Source: Morse
In accordance with its normal practice, Morse plc ('Morse'), the technology integrator, is providing a quarterly sales performance update:
Half year sales up 16% and profits up 33% on prior year period 40% of turnover and 50% of gross profit from services business
Group sales for the second quarter to 31 December 2004 were £124 million (2003: £114 million), resulting in sales for the half year to 31 December 2004 of £217 million (2003: £187 million). The acquisition of Diagonal on 27 August 2004 resulted in sales of £18 million for the period to 31 December 2004 which are included in the Group's £217 million of revenues for the first half. Group operating profits for the first half will show progress on the prior-year period and we would expect these to be around £4 million before exceptional items and goodwill amortisation for the first half (2003: £3 million).
The Group has continued to implement its strategy of growing its services offering to complement the historic strength of its infrastructure business in order to deliver integrated IT solutions to customers across the UK and Ireland, and Continental Europe.
The integration of Diagonal is progressing well. Our 100-day initial integration plan is now successfully completed, with only one disappointment arising in the form of a loss making pre-acquisition contract around which discussions are continuing with the client. Diagonal's contribution to Group profits in the period since acquisition is in line with our expectations and we would expect Diagonal's contribution to improve in the second half as integration continues.
The evolution of the Group, whilst not complete, has continued to progress well and, including Diagonal, the business realised 40% of turnover and 50% of gross profit from its services operations in the first half. This compares with 10% and 12% respectively for the first half of 1999 when the decision was taken to transform the business from a reseller to a full services technology integrator.
The trading environment in the UK is unchanged, with conditions still challenging and competitive. In continental Europe, trading continues to be positive in Spain and Ireland and has stabilised in Germany and France. In particular, the French business is expected to reduce significantly its losses for the six month period to 31 December 2004.
The Group's cash position remains strong with a net cash balance of approximately £39 million at 31 December 2004 (£38 million at 30 September 2004).
Morse's interim results will be announced on 23 February 2005.
Duncan McIntyre, Chief Executive of Morse plc, commented: "We are pleased with the Group's performance for the first half and the continued evolution of the business. With the initial integration of Diagonal now complete, we look forward to an acceleration of the Group's development in the second half."