Stilo tumbles as profit drop following loss of key customer

AIM-listed Stilo International reported a fall in first-half profits after the software group was unable to retain a key customer.

Revenues dropped 22.3% to £707,000, principally due to the expiry of a three-year customer contract for Migrate, which dragged pre-tax profits down a total of 70% to £42,000. Earnings per share dropped 66% to 0.04p.

Despite the major contract loss, Stilo still reduced its operating costs during the six months to 30 June, leading it to declare an interim dividend of 0.6p per share, up from the 0.5p returned to investors a year earlier. Cash and equivalents dipped 10% to £1.44m.

David Ashman, Stilo's chairman, said changes to IFRS accounting rules in 2018 had the effect of deferring £27,000 of software revenue recognition beyond the end of December 2017 and £64,000 beyond the end of June 2018 resulting in the net reduction in H1 revenue.

"With a reduction in operating costs for the period, assisted by favourable exchange rates, we have still been able to report a profit for the half year. This reflects well upon the overall resilience of the company," he concluded.

Although one Migrate customer was lost, customers in the half-year included Viewpoint, Arris, Synopsis, Deltek, Varian and Tibco, while another operational highlights to complement Migrate occurred in the second half, with July seeing the start of development of a professional service tool to automate the de-duplication of content on the DITA open-source publishing engine. Stilo was "encouraged" by initial feedback received from prospective customers and business partners.

As of 0850 BST, Stilo shares had tumbled 16.8% to 2.08p.