Microgen Axess

MICROGEN PLC
5 October 1999



                       MICROGEN PLC
                             
             Microgen Axess - Business Update

Microgen plc, the information management services company,
has recorded strong order intake in September for its
Microgen Axess Application Service Provider ('ASP')
service. These orders will increase the number of customer
companies for Microgen Axess to 33 with a total of 52
applications.

Microgen Axess is an ASP providing online database
management, including the storage, retrieval, processing,
viewing and analysis of computer output or document
databases. The first customer was connected to the Microgen
Axess service in July 1997, growing modestly by an average
of one new customer or application per month through to
July 1998. Following the divisionalisation of Microgens UK
operations in Q3 1998, Microgen Axess has accelerated the
growth rate and established a diverse, blue-chip customer
base, including  :   3M, Amerada Gas, American National
Can, Atos, Bass Brewers, Black & Decker, Bull Information
Systems, Dental Practice Board, Dial-a-Cab, Emap Consumer
Publishing, Fujifilm, Habitat, Halifax plc, The Builder
Center (formerly Hall & Co), Hewlett-Packard, JP Morgan,
Oxford University Press, Pioneer Concrete, Rudolf Wolff,
Stena Line and Thomas Cook.

As a result of the success during the past year, in the
first half of 1999, the Microgen Axess ASP achieved revenue
growth in online, recurring revenue of 88% relative to the
second half of 1998 and 326% greater than the first six
months of 1998. With stored data exceeding 120 million
pages and annualised on-line, recurring revenue now having
a run-rate in excess of  £1 million, Microgen Axess is one
of the most established and successful ASPs in the UK to
date. The investment over the past three years in the
Microgen Axess ASP exceeds £6 million and a technical
outline of the established infrastructure is given in the
attached Notes to Editors. While customer Y2K requirements
may slow the growth rate in the near term as projects get
deferred until after the Millennium, the increasing market
understanding and appreciation of the benefits of the ASP
model are anticipated to stimulate greater demand for ASP
services in the future.

Typical contracts for Microgen Axess are from 18 months to
5 years in duration, although, to date, no customer which
has gone fully live has terminated the service, indicative
of the high value-add and cost-effectiveness of the ASP
model but also a function of the critical nature of the
applications outsourced. Microgen Axess utilises industry
standard internet-based technology, specifically internet
browser and Adobe Acrobat (.pdf) files and offers the
customer data connection options via secure internet, WAN
or dial-IP infrastructure, flexibility that has enabled one
multi-national customer to roll out a Microgen Axess
application across nine European subsidiaries with a
further seven scheduled. Project management of related
services, such as document scanning, can also be provided
and currently account for approximately 16% of the total
Microgen Axess service revenue, although such services
provide significantly lower margin than the on-line
revenue.

With the initial and substantial investment in fixed cost
infrastructure now complete, the emphasis is on increasing
the on-line, recurring revenue. Currently, the average on-
line revenue per Microgen Axess application is in the order
of £2,000 per month and the average monthly revenue per
customer company is in the order of £3,200. While new
customers and additional applications to existing customers
are the key drivers of revenue growth, initial analysis
indicates that on-line, recurring revenue is growing in the
order of 15% per annum, simply due to the increased
customer utilisation and growth in the volume of
data/documents stored on the outsourced database.

The Boards primary objective, which was achieved, during
the first half of 1999 was to pass through the bureau break-
even level, such that the Microgen Axess ASP service
contribution now exceeds the direct costs associated with
the service infrastructure and operations/customer support
staff. The Microgen Axess ASP monthly operating loss
(before Group overheads) is currently in the order of
£130,000 - 70% of which is related to sales and marketing
costs (This compares with a loss of £210,000 for July 1998,
immediately prior to the reorganisation.) Since additional
infrastructure investment is not anticipated to be material
in the near term, future profitability of the ASP is
directly correlated with revenue growth and the Board
continues to review the optimum investment in sales and
marketing resources in order to maximise the long term
shareholder value from the Microgen Axess ASP.

For further information, please contact :

Martyn Ratcliffe, Executive Chairman, Microgen plc
01753-847177

Mike Phillips, Group Finance Director, Microgen plc
01753-847177

Steve Liebmann, Buchanan Communications           
0171-466-5000

Notes to Editors :

Microgen Axess ASP infrastructure has been designed and
developed to be operationally resilient and highly
scaleable. It currently comprises :

*    Dual, mirrored IBM RS6000 S7A servers with 4-way SMP
     64-bit processors, expandable to 12-way multi-processing
     capability,

*    5 terabytes of capacity in a mirrored hierarchical
     storage architecture (dual 2.5 terabyte storage
     infrastructure with each server) incorporating IBM SSA RAID
     arrays, optical disc and robotic tape silos,

*    A wide area network (WAN) outsourced to BT with high
     speed ATM backbone enabling Framestream customer
     connections, providing a resilient internal network for
     inter-server communications and a cost-effective local
     point of access for Microgen Axess customers,

*    Secure internet access with network diversity (BT and
     Demon Internet) for greater resilience, and incorporating
     Checkpoint firewall technology and secure 128-bit SSL
     certification using Verisign technology from BT Trustwise,
     for which Microgen is now authorised to issue certificates
     directly to its Microgen Axess and e-billing customers.

Microgen Axess now offers both 'packaged' service
applications targeted at improving efficiency within
specific business processes through effective database
management, as well as a customised service to satisfy
customer-specific computer output or document database
management applications. These 'packaged' database
management applications currently include Debtor
Management, Purchase Ledger, Customer Service, Contracts
Management, Report Distribution and Human Resource
applications. Furthermore, recent enhancements to these
services include :

*    Virtual Document Flow : Developed in conjunction with
  a major customer, this enhancement integrates key workflow
  functionality into a Microgen Axess document database,
  providing improved business process efficiency in customer
  service and contracts management applications.

*    Database Analysis Tools : As an added-value service
  for customers using Microgen Axess computer output database
  services, data interrogation and analysis tools are
  currently in final testing with a major customer. As with
  all Microgen Axess services, these tools will be chargeable
  on usage.

*    Hosted Extranet Service : By enabling a Customers
  customers to access their Microgen Axess database, Microgen
  is now hosting a market-leading extranet service for a
  major company. This capability has now been further
  developed to integrate business-to-business e-billing
  functionality, providing operational efficiencies, improved
  customer service and increased cash flow.

Typical of an ASP model, the Microgen Axess customer
requires no dedicated capital expenditure with payment for
the service application based on usage and only a modest
consultancy charge is incurred for the initial database
development.  The use of a hierarchical storage
architecture enables the service to be customised to
deliver the optimum price-to-performance for the specific
customer application. Furthermore, the rapid deployment of
the ASP service can enable the benefits of the system to
be achieved by the customer in less than a quarter of the
time it would typically take to deploy an in-house system
of similar functionality.

Microgen Axess is a registered trade name of Microgen plc.
All other brands, trademarks and/or names are the property
of their respective owners.