Interim Results

RNS Number:8127N
Vocalis Group PLC
28 November 2001

                              VOCALIS GROUP PLC



                                 ("Vocalis")


          Interim results for the six months ended 30 September 2001


CHAIRMAN 'S STATEMENT


The six month period to 30 September 2001 was one of significant internal
change and early signs of progress for Vocalis against a backdrop of harsh
market conditions.


Results


Boosted by sales of #1.0 million in the second quarter, our results for the
period show turnover of #1.2 million; this compares to #2.0 million for the
corresponding period last year and #0.7 million achieved in the second half of
last year. After providing #400,000 against the Group's investment in
Intelleca Vocalis and loan to that company, the loss before tax was #1.97
million, compared to a loss before tax of #2.48 million in the first half of
last year and #4.6 million in the second half of last year.


As I highlighted at the AGM in July, the annualised cost base had been reduced
by approximately #2 million. We continue to focus on controlling our cost base
without damaging our ability to take advantage of the opportunities our
marketplace affords us.


In September the Group provided in full for its investment in Intelleca
Vocalis, a South African company in which it holds a 25 per cent. stake. This
decision was taken in the light of trading conditions in South Africa during
the period and the trading forecasts of that company for the remainder of the
year.


The Board considers that the treatment of the consideration for the sale of
system and distribution rights to Intelleca Vocalis in September 2000 was
appropriate and rejects the current auditors' view that it should have been
reported through the Statement of Total Recognised Gains and Losses last year.
At the time of the investment in September 2000, Intelleca Vocalis was in a
position to repay the loan of #200,000 from Vocalis. The equity investment of
#200,000 represented fair cash value for the shares being contributed pari
passu with other cash investors. The effect of the auditors' proposal would be
to increase the loss before taxation for the year to 31 March 2001 to #7.5
million. There would be no cash or net asset implications to the Group in
respect of this suggested treatment in the prior year. The results for the
year to 31 March 2001 were audited by Arthur Andersen who gave an unqualified
audit opinion.


Cash and short term deposits at 30 September 2001 amounted to #1.0 million,
down from #3.5 million at 31 March 2001. This reduction included the cash
effect of the closure costs of the managed services business announced in
March 2001. I am pleased to report that we have significantly reduced our rate
of cash burn since 1 April 2001. Our cash position will also be enhanced by
the proceeds of a placing and open offer, announced separately today, to raise
approximately #4.1 million (net of expenses), by the issue of 92,636,260 new
ordinary shares at 5p per share.


Operations


Business focus

During the period we narrowed the Group's business focus. Vocalis is now a
product and solutions led company focussed on the call centre and financial
services sectors in the UK and, through our partnership with Ericsson, the
overseas telecommunications sector. We believe we can bring tangible business
benefits and cost savings to these sectors where we see the potential for
significant growth and the development of long-term relationships with
customers. This change in focus was reflected in the launch of Vocalis' new
strategy in September 2001, and supported by a subsequent strengthening of our
sales team.


Customers

The revised emphasis has resulted in increased interest from both new
customers and existing customers who are looking to further develop and expand
systems already in place.


In July we were able to announce two important new contracts, with a combined
value of #655,000, awarded through Ericsson with Telenor Mobil and Telefonos
de Mexico (Telmex).


As a supplier to Telenor Mobil, Norway's leading telecommunications and IT
supplier, Ericsson has ordered the most advanced version of our SPEECHtel
telephony platform. Telenor Mobil uses the technology as the basis of its
automated service for managing pre-paid mobile telephone accounts.


Telmex is upgrading its current SPEECHtel telephony platform at a number of
its sites in Mexico. The current contract is worth #260,000, including the
provision of consultancy implementation.


Delivery of the first stage of the contract with Eircom, the leading Irish
telephone company, was completed in September. This contract was worth #
220,000.


Trade agreements

We continue to build commercial relationships with partners and distributors.
In September we announced a distributor agreement with S2 Systems
International, a global provider of business solutions for the financial
sector, to provide voice driven interactive solutions. This month we entered
into a VAR agreement with Post CTI, a UK integrator of end-to-end computer
telephony solutions, making it the first UK distributor of Vocalis' SpeechWare
technology.


These agreements have resulted in further presentations and proposals to new
customers in our target markets.


In addition, last month we joined the VoiceXML forum, the industry body
responsible for promoting the understanding and use of the Voice Extensible
Markup Language (VoiceXML) Standard.


Board Changes


As a result of the announcement in June of the resignation of Charles Halle as
Chief Executive, Paul Wright, Finance Director, assumed additional duties as
Chief Operating Officer of the Group. Since that time Paul has been successful
in progressing the implementation of our new strategy.


Prospects


We are pleased with the progress made since June, and, following the
successful completion of the Placing and Open Offer, we expect progress to be
maintained through the remainder of the year and beyond. We remain confident
that we are now operating in a substantial commercial market which has
business needs suited to our voice driven solutions. We are confident that our
revised structure, focus and approach to our markets and continuing control of
costs will allow us to take advantage of opportunities as they arise.


Ken Hill

Chairman


28 November 2001


nquiries:


Vocalis Group plc      today: 020 7601 1000

Paul Wright, Chief Operating Officer     thereafter: 01223 846177


Weber Shandwick Square Mile     020 7601 1000

Nick Oborne or Stephanie Smart




CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months to 30 September 2001
                                                                        
                                   Unaudited     Unaudited       Audited
                                           6             6            12
                                   months to     months to     months to
                                    30.09.01      30.09.00      31.03.01
                                 Notes #'000         #'000         #'000
Turnover                           2   1,223         2,008         2,701
Cost of Sales                          (590)         (560)         (1,025)

Gross Profit                           633           1,448         1,676
Other operating expenses (net)         (2,486)       (4,024)       (7,604)

Operating Loss                         (1,853)       (2,576)       (5,928)
Cost of closure of managed             (163)         -             (1,446)
service businesses
Bank interest receivable               53            106           250

Interest payable
     Finance leases                    (2)           (4)           (10)
     Other loans                       (3)           (4)           (10)

Loss on ordinary activities            (1,968)       (2,478)       (7,144)
before taxation
Loss on ordinary activities            (1,968)       (2,478)       (7,144)
after taxation
Loss per share - pence             3   (4.25)        (5.60)        (15.82)

The accompanying notes form an integral part of this Consolidated Profit and
Loss Account.



CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the six months to 30 September 2001
                                                                       
                                   Unaudited     Unaudited       Audited
                                           6             6            12
                                   months to     months to     months to
                                    30.09.01      30.09.00      31.03.01
                                       #'000           #'000           #'000

Loss for the period                   (1,968)         (2,478)         (7,144)
Loss on foreign currency                -             (66)            (109)
translation

Total recognised losses for the       (1,968)         (2,544)         (7,253)
period

The accompanying notes form an integral part of this Consolidated Statement of
Total Recognised Gains and Losses.



CONSOLIDATED BALANCE SHEET

As at 30 September 2001

                                            Unaudited   Unaudited     Audited
                                                   as          as          as
                                                   at          at          at
                                             30.09.01    30.09.00    31.03.01
                                       Notes      #           #           #
                                                 '000        '000        '000
Fixed Assets
Intangible assets                            14          45          21
Tangible assets                              821         1,769       975
Investments                                  -           200         200
                                             835         2,014       1,196

Current assets
Stock                                        677         1,154       694
Debtors      - due within one year           1,016       1,062       921
      - due after one year                   -           200         200
Short term cash deposits                     740         6,250       3,250
Cash at bank and in hand                     264         221         224
                                             2,697       8,887       5,289

Creditors: amounts falling due within        (989)       (1,466)     (1,766)
one year

Net current assets                           1,708       7,421       3,523

Total assets less current liabilities        2,543       9,435       4,719

Creditors: amounts falling due after         (40)        (61)        (41)
more than one year

Net assets                                   2,503       9,374       4,678

Capital and reserves
Called-up share capital                      2,316       2,315       2,316
Share premium account                        17,332      17,324      17,332
Other reserves                               1,070       1,070       1,070
Profit and loss account                      (18,215)    (11,335)    (16,040)

Shareholders' funds - equity interests   4   2,503       9,374       4,678
                                            

The accompanying notes form an integral part of this Consolidated Balance
Sheet.



CONSOLIDATED CASH FLOW STATEMENT

For the six months to 30 September 2001

                                             Unaudited   Unaudited   Audited
                                                  6           6           12
                                             months to   months to   months to
                                             30.09.01    30.09.00    31.03.01
                                       Notes    #'000       #'000       #'000
                                                  
Operating loss                               (1,853)     (2,576)     (5,928)
Depreciation charges                         191         308         661
Amortisation charges                         7           30          55
Decrease/(increase) in stock                 28          (225)       109
Increase/ (decrease) in debtors              (101)       241         567
Decrease in creditors                        (496)       (876)       (1,272)
Exchange difference                          -           (70)        (109)
Long Term Incentive Scheme credit            (207)       -           -

Net cash outflow from operating              (2,431)     (3,168)     (5,917)
activities

Returns on investments and servicing
of finance
- interest received                          59          91          250
- interest paid                              (3)         -           (21)
- interest element of finance leases         (2)         (8)         -

Capital expenditure and financial
investment
- purchase of tangible fixed assets          (48)        (152)       (305)
- purchase of trade investment               -           -           (200)

Cash outflow before management of            (2,425)     (3,237)     (6,193)
liquid resources and financing

Management of liquid resources
Decrease/(increase) in short term            2,510       (1,750)     1,250
deposit

Financing
Issue of ordinary shares (net of fees)       -           4,988       4,997
Repayment of secured loan                    (2)         -           (5)
Capital element of finance lease             (43)        (58)        (103)
repayments

Net cash (outflow)/inflow from               (45)        4,930       4,889
financing

Increase/(decrease) in cash in the      5     40          (57)        (54)
period                                      

The accompanying notes form an integral part of this Consolidated Cash Flow
Statement.









Notes to the interim results


 1. Basis of preparation

    The foregoing financial information does not constitute statutory accounts
    within the meaning of section 240 of the Companies Act 1985.


    The financial information for the six months ended 30 September 2001 is
    unaudited and has been prepared in accordance with the accounting policies
    set out in the Annual Report for the year ended 31 March 2001. The
    financial information for the six months ended 30 September 2000 is also
    unaudited.


    The financial information for the full preceding year is based on the
    statutory accounts for the financial year ended 31 March 2001. Those
    accounts, upon which the auditors issued an unqualified opinion, have been
    delivered to the Registrar of Companies.


    These accounts were approved by the Board of Directors on 27 November 2001
    and were signed on its behalf by:


         K L HILL          P K WRIGHT

         Chairman          Director




 2. Segment information
                            Unaudited        Unaudited           Audited
                            as at            as at               as at
                            30.09.01         30.09.00            31.03.01
                            #'000            #'000               #'000

    Turnover by destination
    United Kingdom           241              443                 646
    Rest of Europe           732              202                 722
    Far East                 230              724                 525
    Rest of World            20               639                 808

                             1,223            2,008               2,701




 3. Loss per share

    Loss per share is based on the loss for the period after tax divided by
    the weighted average number of equity shares ranking for dividend in the
    period. The weighted average number of shares was 46,318,130 (2000:
    44,285,546).


 4. Reconciliation of movements in group shareholders' funds

                                               Unaudited   Unaudited   Audited
                                                   as at       as at     as at
                                               30.09.01    30.09.00    31.03.01
                                                  #'000       #'000       #'000

    Retained loss for the financial period     (1,968)     (2,478)     (7,144)
    Issue costs written off                    -           (93)        (93)
    New share issued                           -           5,077       5,090
    Foreign currency translation               -           (66)        (109)
    Long Term Incentive Scheme credit          (207)       -           -
    Net (reduction to)/ increase in            (2,175)     2,440       (2,256)
    shareholders' funds
    Opening shareholders' funds                4,678       6,934       6,934

    Closing shareholders' funds                2,503       9,374       4,678

 5. Reconciliation of cash flow to movement in net funds

                                              Unaudited   Unaudited   Audited
                                                     as          as        As
                                                     at          at        at
                                               30.09.01    30.09.00  31.03.01

                                                      #           #         #
                                                   '000        '000      '000

    Increase/(decrease) in cash in the period     40          (57)        (54)
    Cash outflow from decrease in debt and lease  44          44          110
    financing
    Cash (outflow)/inflow from (decrease)/        (2,510)     1,750      (1,250)
    increase in liquid resources
    Movement in net funds in the period           (2,426)     1,737      (1,194)
    Net funds at the beginning of the period      3,370       4,564       4,564
    Net funds at the end of the period            944         6,301       3,370


 6. Circulation to shareholders

A copy of this report is included within the prospectus dated 28 November
2001. Copies of the prospectus incorporating these results will be available
on application to the company's registered office up to 30 June 2002.






Independent Review Report by KPMG Audit PLC to Vocalis Group plc


Introduction

We have been instructed by the company to review the attached financial
information which comprises the Consolidated Profit and Loss Account,
Consolidated Statement of Total Recognised Gains and Losses, Consolidated
Balance Sheet, Consolidated Cash Flow Statement, and notes 1 to 6 of the
interim report for the six months ended 30 September 2001 and we have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.


Directors 'responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where they are to be changed in the next annual accounts in which case
any changes, and the reasons for them, are to be disclosed.


Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999
/4:Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing
whether the accounting policies and presentation have been consistently
applied unless otherwise disclosed. A review is substantially less in scope
than an audit performed in accordance with Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.


Review conclusion

Included within "Cost of closure of managed services businesses" is a
provision for diminution in value of an investment for #200,000, and a
provision against the realisable value of a long-term loan also of #200,000.
The investment and loan formed part of the consideration for a sale made in
the six months ended 30 September 2000. In our view, this revenue should not
have been recognised during the six months ended 30 September 2000 because the
ultimate cash realisation of these amounts could not be assessed with
reasonable certainty. The related gain of #400,000 should have been reported
in the Statement of Total Recognised Gains and Losses instead.


On the basis of our review, with the exception of the matter described in the
preceding paragraph, we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2001.


KPMG Audit Plc

Chartered Accountants

37 Hills Road

Cambridge CB2 1XL




28 November 2001