Half-year Report

27 March 2018

Artilium plc

("Artilium" or the "Company" or the "Group")

Half yearly results for the six months ended 31 December 2017

Artilium plc (LSE/AIM: ARTA), the AIM quoted provider of innovative telecommunication software and solutions, announces its unaudited half yearly results for the six months ended 31 December 2017.

Financial Highlights

· Revenue for the six months to 31 December 2017 was € 5.5 million (2016: € 5.1 million), an increase of 7.8%

· Adjusted EBITDA of € 0.6 million (2016: € 0.1 million)

· Record results reported and Artilium is upbeat on full year forecasts

Operational Highlights

· Several new MVNOs activated and new large customers won on cloud PBX

· Successful integration of Wbase and Digiweb, acquired in 2017, into the Group

· Livecom integration into Comsys creating increased cross selling across the Group

· Appointment of Chief Financial Officer, Rupert Hutton, to the Board on 1 July 2017 

· Entered into a strategic partnership and share exchange with Pareteum Corporation (NYSE: TEUM) to jointly pursue new and developed markets, accelerate growth and market share

· First contract signed with Chinese MVNO through the Pareteum partnership

· New office opened in Germany where strong demand is seen for the Group's fixed line mobile and data telecom based software solutions

· IoT fuelling the increase in demand for Artilium's products and services

Post Period End

· Acquisition of Interactive Digital Media GmbH (IDM), a German based cloud communication company, with integration proceeding according to plan

Commenting on the results and outlook, Jan-Paul Menke, Non-Executive Chairman of Artilium said:

"Artilium has made considerable progress in the last six months with positive developments across our key financial metrics. We have achieved sales growth and strengthened interest in our core and expanding business offerings. The Group's strategic partnerships, such as the one with Pareteum Corporation, are bearing fruit.

 "The telecommunications market is increasingly moving towards innovative and expanded software products and services and Artilium is now establishing itself as a leading provider of these services. Our integrated offering makes us an attractive business partner on a global scale.

"The new financial year has started well and we look forward to updating the market on our continued progress in due course."

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About Artilium

Artilium is a demonstrated leader in the development of next generation communication technologies. Artilium's strategy focuses on supporting its customers to successfully grow their business by providing flexible, cost effective and innovative solutions.

Artilium's innovation-driven strategy empowers telecom operators around the globe to face the tremendous challenges ahead. We combine next-generation technology with traditional telecom environments to create exciting new business opportunities for our customers. This ensures that our customers are able to keep up with rapidly evolving market demands while simultaneously growing their businesses.

ARTA® is the real-time Authentication, Authorization and Accounting (AAA) software that brings a full suite of new functionalities to telecom Operators and virtual Operators. Thanks to ARTA® value-added services portfolio, including for instance AAA of voice, text and data services, VoIP, 3G and 4G compliance, mobile payments and location-based services, our partners are more than ready to meet future customer needs.

Today, multiple renowned national and international telecommunication companies rely on Artilium to deliver voice, text and data services to about 1.5 million end users every day.

Artilium's "Pay-As-You-Grow" model allows us to scale our solutions to the exact needs of our customers. As a latest innovation, Artilium offers its product suite from the Cloud as a PAAS (Platform As A Service), yielding ARTA's scalability, flexibility and proven stability.

Artilium PLC is a publicly listed software company on the London Stock Exchange (LSE/AIM: ARTA).

Forward Looking Statements

This report contains certain "forward looking" statements and information relating to the Company that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate", "believe", "estimate", "expect", and "intend" and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitation, competitive factors, general economic conditions, customer relations, relationships with vendors, borrowing arrangements, interest rates, foreign exchange rates, litigation, governmental regulation and supervision, seasonality, product introductions and acceptance, technological change, changes in industry practices, one-time events and other factors described herein and in other announcements made by the Company. Based upon changing conditions, should any one or more of these risks or uncertainties materialise, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

Chief Executive's Statement

Introduction

We have made strong progress during the first six months of the current financial year. The delivery of increasing volumes of new software, including IoT platforms and data delivery portals, is building a healthy order book from both new and existing customers. The Group's international prospects for our products and services are geographically diverse and growing which gives us much confidence in our ability to expand our customer base.

Financial results

Reported revenue for the six months to 31 December 2017 of € 5.5 million (2016: € 5.1 million) was generated primarily from maintenance and professional services rendered to existing customers and by United Telecom from fixed calling, broadband and mobile services. The Group generated a gross profit of € 4.3 million or 78.9 per cent. of reported revenue (2016: € 3.8 million or 74.3 per cent. of reported revenue) and generated adjusted EBITDA of € 0.6 million (2016: € 0.1 million).

The Group reported a net loss after tax of € 0.4 million (2016: € 0.9 million), after charging depreciation and amortisation on historic acquisitions of €0.8 million.

Business overview

In October 2017, Artilium signed an agreement and share exchange with Pareteum Corporation, a NYSE quoted Software-as-a-Service provider. Under the agreement both parties are developing new joint products and services, experiencing enhanced sales coverage, increasing speed to market and gaining access to greater knowledge and resources, forming a significant competitive advantage in the fast-growing IT telecoms market. The agreement with Pareteum is focused on mature markets but has also enhanced Artilium's prospects in high growth and traditionally underserved developing markets. 

Artilium is pleased to announce that Pareteum has signed its first contract in China.  Artilium is enabling the new customer's China-based subscribers to connect and transact on their mobile devices anywhere in the world. Pareteum is powering this new customer to expand its subscriber revenues through global connectivity and data, without the need for investment in infrastructure or software. Fully integrated cloud-based product sets are continuing to enable the Artilium philosophy of connecting any device, anywhere, on any network.

At United Telecom ("United"), the Group's Belgian telecoms service provider operating in fixed and mobile telecom, several new MVNOs were activated and new large enterprise customers were won on the cloud PBX platform. The Digiweb customers, which we acquired in May 2017, have been successfully transferred to the United Telecom brand, and have added revenues from July 2017. United now benefits from a much broader customer base to cross sell into the growing enterprise market.

At Comsys, our specialist interactive telephony services business, performance was solid and we have also seen increasing interest in our Livecom products and services from customers around the world. The integration of Livecom into Comsys has significantly increased the appeal of these products and services and, with further integration of the business, cross-selling within the existing customer base is increasing and expected to continue to do so. The Group can now offer telco customers and potential customers with a multi-channel call centre solution, and through these synergies we can offer clients the full range of services, making Artilium more appealing to its growing customer base and positioning us well for future growth.

The telecommunications market continues to innovate and evolve, and the Group's growing presence as a leading integrated provider with cross selling capabilities is benefiting from the evolving market opportunities.

I would like to thank all employees for their hard work through the period and to our shareholders for their trust in the management team as we continue to build momentum and add further value for our customers and shareholders alike.

Post Period End and Current Trading

The start of 2018 calendar year has been very positive, with Artilium selling an IoT platform that has been developed for Telenet, our largest customer. Under this agreement, Artilium will sell products and services within Telenet's customer base which should increase our sales potential for the whole Group.

Our new office in Germany will enable Artilium to further expand into the significant and growing German market, where sales will initially be achieved through IT resellers and systems integrators to our business customers. Our first enterprise customers have been signed up and are now on the Artilium platform in Germany. Artilium's expansion into Germany was underpinned this calendar year by the acquisition of Interactive Digital Media GmbH ("IDM"), a German-based cloud communication company. This deal is expected to increase Artilium's Group revenue by 45 per cent. for the current financial year. The integration of IDM is progressing very well and Artilium is already benefiting from access to IDM's large customer base. The Board is optimistic about Artilium's prospect for the rest of the year and has confidence that Artilium will build on the very encouraging start made to this calendar year.

Historically the Group has presented its results by business line (ARTA, United Telecom, Comsys). However, following the transformational acquisition of IDM, going forward the directors consider that presenting its operations in terms of telecoms services and enterprise services better represents the Group's business by highlighting more clearly the growth characteristics of each offering and how each it is positioned in the market.

Bart Weijermars

27 March 2018

CONDENSED CONSOLIDATED INCOME STATEMENT

A key performance indicator for the Group is adjusted EBITDA. This was € 0.6 million for the six months to December 2017 (2016: € 0.1 million). The reconciliation of adjusted EBITDA to the income statement is disclosed below.

Reconciling table operating result-adjusted EBITDA

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Non-cash transactions

The principal non-cash transactions comprise the issue of shares as consideration for business combinations and the issue of shares to settle Group liabilities.

NOTES TO THE CONDENSED CONSOLIDATED HALF YEARLY FINANCIAL STATEMENTS

1. Nature of operations and general information

Artilium plc and its subsidiaries (together 'the Group') operates in the business to business communications sector delivering innovative software solutions which layer seamlessly over disparate fixed, mobile and IP networks to enable the deployment of converged services and applications. Artilium plc is incorporated and domiciled in the United Kingdom. The address of its registered office is 9-13 St. Andrew Street, London EC4A 3AF. The Group's principal place of business is Belgium and the Netherlands.

2. Basis of preparation

These unaudited condensed consolidated half yearly financial statements have been prepared under the historical cost convention and in accordance with the AIM Rules for Companies. As permitted, the Group has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The unaudited condensed consolidated half yearly financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2017, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The unaudited condensed consolidated half yearly financial statements do not constitute statutory financial statements within the meaning of the Companies Act 2006. They have been prepared on a going concern basis in accordance with the recognition and measurement criteria of IFRSs as adopted by the European Union. Statutory financial statements for the year ended 30 June 2017 were approved by the Board of Directors on 30 October 2017 and delivered to the Registrar of Companies. The report of the auditor on those financial statements was unqualified.

The same accounting policies, presentation and methods of computation are followed in these unaudited condensed consolidated half yearly financial statements as were applied in the preparation of the Group's annual audited financial statements for the year ended 30 June 2017.

The preparation of unaudited condensed consolidated half yearly financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in the Group's Annual Report and Financial Statements for the year ended 30 June 2017. Except as described below, the nature and amounts of such estimates have not changed significantly during the interim period.

The presentational currency of the Group is round thousand Euros.

Basis of consolidation

The unaudited condensed consolidated half yearly financial statements incorporate the financial statements of Artilium plc and the entities controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

All material intra-group transactions, balances, income and expenses are eliminated on consolidation.

Going concern

The Directors have adopted the going concern basis in preparing the condensed consolidated half yearly financial statements, having carried out a going concern review. In carrying out the review the Directors have made assumptions about the future revenue that will be generated based on its pipeline. The Directors are satisfied that the going concern basis is appropriate.

Intangibles

IAS 36 requires the Directors to consider intangible assets and goodwill for impairment on an annual basis. The last review was performed at 30 June 2017 and has not been updated at the interim date.

3. Earnings per share

4. Share capital

5. Post Balance Sheet Events

On 16 January 2018 Artilium acquired the entire issued share capital of Interactive Digital Media GmbH ("IDM"), a German-based cloud communication company, for an aggregate consideration of €3.5 million. The consideration was satisfied in €2.0 million cash and €1.5 million in options over ordinary shares or payment in ordinary shares of 5 pence each in the capital of the Company.  

6. Further Copies

Copies of the half-yearly financial report are available from the Company's registered office at 9-13 St. Andrew Street, London EC4A 3AF and on the Company's website www.artilium.com