Systems integrator, Morse has warned the City that sales in the fiscal second half of the year are likely to be lower than the £114.4m reported in the first half.
In an update on unaudited trading for the year ended June, the integrator said that improved margins on revenues reflected cost reduction programmes and the resolution of problems related to SAP projects in the Business Application Services unit.
It said the Infrastructure, Services and Technology division in Ireland and Spain was expected to be "marginally profitable" despite recording a £600m loss in the first half of the year
Invoices related to the Building Schools for the Future initiative with South Tyneside and Gateshead had been paid and Morse has signed another deal with the next school in the area as part of the Government backed scheme.
Morse expects the cost reduction programme initiated last summer to result in restructuring charges of £10.2m to £11.2m, up from the initial estimation of £8.5m. This was due to "onerous lease and dilapidation provisions" related to properties.
Earlier this year, Morse sold off its Investment Management Consultancy arm to focus the business on four main divisions.
The balance sheet has also recorded an exceptional charge of £13.8m for the impairment of goodwill in this fiscal year.
"We knew this would be a difficult year for the group," said Mike Phillips, Morse chief executive.
"With the significant restructuring and change programme near completion, we have established Morse today as a niche provider of IT services and technology," he added.
The business units had benefited from the cost reduction plan, he said, and working capital was £12m, compared to a net debt of £8.9m a year ago, giving the group "a much more stable, solid position from which to face the current economic climate".
Morse was the subject of a takeover as revealed yesterday but turned down the offer of 25 pence per share. The stock is currently valued at 23.5 pence giving it a market capitalisation of £30.5m
This is a significant improvement on the 52 week low of 12.75 pence.
A version of this story orignally appeared on Microsope.