Pilat Media Global plc
AIM : PGB

Pilat Media Global plc

August 30, 2005 05:17 ET

Pilat Media Global plc: Results for the Six Months and Second Quarter Ended 30 June 2005

LONDON, UNITED KINGDOM--(CCNMatthews - Aug. 30, 2005) - Pilat Media Global plc ("Pilat Media" or the "Company") (AIM:PGB), the London-based supplier of business management software to broadcasters around the world, today announces its results for the six months and second quarter ended 30 June 2005 ("Q2" or "the Quarter").

Summary:

- New $15 million contract signed with the US broadcast group Fox Television Stations

- Six month revenues Pounds Sterling 4,694,000 (2004: Pounds Sterling 5,607,000)

- Second quarter revenues Pounds Sterling 2,481,000 (2004: Pounds Sterling 3,015,000)

- Six month loss of Pounds Sterling 487,000, in line with the management budget

- Healthy pipeline enabling continued year-upon-year growth by the end of 2005 and in 2006

Commenting on the results, Michael Rosenberg, Chairman of Pilat Media Global plc, said:

"The signing of the contract with Fox Television Stations in the USA marks a strategic milestone on the way to leadership in the world's largest broadcast market. Building on such an outstanding endorsement of our product, we can further consolidate our competitive advantage by intensifying our investment in R&D. We expect revenues and profits for 2005 to exceed those of last year."



For further information:

Pilat Media Global plc
Avi Engel, Chief Executive Officer Tel: +44 (0) 20 8782 0700
Martin Blair, Chief Financial Officer
aengel@pilatmedia.com www.pilatmedia.com

Shore Capital
Alex Borrelli / Graham Shore Tel: +44 (0) 20 7408 4090
alex.borrelli@shorecap.co.uk www.shorecap.co.uk

Media enquiries:

Abchurch
Henry Harrison-Topham / Heather Salmond Tel: +44 (0) 20 7398 7700
Henry.ht@abchurch-group.com www.abchurch-group.com
heather.salmond@abchurch-group.com


Chairman's Statement

Pilat Media Global plc announces its results for the six months ended 30 June 2005 and the quarter ended 30 June 2005.

We were extremely pleased to announce, earlier this month, the signing of the formal contract with Fox Television Station Inc ("FTS"), one of the USA's largest broadcast groups, following a Letter of Intent that was announced on 17 May 2005. The contract with FTS is worth $15 million over the coming two to three years, with additional recurring maintenance revenues continuing into the longer term. This is the Company's 36th client and our 11th in North America.

This win follows a similar size contract we signed with CTV in Canada and the earlier large contracts with Discovery International, being only three examples of our full system integration vision being adopted by world class broadcasters using the Company's unique offering. IBMS will enable FTS to bring more closely together airtime sales, content scheduling and media trafficking across its many stations and channels, currently supported by a separate system at each station. Station groups represent the largest market sector in North America for system providers such as Pilat Media and the contract with FTS gives the Company an excellent opportunity to achieve a leadership position in that market.

The sales pipeline continues to remain strong and we are hopeful that there will shortly be some further conversions. The major European broadcaster, which, in the Q1 results, we mentioned had already selected Pilat Media, has indicated that it expects to sign the formal contract during Q4 2005 and work has already commenced on the installation of IBMS based on approved purchase orders.

The work undertaken in Q2 2005 was very similar to that in the first quarter, with further deliveries of software to CTV, Discovery, Sky Italia and TV4. Despite the existing client base generating more revenues than budgeted, revenues in the six months to June 2005 are only in line with budget rather than exceeding it. This is due to the delay in signing the FTS contract, which we had anticipated to start contributing to revenues earlier. Inevitably, revenues this year are likely to be below the previously expected target. As reported in the Q1 statement, we still expect two thirds of revenues and all of the profits for this year to accrue in the second half of the year. These annual revenues and profits are still expected to exceed last year's and substantially underpin expectations for 2006 and beyond.

We continue to focus on increasing earning per share organically but in parallel we examine further routes to enhance shareholder value by looking at opportunities to expand by synergetic acquisitions.

Results

Q2 revenues of Pounds Sterling 2,481,000 (Q2 2004: Pounds Sterling 3,015,000) were broadly in line with management's expectations as were the cumulative figures for the six-month period. These revenues included (a) Pounds Sterling 1,569,000 (Q2 2004: Pounds Sterling 1,838,000) for implementation services (consulting, training, customisation and system integration fees), (b) Pounds Sterling 380,000 (Q2 2004: Pounds Sterling 731,000) for the proportion of IBMS licences recognised in respect of the long-term contract accounting projects according to the progress made during the Quarter and (c) Pounds Sterling 532,000 (Q2 2004: Pounds Sterling 446,000) of recurring maintenance and support fees from existing clients.

In Q2 2005, as in previous quarters, Pilat Media generated a significant proportion of its revenues from long-term contracts, with their licence and implementation fees combined being recognised gradually according to the progress achieved. The new contracts referred to above are also likely to be considered as long term contracts and we anticipate them to start to make an impact in the second half of the year. As a result, this year more than 65% of the annual revenues are expected to be achieved in the second half.

Gross profit in the Quarter was Pounds Sterling 815,000 (Q2 2004: Pounds Sterling 1,029,000), which represents a margin of 32.8% compared to 34% in Q2 2004 and to 46.5% for the whole of 2004. The gross margin is approximately the same as for the equivalent period last year, whilst the reduction compared to 2004 has been caused by non-chargeable development work for TV4 and CTV (that is de-facto R&D) and an increase in staff numbers in preparation for the new projects expected. These new recruits receive on-the-job training and are therefore included in the cost of sales and have only recently started to contribute to revenue. As noted in Q1 these two factors that lowered the gross margins will diminish as the new projects become a higher proportion of revenues. Plans to change our internal methods and systems to enable generic product enhancement work currently reported as cost of sales to be accounted for as R&D are reported below.

Selling and marketing costs in Q2 2005 at Pounds Sterling 290,000 (Q2: 2004 Pounds Sterling 267,000) have increased slightly over previous quarters, reflecting the increase in sales and marketing activity.

General and administrative costs at Pounds Sterling 538,000 (2004 Pounds Sterling :254,000) were at a similar level to the last three quarters. General and administrative costs in the second quarter of 2004 were low due to the re-classification to cost of sales of Oracle and Magic licences (that are required to run IBMS) acquired in Q1 2004, which have now been re-sold to customers.

As revenues in Q2 were lower than those in the corresponding quarter last year, a pre-tax loss of Pounds Sterling 446,000 was incurred, slightly better than the budgeted level, compared to a profit of Pounds Sterling 435,000 in the equivalent period last year.

Research and Development

The Company's R&D expenditure as shown in this Quarter and all previously reported financial statements only includes product improvements initiated and funded by the Company. The many product enhancements developed to meet specific client requirements have so far been treated as cost of sales, like all client specific project costs, irrespective of whether they were designed and built generically for the benefit of other existing and future clients. This has understated the reported investments in product improvements and distorted the true gross margins being achieved, showing them as being unrealistically low. The Company is now implementing a new method and system of tracking software development that will allow generic product enhancements and improvements to be accounted for as R&D whilst retaining the manageability of the specific projects for which such developments are initiated. From Q3 onwards we plan to show the full investment in generic product enhancements as R&D and not as cost of sales and will also provide adjusted historical figures to maintain comparability.

The signing of the FTS contract and the healthy pipeline of additional prospects have increased our confidence in revenues in the future, enabling us to take a longer term view with respect to R&D. We have therefore concluded that in addition to the continued investment in functional enrichment referred to above, we should also intensify and accelerate investments in the product's technical infrastructure, taking advantage of new technology that has become available recently. This technology advancement should widen and further cement our competitive edge for the longer term, making IBMS even more future proof with additional advantages to clients. It will improve IBMS' Graphical User Interface (GUI) as well as the product maintainability and will make it easier for us to scale up to meet growing demand. The feasibility study for the technology upgrade project has now been completed successfully; included in the research and development expenditure for the Quarter is approximately Pounds Sterling 210,000 relating to this project, which is the reason for the higher R&D spent this Quarter. The full upgrade will progress in parallel to the ongoing functional development process over the coming 18 months and the development costs, estimated at approximately Pounds Sterling 1.5 million, will be capitalised and amortised over its estimated useful life - probably 5 to 10 years. For existing clients, the path to the upgraded IBMS will be evolutionary, like with previous major releases, and the database and all existing functionality will be preserved, protecting the clients' investments.

Balance Sheet

There was a decrease in cash balances (including liquid resources), by Pounds Sterling 893,000 in the Quarter due to the loss in the period and an increase in trade receivables of Pounds Sterling 800,000 in the quarter. The increase in trade receivables was purely down to timing as over 70% of trade receivables were collected within 6 weeks of the quarter end. Cash resources remain positive overall.

Outlook

Our continuing success in winning high quality customers like Fox Television Stations Inc, the fast pace of continuous product improvement we are able to maintain and the additional prospects we currently work on give us confidence for the future.



Michael Rosenberg Avi Engel
Chairman CEO
30 August 2005 30 August 2005



CONSOLIDATED PROFIT AND LOSS ACCOUNTS
------------------------------------------------------------------------

Audited
Unaudited Unaudited 12 Months
6 Months ended 3 Months ended ended
30 June 30 June December 31
2005 2004 2005 2004 2004
Pounds Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling Sterling

TURNOVER 4,694,490 5,607,249 2,481,333 3,015,426 12,052,232

Cost of
sales (3,350,932) (3,279,865) (1,666,800) (1,986,326) (6,442,594)
------------------------------------------------------------------------
GROSS PROFIT 1,343,558 2,327,384 814,533 1,029,100 5,609,638
Operating
costs and
expenses:
Research
and
development (581,223) (172,553) (466,331) (91,042) (366,439)
Selling and
marketing (482,598) (406,539) (289,866) (266,791) (888,044)
General and
admin-
istrative (1,095,428) (1,225,067) (537,619) (253,914) (2,418,481)
Amortisation
of Goodwill - (105,600) - (52,800) (211,214)
------------------------------------------------------------------------
Total
operating
costs and
expenses (2,159,249) (1,909,759) (1,293,816) (664,547) (3,672,178)

OPERATING
(LOSS) /
PROFIT (815,691) 417,625 (479,283) 364,553 1,725,460

Interest
receivable 76,013 28,921 33,565 24,507 109,509

Interest
payable and
similar
charges - (11,628) - (5,735) -
------------------------------------------------------------------------
(LOSS) /
PROFIT ON
ORDINARY
ACTIVITIES
BEFORE
TAXATION (739,678) 434,918 (445,718) 383,325 1,834,969

Taxation 252,197 (108,730) 252,197 (108,730) (590,694)
------------------------------------------------------------------------
(LOSS) /
PROFIT ON
ORDINARY
ACTIVITIES
AFTER
TAXATION (487,481) 326,188 (193,521) 274,595 1,244,275
------------------------------------------------------------------------
------------------------------------------------------------------------
(LOSS) /
EARNINGS PER
SHARE
Basic (0.97p) 0.68p (0.38p) 0.57p 2.58p
Diluted (0.97p) 0.65p (0.38p) 0.55p 2.49p
------------------------------------------------------------------------
------------------------------------------------------------------------



CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------

Unaudited Audited
June 30 December 31
2005 2004 2004
Pounds Pounds Pounds
Sterling Sterling Sterling

FIXED ASSETS
Intangible assets - 105,614 -
Tangible assets 200,170 310,965 240,988
------------------------------------------------------------------------
200,170 416,579 240,988
------------------------------------------------------------------------

CURRENT ASSETS
Debtors
- due within one year 7,344,391 5,129,203 6,715,645
- due after more than one year 314,932 487,459 361,326
Cash at bank and in hand 3,014,096 4,692,379 4,213,314
------------------------------------------------------------------------
10,673,419 10,309,041 11,290,285

CREDITORS: Amounts falling due
within one year (2,414,216) (2,500,762) (2,380,531)
------------------------------------------------------------------------
NET CURRENT ASSETS 8,259,203 7,808,279 8,909,754
------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 8,459,373 8,244,858 9,150,742
------------------------------------------------------------------------
------------------------------------------------------------------------

CAPITAL AND RESERVES
Called up share capital 2,527,695 2,522,203 2,523,862
Share premium account 5,190,871 5,170,551 5,176,689
Capital redemption reserve 50,000 50,000 50,000
Merger reserve (853,955) (853,955) (853,955)
Other reserve 3,108,000 3,108,000 3,108,000
Profit and loss account (1,563,238) (1,771,941) (853,854)
------------------------------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS 8,459,373 8,244,858 9,150,742
------------------------------------------------------------------------
------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF CASH FLOWS

Audited
Unaudited Unaudited Twelve
Six months Three months months to
to June 30 to June 30 December 31
2005 2004 2005 2004 2004
Pounds Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling Sterling
Net cash
outflow from
operating
activities a (1,254,944) (791,375) (915,714) (398,825) (1,328,600)

Returns on
investments
and servicing
of finance b 76,013 17,293 33,565 18,772 109,509

Taxation 30,294 - 12,955 - -

Capital
expenditure
and financial
investment c (68,596) (107,216) (34,426) (22,109) (149,069)
------------------------------------------------------------------------
CASH OUTFLOW
BEFORE
FINANCING (1,217,233) (881,298) (903,620) (402,162) (1,368,160)

Management of
liquid
resources d 1,384,535 - 1,069,799 - (1,915,620)

Financing e 18,015 3,372,810 9,009 3,365,684 3,380,607
------------------------------------------------------------------------
INCREASE IN
CASH IN THE
PERIOD 185,317 2,491,512 175,188 2,963,522 96,827
------------------------------------------------------------------------
------------------------------------------------------------------------



APPENDICES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

Audited
Unaudited Unaudited Twelve
Six months Three months months to
to June 30 to June 30 December 31
2005 2004 2005 2004 2004
Pounds Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling Sterling
a Reconciliation of
operating (loss)/
profit to net cash
inflow /outflow
from operating
activities

Operating (loss) /
profit (815,691) 417,625 (479,283) 364,553 1,725,460
Depreciation and
amortisation 107,530 221,803 49,931 110,633 440,747
Loss / (profit) on
sale of fixed
assets 1,884 (500) 1,142 (500) (2,000)
(Increase) /
decrease in
debtors (582,352) (695,465) (2,626,627)
(1,124,384) (1,246,632)
Increase /
(Decrease) in
creditors 33,685 (305,919) 207,961 373,121 (866,180)
------------------------------------------------------------------------
Net cash
(outflow) from
operating
activities (1,254,944) (791,375) (915,714) (398,825) (1,328,600)
------------------------------------------------------------------------
------------------------------------------------------------------------


b Analysis of cash
flows for
headings netted
in the cash flow
statement

Returns on
investments and
servicing of
finance
Interest
received 76,013 28,921 33,565 24,507 109,509
Interest paid - (11,628) - (5,735) -
------------------------------------------------------------------------
Net cash inflow
from returns on
investments and
servicing of
finance 76,013 17,293 33,565 18,772 109,509
------------------------------------------------------------------------
------------------------------------------------------------------------


c Capital
expenditure and
financial
investment
Purchase of
tangible fixed
assets (68,596) (107,716) (34,426) (22,609) (151,069)
Sale of tangible
fixed assets - 500 - 500 2,000
------------------------------------------------------------------------
Net cash outflow
from capital
expenditure and
financial
investment (68,596) (107,216) (34,426) (22,109) (149,069)
------------------------------------------------------------------------
------------------------------------------------------------------------


d Management of
liquid resources

Cash drawn /
(deposited) from /
(placed on) term
deposits 1,384,535 - 1,069,799 - (1,915,620)
------------------------------------------------------------------------
Net cash inflow/
(outflow) from
management of
liquid resources 1,384,535 - 1,069,799 - (1,915,620)
------------------------------------------------------------------------
------------------------------------------------------------------------


e Financing
Issue of share
capital 18,015 3,533,211 9,009 3,526,085 3,541,008
Equity share
issue expenses - (160,401) - (160,401) (160,401)
------------------------------------------------------------------------
Net cash inflow
from financing 18,015 3,372,810 9,009 3,365,684 3,380,607
------------------------------------------------------------------------
------------------------------------------------------------------------



Analysis of net funds

At 1 January At 30 June
2005 Cash flow 2005
Pounds Pounds Pounds
Sterling Sterling Sterling
Cash at bank and in hand 377,097 185,317 562,414
Cash on deposit 3,836,217 (1,384,535) 2,451,682
------------------------------------------------------------------------
4,213,314 (1,199,218) 3,014,096
------------------------------------------------------------------------



NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------


1. Presentation of results

This Report was approved by the directors on 30 August 2005.

The current and the comparative first quarters to March have been prepared using accounting policies and practices consistent with those which will be adopted in the 2005 Annual Report and Accounts but have not been audited by the auditors.

The audited results for the year ended 31 December 2004 are an abridged version of the company's Annual Report and Accounts which have been filed with the Registrar of Companies and on which the auditors gave an unqualified audit opinion.

The financial information contained in this Report does not constitute statutory accounts as defined by Section 240 of the Companies Act 1985.

2. Dividends

The directors do not recommend the payment of a dividend.

3. (Loss) / Earnings per share

Basic and diluted (loss) / earnings per share is based on the (loss) / profit on ordinary activities after taxation and on the following weighted average number of shares in issue.



Shares in Issue
6 months 3 months 6 months 3 Months 31
to 30 June to 30 June to 30 June to 30 June December
2005 2005 2004 2004 2004
Basic 50,511,686 50,537,744 48,259,173 48,301,119 48,309,320
Adjustments:
Issue of
outstanding share
options - - 1,977,007 2,004,317 1,709,428
------------------------------------------------------------------------
Diluted 50,511,686 50,537,744 50,236,180 50,305,436 50,018,748
------------------------------------------------------------------------
------------------------------------------------------------------------


Due to the loss incurred in the quarter ended 30 June 2005 there is no dilutive effect from the issue of share options.

4. Turnover in Geographical Markets

The Group operates only one principal business segment which operates globally. Turnover in the following geographical markets was:



12 Months
6 months 3 months 6 months 3 Months to 31
to 30 June to 30 June to 30 June to 30 June December
2005 2005 2004 2004 2004
Pounds Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling Sterling
Europe, Middle
East and Africa
("EMEA") 1,699,548 922,272 2,098,163 1,488,241 4,172,355
Americas 2,465,913 1,314,590 2,601,238 1,206,808 6,155,288
Australasia 529,029 244,471 907,848 320,377 1,724,589
------------------------------------------------------------------------
4,694,490 2,481,333 5,607,249 3,015,426 12,052,232
------------------------------------------------------------------------
------------------------------------------------------------------------


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