Preliminary Results for Six months ended June 30 2007

14 September 2007

Stilo International plc ("Stilo" or the "Company"), the AIM quoted software and services company, today announces its unaudited Interim Results for the six months ended 30 June 2007.

Highlights

• Profit before taxation, before exceptional items and write-down of intangible assets, of £5,000 (2006: £86,000 profit)
• Results adversely affected by a weak US dollar, this having a £52,000 adverse impact upon profits compared to same period last year
• Sales revenues increased by 14% to £1,251,000 (2006: £1,096,000)
• R&D spend continuing at 8.4% of revenues (£105,000 in the period)
• Collaborative software development undertaken with North American customer
• Customers in this period included Boeing, Wolters Kluwer, ABX Air, Thomson, Bae Systems, Westland Helicopters, Toshiba and the European Parliament
• Consolidation of European operations in UK

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

Whilst trading results have remained steady, we have continued to make significant investments in the development of Version 9 of OmniMark, our flagship product. In recent months we have collaborated with an important North American customer to build an industry-specific, technical information publishing solution. We have re-organised operations in Europe, and are now additionally investing heavily in the development of ground-breaking, online services for delivery over the internet. All of these development efforts will culminate with market releases in 2008, and which we believe will provide Stilo with new opportunities to drive significant sales growth in the future.

Enquiries:

Les Burnham, Chief Executive, Stilo International plc
01793 441444

Russell Cook and Carl Holmes, Charles Stanley Securities (Nominated Adviser and broker)
020 7149 6000

Chairman's Statement

I am pleased to announce Stilo's unaudited interim results for the six months ended 30 June 2007 and to report upon the continued progress made by the Company during the period.

Strategy

Stilo International provides specialist software and professional services to large organisations. Our goal is to be the market leader in our target business sectors, and to aggressively grow sales revenues year on year.

In July 2007 we made significant organisational changes to better focus resources on the following key capabilities i.e.

• Content Migration
• Technical Information Publishing
• Product Lifecycle and Document Management for SAP customers

In each area of capability, Stilo can justifiably claim a market leadership position upon which we intend to build in the future, supported by continued investment in software developments. In the first half of 2007 development spend was £105,000 representing 8.4% of sales revenues. In the second half of 2007, this spend will be further increased to 19% of projected revenues as new, ground-breaking developments are embarked upon based upon the online delivery of services over the internet.

These developments will be announced later in 2007, and are expected to make a positive contribution to 2008 revenues and beyond. They will be representative of the emerging worldwide trend for organisations to adopt Software as a Service (SaaS) business models, and provide exciting opportunities for the achievement of significant, scalable growth in the years ahead.

Operating from offices in the UK and North America, we support an extensive list of customers in Aerospace and Defence, Manufacturing, IT, Telecommunications, Publishing and Government. They include Boeing, Wolters Kluwer, ABX Air, BAe Systems, Thomson Publishing, Westland Helicopters, Toshiba and the European Parliament.

Results

The Company continues to build a solid foundation to support future growth.

The interim trading profit before taxation, and before exceptional items and write-down of intangible assets, was £5,000 (2006: £86,000).

Total sales revenues for the period increased by 14% to £1,251,000 (2006: £1,096,000), including a total 97% growth in professional services revenues to £582,000 (2006: £295,000). Recurring maintenance revenues for OmniMark software were sustained at £360,000.

Results were affected by a weak US dollar, this having a £52,000 adverse impact upon profits, compared to the same period last year.

Non-recurring exceptional costs for the period totalled £37,000, comprising staff redundancy costs.

In the e-Publishing solutions business, sales decreased to £794,000 (2006: £1,096,000), primarily as a result of declining software orders and customer delays in placing project services contracts. During the course of the period, overheads in this business were further reduced through a lowering of staff numbers and the closure of the Paris office. European operations are now centred in the UK.

The Engineering Solutions business achieved sales revenues of £457,000 in the period, and made a positive contribution to overall profitability.

In August 2007 the Company paid a sum of £90,000 in deferred consideration ("Initial Deferred Consideration") to Proceed Holdings. The Initial Deferred Consideration was payable based upon the achievement of a turnover target of no less than £750,000 for Engineering Solutions in the year ended 31 July 2007. As announced at the time of the acquisition, Proceed Holdings agreed to reinvest the sum of £90,000 by subscribing for 4,500,000 new 1p Ordinary shares in Stilo at 2p per share.

At 30 June 2007, the group employed 29 staff, with 12 based in the UK, 15 in North America and 2 in Europe.

The Company had a cash balance of £237,000 as at 30 June 2007 (30 June 2006: £321,000). Working capital of approximately £100,000 was tied up in one long term services contract, with collection of cash from this expected in the second half of 2007.

The accompanying interim results for the six months ended 30 June 2007 have been prepared for the first time in accordance with International Financial Reporting Standards as adopted by the European Union as now required for AIM companies, and a full reconciliation of the impact of these changes (including restatement of the comparative periods) is attached to these results as an appendix.

PRODUCTS, SERVICES and SOLUTIONS

OmniMark

OmniMark provides an application development and high performance run-time environment for XML content processing applications. Users of OmniMark 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 has been deployed by customers around the world over a fifteen year period, and is a robust, well-proven technology.

Stilo interactive Technical Information Publisher (iTIP)

Originally developed for the Canadian Military, Stilo's iTIP has evolved over a ten year period as a proven approach to distributing complex technical information to large and widely-distributed user communities.

The iTIP solution provides an integrated approach to delivering technical documentation using simple web browsers so that organisations can maximise the benefits of electronic distribution while keeping deployment costs low. The iTIP also provides easy-to-use feedback mechanisms that facilitate knowledge acquisition and continuous quality improvement.

The combination of these capabilities makes the iTIP environment a complete solution for organisations that create, manage and deliver technical information across the full product lifecycle, including mission-critical equipment systems in the aerospace, defence, automotive, transportation, manufacturing and engineering sectors.

Solutions for SAP customers

mySAP™ Product Lifecycle Management (mySAP PLM) provides a comprehensive end-to-end solution to help manage the product lifecycle at every stage from design to disposal. Stilo is one of the UK's leading specialists in mySAP PLM, delivering innovative and practical solutions to leading names in the European and global aerospace, defence and manufacturing industries.

Stilo has also teamed up with certified SAP software partners to integrate, where necessary, proven tools and techniques at every stage of the document management process; from capture, indexing, storage, retrieval, through to archiving. Software partners include Easy Software (UK) plc, SEAL Systems AG and Readsoft.

Outlook

Whilst trading results have remained steady, we have continued to make significant investments in the development of Version 9 of OmniMark, our flagship product. In recent months we have collaborated with an important North American customer to build an industry-specific, technical information publishing solution. We have re-organised operations in Europe, and are now additionally investing heavily in the development of ground-breaking, online services for delivery over the internet. All of these development efforts will culminate with market releases in 2008, and which we believe will provide Stilo with new opportunities to drive significant sales growth in the future.

Barry Welck
Chairman
12 September 2007

Unaudited Group Income Statementfor the six months ended 30 June 2007

All losses / profits are attributable to equity holders of the parent.

Unaudited Interim Group statement of recognised income and expense for the six months ended 30 June 2007

Unaudited Group Balance Sheet as at 30 June 2007

Unaudited Group Cash Flow Statement for the six months ended 30 June 2007

Notes to the Interim Results for the six months ended 30 June 2007

1. The interim results (approved by the Board of Directors on 11 September 2007) are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 December 2006 amended for the impact of the adoption of International Financial Reporting Standards (IFRS) as adopted by the European Union. Those accounts, upon which the auditors issued an unqualified opinion, and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies. The figures for the six months ended 30 June 2006 have been extracted from the 2006 interim accounts amended for the impact of the adoption of IFRS. Details of the impact of the adoption of IFRS are set out in Appendix 1 of this announcement. As permitted this interim report has been prepared in accordance with UK AIM listing rules and not in accordance with IAS 34 'Interim Financial Reporting', therefore it is not fully in compliance with IFRS.
2. Stilo Interntional plc is a public limited company incorporated in the United Kingdom under the Companies Act 1985. The Company is domiciled in the United Kingdom and its ordinary shares are traded on the AIM market of the London Stock Exchange plc. Stilo provides specialist software and professional services.
   
   This interim report is the Group's first set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and International Financial Reporting Committee ("IFRC") interpretations that are expected to be applicable to the consolidated financial statements for the year ending 31 December 2007. These standards remain subject to ongoing amendment and / or interpretation and are therefore still subject to change. Accordingly, information contained in these interim financial statements may need updating for subsequent amendments to IFRS required for first time adoption or for new standards issued post balance sheet date.
   
   The basis of preparation and accounting policies followed in this interim report differ from those set out in the Annual Report and Accounts for the year ended 31 December 2006 which were prepared in accordance with United Kingdom accounting standards (UK GAAP). A summary of the significant accounting policies used in the preparation of this interim report under IFRS is provided below, however this does not include accounting policies which are not currently expected to change on transition from UK GAAP.
   
   The consolidated financial statements have been prepared in accordance with IFRS including standards and interpretations issued by the International Accounting Standards Board, as adopted by the European Union. They have been prepared using the historical cost convention.
   
   The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. Where necessary, the comparatives have been reclassified or extended from the previously reported results to take into account presentational changes.
   
   
   1. Basis of consolidation
      
      The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
      
      The trading results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
      
      All intra-group transactions, balances, income and expenditure are eliminated on consolidation.
   2. Turnover and revenue recognition
      
      Turnover represents the value of goods and services supplied and is stated net of value added tax. Contract income represents the value of contracts, which were completed during the period, as well as the estimated value of partially completed contracts at 30 June 2007.
   3. Goodwill
      
      Goodwill arising on consolidation is recorded as an intangible asset and is the surplus of the cost of acquisition over the Group's interest in the fair value of identifiable net assets acquired. Goodwill is allocated to cash generating units and is reviewed annually for impairment. Any impairment identified as a result of the review is charged in the income statement.
      On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
      The Group has elected to take the exemption available under IFRS1 not to apply IFRS3 retrospectively to business combinations occurring prior to the date of transition to IFRS. Goodwill arising on such acquisitions has therefore been retained at its UK GAAP carrying value at 1 January 2006, having been satisfactorily tested for impairment at that date.
   4. Foreign currency translation
      
      Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to income statement.
   5. Intangible assets other than goodwill
      
      An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.
      
      Computer software that is not integral to an item of property, plant and equipment is recognised separately as an intangible asset and is carried at cost less accumulated amortisation and accumulated impairment losses. Costs include software licences and consulting costs attributable to the development, design and implementation of the computer software. Amortisation is calculated using the straight-line method so as to charge the cost of the computer software to the income statement over its estimated useful life (1-7 years).
      
      Expenditure on research activities is recognised as an expense in the period in which it is incurred.
      
      Development expenditure is capitalised as an intangible asset only if the following conditions are met:
      • an asset is created that can be identified;
      • it is probable that the asset created will generate future economic benefit;
      • it is technically and commercially feasible;
      • sufficient resources are available to complete the development;
      • the development cost of the asset can be measured reliably
      Development expenditure thus capitalised is amortised on a straight-line basis over its useful life. Where the criteria are not met, development expenditure is recognised as an expense in the income statement.
   6. Taxes
      
      Income taxes include all taxes based upon the taxable profits of the company. Other taxes not based on income, such as property and capital taxes, are included within operating expenses or financial expenses according to their nature.
      
      Deferred income tax is provided, using the liability method, on temporary differences between the tax bases of assets and liabilities and their carrying amounts, in the financial statements. Deferred income tax assets relating to the carry-forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.
      
      Current and deferred income tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and when there is a legally enforceable right to offset them.
   7. Fair values
      
      Fair value is the amount for which a financial asset, liability or instrument could be exchanged between knowledgeable and willing parties in an arm's length transaction. It is determined by reference to quoted market prices, adjusted for estimated transaction costs that would be incurred in an actual transaction, or by use of established estimation techniques. The fair values at the balance sheet date are approximately in line with their reported carrying values unless specifically mentioned in the notes to the financial statements.
   8. Financial instruments
      
      Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
      
      Trade receivables
      
      Trade receivables do not carry any interest and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts.
      
      Cash and cash equivalents
      
      Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
      
      Financial liabilities and equity
      
      Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its trade payables.
      
      Bank borrowings
      
      Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
      
      Derivative financial instruments
      
      The company uses derivative financial instruments such as foreign currency contracts to hedge its risks associated with foreign currency fluctuations.
      
      All derivative financial instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.
      
      For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective.
      
      Forward currency contract hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the currency risk of future highly probable inventory sales. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when a forecast sale occurs.
      
      Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.
3. The basic earnings per share is calculated on the weighted average number of shares in issue during the period. The fully diluted earnings per share takes account of outstanding options. The exercise price of the share options was more than the average share price for the period and therefore no adjustment to the basic earnings per share is necessary in respect of shares under option. The weighted average number of ordinary shares in issue for the six months to 30 June 2007 was 100,228,470 shares (30 June 2006: 90,228,470 shares).
4. Copies of this report will be sent to shareholders shortly and will be available to the public from the company's registered office, Regus House, Windmill Hill Business Park, Whitehill Way, Swindon, SN5 6QR.

Appendix 1

Explanation of transition to IFRS

Shares in Stilo International plc are quoted on the AIM market of the London Stock Exchange plc. It is therefore required to report its consolidated financial statements in accordance with International Accounting Standards (IFRS) as adopted by the European Union for its accounting periods commencing on or after 1 January 2007. In order to comply with this requirement Stilo International plc has published this Interim Report for the period to 30 June 2007 on the basis of IFRS, including the restatement of the June 2006 comparative information. In doing so it has applied the requirements of IFRS 1 'First time adoption of IFRS'.

This is the first period that the Group has presented its interim financial statements under International Financial Reporting Standards (IFRS) as adopted by the European Union. The following disclosures are required in the year of transition. The last financial statements prepared under UK GAAP were for the year ended 31 December 2006 and the date of transition to IFRS is therefore 1 January 2006. The purpose of this section is to advise on the impact of the initial transition balance sheet adjustments and the restatement of the 2006 published interim and full year information. Although we have discussed the identified adjustments with our auditors the numbers in this report are unaudited and may be subject to revision when the audited financial statements for the year ended 31 December 2007 are published.

Reconciliation of consolidated balance sheet at 1 January 2006

Reconciliation of consolidated balance sheet at 30 June 2006

Reconciliation of consolidated income statement for the six months ended 30 June 2006

Reconciliation of consolidated income statement for the year ended 31 December 2006

Notes to the reconciliation of equity at 1 January and 31 December 2006

Transitional arrangements (IFRS 1)

The opening fair values of fixed assets have been deemed to be their accounting values as at 1 January 2006, after reviewing for impairment as appropriate.

Goodwill and Business Combinations (IFRS3)

The Group has elected to take the exemption available under IFRS1 not to apply IFRS3 retrospectively to business combinations occurring prior to the date of transition to IFRS. Goodwill arising on such acquisitions has therefore been retained at its UK GAAP carrying value at 1 January 2006, having been satisfactorily tested for impairment at that date.

Under UK GAP goodwill was amortised over its useful economic life, but under IFRS no amortisation charge has been made. This increases profit in the six month period ended 30 June 2006 by £147,000, and in the year to 31 December 2006 by £293,000. Instead, goodwill recognised in the balance sheet will be subject to review for impairment on at least an annual basis, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Deferred Taxation (IAS 12)

IAS 12 takes a balance sheet approach to deferred tax whereby deferred tax is recognised in the balance sheet by applying the appropriate tax rate to the temporary differences arising between the carrying value of the assets and liabilities and their tax base.

Adjustments made to the financial statements on the transition to IFRS result in the recognition of a deferred tax asset for the value of tax losses to the extent that it is reasonably foreseen that they will be utilised in the near future. This asset was not previously recognised under FRS 19.