Preliminary Results for Twelve months ended December 31, 2007

19 March 2008

Stilo International plc ("Stilo" or the "Company") (LSE:STL), the AIM quoted software and services company, today announces its unaudited results for the twelve months ended 31 December 2007.

Highlights

• Sales revenues increased by 8% to £2,436,000 (2006: £2,264,000)
• Profit before taxation, before exceptional items and write-down of intangible assets, of £73,000 (2006: £9,000)
• Basic earnings per share of 0.09p (2006: loss per share 0.16p)
• Results adversely affected by a weak US dollar by £95,000 compared to the average rates in 2006
• Collaborative software development successfully completed with major North American customer
• Development of Stilo Migrate, the world's first on-demand content migration service, nearing completion
• Consolidation of European operations

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

"The Company has made steady progress in 2007, increasing both sales revenues and profits, notwithstanding the adverse exchange rate effects of trading in North America.

Having consolidated operations in Europe, we have invested significantly in the development of Stilo Migrate, the world's first on-demand content migration service, due to be released in 2008. We have received considerable early interest in Migrate, and have already won an initial order from a major high-tech customer prior to its general release. With a strong opening order book for professional services in North America, the impending launch of a new, jointly developed solution for the Aviation industry, and the release of OmniMark v9 later in 2008, we look forward to the future with confidence."

Enquiries:

Stilo International plc
Les Burnham, Chief Executive     01793 441444

Charles Stanley Securities
Nominated Adviser
Russell Cook 020 7149 6000

Chairman's Statement

I am pleased to announce Stilo's unaudited results for the twelve months ended 31 December 2007 and to report upon the continued progress made by the Company during the period.

Strategy

Stilo provides software and services to help major enterprises automate the processing of technical and complex information.

Operating from offices in the UK and Canada, we support customers in Aerospace & Defence, Manufacturing, IT, Telco, High Tech, Publishing and Government. Our clients include Boeing, Airbus, IBM, SAP, BAe, Wolters Kluwer, Thomson Publishing, British Library, Japan Patent Office and the European Parliament.

In the latter part of 2007, we re-organised our operations into the following complementary business divisions, to better reflect our key sales and marketing focus i.e.

• Content Processing Solutions
• On-Demand Content Migration Services
• Solutions for users of SAP ERP systems

In each area of expertise, Stilo can justifiably claim a position of market leadership.

Results

The company is pleased to announce that it has returned a trading profit for the second consecutive year. In 2007, results show a trading profit (before exceptional items and amortisation of intangibles) for the year of £73,000 (2006: £9,000). For the first time, there was a profit from continuing operations, after taxation of £94,000 (2006: restated - £144,000 loss).

Total sales revenue for the period increased by 8% to £2,436,000 (2006: £2,264,000).

Administrative expenses, excluding exceptional items, rose slightly in the year to £2,128,000 (2006: £2,102,000) although this includes a full year of the SAP solutions business acquired in August 2006 from Proceed Engineering Solutions. In Europe, with the closure of the Paris office, cost savings of £230,000 were achieved, compared to 2006. European operations are now centred in the UK.

Non-recurring exceptional costs for the year totalled £105,000, consisting of staff redundancy costs, associated legal fees and office closure costs.

At 31 December 2007, the cash position had reduced to £236,000 (2006: £420,000), although there were higher trade receivables at 31 December 2007, and collection of these in the early part of 2008, meant that by 29 February 2008, the group cash position was £466,000.

In the Content Processing Solutions business, sales decreased to £1,602,000 (2006: £1,840,000), primarily as a result of declining software orders and customer delays in placing project service contracts. However, this was offset by cost reductions in Europe referred to above. Professional services revenue in North America increased by 22% to £409,000 (2006: £334,000), and the Content Processing business overall continued to be underpinned by recurring annual software maintenance revenues of £731,000 in 2007, generated from 170 customer contracts.

The group suffered adverse effects from trading in North America with revenue deflated as a result of a weak US dollar. The adverse impact on the results was £95,000 compared to the average rates in 2006.

Research and development expenditure totalled 10% of sales revenues, at £245,000 (2006: £155,000), including investment relating to the ongoing development of OmniMark and the development of Stilo Migrate which commenced in the second half of 2007. Expenditure on Stilo Migrate has been capitalised in 2007 as an intangible asset.

The SAP Solutions business achieved sales revenue of £834,000 in the year (2006: £412,000) 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.

The accompanying results for the year ended 31 December 2007 have been prepared for the first time (for a full year) in accordance with International Financial Reporting Standards as adopted by the European Union as now required for AIM companies.

Content Processing Solutions

Stilo specialises in building high-performance content processing solutions that acquire, enrich and ultimately deliver content to enterprise information portals and supply chain partners.

With over twenty years experience in content engineering, we build solutions that process content in all its forms, including combinations of data, plain text, hypertext and markup text (XML, SGML, HTML). Typical applications include performance support portals for equipment maintenance engineers in the Aerospace and Defense, Automotive and Engineering sectors, where immediate access to detailed information can be of critical importance.

We are particularly pleased to report the successful completion in late 2007 of a collaborative software development with a major Air Cargo Services provider in North America. Details remain confidential, prior to its planned launch in April 2008, but the application will be marketed by our development partner into the Aviation sector, with Stilo providing technical support services to prospective customers as required. We are optimistic as to the potential new market opportunity this represents.

When developing content processing solutions for clients, we typically deploy Stilo's OmniMark content processing platform within enterprise information architectures. OmniMark is a well-proven technology, designed from the ground up, to address the requirements of high-performance, enterprise content processing applications. It is used throughout the content lifecycle, including the initial conversion of content from legacy formats to XML/SGML, and during the enrichment and delivery of that content to publishing systems or other target applications.

OmniMark is deployed in publishing systems across a range of market sectors. Customers for OmniMark during the period included Boeing, Wolters Kluwer, IBM, International Atomic Energy Agency and the European Parliament. The British Library was a new customer in 2007, using OmniMark in their e-journals INGEST project, whereby the Library will accept e-journals from Scientific & Technical publishers, archive them, and subsequently make them generally available online. The project forms one part of a wider Library initiative to archive and manage a whole range of digital publications in the future.

On-Demand Content Migration Services

During 2007 we began the development of Stilo Migrate, the world's first on-demand content migration service. It is the embodiment of Stilo's extensive content engineering expertise and advanced content processing technology, and is reflective of the general market adoption of Software as a Service (SaaS). Scheduled to launch in 2008, Stilo Migrate is set to revolutionise the market for content migration services, massively simplify the content conversion process, and significantly reduce associated project timescales and costs. Accessible 24x7 from anywhere in the world, it will enable users to upload source documents over the internet and migrate content to target XML formats, on a pay-as-you-use basis.

Stilo is very encouraged at the potential market opportunity and the initial interest shown by leading companies, as XML becomes increasingly adopted by organisations around the world for single-source publishing applications.

Solutions for users of SAP ERP systems

In the UK, Stilo provides consulting services to users of SAP ERP systems, specialising in the disciplines of Product Lifecycle Management and Document Management. We offer global clients high-level strategic consulting and development services, and our customers include Augusta Westland, BAe Systems and Waters Micromass. In late 2007 we launched the first of a range of low-cost Stilo software solutions that enable customers to rapidly extend the functionality, and therefore value, of existing SAP ERP installations.

Research and Development

In 2007 we invested 10% of sales revenues in Research and Development and intend to increase this further in 2008, primarily in the ongoing development of OmniMark and Stilo Migrate. Both OmniMark v9 and the initial version of Stilo Migrate are scheduled for release in 2008.

Operations

During 2007, European operations were consolidated in the UK, with the closure of Stilo SARL and the Paris office. Significant cost savings have been made as a result, whilst customer service levels have been maintained.

As at 31 December 2007, the group employed 27 full-time employees, with 14 located in North America and 13 in Europe.

Outlook

The Company has made steady progress in 2007, increasing both sales revenues and profits, notwithstanding the adverse exchange rate effects of trading in North America.

Having consolidated operations in Europe, we have invested significantly in the development of Stilo Migrate, the world's first on-demand content migration service, due to be released in 2008. We have received considerable early interest in Migrate, and have already won an initial order from a major high-tech customer prior to its general release. With a strong opening order book for professional services in North America, the impending launch of a new, jointly developed solution for the Aviation industry, and the release of OmniMark v9 later in 2008, we look forward to the future with confidence.

Unaudited Group Income Statement Year ended 31 December

Group Statement of Recognised Income and Expense for the year ended 31 December

Unaudited Group Balance Sheet As at 31 December 2007

Unaudited Group Cash Flow Year ended 31 December

Notes to the unaudited preliminary financial results

1. The figures for the year ended 31 December 2007 and 2006 do not constitute statutory accounts within the meaning of S.240 of the Companies Act 1985. The figures for the year ended 31 December 2007 have been extracted from the statutory accounts for that year which have yet to be delivered to the Registrar of Companies and on which the auditor has yet to issue an opinion. The figures for the year ended 31 December 2006 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, having been restated under International Financial Reporting Standards. No statement has been made by the auditor under Section 237(2) or (3) of the Companies Act 1985 in respect of either of these sets of accounts. This announcement was approved by the board of directors on 18 March 2008.
2. The consolidated financial statements have, for the first time, 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 unaudited financial statements for the year ended 31 December 2007 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 £94,000 (2006: restated - £144,000 loss), and on the weighted average number of shares in issue during the year of 102,103,470 (2006: 91,936,803). The fully diluted earnings per share takes account of outstanding options which results in a weighted average number of shares in issue during the year of 109,651,090 (2006: 91,636,803).
4. The directors do not recommend the payment of a final dividend (2006: £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 2007 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. The annual general meeting is due to be held at 2 Bloomsbury Street, London at 11.30am on 22 May 2008.