, has already made
significant progress. It has developed a market-leading mobile and banking
payments platform in the UK, on which foundation it continues to build. The
Monitise business operates in exciting, valuable and growing markets and the
Board believes it has the opportunity to establish itself in key geographies as
a leading player.


Contracts to implement the Monitise business's UK mobile banking service ("
MONILINKTM") have already been signed with a number of major UK retail banks, of
which HSBC, First Direct and Alliance & Leicester have live services with
customers and the Royal Bank of Scotland group is at the testing and
implementation stage. These four retail banking groups account for over 33% of
the current account cards in the UK market and the management of the Monitise
business are confident that they will reach similar agreements with other UK
retail banking groups. Vodafone, Orange, T-Mobile, O2, Virgin Mobile, Tesco
Mobile and Hutchison 3G have "connected" to the Monitise Platform and can
provide their customers with services delivered using Monitise technology.


The Board believes Monitise's key strengths are:


•         Significant barriers to entry

•         Significant potential

•         Experienced management team and strong board



The Monitise Board is as follows:


Chairman                           Duncan McIntyre

Chief Executive                    Alastair Lukies

Non-Executive Director             David Dey

Non-Executive Director             Peter Radcliffe

Non-Executive Director             Colin Tucker

Company Secretary                  Lee Cameron


The Directors believe that the Monitise business is an exciting business
providing substantial opportunity based around secure mobile banking
applications and that its business is making substantial progress. The market
continues to expand rapidly and considerable interest continues to be shown in
the services provided by Monitise. The Board is confident about the prospects
for the Monitise business.


Information on Morse

The Morse group has transformed itself from a reselling business into an
advisory and execution professional services business and the Board believes
that it has a significant opportunity to become a leading advisory and execution
professional services business in its specialist areas. The Morse consultancy
business is cash generative and has been increasing its margins in line with its
strategic plan.



The Morse consultancy business, which has operated under a single brand, Morse,
since February 2007, will continue to operate as an advisory and execution
professional services business following the Demerger.



The Board believes the consultancy business's key strengths are:



•         Focused market positioning and specialisation

•         Brand recognition

•         Depth and breadth of client relationships

•         Track record of profitable organic and acquisition-led growth

•         The senior operational management of the Continuing Morse Group is
          highly experienced in business and IT consulting services



The Directors believe that Morse consultancy business continues to make good
progress in its transition to an advisory and professional execution services
business. The Directors believe that this business has performed well in the
second half of the 2007 financial year and they are confident its prospects for
the future, in markets which they believe show good growth characteristics.



The Morse Board, following the Demerger, shall be as follows:


Chairman                                           Richard Lapthorne

Deputy Chairman                                    Duncan McIntyre

Chief Executive                                    Kevin Alcock

Finance Director                                   Eric Dodd

Non-Executive Director                             Derrick Nicholson

Non-Executive Director                             Nigel Whitehead

Non-Executive Director                             Michael Benson

Company Secretary                                  Nicholas Sandison


The Morse Board is therefore expected to remain largely in its current form
immediately following the Demerger, with three important exceptions:


Kevin Alcock, the current Chief Executive of the Morse consultancy business will
become Chief Executive of Morse upon completion of the Demerger. This will allow
Kevin to continue his strong leadership of the Morse consultancy business to
date, and to drive its strategy forward.


Duncan McIntyre will cease to be Chief Executive of Morse upon completion of
the Demerger and will become Deputy Chairman of the Company. This will allow
Kevin Alcock to become Chief Executive of Morse. Duncan's new role has been
created to ensure a smooth transition from the current Morse group structure to
the structure after Demerger when Morse Group will control only the Morse
Business.


Colin Tucker will cease to be a Non-Executive Director of Morse but will become
a Non-Executive Director of Monitise upon completion of the Demerger.


Commenting on the developments announced today, Morse Chairman, Richard
Lapthorne, said:


"Morse and Monitise have progressed very successfully as separate operating
businesses and the decision to demerge them and seek for the admission of
Monitise to AIM is important in providing our existing shareholders with greater
investment choice.  This is significant at a point when the investment profile
of the two businesses is already very different.  Our desire to enable investors
to make that choice is borne out of our confidence that the demerger and
admission will crystalise significant additional value for all Morse plc's
shareholders."


Morse Executive Deputy Chairman (designate), Duncan McIntyre, added:


"Both Morse and Monitise are highly successful businesses in their own right
with experienced, committed management teams and strong leaders in Kevin Alcock
and Alastair Lukies, as well as  strong positions in the markets in which they
operate.  However, each has distinct characteristic and funding requirements,
and each now stands to benefit from implementing its own strategy for growth and
developing as a stand alone, listed entity."


Kevin Alcock, Chief Executive (designate) of Morse, commented:


"Following the demerger, Morse is a pure play professional services advisory &
execution firm with an outstanding blue chip client base and established
international reach.  Our specialist approach based upon deep industry sector
knowledge and proven alignment of business and IT consulting capabilities will
help to differentiate us in our chosen markets, where we continue to see good
growth opportunities for the business."



Alastair Lukies, Chief Executive of Monitise Group, commented:



"With live services across some of the UK's largest banking groups and
arrangements to launch our service in the United States and in other key
markets, we have a unique opportunity to commercialise our business on a
mass-market, international scale.  The proposed admission to AIM and subsequent
placing will provide the appropriate financial structure to exploit the unique
position we hold in this high growth, global market and to retain our leading
position as the market evolves."


                                      Ends


Some of the information in this announcement may contain projections or other
forward-looking statements regarding future events or the future financial
performance of Morse plc. You can identify forward-looking statements by terms
such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could,
" "may" or "might" the negative of such terms or other similar expressions.
These statements are only predictions and actual events or results may differ
materially. We do not intend to or undertake any obligation to update these
statements to reflect events and circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events. Many factors could cause
the actual results to differ materially from those contained in our projections
or forward-looking statements, including, among others, general economic
conditions, our competitive environment and market change in our industries, and
other factors specifically related to Morse plc and its operations.



This document does not constitute or form part of any offer or invitation to
sell or issue, or any solicitation of any offer to purchase or subscribe for,
any shares or other securities, nor shall any part of it nor the fact of its
distribution form part of or be relied on in connection with any contract or
investment decision relating thereto, nor does it constitute a recommendation
regarding any securities referred to herein.



This announcement is not for distribution, directly or indirectly, in or into
the United States (including its territories and dependencies, any State of the
United States and the District of Columbia), Australia, Canada or Japan. This
announcement is not an offer for sale of any securities in the United States or
in any other jurisdiction.  Securities may not be offered or sold in the United
States absent registration or an exemption from registration under the U.S.
Securities Act of 1933. Morse plc has not registered and does not intend to
register any portion of any offering of securities in the United States or to
conduct a public offering of any securities in the United States.


Enquiries:-


Morse plc                                                  Tel: 020 8380 8000
Duncan McIntyre - Deputy Chairman
Kevin Alcock - Chief Executive Designate
Eric Dodd - Finance Director

Monitise Group                                             Tel: 020 7868 5200
Duncan McIntyre - Executive Chairman
Alastair Lukies - Chief Executive

Investec Investment Banking                                Tel: 020 7597 4000
Patrick Robb
Andrew Pinder

Financial Dynamics                                         Tel:  020 7831 3113
Harriet Keen
Haya Chelhot



    THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND NOT FOR
PUBLICATION, DISTRIBUTION OR RELEASE IN AUSTRALIA, CANADA, JAPAN, OR THE UNITED
                               STATES OF AMERICA

                                   Morse plc

       Proposed Demerger of Morse's Mobile Banking and Payments Business


Introduction

On 24 April 2007, the Board announced that it was proposing to demerge the
Company's Monitise business and apply for it to be admitted to AIM. The Board
has today confirmed the proposed Demerger and proposed admission of Monitise to
AIM.



It is proposed that, following the Demerger, Morse will remain the ultimate
holding company for the Morse consultancy business, with the Monitise business
being demerged to a new entity called Monitise plc. Following completion of the
Demerger, Morse Shares will remain on the Official List and will continue to
trade on the London Stock Exchange's market for listed securities. An
application will be made for the Monitise shares to be admitted to AIM.



Due to the size of the transaction, the Demerger is conditional on, inter alia,
the approval of Shareholders, which is to be sought at the EGM. Subject to,
inter alia, this approval, the Demerger is expected to become effective and the
Monitise shares being issued on the Demerger are expected to be admitted to AIM
at 8.00 a.m. on 28 June 2007.



Background to and reasons for the Demerger

The Board stated in Morse's interim results announcement on 28 February 2007
that it was considering the possible separation of the Morse and Monitise
businesses. The Board subsequently undertook an assessment of the options for
more effectively exploiting the potential of these businesses and announced on
24 April 2007 its intention to demerge the Monitise business and apply for it to
be admitted to AIM.



The Monitise business has been structured as a stand-alone business alongside
the Morse consultancy business since August 2006 and the two businesses have
continued to develop as separate entities within the Morse group, operating
separately and having distinct characteristics.


The Morse group has transformed itself from a reselling business into an
advisory and execution professional services business and the Board believes
that it has a significant opportunity to become a leading advisory and execution
professional services business in its specialist areas. The Morse consultancy
business is cash generative and has been increasing its margins in line with its
strategic plan.



The Monitise business, which was founded four years ago, has already made
significant progress. It has developed a market-leading mobile and banking
payments platform in the UK, on which foundation it continues to build. The
Monitise business operates in exciting, valuable and growing markets and the
Board believes it has the opportunity to establish itself in key geographies as
a leading service provider.



The Board believes that the time is now right to demerge the Monitise business
from Morse in order to demonstrate the value of both Morse and the Monitise
business and allow each to pursue its own independent strategy. It believes that
the Demerger could crystallise significant additional value and that seeking
admission of the Monitise business to AIM is the most appropriate route to
pursue in order to maximise value for shareholders.



The Board has decided to propose the separation of the Monitise business from
the rest of the Morse group by way of the Demerger for the following reasons:



  • it believes that the current stock market valuation of Morse does not
    accurately reflect the value of the Morse group's component parts;
  • the business and activities of the Monitise business are fundamentally
    different to those of the Morse consultancy business; and
  • the capital requirements and investment propositions of the Monitise
    business differ from those of the rest of the Morse group.


The Board believes that the Demerger will:



  • allow both businesses to pursue their own independent strategies;
  • give shareholders, and other market participants, attractive and focused
    investments in two separate companies, each with its own market determined
    valuation;
  • bring greater transparency to the activities of the Morse consultancy
    business, which the Board believes will allow the stock market better to
    assess its value;
  • allow Morse more flexibility in actively pursuing and funding growth
    opportunities for the Morse consultancy business;
  • create a separate AIM-quoted holding company for the Monitise business
    with a clear and independent strategy and a strong board; and
  • allow the Monitise business to respond with more flexibility to changing
    market conditions and to take advantage of future opportunities for
    development and growth.



The Board will continue to review opportunities for organic or acquisitive
growth for the Morse consultancy business and will consider both debt and equity
funding in determining how best to finance specific acquisition opportunities in
the future.



Information regarding the Monitise business



Background

The Monitise business was formed in 2003 as a business unit within the Morse
group to invest in building a mobile banking platform which could leverage the
existing banking infrastructure for the rapidly emerging mobile banking and
payments market.



The key product of the Monitise business at the present time is MobileATMTM, a
mass market, mobile phone banking platform, with bank-grade security which
provides consumers with a fast, convenient, secure and straightforward means by
which to conduct their banking enquiries (currently mini-statements and balance
enquiries) and transact (currently top-up of prepay mobile phones) via their
mobile phone. In the UK, it mobilises the secure ATM platform operated by LINK
to access its partner banks' live services (currently three major UK retail
banks) and is connected to all UK mobile networks.



Group structure

The Monitise Group comprises Monilink Limited (a 50:50 joint venture with LINK
Group Holdings Limited which markets the Monitise business in the UK and the
Republic of Ireland) and Monitise International Limited (which is held 85% by
Monitise Holdco and 15% by LINK Group Holdings Limited and which holds the
intellectual property in Monitise's technology and markets the Monitise business
globally, other than in the UK and the Republic of Ireland). Monitise will also,
immediately following the Demerger, include a new joint venture in the US,
Monitize LLC, which will be 51% owned by Metavante (the US financial services
group), and 49% owned by Monitise Inc., a wholly owned subsidiary of Monitise
International, which will market the Monitise Platform in the US.



Market opportunity

Banks around the world are progressively migrating banking services from branch
networks to more cost effective channels such as ATMs, internet banking and
telephone banking. Customer acceptance of self service channels has been
significant and there are now estimated to be 1.5 million1 ATMs operating in
more than 140 countries worldwide2. The ATM has become the global de-facto
standard for electronically accessing banking services on the high street. In a
similar way, the Board considers that a mobile banking solution can become the
de-facto standard for accessing secure banking services in the mobile and
digital world.



The Board believes mobile banking services are becoming increasingly attractive
to banks and mobile operators as they attract new customers, provide choice and
improved satisfaction to existing customers, deliver new income streams, reduce
costs and the incidence of fraud, require minimal IT effort to integrate,
respond to increasing regulatory pressure for transparency, provide
cross-selling and up-selling opportunities and protect against
disintermediation. Industry analysts anticipate that mobile devices could become
the fifth and most heavily utilised banking channel by consumers, following
branch, ATMs, call centres and the internet.



Since its inception, the Monitise group has developed the Monitise platform and
implemented it in the UK with the appropriate infrastructure so that it can
deliver a range of information and banking transaction services to consumers
through their mobile phones whilst being easy to use and employing bank-grade
security.



The Board estimates that the global opportunity for all participants in this
fast-emerging market could amount to over £5 billion over the next five years.
Statistics show that 86% of North American adults now have a mobile phone, and
mobile penetration is still growing slowly3. The Board believes that mobile
banking growth will eventually surpass global internet banking growth and that
there is already an increasing acceptance of data usage through mobile devices.
51% of the UK's frequent internet users have expressed a general interest in
mobile banking4, up from 10% in 2001 and 33% in 20045. In addition, 39% of 25-44
year olds would like to deal with finances on the way to and from work and 50%
of 18-24 year olds would like a bank balance or credit notification on their
mobile phone6.  Mintel International Group estimates that 25% of online banking
customers would switch bank to gain access to mobile banking7.



The Monitise business currently employs 72 people, approximately 90% of whom
hold tertiary qualifications.





1  http://www.researchandmarkets.com/reports/34759/35759.htm

2  RBR Global ATM Report 2007

3  Forrester Research Inc. "Forrester's Consumer Technology Adoption Study, 2000
   to 2005", page 6

4  (Source: Wi-Fi Technology Forum "Publications and Resources: 51% or UK's
   Frequent Internet Users Interested in Mobile Banking" page 1, December 16 
   2005);  http://www.wi-fitechnology.com/displayarticle2501.html

5  (Source:  Forrester Research "What Europeans want from mobile banking", page
   1, 17 March 2005)

6  (Source: BT Media Centre "UK banks risk losing sight of customers as
   automated services take off" page 1, 14 December 2005); 
   http://www.btplc.com/News/Articles/Showarticle.cfm?ArticleD=b6099dc2-0e2c-4417-bea2-df3dba7beee0

7  (Source: Mintel International Group Limited Report "Current Accounts" June
   2007);   http://oxygen.mintel.com/sinatra/display/id=171906


The UK business

MONILINKTM, the Monitise business's UK mobile banking service has been
successfully implemented and operates in the UK, which the management of the
Monitise business believe to be one of the world's more conservative,
security-conscious and heavily regulated financial markets.



In the UK, the Monitise business operates primarily through Monilink Limited,
the 50:50 joint venture with LINK Group Holdings Limited (which owns the
MONILINKTM trademark and licenses it to Monilink). LINK operates the LINK ATM
network, which connects the UK retail banks to over 59,000 ATMs (cash machines)
and carries, or switches, approximately 5.5 million transactions per day. The
Monitise business's partner banks, being members of the LINK ATM network, have
also themselves been subject to stringent tests and have received the
certification required by LINK prior to passing any Monitise transactions
through the LINK ATM switch.



Contracts to implement MONILINKTM  have so far been signed with a number of
major UK retail banks, of which HSBC, First Direct and Alliance & Leicester have
live services with customers and the Royal Bank of Scotland group is at the
testing and implementation stage. These four retail banking entities account for
over 33% of the current account cards in the UK market and the management of the
Monitise business are confident that it will reach similar agreements with other
UK retail banking groups. Vodafone, Orange, T-Mobile, O2, Virgin Mobile, Tesco
Mobile and Hutchison 3G have ''connected'' to the Monitise platform and can
provide their customers with services delivered using the Monitise platform.



As every major retail bank and building society in the UK is a member of the
LINK ATM network and each of these banks has LINK IT systems embedded in its
core processing infrastructure, the Monitise business's services are capable of
being delivered for any UK retail bank, through any partner mobile operator
network and to nearly any mobile handset, irrespective of region and with a
minimum of additional IT hardware required.



Global potential

The Monitise Platform, already deployed in the UK, can be replicated in other
countries with minimal localisation. The Monitise business, through Monitise
International, has selected and is building relationships with a number of
partners around the world, such as Metavante in the US8 which the management of
the Monitise business believes to have the credibility and relationships to be
able to roll out the Monitise Platform in the relevant territories and on
Demerger will have established a joint venture to target the US market. This
strategy reduces the time to market, investment and execution risk.



Significant steps have also been taken towards furthering the Monitise
business's first direct licensing opportunity. A preferred supplier agreement
has been signed with T-Systems in Germany, with commitment to a payment to the
Monitise business for a period of exclusivity. This is a significant step
towards the final licensing and integration of a full overseas service provider.
Management of the Monitise business has confirmed that interest has also been
received regarding the Monitise Platform in a variety of other overseas
territories.



8  For further information, see paragraph 4.2(g) of Part VIII of this document


The Monitise Platform

The Monitise platform is capable of supporting three service categories, not all
of which have been launched commercially as at the date of this announcement:

  • Information services

      • balance enquiries and mini-statements, enquiries (live)
      • credit card balance and mini-statement enquiries
      • stored value card balance and mini-statement enquiries
      • set and manage alerts (e.g. impending overdraft alert)
      • sales prompts (e.g. insurance quotes)
      • bill presentation

  • Transactional services

      • mobile phone top-up services for prepay customers (including family &
        friends)
      • stored value card top-up (including transport (transit cards, road
        pricing, parking meters), gaming and lottery for family and friends)
      • phone resident contactless stored value top-ups
      • transfers between own accounts
      • bill services: presentment, payment, meter reading
      • peer-to-peer payments/third party remittances (including international
        remittances)

  • Security and identity

      o    The Monitise platform provides both secure authentication codes and
transaction confirmation and thus negates the need to provide card readers or
passcode-generating tokens to every internet banking customer. The Monitise
platform also delivers two factor authentication of telephone banking, and 
''cardholder not present'' transactions. When used for ''cardholder not 
present'' transactions the Monitise platform can confirm the transaction details 
providing ''chip and pin'' equivalent authentication for ''cardholder not 
present'' transactions similar to those carried out for internet banking.



Independent review

A large number of third parties have undertaken due diligence on the Monitise
business and the Monitise platform, including several independent experts and
several major UK retail banks and mobile network operators that have signed
agreements with the Monitise business. In addition, the Monitise business
complies with ISO8583, the international standard for payment processing, and is
subject to ongoing independent reviews.



The combined level of due diligence undertaken by these parties has been
extensive and has included, inter alia, detailed reviews of security,
cryptography, development standards, service level agreements, business
continuity plans, penetration testing and external risk assessments.



As a result, the Board believes that the Monitise business has a scaleable and
robust platform.



Business model

The Monitise business is investigating a variety of revenue models for each of
these services, ranging from a licensing model to revenue per customer and
revenue per service usage. It expects that these models will develop as the
mobile banking market matures.



The Monitise platform is delivered and conducted as a managed service, which the
Board believes has a number of advantages over competing offerings that use SMS,
mobile internet or software solutions, and do not offer the mass-market
characteristics required for mobile banking to become a ubiquitous banking
channel.



Having established itself in the UK, a key market for mobile banking, the Board
believes that the Monitise business has the opportunity to become a leading
player within the fast-growing markets for mobile banking, commerce and payments
and it is vital that it continues aggressively to deliver on its strategy of
being the platform of choice within the global market. In order to achieve this,
the Monitise business needs to continue to develop its product roadmap, pursue
international expansion, exploit its intellectual property and core expertise,
and attract and retain key personnel.



The Monitise group has established Monitise Business Solutions ('MBS') to apply
technology developed by Monitise to non-mobile banking commercial markets. MBS
has developed two initial products and services for these markets:

  • ACCODE, a mobile dual-factor authentication solution, which offers a
    secure, reliable, costeffective and convenient verification solution to
    solve the security issues surrounding desktop access, remote access and
    portal security; and

  • Mobile Card Manager Service, which offers mobile-based top up and balance
    and ministatement enquiries for stored value accounts including, among
    others, lottery and transport applications.



Funding

The Board anticipates requiring an increasing level of investment in the
Monitise business, and having reviewed potential working capital requirements
over the next 18 months, is expecting an investment of approximately £20
million. This funding requirement should be partially offset by expected
revenues from a number of overseas sales opportunities together with revenues
beginning to build from both the Monitise business's UK operations and from MBS.
The Board has determined that this investment will be most appropriately
provided by external sources and consequently it is anticipated that a placing
of Monitise shares will be undertaken on the Business Day following the
Demerger.



Strategy

The Board believes that the Monitise business has developed a unique blend of
services, which enables banks and mobile network operators to capitalise on the
mobile phone as a fifth channel to market (in addition to branch, ATM, call
centre and the internet channels). As at 31 December 2006, Morse and its
partners had invested approximately £10 million in the Monitise business, of
which approximately £8 million had been contributed by Morse (gross of tax
credits).



The objective of the Monitise business will be to achieve profitability by
exploiting its intellectual property, its market position in the UK and pursuing
its international opportunities. It expects to achieve this through a continued
investment in the development of new products and services, pursuit of
geographic expansion through a combination of organic growth, joint ventures and
licensing agreements, consultancy and the continued adoption of its services by
consumers.



The objective of the Monitise business is that the Monitise platform becomes the
global de facto standard for mobile banking and payments. Management of the
Monitise business believes this will be achieved through:

  • being the first credible service to market;
  • retail banks and mobile network operators participating in the business
    model and being advocates;
  • offering a comprehensive set of services at a low cost;
  • providing the broadest possible consumer coverage;
  • expanding internationally in advance of mass consumer uptake, including
    through the use of joint ventures and licence agreements to reduce
    investment risk;
  • attracting and retaining key personnel;
  • delivering the best user experience; and
  • building a sustainable network for financial institutions, mobile network
    operators, merchants and consumers that guarantees and balances the
    interests of all parties.



Key strengths

  • Significant barriers to entry

      • an established joint venture with LINK;
      • Monitise has been first to market in the UK with an industry platform;
      • relationships have been established with switches, banks and mobile
        network operators in several key countries;
      • robust, scaleable technology with bank-grade security architecture;
      • successful integration with the LINK network, the busiest ATM switch
        engine in the world;
      • the security model is effective in the UK, in one of the world's more
        conservative, security conscious and heavily regulated financial
        markets; and
      • the Monitise platform leverages the existing infrastructure of banks,
        mobile network operators and switches.

  • Significant potential

      • a high-growth global market provides significant opportunity;
      • could replicate and exceed the impact of ATMs on financial services;
      • could become a global de facto standard;
      • foundation is in place for development in parallel areas (such as
        supporting contactless payments and e-cash platforms); and
      • mobile banking technology and expertise is able to be applied to other
        sectors through MBS.

  • Experienced management team and strong board

      • listed company and growth company accomplishments; and
      • blend of leading industry specialists from banking, mobile and
        technology backgrounds.



Financial Record

          Monitise business                                          Unaudited
                                              12 months        12 months        12 months           12 months
                                                  ended            ended            ended               ended
                                           30 June 2004     30 June 2005     30 June 2006    31 December 2006
                                                  £'000            £'000            £'000               £'000

Loss before taxation                                  -            (551)          (3,279)             (2,890)

Operating loss                                        -            (551)          (3,279)             (2,890)

Gross assets                                        335              401              894               1,645


Net liabilities                                       -            (551)          (2,967)             (5,054)


Information regarding the continuing Morse group



Background



The continuing Morse group, which has operated under a single brand, Morse,
since February 2007, will continue to operate as an advisory and execution
professional services business following the Demerger.



For the year ended 30 June 2006, Morse reported turnover of £367.1 million and a
profit before tax and exceptional items of £6.7 million (including discontinued
turnover of £70.2 million). As at 30 June 2006, Morse had net assets of £64.5
million, including net cash of £27.3 million9.



For the six months ended 31 December 2006, Morse reported unaudited turnover of
£132.2 million and an unaudited profit before tax and exceptional items of £2.9
million. As at 31 December 2006, Morse had unaudited net assets of £62.8
million, including net cash of £18.1 million10.



The Morse consultancy business offers the services detailed below. The figures
estimated below are based on Morse unaudited interim financial statements for
the six month period to 31 December 2006, which were announced on 28 February
2007:



9  These financial results include the Monitise business.  Please refer to
paragraph (b) below and to Part VI of this document for information about pro
forma financial statements in respect of Morse.

10  These financial results include the Monitise business.  Please refer to
paragraph (b) below and to Part VI of this document for information about pro
forma financial statements in respect of Morse.


Management consultancy

Morse's management consultancy business comprises the provision of strategy and
business improvement services to help clients identify and address business
opportunities, enabling the delivery of change to improve business performance
and reduce risk.



Morse's management consultancy operations continue to grow outside their
traditional UK client base of investment organisations to include new clients in
the life and pensions and capital markets segments, as well as internationally
with an expanding presence in Australia, Singapore, South Africa and France.



Applications consultancy

The Morse consultancy business provides applications consultancy which spans the
spectrum of critical competencies from business case development, process
innovation and implementation through to benefits realisation. It has the
capability and experience of successfully implementing and supporting a wide
variety of business solutions, including Oracle, Microsoft, SAP and Enterprise
Content Management. It also provides independent and objective advice about
selecting the right solution for an organisation. It operates in three main
territories: the UK, Asia Pacific and the US.



UK infrastructure consultancy

Morse's UK infrastructure consultancy business provides technology and
integration solutions to clients who wish to make their IT more flexible and
better aligned to their business goals. It offers services that include the
efficient and effective provisioning of technology, mission critical technology
environments that deliver project return on investment, flexible resources and
architecture strategy and design.



Morse's four key industry verticals

The Morse consultancy business specialises in four key industry verticals:
Financial Services, Media and Communications, Commercial and Public Sector. As
stated in the Morse results announcement dated 28 February 2007, as the Morse
consultancy business develops, the Board believes that it will continue to move
from its historic solutions-based structure to a vertical industry-aligned
operating model.



Strategy

Following the Demerger, the continuing Morse group's strategy will be to
maintain its focus on operating as an advisory and execution professional
services company to certain chosen business areas and industry verticals.



Specifically, the Morse consultancy business strategy will be to:

  • develop further its chosen business areas and industry verticals;
  • expand the range of services delivered to its clients; and
  • continue to improve operational performance and productivity.



Key strengths

  • strong market positioning;
  • brand recognition;
  • depth and breadth of strong client relationships;
  • track record of profitable organic and acquisition-led growth; and
  • the senior management of the continuing Morse group is highly experienced
    in business and
  • IT and consultancy services.



Terms of the Demerger

The Demerger will be effected by Morse declaring a special dividend, equal to
the book value of its shareholding in Monitise Group Limited, subsidiary which
currently operates the Monitise business, which will be satisfied, in specie, by
the allotment and issue by Monitise of shares, credited as fully paid, to Morse
shareholders. Morse shareholders on the register at the close of business on 27
June 2007 will receive one ordinary share in Monitise plc for each Morse share
held by them.



As at the close of business on 6 June, there were 156,551,455 Morse shares in
issue. It is therefore expected that, immediately following completion of the
Demerger, there will be 156,551,455 Monitise shares in issue.



Neither Morse nor Monitise will have a shareholding in the other following the
Demerger. Duncan McIntyre will be the only director common to Morse and
Monitise. Application will be made for the Monitise Shares to be admitted to
AIM. Immediately after the completion of the Demerger, each Morse shareholder
will own the same percentage of Monitise shares as it currently owns of Morse
shares.



The Demerger is conditional, inter alia, upon shareholders approving the
Demerger at the EGM.



Monitise Placing

Monitise intends to implement a placing of Monitise shares with certain
Qualified Investors, and other institutional investors and directors of Morse
and Monitise, on the Business Day following the Demerger, in order to provide
working capital for the Monitise business to support its continuing growth. The
placing will be carried out on a non-pre-emptive basis, and application will be
made for these placing shares to be admitted to AIM on the Business Day
following the admission of the Monitise shares issued pursuant to the Demerger
to AIM. As a result of the placing, Shareholders' percentage holdings in
Monitise may be diluted.



The number and price of Monitise shares offered as part of the placing will be
determined on completion of a competitive book-build process. The Directors
currently expect the placing to raise approximately £20 million Monitise will
bear the costs of the placing.



To the extent that the placing raises less than £20 million (after expenses),
the Company has agreed to provide an unsecured working capital facility to
Monitise Holdco for the benefit of the Monitise Group.



Current trading and prospects



Continuing Morse group

The Directors believe that the continuing Morse group continues to make good
progress in its transition to an advisory and professional execution services
business. The Directors believe that the continuing Morse group has performed
well in the second half of the 2007 financial year and they are confident about
the continuing Morse group's prospects for the future, in markets with good
growth characteristics.



Monitise business

The Directors believe that the Monitise business is an exciting business
providing substantial opportunity based around secure mobile banking
applications and that its business is making substantial progress. The market
continues rapidly to expand and considerable interest continues to be shown in
the services provided by the Monitise business. The Board is confident about the
prospects for the Monitise business.



Dividend policies

In setting the level of future dividends of Morse, the Board will have regard to
the progress made by the Morse Business, the cash flows generated by the
business and the Company's future prospects. The Board intends to maintain a
consistent dividend policy following the Demerger.



The future dividend policy of Monitise is a matter for the board of Monitise to
decide following the Demerger. However, it is not expected that any dividends
will be paid until Monitise becomes profitable. In any event, declaration and
payment of dividends by Monitise will be dependent upon its financial position,
cash requirements, future prospects, profits available for distribution and
other factors regarded by the Monitise board as relevant at the time.



Board structure

Following the Demerger, Morse and Monitise will be separately listed companies.
The boards of the two companies following the Demerger are anticipated to be as
follows:


                                                      Morse                               Monitise

Chairman                                        Richard Lapthorne                     Duncan McIntyre
Deputy Chairman                                  Duncan McIntyre                            N/A
Chief Executive                                    Kevin Alcock                       Alastair Lukies
Finance Director                                    Eric Dodd                    Not appointed (see below)
Non-Executive Director                          Derrick Nicholson                        David Dey
Non-Executive Director                           Nigel Whitehead                      Peter Radcliffe
Non-Executive Director                            Michael Benson                        Colin Tucker
Company Secretary                               Nicholas Sandison                       Lee Cameron



The Board is therefore expected to remain largely in its current form
immediately following the

Demerger, with three important exceptions:



Duncan McIntyre will cease to be Chief Executive of Morse upon the Demerger
becoming effective, and will become Deputy Chairman of the Company. This will
allow Kevin Alcock to become Chief Executive of Morse at that time. Duncan's new
role has been created to ensure a smooth transition from the current Morse Group
structure to that after Demerger, when Morse will control only the Morse
Business. Duncan will work two days a week in this new role.



Kevin Alcock the current chief executive of the Morse consultancy business, will
become Chief Executive of Morse. This will allow Kevin to continue his strong
leadership of the Morse Business to date, and to drive forward the outlined
business strategy;



Colin Tucker will cease to be a Non-Executive Director of Morse and will become
a Non- Executive Director of Monitise.



No finance director will have been appointed to the Board of Monitise at the
time of the Demerger. Duncan McIntyre will provide the financial experience
required at Monitise board level.


                                      Ends



Some of the information in this announcement may contain projections or other
forward-looking statements regarding future events or the future financial
performance of Morse plc. You can identify forward-looking statements by terms
such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could,
" "may" or "might" the negative of such terms or other similar expressions.
These statements are only predictions and actual events or results may differ
materially. We do not intend to or undertake any obligation to update these
statements to reflect events and circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events. Many factors could cause
the actual results to differ materially from those contained in our projections
or forward-looking statements, including, among others, general economic
conditions, our competitive environment and market change in our industries, and
other factors specifically related to Morse plc and its operations.

This document does not constitute or form part of any offer or invitation to
sell or issue, or any solicitation of any offer to purchase or subscribe for,
any shares or other securities, nor shall any part of it nor the fact of its
distribution form part of or be relied on in connection with any contract or
investment decision relating thereto, nor does it constitute a recommendation
regarding any securities referred to herein.

This announcement is not for distribution, directly or indirectly, in or into
the United States (including its territories and dependencies, any State of the
United States and the District of Columbia), Australia, Canada or Japan. This
announcement is not an offer for sale of any securities in the United States or
in any other jurisdiction.  Securities may not be offered or sold in the United
States absent registration or an exemption from registration under the U.S.
Securities Act of 1933. Morse plc has not registered and does not intend to
register any portion of any offering of securities in the United States or to
conduct a public offering of any securities in the United States.


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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