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

 

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months to 30 September 2001