Press Release

28 February 2014

 

 

 

Pilat Media Global PLC

 

("Pilat Media" or the "Group")

 

Final Results

 

Pilat Media Global plc (AIM:PGB), the London-based AIM-listed supplier of business management software to the media industry around the world, today announces its audited final results for the year ended 31 December 2013.

 

Highlights:

 

●	Strong Q4:
	·      Revenues up 17% at £9.0 million (Q4 2012: £7.7 million)
	·      Profit before tax £2.25 million (Q4 2012: £1.95 million)
●	Annual revenues increased by 18.1% to £27.7 million (2012: £23.5 million)
●	Strong positive cash flow with cash, net of loans, increasing by £4.5 million to £15.2 million (2012: £10.7 million)
●	Profit from operations (before amortisation of intangible assets) up 20% at £3.4 million (2012: £2.8 million)
●	Five new contracts signed in the year
●	On 12 February 2014, the Company posted a scheme document to shareholders in connection with the recommended offer at 95 pence per share for the Company

 

For further information:

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

 

Shore Capital (Nomad)
Dru Danford / Patrick Castle	Tel: +44 (0) 20 7408 4090
	www.shorecap.co.uk

 

Media enquiries:

Abchurch Communications
Henry Harrison-Topham / Olivia Stuart Taylor	Tel: +44 (0) 20 7398 7702
[email protected]	www.abchurch-group.com

 

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT 2013

 

Pilat Media is pleased to report its final results for the year ended 31 December 2013.  This has been another strong year of growth with the Group achieving its highest annual revenue for the year as a result of Q4 being the strongest quarter to date.  Annual revenues grew by 18.1% to £27.7 million (2012: £23.48 million) and cash balances, net of loans, increased by £4.5 million to £15.2 million (2012: £10.7 million).

 

The growth in revenues results from new clients contracted during the year as well as from the Group's existing client base, where the demand for additional modules, license extensions, software enhancements and additional services has increased.  Over 83% of 2013 revenues came from existing clients, both those that have been clients for a number of years as well as those that signed in 2012 and were going through their implementations.  It is pleasing to see that such strength from the existing client base is combined with five new contract conversions which were announced during the year.

 

The five new contracts, two signed in the first half of the year and three in the second half, are spread across the globe and cover a diverse range of broadcasters, further demonstrating the adaptability and versatility of the Group's IBMS software.  The new clients include (1) Seven Networks (Operations) Limited ("Seven Television"), Australia's largest free to air television network licensing the full suite of IBMS modules (2) Starz Entertainment LLC ("Starz"), a leading provider of premium pay TV content and services in America, licensing and implementing the IBMS software for their content and rights management and linear and non-linear on demand programming (3) a leading premium television network in Latin America licensing the full suite of IBMS modules for gradual implementation and long term maintenance for an eight year period, (4) a new partner the Company has appointed in South America who will be sublicensing and fronting the implementation of IBMS at VTR, a major telecommunications company in Chile and (5) Digiturk, a major provider of premium television service in Turkey, licensing IBMS-Rights and IBMS-OnDemand.

 

To meet all of these new demands the Group has increased recruitment of software engineers and has continued to invest heavily in their training to ensure that they have sufficient knowledge of the various modules of IBMS.  This investment in new people has had some detrimental impact on margins and profits but despite this the Group has achieved its highest operating profit to date and the Board believes that its current investments will bring future benefits.

 

The Group has continued to invest in the OTTilus platform to widen and complement its offering in the emerging Over The Top ("OTT") market and this still remains in a development phase.  During the year, the Group acquired the remaining 40% stake in OTTilus Limited held by SimpleStream, the partner from whom Pilat Media bought the base software for £435,000.  This, together with the development costs that have been capitalised in intangible assets, make the total investment in the new product £995,000.  The platform is now being demonstrated to prospects and at trade shows and stimulates interest; it is expected to reach commercial availability and start to generate revenues later this year.

 

On 16 January 2014 the Boards of Sintec Media Ltd. ("SintecMedia"), Sintec Media Software Ltd., ("SMS") and Pilat announced the terms of a recommended proposal under which SintecMedia and its wholly owned subsidiary SMS will acquire for cash the entire issued and to be issued share capital of Pilat not already owned by SintecMedia (the "Acquisition").  It is intended that the Acquisition will be effected by means of a scheme of arrangement under Part 26 of the Companies Act 2006 (the "Scheme").  The Company posted a scheme document to shareholders on 12 February 2014 (the "Scheme Document") which contains further information on the Scheme.

 

Revenues

The revenues in Q4 2013 were the highest quarterly revenues for the Group to date at £9.0 million (Q4 2012: £7.7 million) and this resulted in an increase in annual revenues for 2013 by 18.1% to £27.7 million, again the highest level to date.

 

As a result of the new contracts and the additional work for existing customers revenues resulting from professional services, which cover project management, requirement analysis, customisation, integration, data migration, training and general customer support, grew by more than 36% and altogether amounted to £18.4 million, representing 66% of 2013 revenues (2012: £13.5 million, 57% of revenues).

 

Revenues for recurring support and maintenance services grew by 14% to £6.3 million from £5.5 million in 2012.  This increase was a result of implementation clients that went live in the year and existing clients that added new modules requiring additional support.

 

License fees in 2013 fell back to the 2011 level of £3.0 million (2012: £4.5 million) and represented only 11% of revenues (2012: £4.5 million, 19.2% of revenues).  The license fee revenue in 2012 was boosted by some clients converting the licenses from term licenses to perpetual licenses.

 

In respect of the large and long-term implementation contracts, revenue on license fees and professional services are recognised progressively according to the project's stage of completion, as in previous years.  The contribution of such long term contracts increased in 2013 to 33% of revenue (2012: 26%) thanks to the new contracts signed in the year.  However, as some of these new contracts only started activity in the second half of the year their contribution to the Group's revenues was reduced and is expected to increase in 2014.

 

In 2013 the Group's largest three clients contributed 25.3% to revenues, a similar level to that of 2012, where the top three clients contributed 25.5% of the total 2012 revenues.

 

The North and South American clients contributed 40% of total revenues in 2013 (2012: 40%), the European and African clients contributed 33% (2012: 37%) and the Australasian clients contributed 27% (2012: 23%).

 

Research and development

As the market for business management software becomes more competitive and broadcasters demand more so Pilat Media has continued to invest in improvements to the IBMS software to ensure it remains relevant and attractive to existing and new clients.  In 2013 the Board made a further increase in the resources allocated to R&D by 22% to £4.5 million (2012: £3.7 million) due to the continued investment in new modules and features and a higher proportion of enhancements commissioned by clients that were of a generic nature.  R&D efforts focused on making IBMS better equipped to support multi-platform TV and TV Everywhere/Anytime initiatives by further enhancing the Advanced Rights Module (adding customer-defined, multilevel rights management to support multiplatform media environments), developing a version of IBMS that can be deployed in a cloud infrastructure and the creation of IBMSExpress which can be deployed in just a few weeks.

 

Profitability

As a number of new projects started in the year and in anticipation of growth to continue, Pilat Media increased its development resources ahead of the projects getting fully up to speed.  Consequently the gross profit decreased slightly to 51.5% of revenues (2012: 52.4%).  2012 also benefitted from an exceptional number of license fee renewals which boosted the level of gross profit.  There was also a 5% increase in the sales and marketing spend year on year (2013: £1.57 million; 2012: £1.49 million) due to marketing resources added to promote OTTilus.  There was a small 3% rise in general and administrative costs primarily due to an increase in depreciation on leasehold assets in Israel ahead of a move to a new office in January 2014.

 

Operating profit before amortisation of intangible assets in 2013 was £3.4 million representing 12.3% of revenues, compared with £2.8 million or 12.1% in 2012.  Finance income remained at a similar level to last year whilst finance costs were lower due to the lower interest charges on the foreign currency loans as balances were repaid during the year.

 

The effective rate of tax in 2013 is 22.0% (2012: 25.8%), approximately the standard rate of corporate tax rate in the UK.

 

Statement of Financial Position

As in previous years, the Group continued to achieve a significant reduction in trade and other receivables, to £9.0 million at the end of 2013 compared £10.2 million at the end of 2012 and £11.3 million at the end of 2011.  The reduction this year is primarily as a result of improved speed of payment by a number of the Group's new clients whereas in previous years the reduction was primarily due to implementation projects being completed during the year and the final milestone payments invoiced and received.

 

As a result of collections during the year, cash balances increased to £18.6 million from £14.9 million at 31 December 2012.  The net cash balances which includes the sterling value of the currency loans designed to minimise currency fluctuations is £15.2 million compared to £10.7 million at the end of 2012.  During the year the Group repaid £0.8 million of these currency loans and the balance of the loans at 31 December 2013 reduced to £3.4 million (2012: £4.2 million).  The currency loans are repayable on demand but are not due for repayment in full until 31 December 2014.

 

Cash flow

As noted above, the Group generated £6.0 million of cash from operating activities (2012: £4.3 million), and achieved a significant increase in cash balances to £18.6 million (2012: £14.9 million) whilst reducing the currency loan balance.  The cash balance net of loans increased at the end of 2013 to £15.2 million (2012: £10.7 million) as a result of collections of receivables and the profit generated in the year.

 

Key Performance Indicators ("KPIs")

The Board uses a number of financial and non-financial key performance indicators that help in managing the business.  None of the KPIs can be judged in isolation of each other nor can they be used without due interpretation of the reasons that have caused the changes.

 

The main financial KPI's the Board uses are:

	2013	2012	2011
% change in revenues	18.1%	4.2%	3.0%
% net profit from operations (1)	12.3%	12.1%	10.7%
Revenue per employee	£105,430	£100,355	£103,330

 

(1) Operating profit before amortisation of intangible assets as a percentage of revenue.

 

The Board is pleased with the growth in revenues, the increase in percentage net profit from operations and the improvement in revenue per employee. 

The non-financial KPI's used by the Board are:

	2013	2012	2011
Number of new contracts signed	5	2	2
Number of new staff hired	41	47	42
Staff turnover	8%	14%	19%

 

The reduction in staff turnover is mainly as a result of continued stabilising measures to improve retention in Pliat Media's offshore development centre in Kiev.  This has enabled the Group to further rely on this lower cost development centre to further reduce the average cost of its software engineers.

 

In addition to the number of new contracts signed, the Board makes a qualitative judgment about the significance of the new contracts as well as the number of existing contracts that are renewed.  In this respect, the five new contracts signed and the progress made in developing both the IBMS:Express product and the OTTilus platform are considered of high importance.

 

Outlook

Pilat Media is in a very healthy position.  It has a strong balance sheet with significant cash resources, a client base of over sixty global and high quality companies with good visibility to revenues for 2014 and beyond.  The Group continues to work on a small number of highly targeted opportunities where it believes chances of conversion to be good.  The Group has expanded its product base with the addition of IBMS:Express and OTTilus which widens the Group's potential target market.

 

In the Scheme Document, Pilat Media and SintecMedia gave the following background to and reasons for the Scheme:

 

"SintecMedia and Pilat have been developing and marketing business management software for broadcasters for many years. The two companies provide end-to-end integrated and modular solutions, targeting major broadcasters and media companies around the world. The market in which SintecMedia and Pilat operate is rapidly evolving, with new players and new technologies presenting new opportunities but also difficult challenges. The Boards of SintecMedia and Pilat believe that the merger of the SintecMedia and Pilat groups of companies will realise a number of benefits for clients and staff, resulting from the considerable additional scale of the Enlarged Group."

 

Michael Rosenberg Chairman 28 February 2014

Avi Engel Chief Executive Officer 28 February 2014

 

CONSOLIDATED INCOME STATEMENT

	Note	Year ended 31 December 2013 £'000	Year ended 31 December 2012 £'000
REVENUE	5	27,728	23,483
Cost of sales		(13,437)	(11,176)
GROSS PROFIT		14,291	12,307
Other operating expenses
Research and development		(4,481)	(3,682)
Selling and marketing		(1,567)	(1,491)
General and administrative		(4,220)	(4,083)
Exchange rate movement		(604)	(204)
		(10,872)	(9,460)
Operating profit before amortisation of intangible assets		3,419	2,847
Amortisation of intangible assets		(1,065)	(1,065)
PROFIT FROM OPERATIONS		2,354	1,782
Foreign exchange gain on financial instruments		131	205
Finance income		97	94
Finance costs		(63)	(99)
PROFIT BEFORE TAX		2,519	1,982
Income tax expense		(553)	(512)
PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF PILAT MEDIA GLOBAL PLC		1,966	1,470
EARNINGS PER SHARE
Basic	4	3.14p	2.38p
Diluted	4	3.08p	2.37p

 

Note:  The profit from operations for the period arises from the Group's continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

		Year ended 31 December 2013 £'000	Year ended 31 December 2012 £'000
PROFIT FOR THE YEAR		1,966	1,470
OTHER COMPREHENSIVE INCOME:
Items that may be reclassified subsequently to profit or loss:
Current tax credit in respect of share based payments		-	5
Exchange translation differences on foreign operations		(8)	(76)
Items that will not be reclassified to profit or loss:
Deferred tax on foreign exchange differences		79	-
Other comprehensive expenses for the year, net of tax		71	(71)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO OWNERS OF PILAT MEDIA GLOBAL PLC		2,037	1,399

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

	Note	Year ended 31 December 2013 £'000	Year ended 31 December 2012 £'000
ASSETS
NON-CURRENT ASSETS
Intangible assets		2,777	2,846
Property, plant and equipment		635	713
Deferred taxation		260	54
		3,672	3,613
CURRENT ASSETS
Trade receivables		4,416	5,448
Other receivables		4,615	4,726
Derivative financial instruments	7	-	22
Cash and cash equivalents		18,611	14,916
		27,642	25,112
TOTAL ASSETS		31,314	28,725
EQUITY
Called up share capital	9	3,127	3,118
Share premium account	9	9,677	9,630
Capital redemption reserve		50	50
Merger reserve		(854)	(854)
Cumulative translation reserve		451	380
Retained earnings		10,701	8,698
EQUITY ATTRIBUTABLE TO OWNERS OF PILAT MEDIA GLOBAL PLC		23,152	21,022
LIABILITIES
NON-CURRENT LIABILITIES
Deferred taxation		113	257
		113	257
CURRENT LIABILITIES
Trade and other payables		4,395	3,124
Taxation		280	132
Derivative financial instruments	7	4	-
Fixed term loan	8	3,370	4,190
		8,049	7,446
TOTAL LIABILITIES		8,162	7,703
TOTAL EQUITY AND LIABILITIES		31,314	28,725