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13th June 2002

Vocalis Group PLC

Preliminary Results for the Year ended 31 March 2002

Vocalis Group plc, a leading provider of voice driven business solutions to the call centre industry, announces results for the year ended 31 March 2002.

Highlights

The year was one of significant progress for the Group:
  • Major changes were made to Vocalis strategy to establish a sound commercial base on which to develop a successful business
  • Vocalis was transformed from a pure technology company developing its own proprietary software to a market driven business solutions provider
  • Significant operational and personnel changes were introduced to underpin the commercial strategy.
  • The Group is enjoying the first commercial successes of these moves. New contracts to the value of 2 million were won in the final quarter from Powergen, Chelsea Building Society and Abbey National. Revenues from these contracts will be recognised in the year ending 31 March 2003.
  • The monthly overhead cost base was significantly reduced during the year from 700,000 to 400,000.
  • The Groups cash position remains strong following the Placing in December 2001 to raise 4.1 million (net). Cash balances at the year end were 4.0 million.
  • The Group returned a loss for the year of 3.8 million (2001: loss of 7.1 million). Turnover from continuing activities was 1.74 million (2001: 1.98 million).

 

Paul Wright, Chief Executive, commented:

"A strong business need for voice driven solutions in the Call Centre market has been identified by independent market research and confirmed by many leading organisations in the financial services, utility and other sectors who operate large call centres. Following the changes made last year, Vocalis is well positioned to provide valuable, cost effective solutions which can bring real benefit to organisations in this substantial market whilst delivering value to shareholders.

Vocalis is one of the UKs leading providers of voice driven solutions and we enter the current year as a strong organisation pursuing a clear and focused strategy. Early progress suggests the changes we have introduced will lead to success and we look forward with increasing confidence.

- ends -


Chairman's Statement

The year to 31 March 2002 has been one of significant progress for Vocalis providing the Group with a secure base from which to enter the new financial year. The Group started the year possessing a strong technology but without the commercial focus needed to translate its technological expertise into sales and sustainable profitability. During the year we introduced a focused strategy aimed at meeting the specific requirements of our marketplace and the demands of our customers. We made significant operational and personnel changes. I am pleased to report that we are already enjoying the first commercial successes as a result of these major changes.

RESULTS

Against a background of continued harsh trading conditions, and reflecting a period during which we introduced but did not realize the full benefit of key operational changes, turnover was lower at £1.7m, against £2.7m last year. On 19 March 2002 we announced several major contract wins, the revenue for which will be recognised in the new financial year. In response to the realignment of our cost base, the loss for the year was reduced to £3.8m (2001: £7.1m, after a £1.4m charge for closure of the managed service business).

PLACING

In December 2001 we issued just under 93 million new shares, raising £4.1m (net) for the Company. As set out in the circular to shareholders, the Placing provided the working capital to allow the implementation of our revised strategy and introduced a number of significant institutional shareholders to the Group. In welcoming them I would also like to take this opportunity to thank all our shareholders for their support during the recent difficulties and to confirm our total commitment to seeking to deliver increases in shareholder value for them.

PEOPLE

Following the resignation of Charles Halle in July 2001, Paul Wright assumed the role of Chief Operating Officer. On 1 January 2002 Paul was appointed Chief Executive, a reflection of his success in progressing the development and implementation of our revised strategy

In March we further strengthened the team through the appointment of Richard Watrasiewicz as Operations Director. Richard joined from TCA Consulting Ltd (part of the Terence Chapman Group plc) where he was a director of the Retail Financial Services practice.

Minesh Patel, Technical Director, left the Group at the end of the year to pursue other opportunities. Minesh was a founder member of Vocalis and we thank him for his contribution during his many years with the Group.

Roy Cotterill, who intended to retire from the Group in July 2001, extended his term as non-executive director at the Boards request. He will now be standing down at the Annual General Meeting. His vast commercial experience has proved to be invaluable to the Group in the last nine years both as Chairman and as a non executive director. We thank him for his support and wish him well for the future.

On behalf of the Board I should like to thank all of our staff for their continued commitment during a year of tremendous change and for the way in which they have embraced the commercial focus following our September 2001 relaunch.

We now have in place a strong management team with appropriate experience and skills, to take the Group forward into our target markets.

PROSPECTS

Vocalis is one of the UKs leading providers of voice driven solutions and we enter the current year a strong organisation pursuing a clear and focused strategy. Early progress suggests the changes we have introduced will lead to success and we look forward with increasing confidence.

OPERATIONAL AND FINANCIAL REVIEW

The financial year to 31 March 2002 saw Vocalis undertake fundamental change in order to establish a sound, commercial base on which to develop a successful UK and European business and from which to deliver value to shareholders and customers in our target markets.

STRATEGY

During the period we focused our business, to address the needs of UK corporations in their interaction with customers by telephone, transforming Vocalis from a pure technology company developing its own proprietary software, to a market driven business solutions provider.

Vocalis is now a product and solutions led company focused on Call Centre markets, with initial targets within the Financial Services, Utilities and Telecom sectors. These are large markets where call centre operations are central to customer interaction and where Vocalis can offer solutions providing both financial and other tangible benefits.

SpeechWareTM, the Vocalis speech recognition engine, is the core technology used in our solutions which adopt a best of breed approach to related technologies and use industry standard components. As part of this standardisation we joined the VoiceXML Forum last year, the industry body responsible for promoting the understanding and use of the Voice Extensible Markup Language (VoiceXML) standard.

Our repositioned business was successfully launched at the London Stock Exchange Conference Centre on 20 September. There we were joined by S2 Systems, a leading provider of back-end transaction software for the financial services market and by Eircom, a leading provider of directory enquiries in Ireland and a Vocalis call centre customer.

VOCALIS SOLUTIONS

Vocalis solutions are based on standard modules that have been developed to address the needs of call centres. Working with our customers, Vocalis creates tailored dialogues to integrate these modules together, thereby creating an individual solution, based on standard Vocalis and third party products.

Our approach offers significant benefits to Vocalis customers. The use of standard products reduces customer risk and implementation leadtimes, providing cost effective, high quality, flexible solutions. It also reduces development time and costs which, together with our inherent and unrivalled expertise in the use of the English language, gives us a clear competitive advantage in our target markets.

THE MARKET

Our strategy recognises that after a decade of explosive growth, the Call Centre market, of which the UK is the largest in Europe, faces a number of critical issues.

Call Centres are becoming increasingly popular but with annual staff turnover rates approaching thirty per cent and an almost insatiable need for more people, the costs associated with hiring, training and retaining employees are significant. Customer expectations continue to increase and, as a result, dependence on call centers and their role as the primary customer interface is fundamental to many business sectors, most notably in Financial Services and Utilities.

Our own and independent research has confirmed that voice remains the most intuitive and simple way for people to interact with businesses and other organisations, not least because people speak five times faster than they can type and ten times faster than they can write. We believe that the adoption of a voice driven solution will not only address many of the problems currently being experienced by Call Centres but can deliver competitive advantage for our customers.

Our voice driven solutions automate many basic customer identification and verification tasks currently performed by call center operators. They provide a flexible alternative to the increasingly unpopular touch-tone solution utilised in many call centres, shortening the operators time per call and increasing the number of calls that can be handled by each operator. Vocalis solutions are sold on a return on investment criteria to our customers, addressing business issues to improve efficiency within these organisations.

CUSTOMERS

The final quarter of the year saw early signs of the success of our new strategy, with the award of a number of new contracts.

We are providing Chelsea Building Society with the solution for a voice driven telephone banking system for money transfers, balance enquiries and recent transaction reporting.

Powergen is to introduce over the next year a complete voice driven solution with applications such as meter reading, direct debit changes and balance enquiries. Vocalis is providing both the solution and consultancy.

Abbey National, an existing Vocalis client, is continuing with its telephone banking system and during the final quarter of the year signed an order for ongoing maintenance and support. The telephone banking solution now handles over 1.5 million calls every month.

In addition, delivery of contracts through Ericsson, including those to Eircom,a providers of directory enquiries in Ireland, Telenor Mobile, one of Norways telecommunications suppliers and Stet Hellas a mobile telecoms operator in Greece were completed during the year.

Feedback from our customers is positive and our order pipeline is encouraging.

EMPLOYEES

In order to underpin our commercial strategy the Company has changed the balance of its staff. Consultancy and Customer Service operations have been set up to deliver and support solutions to our customers. We have invested in staff with experience in our target sectors and realigned our technical expertise to the extent that over fifty per cent of our staff have regular interaction with customers and prospects, a level that will continue to grow in the new financial year.

FINANCIAL REVIEW

In implementing our strategy based on the call centre market and standardisation we focused on reducing our cost base, enhancing value for shareholders without limiting our ability to take advantage of opportunities offered by our market place. Monthly overheads have been lowered from a high of £700,000 per month in March 2001 to a level of £400,000.

As we moved from the in-house development of a range of proprietary technology to focus on our core SpeechWareTM technology in conjunction with third party products, we reduced expenditure on research and development. As part of this change we have ceased the development of proprietary software for applications where appropriate industry standard products already exist. Research and development expenditure fell from 2.7m for the year to 31 March 2001 to £1.3m for the year just ended. Vocalis continues to have extensive intellectual property rights and maintains a strong research and development capability, which is focused on the future commercial needs of the market place.

The successful fund raising in December 2001 provided the Group with a strong financial base. Of the £4.1m raised, £4.0m remained on the Balance Sheet at the year end.

At 31 March 2002, the Group has, subject to agreement by the Inland Revenue, tax losses of £16m available for offset against future taxable profits in the United Kingdom.

SHAREHOLDERS’ RETURN

The loss per share for the financial year under review, which was also the diluted loss per share was 5.4p compared to a loss per share, basic and diluted of 15.8p last year. The directors do not propose the payment of a dividend.

PROSPECTS

A strong business need for voice driven solutions in the Call Centre market has been identified by independent market research and confirmed by many leading organisations in the financial services, utility and other sectors who use large call centres. Following the changes made last year, Vocalis is well positioned to provide valuable, cost effective solutions which can bring real benefit to organisations in this substantial market whilst delivering value to shareholders.


Consolidated Profit and Loss Account

For the year ended 31st March 2002

Notes

2002
£’000

2001
£’000

Turnover
Continuing
Discontinuing






1,735
-


1,982
719


Cost of sales




1,735
(754)

2,701
(1,025)

Gross Profit
Other operating expenses (net)




981
(5,055)

1,676
(7,604)

Operating loss
Continuing
Discontinued





(4,074)
-


(4,152)
(1,776)


Cost of closure of managed service businesses




(4,074)

(195)

(5,928)

(1,446)

Loss on ordinary activities before interest and finance charges
Bank interest receivable
Interest payable





(4,269)
96
(12)


(7,374)
250
(20)

Loss on ordinary activities before taxation
Taxation




(4,185)
388

(7,144)
-

Loss for the year


(3,797)

(7,144)

Loss per share, basic and diluted – pence

2

(10.57)

(3.36)


Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 March 2002

2002
£’000

2001
£’000

Loss for the year
Loss on foreign currency translation

(3,797)
-

(7,144)
(109)

Total recognised losses for the year

(3,797)

(7,253)



Balance Sheet
As at 31 March 2002

   

Group

2002

£’000

Group

2001

£’000


Fixed assets

Intangible assets

8

21

Tangible assets

740

975

Investments

-

200


748

1,196


Current assets

Stocks

535

694

Debtors

471

1,121

Cash at bank

4,012

3,474


5,018

5,289

Creditors: amounts falling due within one year

 

(965)

(1,766)


Net current assets

4,053

3,523


Total assets less current liabilities

4,801

4,719

Creditors: amounts falling due after more than one year

 

38

(41)


Net assets

4,763

4,678


Capital and reserves

Called-up share capital

6,948

2,316

Share premium account

16,789

17,332

Other reserves

1,070

1,070

Profit and loss account

(20,044)

(16,040)


Shareholders’ funds –equity interests

4,763

4,678




Consolidated Cash Flow Statement

for the year ended 31 March 2002

   

2002

£’000

2001

£’000


Net cash outflow from operating activities

(3,862)

(5,917)

Returns on investments and servicing of finance

- interest received

96

250

- interest paid - finance leases

(6)

(10)

- other loans

(6)

(11)


Net cash inflow from returns on investments and servicing of finance

 

84

229

Capital expenditure and financial investment

- purchase of tangible fixed assets

(95)

(305)

- purchase of trade investment

-

200

- taxation

388

-


Net cash inflow (outflow) from capital expenditure and financial investment

 

293

(505)

Cash outflow before management of liquid resources and financing

 

(3,485)

(6,193)


Management of liquid resources

- (increase)decrease in short term deposits

(700)

1,250

Financing

Proceeds from issue of Ordinary Shares

4,631

5,090

Costs of issue of Ordinary Shares

(542)

(93)

Repayment of secured loan

(3)

(5)

Capital element of finance lease repayments

(63)

(103)


Net cash inflow from financing

4,023

4,889


Decrease in cash in the year

(162)

(54)


 

NOTES:

  • 1. The financial information set out above does not constitute the Company's statutory financial statements for the year ended 31 March 2002 within the meaning of section 240 of the Companies Act 1985 but is derived from those financial statements. The statutory financial statements for the Company for the year ended 31 March 2002 will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on those financial statements and their report was unqualified.
  • 2. Loss per share
    The calculations of loss per share are based on the following losses and numbers of shares.

2002
£’000

2001
£’000

Loss for the financial year

(3,797)

(7,144)


Weighted average number of shares used to calculate basic and diluted loss per share.


2002
Number of shares

2001
Number of shares

70,175,139

45,153,500

 

  • 3. Copies of the 2002 Report and Accounts will be sent to shareholders in due course. Further copies will be available from the Company's offices at Chaston House, Mill Court, Great Shelford, Cambridge CB2 5LD

About Vocalis

Vocalis works with organisations to create contact centre solutions that build the organisations business and brands. These solutions can turn your contact centre from a cost to a profit centre by ensuring it builds your brand, helps your business be more competitive, and increases customer loyalty through more effective and efficient service. Vocalis was formed in 1993, is publicly traded on FTSE Stock Market and has been listed since July 1996. Vocalis brings back the reassurance of the most personal human touch in business - putting voice to work.

The Vocalis Website is at

Email: [email protected]


For further Vocalis Group information, contact:

Rebecca Knight Philippa Buttle
QBO Vocalis Group plc
22 Endell Street
Covent Garden
London
WC2H 9AD
Chaston House
Mill Court
Gt Shelford
Cambridge
CB2 5LD
Tel: 020 7379 0304 Tel: 01223-846177
Fax: 020 7497 2533 Fax: 01223-846178
Email:[email protected] Email:[email protected]


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