Stilo Regulatory News (STL)

13 March 2013

STILO INTERNATIONAL PLCPreliminary Announcement of Resultsfor Year Ended 31 December 2012

Stilo International plc ("Stilo", the "Group" or the "Company") today announces its results for the year ended 31 December 2012. The Company provides XML content processing technology and cloud content conversion services to major corporations.

FINANCIAL HIGHLIGHTS

·; Profit after taxation increased to £118,000(2011: £105,000)

·; Sales revenues reduced to £1,409,000, reflecting curtailment of SAP-related activities(2011: £1,735,000)

·; Increase in sales of Stilo Migrate to £355,000(2011: £83,000)

·; Annual software maintenance revenues of £735,000(2011: £771,000)

·; Operating expenses reduced by 16% to £1,270,000(2011: £1,508,000)

·; Continued investment in product development of £368,000(2011: £377,000)

·; Cash position continues to strengthen to £976,000 as at 31 December 2012(2011: £939,000)

BUSINESS HIGHLIGHTS

·; Encouraging growth in orders received for Stilo Migrate, the cloud XML content conversion service, from customers including IBM, EMC Corp, Cisco Systems, Micron Technology, Varian Medical Systems, Cassidian Communications and ACME Packet

·; Migrate functionality enhanced with a RoboHelp to DITA XML conversion capability

·; Migrate recommended by central IBM Information Development tools group to over 400 globally dispersed documentation teams

·; Migrate deployed by IBM Retail Store Solutions and IBM z/OS mainframe team in USA

·; EMC Corp implemented Migrate conversion portals across five business divisions in USA

·; Migrate used extensively by Cisco Systems documentation teams in India and Israel

·; OmniMark version 10 released, addressing high-performance XML/SGML content processing requirements of major organisations

·; Significant OmniMark orders received for deployment at the Japan Patent Office in Tokyo

·; Major OmniMark orders received from Embraer in Brazil to process aircraft technical documentation

David Ashman, Chairman, commenting on the Company's performance, stated:

"The Company has made good progress in 2012. While our sales revenues decreased overall, our profits increased as we focussed the business on XML content conversion technology and associated services. Sales of Migrate, our cloud content conversion service, accelerated significantly, with many prestigious new customers.

OmniMark version 10 was released in February 2012, and the capabilities of Migrate have been further enhanced with the release of a new RoboHelp to DITA XML document conversion service in May 2012.

With an expert development team, a global customer base, growing adoption of Migrate and a strong cash position, we look forward to making further progress in 2013."

ENQUIRIES

CHAIRMAN'S STATEMENT

The Company has made good progress in 2012. While our sales revenues decreased overall, our profits increased as we focussed the business on XML content conversion technology and associated services. Sales of Migrate, our cloud content conversion service, accelerated significantly, with many prestigious new customers.

OmniMark version 10 was released in February 2012, and the capabilities of Migrate have been further enhanced with the release of a new RoboHelp to DITA XML document conversion service in May 2012.

With an expert development team, a global customer base, growing adoption of Migrate and a strong cash position, we look forward to making further progress in 2013. 

David Ashman

Chairman

12 March 2013

BUSINESS REVIEW

Large organisations need to process ever increasing amounts of digital content and publish information to multiple media channels including print, web, CD-ROM, smartphones, ebook readers and mobile devices.

They often need to author and publish content in multiple languages, and re-use that content in many different ways, across different publications and document types. Innovative web applications dynamically assemble and deliver content to users that is tailored to their individual purchasing requirements, reading preferences or personal interests.

The content management systems that support such digital publishing applications typically necessitate that content is stored and processed in a 'neutral' XML (Extensible Markup Language) format prior to publication.

Stilo specialises in helping organisations automate the conversion of their existing content into different XML formats. Our solutions are used by commercial publishers, technology companies and government agencies and include organisations involved in the production and maintenance of technical documentation.

The business opportunity for XML content conversion technology and services is global and growing, and it is Stilo's objective to dominate this market sector.

Technology and Customers

Stilo's core technology is OmniMark, a leading content processing platform used by customers to rapidly develop high-performance, SGML/XML content conversion solutions that integrate with complex publishing applications. Users include Boeing, Thomson Publishing, Wolters Kluwer, Embraer and the Japan Patent Office. It is a mature, well-proven technology with an excellent reputation amongst users for robustness and reliability. OmniMark version 10 was released in February 2012.

In recent years there has been a trend for organisations to outsource their content conversion requirements to third-party specialists, often based in offshore locations. Although this approach can work successfully, we recognised an opportunity to further improve turnaround times and reduce the costs of conversion projects through improved automation.

This gave rise to the development of Migrate, the world's first cloud content conversion service, based upon OmniMark technology. Non-technical users of Migrate are able to upload source documents to a dedicated portal, and convert them in real time to the target XML format. The service operates on a pay-as-you-use basis, and can be quickly deployed for conversion projects of all sizes.

There was strong growth of Migrate sales in 2012 to customers including IBM, Cisco Systems, EMC Corp, Micron Technology, Varian Medical Systems, ACME Packet and Cassidian Communications.

Migrate customer highlights include:

·; Migrate recommended by central IBM Corporate User Technologies group to over 400 globally dispersed documentation teams

·; Migrate deployed by IBM Retail Store Solutions and IBM z/OS mainframe team in USA

·; EMC Corp implemented Migrate conversion portals across five business divisions in USA

·; Migrate used extensively by Cisco Systems documentation teams in India and Israel

Sales to new customers are being driven by their adoption of the DITA XML authoring and publishing standard, which originated in the high-tech industry, but is now gaining popularity in other market sectors. Our development and marketing activities retain a very strong focus in the DITA XML market, and through partnering programmes we will seek to address additional business opportunities in market sectors that adopt different XML standards.

Our technical team includes leading experts in the development of content conversion tools, and by association, the solving of complex SGML/XML content processing problems. Services engagements previously undertaken on behalf of clients in the airline sector have led to the development of JETView, a digital publishing solution for aircraft technical documentation. It is used by cargo airline ABX Air, Inc. to aggregate and update information periodically provided by aircraft OEMs, and publish that information digitally for use by maintenance engineers.

Sales analysis by geographic region

Our customers typically comprise large organisations, and are spread globally. Geographic sales revenues were derived as follows:

Region 2012 2011

UK 5% 10%

Rest of Europe 13% 17%

North America 62% 43%

South America 5% -

Asia 15% 30%

North American revenues grew significantly as an overall percentage in 2012, as adoption of the DITA XML standard has been primarily led by corporations with their headquarters based in the USA. It is anticipated that adoption of the DITA XML standard will spread internationally over the coming years.

Operations

Stilo operates from offices located in Swindon, UK and Ottawa, Canada. The development team is based in our Ottawa office.

As of 31 December 2012, there were 14 permanent employees in the Company, complemented by the use of contractors. In 2013 we will be making additional investments in the recruitment of development personnel, but it is not anticipated that we will be growing headcount significantly, as we look to contain our costs and scale the business through technology sales and partnering agreements.

The results for the year ended 31 December 2012 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

In 2012, the results for Stilo show a profit, after taxation, of £118,000 (2011: £105,000). There was an improved operating profit result achieved from continuing operations of £54,000 (2011: break-even).

Total sales revenues for the period decreased to £1,409,000 (2011: £1,735,000). This was as a result of the continued reduction in revenue from consulting services. Revenue from sales of Stilo Migrate increased to £355,000 (2011: £83,000). Total OmniMark software and maintenance sales were £975,000 (2011: £1,403,000).

The Company continued to benefit from revenue from software maintenance contracts of £735,000 (2011: £771,000). The increase in the sales of Stilo Migrate and the continued change in the mix of types of revenue towards technology sales meant that the company was able to achieve an improved profitable result despite the fall in turnover.

Operating expenses decreased by 16% in the year to £1,270,000 (2011: £1,508,000).

The decrease in overall operating costs was primarily due to anticipated cost reductions in the Solutions for SAP Division, following the curtailment of SAP-related services in 2011.

Investment in research and development continued in 2012, with research and development expenditure for the year of £368,000 (2011: £377,000). As a result of this investment, Stilo continues to benefit from research and development tax credits.

Stilo had a cash balance of £976,000 as at 31 December 2012 (31 December 2011: £939,000), and remains entirely un-geared. This further strengthening of the balance sheet provides a stable financial base for the Company and will support continued investment in product development, sales and marketing. However, overall costs will continue to be carefully managed in order to maintain cash reserves at a satisfactory level.

Group Income Statement

Group Statement of Comprehensive Income

Year Ended 31 December 2012

Group Statement of Financial Position

as at 31 December 2012

Group Statement of Changes in Equity

for the year ended 31 December 2012

Group Cash Flow Statement

for the year ended 31 December 2012

1. The figures for the year ended 31 December 2012 and 2011 do not constitute statutory accounts within the meaning of S.434 of the Companies Act 2006. The figures for the year ended 31 December 2012 have been extracted from the statutory accounts for that year on which the auditor has issued an unqualified audit report which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 December 2011 have been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. No statement has been made by the auditor under Section 489(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts. This announcement was approved by the board of directors and authorised for issue on 12 March 2013.

2. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together 'IFRS') as endorsed by the European Union. The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2012 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').

3. Earnings per Share. The basic earnings per share is calculated on the profit for the financial year of £118,000 (2011: profit of £105,000), and on the weighted average number of shares in issue during the year of 109,808,470 (2011: 109,728,470). The fully diluted earnings per share in 2012 takes account of outstanding options which results in a weighted average number of shares in issue during the prior year of 117,949,316 (2011: 118,408,470).

4. The directors do not recommend the payment of a final dividend (2011: £nil).

5. These financial statements are presented in sterling as that is the currency of the primary economic environment in which the Group operates.

6. Copies of the 2012 Annual Report and Accounts will be posted to shareholders in April. Further copies may be obtained by contacting the Company Secretary at the registered office. Alternatively the 2012 Annual Report and Accounts will be available to download from the investor relations section on the Company's website www.stilo.com. The annual general meeting is due to be held at the offices of Baker Tilly, 25 Farringdon Street, London EC4A 4AB at 11.30am on 23 May 2013.