Final Results

15 March 2012

STILO INTERNATIONAL PLCPreliminary Announcement of Resultsfor Year Ended 31 December 2011

Stilo International plc ('Stilo', 'the Group' or 'the 'Company') (LSE:STL), the AIM quoted software and services company, today announces its results for the year ended 31 December 2011.

FINANCIAL HIGHLIGHTS

- Sales revenues reduced to £1,735,000, as SAP-related services activities curtailed(2010: £2,384,000)

- Increase in sales of OmniMark software, including annual maintenance revenues,to £1,403,000 (2010: £1,139,000)

- Profit after taxation of £105,000(2010: £142,000)

- Operating expenses reduced by 17% to £1,508,000(2010: £1,823,000)

- Increased investment in product development to £377,000(2010: £337,000)

- Cash position strengthened significantly to £939,000 as at 31 December 2011(2010: £494,000)

BUSINESS HIGHLIGHTS

- Focus on XML content conversion technology and associated services

- Prestigious orders received from IBM and Cisco Systems for Stilo Migrate, the world's first XML cloud content conversion service

- Culmination of OmniMark version 10 development efforts (released February 2012), the leading platform for building high-performance XML/SGML content conversion solutions

- Significant OmniMark software orders received from Japan Patent Office and Boeing 

- Services contracts successfully undertaken with AgustaWestland, ALLDATA LLC and Schlumberger

ENQUIRIES

CHAIRMAN'S STATEMENT

2011 saw a major change in the Company's operations, as reduced budgets in the UK Defence sector and the successful completion of associated services engagements, led us to curtail our SAP-related services activities, and to focus on technology developments.

This operational change led to a reduction in sales revenues and operating profit, partially offset as a result of a significant increase in the sales of OmniMark software.

David Ashman

Chairman

14 March 2012

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 through the provision of innovative technology and advanced levels of automation.

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, Japan Patent Office and the British Library. 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. This approach can work very successfully, but we recognised an opportunity to further improve turnaround times and reduce the costs of conversion projects through the provision of improved levels of 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. It is particularly noteworthy that IBM adopted the service following extensive trials by their central technical documentation team, and more recently it has been adopted by Cisco Systems for global deployment. In the future we will continue to develop a range of source document formats and target XML formats, to address the requirements of particular vertical market sectors.

Services engagements with clients, centred typically around content conversion and aggregation requirements, has led to the development of JETView, a digital publishing solution that generates aircraft maintenance documentation. The solution, based upon OmniMark, is used by ABX Air to consolidate information periodically provided by aircraft OEMs, and publish that information digitally for use by maintenance engineers.

Notwithstanding the curtailment of the SAP-related services activities during 2011, we continue to support our SAP® certified Product Change Impact Analysis tool, used by manufacturing companies to better manage the impact of product changes across engineering, production, supply chain logistics and finance. It is currently being evaluated as a potential strategic solution by a major UK Defence contractor.

Technical Expertise

Our technical team are leading experts in the development of content conversion tools, and by association, the solving of complex SGML/XML conversion problems. This enables Stilo customers to achieve very high levels of automation in content conversion projects, reducing the time, cost and inaccuracies generally associated with manual intervention or patchwork solutions.

It also serves to highly differentiate Stilo in potential services engagements, such as projects recently undertaken at ALLDATA LLC, where our team successfully developed a conversion solution to aggregate technical content from multiple automotive OEMs, prior to its online publication for use by car maintenance mechanics.

We will be seeking to undertake similar services engagements, utilising OmniMark technology, in the future.

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 2011, there were 16 permanent employees in the Company, complemented by the use of contractors. In 2012 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 2011 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

In 2011, the results for Stilo show a profit, after taxation, of £105,000 (2010: £142,000). There was a break-even result achieved from continuing operations (2010: profit £108,000).

Total sales revenues for the period decreased to £1,735,000 (2010: £2,384,000). This was as a result of an anticipated reduction in revenue from consulting services in the Solutions for SAP Division. Revenue from total software sales in the Digital Publishing Division more than doubled to £721,000 (2010: £349,000).

Revenue from software maintenance contracts was £750,000 (2010: £799,000). This change in the mix of types of revenue meant that the company was able to achieve a profitable result despite the overall fall in turnover.

Operating expenses decreased by 17% in the year to £1,508,000 (2010: £1,823,000).

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.

Investment in research and development continued in 2011, with the development team extended. Research and development expenditure for the year increased to £377,000 (2010: £337,000). As a result of this investment, Stilo continues to benefit from research and development tax credits.

Stilo had a cash balance of £939,000 as at 31 December 2011 (31 December 2010: £494,000). This significant improvement in the year-end cash position 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 2011

Group Statement of Financial Position

as at 31 December 2011

Group Statement of Changes in Equity

for the year ended 31 December 2011

Group Cash Flow Statement

for the year ended 31 December 2011

1. The figures for the year ended 31 December 2011 and 2010 do not constitute statutory accounts within the meaning of S.434 of the Companies Act 2006. The figures for the year ended 31 December 2011 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 2010 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 14 March 2012.

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 2011 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 £103,000 (2010: profit of £142,000), and on the weighted average number of shares in issue during the year of 109,808,470 (2010: 109,728,470). The fully diluted earnings per share in 2011 takes account of outstanding options which results in a weighted average number of shares in issue during the prior year of 118,408,470.

4. The directors do not recommend the payment of a final dividend (2010: £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 2011 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 2011 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, 2 Bloomsbury Street, London WC1B 3ST at 11.30am on 17 May 2012.