Morse offloads loss-making units

Pan-European integrator Morse has completed the sale of its loss-making divisions in Germany and Austria.
The divisions, Morse GmbH and Morse IT Solutions Austria GmbH (Morse Germany) have been sold to the Becom Group for around €9.5m. An initial consideration of 7.1m euros is payable in cash with €2.4m of deferred consideration payable in cash in 90 days, subject to the collection of Morse Germany’s receivables.

At completion, Morse Germany’s cash balance stood at €8.5m, but was expected to report an operating loss of approximately €1.2m for the second half of 2006.
Duncan McIntyre, chief executive of Morse, said the divisions no longer fitted in with Morse’s transformation from a reseller to a technology, consulting and support provider.

In a statement, McIntyre said: “The majority of activity in Germany and Austria was based around reselling and infrastructure services and this factor, taken together with the infrastructure trading environment in Germany, led us to the decision to dispose of this business.

“The mix of activity of our operations in Spain and Ireland is more consistent with the remainder of the Group, with a significantly higher proportion of revenues derived from services than was the case in Germany and Austria.
“Our decision to dispose of our German and Austrian operations enables us to focus on completing the transition of the Group and on developing other opportunities which we believe will provide greater shareholder value,” he said.
McIntyre added he was “satisfied” with the progress of the rest of the Group, which includes Morse UK.

Phil Codling, analyst at Ovum, said the move was expected.
“[The move] fits with the company’s unambiguously-stated strategy of shifting away from its legacy in reselling and into services. The German and Austrian operation was hevily weighted towards the former so its days were numbered, especially as it appears to have become loss-making once again in its financial year 2006.”

Codling added the price accepted showed how keen Morse was to offload Germany and Austria.
“If you consider that becom is getting €8.5m of cash with the acquired operation, the price being paid is really just €1m. That's one per cent of financial year 2005 revenues of around €100m. Furthermore, Morse will take an exceptional charge of €2.7m arising from the disposal on its financial year 2006 accounts. So this is a rather sorry end to an operation that began in 1996, when Morse opened its first office in Germany - indeed at the time, it was the company's first sortie outside the UK. That said, the disposal is, we believe, a necessary and defensible step on Morse's path away from reselling,” he said.

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