In the Group's half year results, it was reported that the performance of Morse's operations in Germany and Austria had slowed, achieving break even at the operating profit level before exceptionals. These operations remain predominantly focused on reselling and infrastructure services and their revenues are typically weighted to the end of each quarter.

Morse's German and Austrian businesses have experienced a more marked weighting than usual in revenue profile towards the end of the fourth quarter with an adverse effect on deliveries and hence booked revenues. April's trading was below management's expectations and, while Morse's German and Austrian operations have continued to achieve a reasonable pipeline of business, the Board now considers it unlikely that all of the pipeline will be converted in this financial year. The Board therefore believes that its German and Austrian operations could report losses of approximately £1m for the second half and full year to 30 June 2006.

Trading within the rest of the Group remains satisfactory.

Duncan McIntyre, Chief Executive of Morse, commented: "The performance of our operations in Germany and Austria has continued to be disappointing in the second half of the financial year to date. These businesses have less well established service components than other areas of Morse and are progressing more slowly in their transformation. We continue to be satisfied with the progress of the rest of the Group."