Vocalis Group PLC

1st November 2002

Interim Results for the six months ended 30 September 2002

Vocalis Group plc, a leading provider of voice driven business solutions to the call centre industry, announces interim results for the six months ended 30 September 2002.

HIGHLIGHTS

Solutions were successfully delivered during the period to Powergen and Chelsea Building Society and additional orders were generated and delivered to these and other existing customers
Turnover increased to 1.4 million (2001: 1.2 million). 85% of revenues were derived from UK customers (year ended 31.03.02: 20%), reflecting the Groups focus on UK markets
The Company continues to monitor all aspects of its cost base and monthly overheads were maintained at the level established in November 2001
The loss on ordinary activities was reduced to 1.5 million (2001: 2.0 million)
Cash balances at 30 September 2002 were 2.7 million
Independent research carried out during the summer confirmed the growing need for business solutions providing semi-automation within a call centre environment
The Company experienced particularly difficult trading conditions during the second quarter but has experienced a strengthening of activity during the initial weeks of the third quarter

Paul Wright, Chief Executive, commented:

Although market conditions during the first half of the current financial year have been difficult, Vocalis has continued to benefit from the strategic repositioning of the business carried out at the end of 2001 and has established key reference sites in its chosen market sectors. The Company maintains its unique position in the UK call centre market as a leading provider of voice driven solutions and has made further progress in securing its position within its chosen target sectors.

Recent research has confirmed the belief that there is a strong requirement for voice driven solutions in the call centre market and we are confident that our focus and commercial offerings position us well to support and develop this growing market.

CHAIRMAN 'S STATEMENT

Results

The revenues resulting from the successful delivery of Vocalis solutions to Powergen and Chelsea Building Society, together with ongoing maintenance and additional upgrades from existing customers, helped increase turnover for the first six months of this year to 1.4 million compared to revenues of 1.2 million for the six months to 30th September 2001 and 0.5 million for the six months to 31st March 2002.

The focus on UK markets has resulted in a significant change to the geographical mix of revenues. During the six months to September, 85% of total revenues came from UK customers compared to only 20% in the year to 31st March 2002.

Cost control continues to be a high priority. Monthly overheads have been maintained at 400,000, the level established in November last year, and the Company continues to monitor all aspects of its cost base. Loss on ordinary activities was reduced to 1.5 million (2001: 2.0 million). Loss per share was reduced to 1.28p (2001: 4.25p).

Cash balances at 30th September were 2.7 million compared to 4.0 million at 31st March 2002.

Vocalis experienced particularly difficult trading conditions during the second quarter and as a result did not achieve the anticipated level of orders. However, the Company has experienced a strengthening of activity during the initial weeks of the third quarter.

Operations

The Company has maintained its strategic focus on the UK call centre market and in particular the financial services and utilities sectors. During the period, solutions were successfully delivered to Powergen and Chelsea Building Society and additional orders were generated and delivered to these and other existing customers. The modular approach adopted under the new strategy allows similar solutions to be replicated within the respective market sectors. Solutions were delivered on a modular basis using Vocalis and best of breed third party products in line with the strategy set out last year. Vocalis used its unique position in the UK market to work closely with its customers to create flexible, tailored solutions for their call centres. These solutions were delivered according to the agreed timetables, within budget and in line with customer expectations.

In addition to these contracts, Vocalis secured ongoing maintenance and support from existing customers, all of whom renewed their agreements with Vocalis as they fell due during the period.

Marketplace
During the summer, Vocalis commissioned independent market research on the UK call centre markets. The resulting report covers a range of call centre issues from cost and efficiency to staffing and business development. Findings confirmed that there is a growing need for business solutions to provide semi-automation within a call centre environment thereby improving agent performance and customer experience.

Through the use of voice driven solutions, call centres are able to address a number of problems they face on a day to day basis. Automated solutions can be provided to deal with repetitive and less challenging tasks thereby freeing up call centre agents to focus on added value transactions. They can also reduce the instances of phone rage which is often caused by complicated menu options and cut waiting time to provide a more efficient service to callers.

Prospects

Although market conditions during the first half of the current financial year have been difficult, Vocalis has continued to benefit from the strategic repositioning of the business carried out at the end of 2001 and has established key reference sites in its chosen market sectors. The Company maintains its unique position in the UK call centre market as a leading provider of voice driven solutions and has made further progress in securing its position within its chosen target sectors.

The prospect and pipeline list is growing in quality and quantity. However, it is taking longer than originally anticipated to convert into firm orders. Potential customers are recognising the benefits of our solutions for their customers and their staff, aligned with the strong return on investment proposition that our solutions deliver. Whilst we expect a significant increase in revenue during the second half of the year, the delays experienced in the first six months will have a material impact on the Companys results for the year.

Recent research has confirmed the belief that there is a strong requirement for voice driven solutions in the call centre market and we are confident that our focus and commercial offerings position us well to support and develop this growing market.

Ken Hill

Chairman

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months to 30 September 2002

		Unaudited 6 months to 30.09.02	Unaudited 6 months to 30.09.01	Audited 12 months to 31.03.02
	Notes	'000	'000	'000
Turnover	2	1,404	1,223	1,735
Cost of Sales		(692)	(590)	(754)

Gross Profit		712	633	981
Other operating expenses (net)		(2,401)	(4,486)	(5,0551)

Operating Loss		(1,689)	(1,853)	(4,074)
Cost of closure of managed service businesses		-	(163)	(195)
Bank interest receivable		64	53	96

Interest payable
Finance leases		-	(2)	(6)
Other loans		(1)	(3)	(6)

Loss on ordinary activities before taxation		(1,626)	(1,968)	(4,185)
Taxation	3	138	-	388
Loss on ordinary activities after taxation		(1,488)	(1,968)	(3,797)
Loss per share - pence	4	(1.28)	(4.25)	(5.41)

There were no recognised gains or losses other than the loss for the period.

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

CONSOLIDATED BALANCE SHEET

As at 30 September 2002

		Unaudited as at 30.09.02	Unaudited as at 30.09.01	Audited as at 31.03.02
	Notes	'000	'000	'000
Fixed Assets
Intangible assets		16	14	8
Tangible assets		614	821	740

Current assets
Stock		412	677	535
Debtors - due within one year		353	1,016	471
Short term cash deposits		2,325	740	3,950
Cash at bank and in hand		385	264	62
		3,475	2,697	5,018

Creditors: amounts falling due within one year		(797)	(989)	(965)

Net current assets		2,678	1,708	4,053

Total assets less current liabilities		3,308	2,543	4,801

Creditors: amounts falling due after more than one year		(33)	(40)	(38)

Net assets		3,275	2,503	4,763

Capital and reserves
Called-up share capital		6,948	2,316	6,948
Share premium account		16,789	17,332	16,789
Other reserves		1,070	1,070	1,070
Profit and loss account		(21,532)	(18,215)	(20,044)

Shareholders' funds - equity interests	5	3,275	2,503	4,763

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

CONSOLIDATED CASH FLOW STATEMENT

For the six months to 30 September 2002

		Unaudited 6 months to 30.09.02	Unaudited 6 months to 30.09.01	Audited 12 months to 31.03.02
	Notes	'000	'000	'000
Operating loss		(1,689)	(1,853)	(4,074)
Depreciation charges		174	191	373
Amortisation charges		7	7	13
Impairment of investment		-	-	200
Closure Costs		-	-	(195)
Decrease/(increase) in stock		123	28	154
Decrease/ (increase) in debtors		118	(101)	628
Decrease in creditors		(168)	(496)	(754)
Long Term Incentive Scheme credit		-	(207)	(207)

Net cash outflow from operating activities		(1,435)	(2,431)	(3,862)

Returns on investments and servicing of finance
- interest received		64	59	96
- interest paid		(1)	(3)	(6)
- interest element of finance leases		-	(2)	(6)

Taxation		138	-	388

Capital expenditure and financial investment
- purchase of intangible fixed assets		(15)	-	-
- purchase of tangible fixed assets		(47)	(48)	(95)
- sales of tangible fixed assets		(1)	-	-

Cash outflow before management of liquid resources and financing		(1,297)	(2,425)	(3,485)

Management of liquid resources
decrease/(increase) in short term deposits		1,625	2,510	(700)

Financing
Issue of ordinary shares (net of fees)		-	-	4,631
Cost of issue of ordinary shares		-	-	(542)
Repayment of secured loan		(5)	(2)	(3)
Capital element of finance lease repayments		-	(43)	(63)

Net cash (outflow)/inflow from financing		(5)	(45)	4,023

Increase/(decrease) in cash in the period	6	323	40	(162)

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 2002 is unaudited and has been prepared in accordance with the accounting policies set out in the Annual Report for the year ended 31 March 2002 except for the accounting policy on turnover which is as follows:

Turnover comprises the value of sales (excluding VAT and trade discounts) of goods and services in the normal course of business. Effective from 1 April 2002, the revenue for sale of business solutions is recognised based on a percentage completion basis.

Maintenance income is invoiced annually and quarterly in advance and is recognised in the period to which the maintenance commitment relates.

Deferred income represents amounts invoiced to customers in advance in respect of goods and services, support contracts and other services.

Accrued income represents goods and services delivered to customers that are uninvoiced at the date of the financial statements.

The financial information for the six months ended 30 September 2001 is also unaudited.

The financial information for the full preceding year is based on the statutory accounts for the financial year ended 31 March 2002. 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 1 November 2002 and were signed on its behalf by:

K L HILL - P K WRIGHT

Chairman - Director

2. Segment information

	Unaudited	Unaudited	Audited
	six months to	six months to	year ended
	30.09.02	30.09.01	31.03.02
	'000	'000	'000

Turnover by destination
United Kingdom	1,194	241	377
Rest of Europe	107	732	603
Far East	-	230	26
Rest of World	103	20	729

	1,404	1,223	1,735

3. Taxation
The tax credit for the periods represent research and development tax credits received in the relevant period.

4. 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 116,620,168 (March 2002: 70,175,139, September 2001: 46,318,130).

5. Reconciliation of movements in group shareholders' funds

	Unaudited	Unaudited	Audited
	six months to	six months to	year ended
	30.09.02	30.09.01	31.03.02
	'000	'000	'000

Retained loss for the financial period	(1,488)	(1,968)	(3,797)
Issue costs written off	-	-	(543)
New share issued	-	-	4,632
Long Term Incentive Scheme credit	-	(207)	(207)
Net (decrease)/ increase in shareholders' funds	(1,488)	(2,175)	85
Opening shareholders' funds	4,763	4,678	4,678

Closing shareholders' funds	3,275	2,503	4,763

6. Reconciliation of cash flow to movement in net funds

	Unaudited six months to 30.09.02 '000	Unaudited six months to 30.09.01 '000	Audited year ended 31.03.02 '000

Increase/(decrease) in cash in the period	323	40	(162)
Cash outflow from decrease in debt and lease financing	5	44	66
Cash (outflow)/inflow from (decrease)/increase in liquid resources	(1,625)	(2,510)	700
Movement in net funds in the period	(1,297)	(2,426)	604
Net funds at the beginning of the period	3,974	3,370	3,370
Net funds at the end of the period	2,677	944	3,974

Report of the Independent Auditors to the Members of Vocalis plc

Introduction

We have been instructed by the company to review the financial information for the six months ended 30 September 2002 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. 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. Our responsibilities do not extend to any other 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 any changes, and the reasons for them, are 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 excludes audit procedures such as tests of control and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom 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

On the basis of our review, 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 2002.

Grant Thornton
Registered Auditors
Chartered Accountants
Grant Thornton House
Melton Street
Euston Square
London NW1 2EP

1st November 2002