Interim Results

Microgen PLC
18 July 2001


FOR IMMEDIATE RELEASE                                              18 July 2001



                          MICROGEN plc ('Microgen')


                   INTERIM RESULTS FOR THE SIX MONTHS ENDED

                                 30 JUNE 2001



HIGHLIGHTS





*  Profit before tax and goodwill amortisation of £0.8 million (2000: loss of   
   £2.2 million)



*  Adjusted eps (excl. goodwill amortisation) of 1.5p (2000: loss per share of  
   3.6p)



*  Positive operating cash flow of £1.6 million in the period producing net free
   cash at 30 June of £10.1 million



*  Consultancy revenue growth of 25% with operating profit margin of 24%



*  Hosted e-services revenue growth of 25%.



*  Continued investment and growth in B2B e-billing with 25 billers and over 600
   recipients  connected to Microgen's hosted service.



Martyn Ratcliffe, Chairman, commented :



'Throughout the recent turmoil in the IT sector, the Board has maintained
disciplined financial management enabling both operating divisions to deliver
a solid performance during the first half of the year. In the current market
environment, the balance between profitability, investment and revenue growth
in our strategic sectors is very satisfactory.'



Contacts :


Martyn Ratcliffe, Chairman                                         01753-847123
Mike Phillips, Group Finance Director

Steve Liebmann, Buchanan Communications                           020-7466-5000





                                 MICROGEN plc

                   INTERIM RESULTS FOR THE SIX MONTHS ENDED
                                 30 JUNE 2001

                             CHAIRMAN'S STATEMENT



The performance of the Group in the first six months of the year has been very
satisfactory with the return to profitability, following the restructuring in
2000. The growth in the strategic sectors is particularly pleasing considering
the current IT market environment and the overall performance is affirmation
of the Board's commitment to disciplined financial management.



FINANCIAL PERFORMANCE



In the six months ended 30 June 2001, Microgen generated operating profit
before goodwill amortisation of £0.5 million (2000 : £0.0 million) from
revenue of £11.0 million (2000 : £11.0 million from continuing operations).
Profit before tax and goodwill amortisation was £0.8 million (2000 : loss of £
2.2 million), producing an adjusted earnings per share (excluding goodwill
amortisation) of 1.5p (2000 : loss per share of 3.6p ).



During the period, the Group produced positive cash flow of £1.6 million,
including a  contribution of £0.7 million due to improved debtor management
and continues to have a robust balance sheet with net free cash of £10.1
million at 30 June 2001 (30 December 2000 : £8.4 million). As previously
announced, the Group does not pay interim dividends (2000: 0.0 p).



MICROGEN-TELESMART



The consolidation of the billing services (legacy and e-billing), payment
solutions and hosted database services operations into a single division,
renamed Microgen-Telesmart, has enabled increased efficiency and cost
reductions while developing a larger customer base for cross-marketing of
Group services.



Revenue in the division was £6.3 million (2000 : £7.2 million) producing
operating profit before Group overhead of £0.5 million (2000 : £0.3 million),
including a one-off benefit of £0.1 million from a discontinued legacy
business. The planned decline in revenue occurred in the legacy print & mail
services through the restructuring and associated account rationalisation in
2000, although there was underlying organic growth of 11% from the retained
account base and new customer acquisition. In particular, the e-services
revenue grew by 25 % compared with the first half of 2000. In the B2B
e-billing business, Microgen now has 25 companies enabled with over 600
recipients having access to on-line invoices, statements, remittance advice
notes and related billing documentation via Microgen's hosting infrastructure.



MICROGEN-KAISHA



Microgen Kaisha, the Group's consultancy division, had a good start to the
year with revenue growth of 25%, compared to the first half of 2000, despite
the widely reported deterioration in the IT consultancy sector. Revenue for
the division was £4.7 million producing an operating profit before Group
overhead and goodwill amortisation of £1.1 million, equivalent to an operating
margin of approximately 24%. (2000 : revenue of £3.8 million and operating
profit before Group overhead and goodwill amortisation of £0.9 million).



PROSPECTS



The Board's decision last year to accelerate the transition of the Group
towards IT consultancy, focused on information management, and value-added
e-services has enabled Microgen to return to profitability despite the recent
slowdown in the IT market. These results demonstrate the success of the
Board's strategy of balancing profitability, investment and growth.



In terms of corporate development, the Board continue to explore merger and
acquisition opportunities, but maintain a prudent approach when evaluating
such activities.



In summary, the Board are pleased with the solid performance of the Group in
the first half of the year and are cautiously optimistic for the year as a
whole.




Martyn Ratcliffe                                                   18 July 2001

Chairman



                        GROUP PROFIT AND LOSS ACCOUNT
                    FOR THE SIX MONTHS ENDED 30 JUNE 2001


                                            Notes Unaudited Unaudited   Audited
                                                       six        six      Year
                                                     months    months     ended
                                                      ended     ended    31 Dec
                                                    30 June   30 June      2000
                                                       2001      2000
                                                      £'000     £'000     £'000


Turnover                                    1 (a)
  - continuing operations                            11,020    10,994    22,578
  - discontinued operations                               -     2,766     2,766
                                                     11,020    13,760    25,344
Operating costs                                    (11,226)  (14,877)  (26,711)


Operating profit/(loss)
Continuing operations
 - Operating profit/(loss) before goodwill  1 (b)       511       (2)       415
amortisation
  - Goodwill amortisation                   1 (b)     (717)     (627)   (1,328)
                                                      (206)     (629)     (913)
Discontinued operations                     1 (b)         -     (488)     (454)

Operating loss after goodwill amortisation  1 (b)     (206)   (1,117)   (1,367)
Exceptional Items - discontinued operations 1 (c)         -   (2,037)   (2,323)
Loss on ordinary activities before interest           (206)   (3,154)   (3,690)
and tax

Net interest                                            265       346       604

Profit/(Loss) on ordinary activities before              59   (2,808)   (3,086)
tax

Tax on profit/(loss) on ordinary activities     2      (14)       351       358

Profit/(Loss) on ordinary activities after               45   (2,457)   (2,728)
taxation

Dividends                                                 -         -     (512)

Retained profit/(loss) transferred to                    45   (2,457)   (3,240)
reserves



Earnings per share                              3

Basic                                                  0.1p    (4.9)p    (5.4)p
Diluted                                                0.1p    (4.7)p    (5.2)p

Adjusted earnings per share (before             3
goodwill amortisation)
Basic                                                  1.5p    (3.6)p    (2.8)p
Diluted                                                1.5p    (3.5)p    (2.7)p

Dividend per share                                      Nil       Nil      1.0p



                             GROUP BALANCE SHEET
                              AS AT 30 JUNE 2001


                                             Unaudited    Unaudited     Audited
                                                 as at        as at       as at
                                          30 June 2001 30 June 2000 31 Dec 2000
                                    Notes        £'000        £'000       £'000
Fixed assets

- Tangible                                       1,587        2,224       2,044
- Intangible                                    25,949       23,650      26,665
- Investments                                      192          312         252
                                                27,728       26,186      28,961

Current assets
- Stocks - raw materials                           131          171         122
- Debtors                               4        4,249        5,090       5,023
- Cash at bank and in hand                      11,556       18,091      13,871
                                                15,936       23,352      19,016

Creditors: due within one year          5      (8,326)     (13,966)    (12,236)


Net current assets                               7,610        9,386       6,780



Total assets less current                       35,338       35,572      35,741
liabilities


Creditors: due after more than one      6        (115)        (105)       (295)
year


Provisions for liabilities and          7      (1,366)   (1,796)        (1,708)
charges

Net assets                                      33,857       33,671      33,738

Equity capital and reserves

- Called up share capital               8        2,561        2,544       2,560
- Share premium account                 9       17,592       16,785      17,569
- Other reserves                        9          300          200         250
- Profit and loss account               9       13,404       14,142      13,359

Equity shareholders' funds                      33,857       33,671      33,738



                           GROUP CASH FLOW SUMMARY
                    FOR THE SIX MONTHS ENDED 30 JUNE 2001


                                                  Unaudited  Unaudited  Audited
                                                 Six months Six months     Year
                                                      ended      ended    ended
                                                    30 June    30 June   31 Dec
                                                       2001       2000     2000
                                            Notes     £'000      £'000    £'000



Net cash flow from operating activities    10(i)      1,555         49    1,520



Returns on investments and servicing of                 240        305      604
finance

Taxation                                              (366)         89      102

Capital expenditure and financial                     (145)       (71)    (503)
investment

Acquisitions and disposals                                -      (324)  (2,675)


Equity dividends paid to shareholders                 (512)      (509)    (509)

Cash inflow/(outflow) before use of liquid              772      (461)  (1,461)
resources and financing

Management of liquid resources                        2,008      (766)    4,040

Financing                                  10(ii)   (3,087)      (272)  (3,492)
                                            

Decrease in cash                           10(iii)    (307)    (1,499)    (913)
                                           



NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001



1.       Turnover, profit and exceptional items




                                                  Unaudited  Unaudited Audited
                                                 Six months Six months    Year
                                                      ended      ended   ended
                                                    30 June    30 June  31 Dec
                                                       2001       2000    2000
                                                       £000       £000    £000
                                                                          
1 (a) Turnover
Continuing operations
- Microgen-Telesmart                                  6,293      7,223  14,533
- Microgen-Kaisha                                     4,727      3,771   8,045
                                                     11,020     10,994  22,578


Discontinued operations                                   -      2,766   2,766
                                                     11,020     13,760  25,344

1 (b) Operating profit/(loss)
Continuing operations
- Microgen-Telesmart                                    508        257     141
- Microgen-Kaisha                                     1,115        901   2,198
                                                      1,623      1,158   2,339
- Group overhead                                    (1,112)    (1,510) (2,255)
                                                        511      (352)      84
Movement on property provision                            -        350     331
Operating profit from continuing operations
before goodwill amortisation                            511        (2)     415
                                                        

Goodwill amortisation
     - Microgen-Telesmart                              (90)          -    (75)
     - Microgen-Kaisha                                (627)      (627) (1,253)
                                                      (717)      (627) (1,328)

Operating loss after goodwill amortisation from       (206)      (629)   (913)
continuing operations



 Discontinued operations                                  -      (488)   (454)

Operating loss after goodwill amortisation            (206)    (1,117) (1,367)

1 ( c ) Exceptional items - discontinued
operations

Loss on disposal of discontinued operations               -      (240)   (240)
Loss on disposal of fixed assets - discontinued           -    (1,024) (1,006)
operations
Restructuring costs - discontinued operations             -      (773) (1,077)
                                                          -    (2,037) (2,323)

1 (d) Profit/(loss) before tax and goodwill
amortisation

Profit/(loss) on ordinary activities before tax          59    (2,808) (3,086)
Add back goodwill amortisation                          717        627   1,328
Profit/(loss) before tax and goodwill                   776    (2,181) (1,758)
amortisation



2.         Taxation


                                            Unaudited      Unaudited    Audited
                                           Six months     Six months       Year
                                                ended          ended      ended
                                         30 June 2001   30 June 2000     31 Dec
                                                 £000           £000       2000
                                                                           £000

UK corporation tax (charge)/credit at            (14)            351        358
30%



The effective rate of tax for the Group on its profit on ordinary activities
after tax but before goodwill is 1.8% (2000:11.3%).  At 30 June 2001, the
Group had a potential deferred tax asset of £1,250,469 due to timing
differences relating to accounting provisions and capital allowances which, in
accordance with UK GAAP, has not been recognised in the accounts.  The
movement in the potential deferred tax asset in the period was £173,000 and
without this movement the effective rate of tax would have been 24.5%.  The
remainder of the difference is due to permanent timing differences.



3.         Earnings per share


                                                   Unaudited Unaudited  Audited
                                                  Six months       Six     Year
                                                       ended    months    ended
                                                      30 June     ended   31 Dec
                                                        2001   30 June     2000 
                                                                  2000



Basic earnings per share                                0.1p    (4.9)p   (5.4)p

Diluted earnings per share                              0.1p    (4.7)p   (5.2)p

Adjusted basic earnings per share (before
goodwill amortisation)                                  1.5p    (3.6)p   (2.8)p
                                                        

Adjusted diluted earnings per share (before
goodwill amortisation)                                  1.5p    (3.5)p   (2.7)p
                                                        



Adjusted and basic earnings per share are based on the share capital of
50,844,577 shares (2000: 50,509,231) being the weighted average number of
shares in issue during the period.  Diluted earnings per share are based on
share capital of 51,924,802 (2000: 52,769,356). A reconciliation of earnings
to adjusted earnings is set out below:


                                                                  Basic Diluted
                                                         Earnings   EPS     EPS
                                                             £000 Pence   Pence

Profit on ordinary activities after tax                        45   0.1     0.1
Goodwill amortisation                                         717   1.4     1.4
Profit on ordinary activities after tax but before            762   1.5     1.5
goodwill amortisation



Adjusted earnings per share were previously based on profit or loss before
exceptional items, goodwill amortisation and charges related to share price
movements



4.         Debtors


                                    Unaudited         Unaudited         Audited
                                        as at             as at           as at
                                 30 June 2001      30 June 2000     31 Dec 2000
                                        £'000             £'000           £'000

Trade debtors                           2,888             3,873           3,911
Corporation tax recoverable               369                 -             369
Other debtors                             992             1,217             743
                                        4,249             5,090           5,023



5.         Creditors: due within one year


                                           Unaudited     Unaudited      Audited
                                               as at         as at        as at
                                        30 June 2001  30 June 2000  31 Dec 2000
                                               £'000         £'000        £'000

Net obligations under finance leases               -           701          358
Trade creditors                                1,083         1,029        1,559
Corporation tax                                  417           393          769
Other taxes and social security costs            909           796          835
Other creditors                                1,745           293          834
Deferred consideration on acquisition            399         2,430          773
Loan notes payable                             1,050         4,600        3,219
Accruals                                       2,723         3,724        3,377
Proposed dividend                                  -             -          512
                                               8,326        13,966       12,236



6.        Creditors: due after more than one year


                                           Unaudited     Unaudited      Audited
                                               as at         as at        as at
                                        30 June 2001  30 June 2000  31 Dec 2000
                                               £'000         £'000        £'000

Net obligations under finance leases               -             -          210
Other taxes and social security costs            115           105           85
                                                 115           105          295



7.        Provisions for liabilities and charges



Provisions for liabilities and charges relate to surplus property and may be
analysed as follows:


                                           Unaudited     Unaudited      Audited
                                               as at         as at        as at
                                        30 June 2001  30 June 2000  31 Dec 2000
                                               £'000         £'000        £'000

Balance brought forward                        1,708         2,438        2,438
Utilised in the period                         (342)         (292)        (399)
Credit to the profit and loss account              -         (350)        (331)
                                               1,366         1,796        1,708



8.         Share Capital


                                                                Number         £

Authorised ordinary shares of 5p each                       70,000,000 3,500,000
Issued allotted and fully paid:                             51,202,281 2,560,114
At 1 January 2001
Shares issued as deferred consideration to the                  10,690       535
Vendors of Microgen - Kaisha under the terms 
of the Acquisition Agreement dated 29 March 1999
At 30 June 2001                                             51,212,971 2,560,649



9.         Reserves


                                  ---------   Profit & Loss Account   --------
                                    Share    Other  Revenue  Goodwill    Total
                                  Premium Reserves  Reserve   Reserve
                                  Account                                
                                    £'000    £'000    £'000     £'000    £'000

At 1 January 2001                  17,569      250   25,003  (11,644)   13,359
Retained profit for the period          -        -       45         -       45
Shares issued during the period        23        -        -         -        -
UITF 17 charge arising on               -       50        -         -        -
previous grant of share options
                                   

At 30 June 2001                    17,592      300   25,048  (11,644)   13,404



10.       Notes to the group cash flow statement



(i)             Reconciliation of operating loss to net cash flow from
                operating activities:




                                               Unaudited   Unaudited    Audited
                                              Six months  Six months       Year
                                                   ended       ended      ended
                                            30 June 2001     30 June     31 Dec
                                                   £'000        2000       2000
                                                               £'000      £'000

Operating loss                                     (206)     (1,117)    (1,367)
Depreciation                                         656       1,148      1,832
Loss on disposal of tangible fixed                     -          17         24
assets
Goodwill amortisation                                717         627      1,328
Property provision release                             -       (350)      (331)
Non-cash share price related items                   138         119        208
Decrease/(Increase) in debtors                       774       (376)        535
(Increase)/Decrease in stocks                        (9)         109        158
(Decrease) in creditors                            (515)       (128)      (867)
Net cash inflow from operating                     1,555          49      1,520
activities



(ii)       Analysis of movement in Financing


                                                 Unaudited  Unaudited   Audited
                                                Six months Six months      Year
                                                     ended      ended     ended
                                                   30 June    30 June    31 Dec
                                                      2001       2000      2000
                                                     £'000      £'000     £'000

Issue of Ordinary shares                                 -         24       124
Payment of deferred consideration                    (350)          -   (1,806)
Repayment of capital element of finance lease        (568)      (296)     (429)
obligations
Repayment of Loan notes                            (2,169)          -   (1,381)

Net cash outflow from financing                    (3,087)      (272)   (3,492)



(iii)       Reconciliation of net cash flow to movement in net funds:


                                                 Unaudited  Unaudited   Audited
                                                Six months Six months      Year
                                                     ended      ended     ended
                                              30 June 2001    30 June    31 Dec
                                                     £'000       2000      2000
                                                                £'000     £'000

Decrease in cash in the period                       (307)    (1,499)     (913)
Cash outflow from decrease in lease                    568        296       429
financing
Cash (outflow)/inflow from movement in term        (2,008)        766   (4,040)
deposits
Change in net funds resulting from cash flow       (1,747)      (437)   (4,524)

Disposal of leases from discontinued                     -         18        18
operations
Redemption of loan notes                             2,169          -     1,381
Movement in net funds in the period                    422      (419)   (3,125)

Net funds at beginning of period                    10,084     13,209    13,209

Net funds at end of period                          10,506     12,790    10,084



The net free cash figure of £10.1 million referred to in the Chairman's
Statement is arrived at after deducting net Corporation Tax payable and
deferred consideration, totaling £0.4 million from the net funds of £10.5
million shown above.



(iv)       Analysis of net funds


                                 1 Jan 2001       Cash Flow        30 June 2001
                                       £000            £000                £000

Cash at bank and in hand             13,871         (2,315)              11,556

Debt due within 1 year              (3,219)           2,169             (1,050)

Finance leases                        (568)             568                   -

Total                                10,084             422              10,506



11.       Statement by the directors



The figures in the Group Profit and Loss Account and Consolidated Balance
Sheet do not amount to full accounts within the meaning of Section 254 of the
Companies Act 1985.  Full accounts of Microgen plc for the year ended 31
December 2000, on which the auditors gave an unqualified report, have been
delivered to the Registrar of Companies.



This interim statement has neither been audited nor reviewed by the Company's
Auditors.



Copies of this statement are being posted to shareholders and will also
available on the investor relations page of our web site (www.microgen.co.uk).
Further copies are available on request and free of charge from the Company
Secretary at 11 Park Street, Windsor, Berkshire SL4 1LU.