Half Yearly Report

Artilium plc

("Artilium" or the "Company")

Half yearly results for the six months ended 31 December 2013

Artilium Plc. reports an improved adjusted EBITDA of €0.765 million and a positive net profit after tax of €0.34 million.

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 2013.

Financial Highlights

§ Revenue for the six months to 31 December 2013 was € 5.5 million (2012: € 5.7 million)

§ Adjusted EBITDA of € 0.765 million (2012: € 0.475 million)

§ Improved net profit after tax of € 0.34 million (2012: € 0.009 million)

 Commenting on the results, Patrick Morley, Non-Executive Chairman of Artilium said: 

"I am pleased that, in the face of increased competition in the software business and price pressure in the telecom business, we can report this increased adjusted EBITDA and net profit for first half year.

The challenge for the coming period is now to convert the promising sales pipeline into revenue and start growing the top line."

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Chief Executive's Statement

Introduction

After the first year of transformation ending June 2013 the focus in this financial year has been on sustaining the positive EBITDA trend.

The Company's main business line is delivering its higher margin real time software to mobile operators. We have concentrated on expanding and further professionalising the release delivery process in this part of the business. We have been successful in growing this business resulting in increased revenue and adjusted EBITDA margin. 

The, lower margin, traffic re-sales of mobile, fixed and broadband business has experienced a very challenging market especially in the mobile domain. Mobile Operators in Belgium have very aggressively lowered their prices and this has had an impact on United Telecom revenue which showed a decrease. However we have been able to improve the adjusted EBITDA margin by optimising the cost-levels in the different processes. Our current focus is on restoring the traffic revenues and we are in further re-negotiations in relation to the different traffic re-sale conditions.

The sales organisation has been further professionalised and extended, leading to a number of promising national and international opportunities in our sales pipeline.

I am pleased that with a good team effort at both board and management levels we have been able fix the basics last year and we have been working hard to expand the business from that baseline.

These half yearly results show that we have delivered a year-on-year growth of adjusted EBITDA from € 0,475 million to € 0,765 million, an increase of 61%. We are pleased that the company has delivered net profit of € 0,34 million increased from € 0,009 million last half year. The Artilium software sales has seen an increase from € 2,9 million to € 3,25 million a 12% year-on-year increase. This increase however could not mitigate the (lower margin) traffic revenue loss at United Telecom resulting in a total revenue decrease from € 5,7 million to € 5,5 million.

Financial results

Reported revenue for the six months to 31 December 2013 of €5.5 million (2012: €5.7 million) was generated primarily from maintenance and professional services rendered to existing customers and by United Telecom its fixed line, broadband services and mobile services. The Company generated a gross profit of €4.0 million or 71.9% of reported revenue (2012: €4.2 million or 73.8% of reported revenue) and generated an adjusted EBITDA of €0.765 million (2012: €0.475 million), inclusive of administrative expenses of €3.4 million (2012: €3.8 million). The company generated a positive net profit after tax of €0.34 million (2012: € 0.009 million).

Outlook

Management is still focussed on enlarging the customer base for managed services by selling the ARTA software. Although current macro-economic conditions remain difficult, we believe that the ARTA platform, with its high performance IT engine at low-cost, is a unique asset. The ARTA platform drew a lot of attention on the Mobile World Congress in Barcelona. Management is confident that current discussion with its prospects can grow the Artilium business.

With United Telecom we are re-negotiating the current traffic tariffs in order to remain attractive for consumers in the Belgian market and restore revenue levels.

We expect the challenging conditions in our operating environment to continue into the second half of the year and revenue growth will depend on converting the promising sales pipeline. Notwithstanding adverse market conditions we believe we can continue to grow our business, albeit this depends on converting our existing sales pipeline.

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 materialize, 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.

CONDENSED CONSOLIDATED INCOME STATEMENT

A Key performance indicator for the company is adjusted EBITDA. This was € 0.8 million for the 6 months to December 2013(2012:€ 0.5 million). The reconciliation of adjusted EBITDA to the income statement in disclosed below.

Reconciling table operating result-adjusted EBITDA

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

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 EC4A3AF, The Group's principle place of business is Belgium.

The Group's condensed consolidated half yearly financial statements are presented in round thousand Euro's because that is the principal currency the Group operates in. These condensed consolidated half yearly financial statements have been approved for issue by the directors on 25 March 2014. The financial information for the year ended 30 June 2013 set out in this half yearly report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 June 2013 have been filed with the Registrar of Companies.

2. Basis of preparation

These unaudited condensed consolidated half yearly financial statements have been prepared in accordance with IAS 34 - Half yearly Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the 30 June 2013 annual consolidated financial statements. These condensed consolidated half yearly financial statements have been prepared in accordance with the accounting policies adopted in the last financial statements for the year ended 30 June 2013.

Basis of consolidation

The condensed consolidated half yearly financial statements incorporate the financial statements of Artilium plc ('the Group') and the entities controlled by the Company (together 'the Group'). 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.

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

The accounting policies have been applied consistently throughout the group for the purposes of preparation of these condensed consolidated half yearly financial statements.

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 and in assessing future cashflows the Directors have made detailed assumptions regarding the revenue that will be generated in the period to June 2015 based on its pipeline together with forecasts of costs and margins. These forecasts form the basis for the directors to satisfy themselves that the going concern assumption 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 2013. This has not been updated at the interim date. The review of the carrying value of the Group's intangible assets and goodwill at 30 June 2013 was carried out and the assets were found to be unimpaired. The directors do not consider that any indicators of impairment exist at 31 December 2013.

4. Earnings per share

The share options in issue do not have a dilutive effect due to the result for the period being a profit, and as a result diluted profit per share is the same as basic earnings per share.

5. Share capital

The Company has issued 2,140,604 ordinary shares at a price of 8,5p during the half year in payment to directors, key personnel and service providers of the Company.

6. Status of half yearly financial statements

The condensed set of half yearly financial statements for the six months ended 31 December 2013 is unaudited and does not constitute statutory accounts as defined by The Companies Act 2006. The comparative figures for the period to 31 December 2012 are also unaudited. The comparative figures for the year to 30 June 2013 are extracted from the statutory accounts to that date. A copy of those statutory accounts has been filed with the Registrar of Companies.

7. Further Copies

Copies of the half-yearly financial report are available from the Company's registered office at 9-13 St. Andrew Street, London EC4A3AF.