Interim Results for 6 Months ended 30 June 2005

13 September 2005

Stilo International plc ("Stilo" or the "Company"), the AIM quoted XML Content Engineering solutions company, today announces its Interim Results for the 6 months ended 30 June 2005.

Highlights

1. Loss before taxation before exceptional items and amortization of goodwill of £237,000 masks successive trading improvement in the last four quarters. Q1 2005 trading loss of £193,000, Q2 2005 trading loss of £44,000.
2. Profitable trading in June, July and August with positive momentum set to continue in H2.
3. Successful integration of Xia Systems (Content Engineering Division).
4. Maintenance revenues from content engineering software increased by 15% to £378,000.
5. First sale of StiloCF2, Stilo's content processing framework, to a major publishing company, worth £170,000.
6. Customers in this period include Boeing, International Atomic Energy Agency (IAEA), Wolters Kluwer, Lockheed Martin, Sikorsky Aircraft, United Airlines, Italian Parliament, Snecma Moteurs and Lamy.
7. OmniMark v8 scheduled for release in Q4 2005.
8. New XML solutions to be launched in Q3 2005.

Barry Welck, Chairman, commenting on the Group's performance, stated,

"The Board is pleased to say that after five years of fundamental losses the Company now sees the likelihood of month on month profitability. For the first time we have had three consecutive months of profitability. The business model is sustainable with overheads in line with revenues, with an increasing portfolio of saleable products and solutions. "The Board understands the challenges ahead and are now considering how Stilo can become a significantly larger enterprise with sustainable profits, without challenging the foundations in place and within current cash constraints. "The results for the period do not show the significant progress being made by the Company, with timing differences of one large customer adversely affecting annual comparisons. Successive trading improvements have been made in the previous four quarters, with profitable trading in the three months up to the end of August 2005, which the management expects to continue in the second half. "With the successful integration of Xia Systems accomplished, and new solutions and product releases planned for the second half, the Company is well placed to further build upon its improving trading performance."

Enquiries:

Les Burnham, Chief Executive, Stilo International plc 01793 441444

Russell Cook, Charles Stanley & Co. Limited 020 7739 8200

Chairman's Statement

I am pleased to announce Stilo's unaudited results for the six months ended 30 June 2005 and to report upon the progress made by the Company during the period.

The Company continues its transformation to an XML solutions organisation, providing both specialist services and supporting technologies.

Strategy

Stilo is a global company specializing in Content Engineering. By developing market-leading technologies which drive high-value solutions, Stilo delivers significant benefits to blue chip companies and organisations for which the quality, timeliness and cost-effectiveness of the content of information is a critical factor for success.

Stilo provides XML content processing tools and solutions which help organisations solve complex content conversion and publishing problems.

By applying highly efficient automation to complex content processes, Stilo helps customers contain existing systems infrastructure and support costs. By seeking ways to leverage the technology assets and personnel skills that a customer already possesses, Stilo can often postpone, or, even better, eliminate completely the need to invest in completely new infrastructure and capabilities.

Results

There was a slow start to the year following the closure of the Knowledge Engineering Division and acquisition of Xia Systems Corporation (content engineering division) at the end of 2004, now successfully integrated.

The interim trading loss of £237,000 masks the successive improvements which the Company has made in the last four quarters in its trading position. A trading loss of £193,000 in Q1 was followed by a much reduced trading loss of £44,000 in Q2 and profitable trading in June, July and August is expected to continue in the second half of 2005.

Total sales revenues for the period were £905,000 (2004: £1,231,000). Timing differences between the periods for one large sale account for the majority of this reduction. Total operating costs have been reduced by 16% compared to the same period in 2004 following the closure of the Knowledge Engineering Division, and are now running at approximately £2.2m annually. Loss before taxation before exceptional items and goodwill amortization for the period was £237,000 (2004: £128,000 loss).

Non-recurring exceptional costs for the period totalled £40,000, comprising staff redundancy costs.

The goodwill amortisation of £155,000 relates to the purchase of OmniMark Techologies Corporation in 2001, and to the purchase of Xia Systems Corporation, Content Engineering Division, in 2004.

Annual maintenance revenues, now comprising over 200 contracts, grew 15% to £378,000.

The Company had a cash balance of £340,000 as at 30 June 2005.

Customers

During H1 the first sale of StiloCF2, which provides a framework for managing content processing tasks, was made to a leading publisher and implementation is now underway.

A Stilo project team is currently involved in improving publishing processes at the International Atomic Energy Agency in Vienna. The Italian Parliament recently purchased OmniMark to help publish parliamentary proceedings to the Web. In North America consulting assignments are being undertaken at Boeing, helping them to better manage technical information. Other customers during the period include Wolters Kluwer, Lockheed Martin, Sikorsky Aircraft, United Airlines, Snecma Moteurs and Lamy. Our blue chip customers and level of consulting assignments reflect the high quality software and expertise that Stilo provides.

Partners

Stilo's products and expert professional services complement those offered by vendors of content management systems and leading systems integrators. Software technology partners include Documentum and SAP. Toshiba distributes Stilo products in Japan.

Products and Technologies

OmniMark

OmniMark provides an application development and high performance run-time environment for XML content processing applications. Users of OmniMark products are able to reduce significantly the time and costs of developing and maintaining new content processing applications, whilst ensuring high-performance levels of execution which is especially critical to major web applications. OmniMark version 8 is planned for release in Q4 2005.

StiloCF2

StiloCF2 provides a framework which enables organizations to improve the management of what can be typically hundreds of inter-related content processing applications, reducing the time and costs of implementing and maintaining enterprise publishing systems. The first implementation of StiloCF2 has recently begun.

Interactive Technical Information Platform (ITIP)

Originally developed for the Canadian Military, ITIP provides design engineers, system maintainers, operators and instructors with an interactive viewing capability, providing Web-access to repositories of existing information and sources of technical documentation. Initial marketing of ITIP is now underway, with encouraging preliminary results.

Content Processing Solutions

The first of a planned set of XML content processing solutions is planned to be launched in Q3 2005, comprising both technology and professional services. These will provide full content lifecycle support to customers, incorporating content conversion and publishing capabilities.

Outlook

The Board is pleased to say that after five years of fundamental losses the Company now sees the likelihood of month on month profitability. For the first time we have had three consecutive months of profitability. The business model is sustainable with overheads in line with revenues, with an increasing portfolio of saleable products and solutions.

The Board understands the challenges ahead and are now considering how Stilo can become a significantly larger enterprise with sustainable profits, without challenging the foundations in place and within current cash constraints.

The results for the period do not show the significant progress being made by the Company, with timing differences of one large customer adversely affecting annual comparisons. Successive trading improvements have been made in the previous four quarters, with profitable trading in the three months up to the end of August 2005, which the management expects to continue in the second half.

With the successful integration of Xia Systems accomplished, and new solutions and product releases planned for the second half, the Company is well placed to further build upon its improving trading performance.

Barry Welck
Chairman
13 September 2005