Business Update

Vocalis Group plc ("Vocalis"), the international speech technology group, announces today that is has secured a number of contracts for its internet related and traditional products. Whilst the revenues from the internet related contracts are significant, the Company has taken a strategic decision to recognise a large proportion of these revenues over the term of the contracts, which span the next 3 years.

Over time this will serve to even out what has traditionally been a lumpy revenue stream due to the size and nature of contracts for its SpeechTel products. In addition, this business model will make Vocalis internet related products more accessible and affordable to a broader potential customer base.

The Company has previously stated that the year 2000 would be a year of investment with the benefits showing in 2001 and the years beyond. As a result, the Companys expected loss for the year ended 31st March 2000 will be materially greater than current expectations.

New Contracts

Specifically, Vocalis is delighted to announce the following:

The agreement of an exclusive three year deal with MCI Worldcom in the UK for the provision of telephony services for SpeecHTML and SpeechMail. This significantly enhances the revenue potential of SpeecHTML and SpeechMail. MCI Worldcom has also agreed to purchase exclusive supply rights under license, based on the successful growth of SpeecHTML and SpeechMail.

Vocalis Inc. has signed an exclusive contract with Zebec Data Systems Inc. of Houston for the provision of SpeecHTML to the US Healthcare market. The initial license value is US$1.5 million and will be recognised over the next three years. In addition Vocalis Inc. will continue to share in the gross revenues derived from the on-going use of SpeecHTML in the US Healthcare market. The Company is pursuing opportunities for SpeecHTML in other niche sectors of the US market.

Negotiations are in progress with potential partners to provide SpeechMail as a managed service in the US. Shared Network Services (SNS) is the first example of a US SpeechMail partnership in which SNS will offer SpeechMail to their customers nationwide for a monthly fee to be shared between Vocalis and SNS. Based in Lodi California, SNS is a fast growing provider of build-your-own website tools and services to businesses with an estimated 150,000 customers.

Embratel, the Brazilian arm of MCI Worldcom, has installed SpeechTel for the advanced handling of collect calls in their domestic and international markets. This contract has an initial value of 650,000 and the system was delivered, tested and accepted in March.

Product development

The Companys new products: SpeechMail, SpeecHTML and SpeechWare have been launched and sales have begun.

SpeechMail has been adopted by over 70 Internet Service Providers including many of the leading names in the UK and Vocalis is marketing SpeechMail into the US and other Countries. Sign up of users of SpeechMail in the UK has risen rapidly during the last three months of the financial year.

SpeecHTML is poised for launch in the USA later this month and has already generated a great deal of interest in the US Healthcare industry following Vocalis participation at their recent annual conference. This opportunity is particularly exciting and on 31st March the Company signed an exclusive licensing and revenue share contract with Zebec Data Systems Inc., a leading data warehousing company in the US Healthcare sector.

Development of the full software version of SpeechWare was completed in March 2000 and is being actively marketed to over 30 customers. A global distribution channel is being put in place with partners including Dialogic and Natural Microsystems. The hardware version of SpeechWare has taken longer than planned but is now in the final stages of testing and is expected to come to market in the early summer. The Company believes that this will provide a unique opportunity in the Speech Recognition Telephony market because of the power and flexibility offered by the solution and a number of customers are awaiting its initial release.

As previously indicated to the market the SpeechTel business model has been revised during the last nine months with a new sales and distribution strategy, including both global and regional partnerships, being put in place. Whilst this has exacerbated the lumpy nature of the SpeechTel business in the short-term, the new business model has been implemented to create a more predictable and even revenue stream in the future. Interest in the Companys SpeechTel platform and solutions has never been higher and Vocalis enters the new financial year with a strong prospect list from five Continents.

Outlook

During the period, the Company has made a substantial investment in new staff, capital equipment and marketing, and brought new products to market during the final quarter of the financial year. The Sales teams have been restructured under Peter Hauser, who joined the Company last summer as Sales Director.

The Directors believe that the strategy to maximise future revenues generated by its internet related products by retaining the rights to on-going license based revenue streams is fundamental to the future long-term growth of the Company. It will increase visibility going forward and assist in the securing of future business along similar lines to that announced today.

These business wins are evidence of the Companys ability to succeed in this market and the effectiveness of this strategy. In conjunction with a record number of opportunities in the pipeline, the Directors view the future with confidence.