PILAT TECHNOLOGIES INTERNATIONAL LTD.
('PTI', the 'Group' or the 'Company')
Results for the Half Year and Second Quarter ended 30 June 2008
London and Tel Aviv 1 September 2008 - Pilat Technologies International Ltd, the
AIM quoted human resources management consultancy, software and services group,
announces its results for the half year and second quarter ended 30 June 2008. PTI
is also quoted on the Tel Aviv Stock Exchange.
SUMMARY
- Sales up 17% for the half year and 18% for Q2 compared with 2007
- Operating loss of �142,000 for the half year (H1 2007 loss �32,000)
Through three main subsidiaries, Pilat Europe, Pilat North America and Pilat Israel,
the Group provides consultancy, advanced web based software applications and data
processing and analysis services in the fast growing field of Human Capital Management.
Pilat has a wide and varied client base including many major global corporations and
international public sector bodies. The Company works across all sectors with
organisations employing from a few hundred to hundreds of thousands of staff. Pilat
has extensive industry experience in Financial Services, Energy and Telecommunications
and sector specific offerings in Healthcare, Public Housing, Local Government and
Education.
The shares of PTI are quoted on both AIM and the Tel Aviv Stock Exchange.
Enquiries
Pilat Technologies International Ltd + 972 3 67 9200
Jonathan Berger, Chief Financial
Officer
Hanson Westhouse Limited + 44 (0)113 246 2610
Tim Feather / Matthew Johnson
CHAIRMAN'S STATEMENT
The Board of PTI presents the Company's results for the first half and second quarter
(the "Q2") of 2008.
These interim results should be read against the background of a strong rise in the
value of the Israeli Shekel against both Sterling and the US Dollar over the last year.
For the first half of 2008, the Company showed strong overall growth with sales up 17%
and margins broadly maintained with gross profit up 16%. However, our continuing
investment in R&D, which we expense as incurred, 10% higher sales and marketing expenses
and an increase in overheads (mainly a reflection of more expensive in Sterling head
office expenses) pushed operating losses to �146,000 compared to a loss of �32,000 in
the first half last year. Net financial expenses of �117,000 took losses before tax
to �262,000.
Cash used in operating activities was �91,000 for Q2, broadly reflecting the operating loss.
We were disappointed to make losses in the first half with sales growing strongly. All
the operating companies were in profit for the half year and we are currently taking action
to reduce costs where appropriate.
Our results in Shekels, also published today, show a strong rise in sales for our Israeli
operations of 18% in the first half. The same results in Sterling show sales growth of
38% due to the appreciation of the Shekel against Sterling during the first half. This
rise in the Shekel against Sterling also accounts for the high financial expenses in the
six months ended 30 June 2008.
The board remains supportive of further consolidation of the industry in Israel and will
continue to look for opportunities to acquire or merge its activities in this market place.
In Pilat HR Solutions (our European and North American companies) growth has been mixed
with US revenues falling slightly (5% down over the half year) and Europe growing more
strongly with a 12% rise.
Revenues and profitability
Overall sales in the first half were �4,400,000, an increase of 17% compared to the first
half of 2007. This was due to the sales increases in Europe (12%) and Israel (38%- in
local currency the increase was 17%).
Total sales in Q2 were �2,289,000, an increase of 18% over Q2 2007 (�1,932,000).
Sales at Pilat Europe to non-Group customers during Q2 were �752,000, an increase of 22%
over Q2 2007 (�616,000).
In Israel, sales in Q2 were �1,029,000, an increase of 41% over Q2 2007. In Shekels,
sales grew by 17% in Q2.
Pilat North America sales in Q2 were down by 14% to �508,000 (Q2 2007 �589,000).
The gross margin in Q2 stood at 38%, similar to the gross margin in Q2 2007
and for the full half year of 2008.
Research and development costs more than doubled to �189,000 in Q2 compared to
�89,000 in Q2 2007 in line with management policy.
Sales and marketing expenditure increased by 15% to �262,000 in Q2 compared to
�228,000 in Q2 2007.
The majority of our general and administrative expenses are denominated in
Shekels and in that currency the expense was reduced by 4% during Q2. However
due to the appreciation of the Shekel against Sterling during the period, the
Sterling expense increased by 16% in Q2 to �473,000 (Q2 2007 �406,000).
The Company made an operating loss in Q2 of �84,000 against an operating
profit of �64,000 in Q2 2007.
The operational currency of the Company is the New Israeli Shekel which
appreciated by 14% against Sterling during the first half year (and 22% since
30 June 2007). The effect of this appreciation on the cash balances of the
Company was to reduce the value in New Israeli Shekels of the Sterling and
Dollar deposits, thereby creating a financial loss during Q2 of �64,000 (Q2
2007- nil) and during the first half of 2008, �146,000 (H1 2006 �4,000). There
were no material interest payments during Q2.
The loss before tax stood at �133,000 during Q2 (2007 a profit of �97,000) and
net loss for the quarter stood at �138,000 compared with a net profit of
�102,000 in Q2 2007.
Balance Sheet
The Group's current assets at 30 June 2008 were �4,388,000, which represents
approximately 88% of assets (91% at 30 June 2007 and 92% at 31 December 2007).
Current liabilities at 30 June 2008 were �1,815,000 similar to the position at
31 December 2007. Long-term liabilities stood at �5,000 at 30 June 2008.
The Group's current ratio is 2.42 (2.6 at 30 June 2007 and 2.55 at
31 December 2007).
Shareholders' equity decreased during the first half of 2008 to
�3,193,000 (31 December 2007 �3,319,000), which arose from net losses of
�245,000, issuing of a dividend of �265,000 and positive foreign currency
translation adjustments of �373,000.
Liquidity
The Group used �91,000 of operating cash during Q2 compared to
�263,000 generated in Q2 2007. During the first half of 2008 the Group had a
negative cash flow of �610,000 from operating activities compared to a
positive cash flow of �15,000 in the equivalent period of 2007. The negative
cash flow during Q2 was mainly due to the loss for the period.
A distribution of dividends created a negative cash flow from financing
activities of �267,000 during Q2, compared with �nil during Q2 2007.
Positive effects of currency exchange rates were �82,000 giving a net decrease
of �282,000 in cash and cash equivalents in Q2 (Q2 2007 increase of �186,000).
Without the distribution of the dividend during Q2, cash balances would have
been reduced by �17,000.
At 30 June 2008 the cash and short term investment balances of the Company
were �1,717,000 (30 June 2007: �2,100,000) with total liabilities to banks at
�10,000 (30 June 2006: �22,000).
Michael Zuckerman, Chairman of the Board
David Sapiro, Chief Executive Officer
Jonathan Berger, Chief Financial Officer
CONSOLIDATED BALANCE SHEETS
British pounds in thousands
June 30, December 31,
2008 2007 2007
Unaudited Audited
CURRENT ASSETS
Cash and cash equivalents 1,567 1,956 2,411
Short term investments 150 144 147
Trade receivables 2,397 1,788 2,013
Other accounts receivable 215 225 219
Income tax receivable 59 30 59
4,388 4,143 4,849
NON-CURRENT ASSETS
Long - term loans and receivables 28 20 25
Employees benefits assets 65 37 52
Fixed assets, net 300 326 297
Deferred taxes 10 11 7
Intangible assets 222 - 14
625 394 395
TOTAL ASSETS 5,013 4,537 5,244
CURRENT LIABILITIES
Current maturities of long-term 10 12 10
bank loans
Trade payables 444 372 359
Other accounts payable 1,311 1,157 1,481
Income tax payable 35 36 53
Liabilities related to discontinued 15 - -
operations
1,815 1,577 1,903
NON-CURRENT LIABILITIES
Liabilities to banks - 10 6
Employees benefits liabilities 5 7 3
Liabilities related to discontinued - 12 13
operations
5 29 22
SHAREHOLDERS' EQUITY
Share capital 50 50 50
Additional paid-in capital 7,084 7,083 7,083
Capital reserve 55 39 45
Cumulative foreign currency 270 (320) (103)
translation adjustments
Accumulated deficit (4,170) (3,825) (3,660)
Less-shares held by subsidiaries (96) (96) (96)
3,193 2,931 3,319
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 5,013 4,537 5,244
CONSOLIDATED STATEMENTS OF INCOME
British pounds in thousands (except for net earnings (loss) per share amounts)
Six months ended Three months ended Year ended
June 30, June 30, December 31,
2008 2007 2008 2007 2007
Unaudited Unaudited Audited
Revenues 4,400 3,758 2,289 1,932 7,873
Cost of revenues 2,740 2,330 1,427 1,145 4,623
Gross profit 1,660 1,428 862 787 3,250
Research and development costs 374 164 189 89 500
Selling and marketing expenses 506 465 262 228 880
General and administrative expenses 897 831 473 406 1,621
Other expenses , net 29 - 22 - 2
Operating income (loss) (146) (32) (84) 64 247
Capital gain (loss) from sale of fixed assets 1 - (1) - 3
Financial income 29 35 16 33 74
Financial expenses (146) (4) (64) - (100)
Net income (loss) before taxes on income (262) (1) (133) 97 224
Taxes on income 17 33 (5) 5 (27)
Net income (loss) (245) 32 (138) 102 197
Net earnings (loss) per share (in British
Pence):
Basic Net earnings (loss) per share (0.95) 0.12 (0.54) 0.39 0.75
Diluted Net earnings (loss) per share (0.9) 0.12 (0.51) 0.38 0.73
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
British pounds in thousands
Less -
Cumulative
Additional foreign shares
Share paid-in Capital currency
translation Accumulated held by
capital capital reserve adjustments deficit subsidiaries Total
Balance at
January 1, 2007
(audited) 49 7,078 32 (251) (3,857) (96) 2,955
Cumulative
foreign
currency
translation
adjustments - - - 148 - - 148
Total income
for the year
recognized
directly in
equity - - - 148 - - 148
Net income - - - - 197 - 197
Total income
for the year - - - 148 197 - 345
Options
exercise into
shares 1 5 - - - - 6
Amounts
assigned to
employees and
director
stock-based
compensation - - 13 - - - 13
Balance at
December 31,
2007 (audited) 50 7,083 45 (103) (3,660) (96) 3,319
Cumulative
foreign
currency
translation
adjustments - - - 373 - - 373
Total income
for the period
recognized
directly in
equity - - - 373 - - -
Loss - - - - (245) - (245)
Total income
and expense for
the period - - - 373 (245) - 128
Options
exercise into
shares - 1 - - - - 1
Amounts
assigned to
employees and
director
stock-based
compensation - - 10 - - - 10
Dividends paid - - - - (265) - (265)
Balance at June
31, 2008
(unaudited) 50 7,084 55 270 (4,170) (96) 3,193
Balance at
January 1,
2007
(audited) 49 7,078 32 (251) (3,857) (96) 2,955
Cumulative
foreign
currency
translation
adjustments - - - (69) - - (69)
Total expense
for the
period
recognized
directly in
equity - - - (69) - - (69)
Net income - - - - 32 - 32
Total income
and expense
for the
period - - - (69) 32 - (37)
Options
exercise into
shares 1 5 - - - - 6
Amounts
assigned to
employees and
director
stock-based
compensation - - 7 - - - 7
Balance at
June 31, 2007
(unaudited) 50 7,083 39 (320) (3,825) (96) 2,931
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
British pounds in thousands
Less -
Cumulative
Additional foreign shares
Share paid-in Capital currency
translation Accumulated held by
capital capital reserve adjustments deficit subsidiaries Total
Balance at April
1, 2008
(unaudited) 50 7,083 50 112 (3,767) (96) 3,432
Cumulative
foreign currency
translation
adjustments - - - 158 - - 158
Total income for
the period
recognized
directly in
equity - - - 158 - - 158
Loss - - - - (138) - (138)
Total income and
expense for the
period - - - 158 (138) - 20
Options exercise
into shares - 1 - - - - 1
Amounts assigned
to employees and
director
stock-based
compensation - - 5 - - - 5
Dividends paid - - - - (265) - (265)
Balance at June
30, 2008
(unaudited) 50 7,084 55 270 (4,170) (96) 3,193
Balance at April 1,
2007 (unaudited) 49 7,078 37 (210) (3,927) (96) 2,931
Cumulative foreign
currency translation
adjustments - - - (110) - - (110)
Total expense for the
period recognized
directly in equity - - - (110) - - (110)
Net income - - - - 102 - 102
Total income and
expense for the period - - - (110) 102 - (8)
Options exercise into
shares 1 5 - - - - 6
Amounts assigned to
employees and director
stock-based
compensation - - 2 - - - 2
Balance at June 30,
2007 (unaudited) 50 7,083 39 (320) (3,825) (96) 2,931
CONSOLIDATED STATEMENTS OF CASH FLOWS
British pounds in thousands
Six months ended Three months ended Year ended
June 30, June 30, December 31,
2008 2007 2008 2007 2007
Unaudited Unaudited Audited
Cash flows from operating
activities:
Net income (loss) (245) 32 (138) 102 197
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities (a) (365) (17) 47 161 179
Net cash provided by (used in) (610) 15
operating activities (91) 263 376
Cash flows from investing
activities:
Purchase of fixed assets (63) (54) (21) (10) (102)
Proceeds from sale of fixed assets 12 - 7 - 21
Short and long term investments, net 20 (4) 8 (4) 6
Purchase of intangible assets (154) - - - (16)
Net cash used in investing (185) (58) (6) (14) (91)
activities
Cash flows from financing
activities:
Repayment of long-term loans from (6) (11)
banks (3) (6) (18)
Shares issue 1 6 1 6 6
Dividends paid (265) - (265) - -
Net cash used in financing (270) (5)
activities (267) - (12)
Effect of exchange rate changes on
cash and cash equivalents 221 (40) 82 (63) 94
Increase (decrease) in cash and cash (844) (88)
equivalents (282) 186 367
Cash and cash equivalents at the
beginning of the period 2,411 2,044 1,849 1,770 2,044
Cash and cash equivalents at the end 1,567 1,956 1,567 1,956 2,411
of the period
CONSOLIDATED STATEMENTS OF CASH FLOWS
British pounds in thousands
Six months ended Three months ended Year ended
June 30, June 30, December 31,
2008 2007 2008 2007 2007
Unaudited Audited
(a) Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
income:
Income and expenses not
involving cash flows:
Stock - based compensation 10 7 5 2 13
Depreciation and amortization 96 72 56 36 145
Deferred taxes (2) (40) 2 2 (37)
Increase (decrease) in employees
benefits Assets/ Liabilities,
net (4) (7) 8 (11) (25)
Capital gain from sale of fixed (1) -
assets 1 - (3)
Erosion of long-term loans - - - (1) -
Changes in operating assets and
liability items:
Decrease (increase) in trade
receivables, other accounts
receivable and long-term loans
and receivables (188) (60) (63) 259 (163)
Decrease (increase) in income
tax receivableas - 9 - 9 (20)
Increase (decrease) in trade
payables and other accounts
payable (257) 10 57 (127) 260
Increase (decrease) in income
tax payable (19) (8) (19) (8) 9
(365) (17) 47 161 179
(b) Non cash investing and financing
activities
Sale of fixed assets - - - - 7
Purchase of intangible assets 50 - - - -
(c) Supplemental disclosures of cash
flow
information
Cash paid during the period for:
Interest 1 2 - 1 4
Income taxes 1 1 - 1 48
Dividend 265 - 265 - -
Cash received during the period
for:
Interest 29 34 16 21 67
Note 1: General
These financial statements have been prepared in accordance with
the International Financial Reporting Standards (hereinafter - the IFRS
standards) in an abbreviated format as of June 30, 2008, and for the periods
of six months and three months ended on that date (hereinafter - the interim
consolidated financial statements). The Company's annual financial statements
as at December 31, 2007 and for the year then ended, the last annual financial
statements that were prepared in accordance with generally accepted accounting
principles in Israel should be reviewed in connection with certain notes, such
as information in respect of commitments, contingent liabilities and claims,
and similar items.
NOTE 2: Geographic Segments
Six months ended June 30, 2008
North
Israel Europe America Adjustments Total
Unaudited
British
pounds
in thousands
Revenue from external
customers 1,988 1,398 1,014 - 4,400
Inter segment sales - 45 - (45) -
Total revenues 1,988 1,443 1,014 (45) 4,400
Segment results 106 54 16 - 176
General joint expenses
unallocated (322)
Operating loss (146)
Six months ended June 30, 2008
North
Israel Europe America Adjustments Total
Unaudited
British
pounds
in thousands
Revenue from external
customers 1,439 1,249 1,070 - 3,758
Inter segment sales - 100 - (100) -
Total revenues 1,439 1,349 1,070 (100) 3,758
Segment results 102 160 (27) - 235
General joint expenses
unallocated (267)
Operating loss (32)
Three months ended June 30, 2008
North
Israel Europe America Adjustments Total
Unaudited
British
pounds
in thousands
Revenue from external
customers 1,029 752 508 - 2,289
Inter segment sales - 24 - (24) -
Total revenues 1,029 776 508 (24) 2,289
Segment results 47 72 (24) - 116
General joint expenses
unallocated (179)
Operating loss (84)
Three months ended June 30, 2007
North
Israel Europe America Adjustments Total
Unaudited
British
pounds
in thousands
Revenue from external
customers 727 616 589 - 1,932
Inter segment sales - 43 - (43) -
Total revenues 727 659 589 (43) 1,932
Segment results 57 62 60 - 179
General joint expenses
unallocated (115)
Operating loss 64
Year ended December 31, 2007
North
Israel Europe America Adjustments Total
Audited
British
pounds
in thousands
Revenue from external
customers 3,114 2,658 2,101 - 7,873
Inter segment sales - 232 - (232) -
Total revenues 3,114 2,890 2,101 (232) 7,873
Segment results 221 442 84 - 747
General joint expenses
unallocated (500)
Operating income 247
END
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