PILAT TECHNOLOGIES INTERNATIONAL LTD                      

                    ("Pilat", the "Group" or the "Company")                    

                                                                               

  Announces results for Quarter Three and the nine months ended 30 September   
                                     2003.                                     

                    Operating performance shows improvement                    

 

London and Tel Aviv 30 November 2003 - Pilat Technologies International Ltd
("PTI"), the AIM quoted human resources management consultancy, software and
services group, announces its results for the third quarter ended 30 September
2003

 

SUMMARY


�          Q3 2003 net losses down to  �187,000 compared with �508,000 for the
same period in 2002.

�          Nine month losses down to �340,000 compared with �996,000 in the
same period in 2002.

 

 

Enquiries:

 

Pilat Technologies International Ltd    + 972-3-767-9230
                                                        
Chaim Helfgott, Chief Financial Officer                 
                                                        
                                                        
                                                        

                                                                               

                                                                               

Chairman's Statement

 

The Board of Pilat Technologies International Ltd presents the Company's
results for the Third Quarter of 2003.

 

Although the improvement is slower than desired, it nevertheless resulted in a
substantial reduction of losses compared with the equivalent period in 2002. 
Steady progress has been made in reducing the cost base without prejudicing
revenue and maintaining sufficient resources to allow for a return to
profitable growth.

 

We have continued to reduce costs again in the Israeli business in October and
these reductions will take effect shortly.

 

The financial results were as follows:

 

Revenues and profitability

 

Improvements have been achieved in terms of revenues and expenses.

 

Revenues in the third quarter of 2003 (the "Period") were �2,350,000, an
increase of 4% compared with 2002 and an increase of 8.8% after the subtraction
of �100,000 revenue for 2002 from the operations of ROM Pilat, which have now
ceased.  The increase in revenues originates mainly from the Israeli
businesses.  Revenues in the UK and the USA in the Period were 35.5% of all
revenues, 37% in the first 9 months of 2003.

 

The gross profit margin fell from 34.3% to 28.8%, mainly as a result of
decreasing profitability in Israel, especially in the operations of
Renaissance, the non-HR software distribution subsidiary.  The gross profit
margin of Pilat's activities in the UK and US remained in excess of 50%.

 

Following continued cost cutting actions taken across all Group's businesses
and the closing down of ROM Pilat, general and administration costs for the
Period decreased by 17% to �649,000.

 

Selling and marketing expenses decreased by �128,000, from �348,000 in 2002 to
�220,000 for the Period.  The reduction in marketing expenses occurred mainly
in the US.  As a result, Pilat's losses before financing for the Period were �
227,000 (compared with a �393,000 loss in the third quarter of 2002) and �
350,000 for the first nine months (the loss for the first nine months of 2002
was a �792,000).  Financing expenses for the Period were �25,000 (compared with
�111,000 in 2002).

 

The after-tax loss for the Period was �187,000 and �340,000 for the first nine
months, compared with �508,000 and �996,000 in the third quarter and the first
nine months of 2002, respectively.

 

 

Extracts from the Financial Statements ( in � 000)

 

 

                             3 3 Months 9 Months 9 Months        
                                                                 
                        Months  to 9/02  to 9/03  to 9/02  Annual
                                                                 
                       to 9/03                               2002
                                                                 
Revenues                 2,350    2,255    7,972    8,541  11,476
                                                                 
Operating profits        (227)    (393)    (350)    (792) (1,152)
                                                                 
Profit before taxation   (182)    (503)    (340)  (1,014) (1,484)
                                                                 
Net profit               (187)    (508)    (340)    (996) (1,457)
                                                                 
                                                                 
                                                                 
EPS                     (0.72)   (1.96)   (1.31)   (3.84)   (5.6)
                                                                 

 

 

 

Balance sheet situation

 

Current assets as at 30 September 2003 were �4,485,000, which represents
approximately 81% of the assets (83% a year before and 81% as at 31 December
2002).  Compared to 31 December 2002, the decrease in current assets stems
mainly from an approximate �953,000 decrease in cash and the short-term
investments, used to finance the losses as well as the repayments of trade and
other account payables.

 

Fixed assets, as at 30 September 2003, decreased by �324,000 to �698,000 from �
1,022,000 at 31 December 2002, resulting from the amortization of the assets
and the sale of motor vehicles both in Israel and the UK, as well as the
elimination of the fixed assets of ROM Pilat. 

 

Current liabilities decreased from �4,812,000 at 31 December 2002 to �3,769,000
at 30 September 2003 as a result of a �588,000 decrease in suppliers' credit
(due to reduced revenues) and �651,000 decrease in other accounts payable.
Conversely, there was a �196,000 increase in the short-term credit, used to
finance a portion of the losses for the Period.

 

Liquidity

 

The Company had negative cash flow of �240,000 from its operations in the third
quarter of 2003, in line with its losses for the Period, and a decrease in
trade payables in excess of the decrease in accounts receivables.  This is
compared with a �524,000 negative cash flow in the equivalent period of 2002.

 

Cash flows from investments amounted to �54,000 in the first three months of
2003, mainly due to the sale of fixed assets.

 

The Group's current assets exceed its current liabilities by �716,000,
resulting in a healthy current ratio of 1.19x.

 

 

CONSOLIDATED BALANCE SHEETS

British pounds in thousands

 

 

 

                                        September 30         December 31
                                                                        
                                   2003               2002          2002
                                                                        
                                           Unaudited             Audited
                                                                        
ASSETS                                                                  
                                                                        
                                                                        
                                                                        
CURRENT ASSETS:                                                         
                                                                        
Cash and cash equivalents         1,013                948         1,810
                                                                        
Short-term deposits                   -                501           156
                                                                        
Trade receivables                 2,702              3,269         2,963
                                                                        
Other accounts receivable           336                574           410
                                                                        
Inventory                           434                383           322
                                                                        
                                                                        
                                                                        
                                  4,485              5,675         5,661
                                                                        
                                                                        
                                                                        
LONG-TERM LOANS AND RECEIVABLES     263                 40           214
                                                                        
                                                                        
                                                                        
FIXED ASSETS, NET                   698              1,079         1,022
                                                                        
                                                                        
                                                                        
OTHER ASSETS, NET                    44                 43            43
                                                                        
                                                                        
                                                                        
                                  5,490              6,837         6,940
                                                                        

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY                        
                                                            
                                                            
                                                            
CURRENT LIABILITIES:                                        
                                                            
Short-term bank credit                 1,515   1,734   1,319
                                                            
Trade payables                         1,189   1,523   1,777
                                                            
Other accounts payable                 1,065   1,241   1,716
                                                            
                                                            
                                                            
                                       3,769   4,498   4,812
                                                            
                                                            
                                                            
LONG-TERM LIABILITIES:                                      
                                                            
Liabilities to banks                      51      30      64
                                                            
Accrued severance pay, net               128     167     153
                                                            
                                                            
                                                            
                                         179     197     217
                                                            
                                                            
                                                            
SHAREHOLDERS' EQUITY                   1,542   2,142   1,911
                                                            
                                                            
                                                            
                                       5,490   6,837   6,940
                                                            

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

British pounds in thousands (except per share amounts)

 

 

                                           Nine                Three           
                                         months               months       Year
                                          ended                ended      ended
                                                                               
                                      September            September   December
                                             30                   30         31
                                                                               
                               2003        2002     2003        2002       2002
                                                                               
                                      Unaudited                         Audited
                                                                               
Revenues from sales and                                                        
services provided             7,972       8,541    2,350       2,255     11,476
                                                                               
Cost of sales and                                                              
services provided             4,978       5,420    1,672       1,481      7,300
                                                                               
                                                                               
                                                                               
Gross profit                  2,994       3,121      678         774      4,176
                                                                               
                                                                               
                                                                               
Research and development                                                       
costs                           112          73       36          33         99
                                                                               
Selling and marketing                                                          
expenses, net                   905       1,027      220         348      1,389
                                                                               
General and administrative                                                     
expenses                      2,327       2,813      649         786      3,840
                                                                               
                                                                               
                                                                               
Operating loss                (350)       (792)    (227)       (393)    (1,152)
                                                                               
Financial expenses, net        (84)       (199)     (25)       (111)      (287)
                                                                               
Other income (expenses),                                                       
net                              94        (23)       70           1       (45)
                                                                               
                                                                               
                                                                               
Loss before taxes on                                                           
income                        (340)     (1,014)    (182)       (503)    (1,484)
                                                                               
Taxes on income                   -        (18)        5           5       (27)
                                                                               
                                                                               
                                                                               
Loss from continuing                                                           
operations                    (340)       (996)    (187)       (508)    (1,457)
                                                                               
Loss from discontinued                                                         
operations, net                   -       (699)        -           -      (643)
                                                                               
                                                                               
                                                                               
Loss for the period           (340)     (1,695)    (187)       (508)    (2,100)
                                                                               
                                                                               
                                                                               
Loss per NIS 1 par value                                                       
of Ordinary shares (in                                                         
British pounds):                                                               
                                                                               
                                                                               
                                                                               
Loss from continuing                                                           
operations                   (1.31)      (3.84)   (0.72)      (1.96)      (5.6)
                                                                               
                                                                               
                                                                               
Loss from discontinued                                                         
operations                        -      (2.71)        -           -      (2.5)
                                                                               
                                                                               
                                                                               
Loss for the period          (1.31)      (6.55)   (0.72)      (1.96)      (8.1)
                                                                               

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

British pounds in thousands

 

 

                                    Nine                       Three       Year
                                  months                      months      ended
                                   ended                       ended           
                                                                       December
                               September                   September         31
                                      30                         30,           
                                                                               
                        2003        2002            2003        2002       2002
                                                                               
                                         Unaudited                      Audited
                                                                               
Cash flows from                                                                
operating                                                                      
activities:                                                                    
                                                                               
Loss for the                                                                   
period                 (340)     (1,695)           (187)       (508)    (2,100)
                                                                               
Adjustments to                                                                 
reconcile loss to                                                              
net cash used in                                                               
operating                                                                      
activities (a)         (907)         453            (53)        (16)      1,658
                                                                               
                                                                               
                                                                               
Net cash used in                                                               
continuing                                                                     
operating                                                                      
activities           (1,247)     (1,242)           (240)       (524)      (442)
                                                                               
Net cash used in                                                               
discontinued                                                                   
operating                                                                      
activities                 -       (348)               -           -      (343)
                                                                               
                                                                               
                                                                               
Net cash used in                                                               
operating                                                                      
activities           (1,247)     (1,590)           (240)       (524)      (785)
                                                                               
                                                                               
                                                                               
Cash flows from                                                                
investing                                                                      
activities:                                                                    
                                                                               
Purchase of fixed                                                              
assets                  (53)       (254)             (8)        (71)      (277)
                                                                               
Proceeds from sale                                                             
of fixed assets           64          31              52           -         28
                                                                               
Sale of previously                                                             
consolidated                                                                   
subsidiary (b)           (8)        (81)             (8)           -       (81)
                                                                               
Short-term                                                                     
deposits, net            156         135               1         171        306
                                                                               
Long-term loans                                                                
and receivables            -         145               -          11        174
                                                                               
Repayment of loan                                                              
to an affiliate           57           -              17           -        145
                                                                               
                                                                               
                                                                               
Net cash provided                                                              
by (used in)                                                                   
continuing                                                                     
investing                                                                      
activities               216        (24)              54         111        295
                                                                               
Net cash used in                                                               
discontinued                                                                   
investing                                                                      
activities                 -       (215)               -           -      (174)
                                                                               
                                                                               
                                                                               
Net cash used in                                                               
investing                                                                      
activities               216       (239)              54         111        121
                                                                               
                                                                               
                                                                               
Cash flows from                                                                
financing                                                                      
activities:                                                                    
                                                                               
Receipt of                                                                     
long-term loans                                                                
from banks                 -           -               -           -         57
                                                                               
Repayment of                                                                   
long-term loans                                                                
from banks              (16)         (6)             (6)           -       (13)
                                                                               
Short-term bank                                                                
credit, net              334         142            (86)         419      (286)
                                                                               
                                                                               
                                                                               
Net cash provided                                                              
by (used in)                                                                   
continuing                                                                     
financing                                                                      
activities               318         136            (92)         419      (242)
                                                                               
Net cash provided                                                              
by discontinued                                                                
financing                                                                      
activities                 -         537               -           -        537
                                                                               
                                                                               
                                                                               
Net cash provided                                                              
by (used in)                                                                   
financing                                                                      
activities               318         673            (92)         419        295
                                                                               
                                                                               
                                                                               
Effect of exchange                                                             
rate changes on                                                                
cash and cash                                                                  
equivalents             (84)         (5)            (10)        (29)         70
                                                                               
                                                                               
                                                                               
Decrease in cash                                                               
and cash                                                                       
equivalents            (797)     (1,161)           (288)        (23)      (299)
                                                                               
Cash and cash                                                                  
equivalents at                                                                 
beginning of                                                                   
period                 1,810       2,109           1,301         971      2,109
                                                                               
                                                                               
                                                                               
Cash and cash                                                                  
equivalents at end                                                             
of period              1,013         948           1,013         948      1,810
                                                                               

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

British pounds in thousands

 

 

 

                                                Nine                       Three           
                                              months                      months       Year
                                               ended                       ended      ended
                                                                                           
                                           September                   September   December
                                                  30                          30         31
                                                                                           
                                    2003        2002            2003        2002       2002
                                                                                           
                                                     Unaudited                      Audited
                                                                                           
(a) Adjustments to reconcile                                                               
    loss to net cash used in                                                               
    operating activities:                                                                  
                                                                                           
                                                                                           
                                                                                           
    Income and expenses not                                                                
    involving cash flows:                                                                  
                                                                                           
                                                                                           
                                                                                           
    Loss from discontinued                                                                 
    operations, net                    -         699               -           -        643
                                                                                           
    Erosion of long-term debts        13           -               2           4          -
                                                                                           
    Depreciation and                                                                       
    amortization                     247         289              88          86        392
                                                                                           
    Deferred taxes, net              (2)           8               3          14         12
                                                                                           
    Accrued severance pay, net       (9)          25             (2)           -         11
                                                                                           
    Capital loss (gain) from                                                               
    sale of fixed assets               5         (8)            (20)         (1)        (9)
                                                                                           
    Erosion of long-term loans       (2)           -             (3)           -        (1)
                                                                                           
    Loss (gain) from long-term                                                             
    investment                      (99)           -            (55)           -         24
                                                                                           
    Loss from sale of                                                                      
    previously consolidated                                                                
    subsidiary                        15           -              15           -          -
                                                                                           
                                                                                           
                                                                                           
    Changes in operating                                                                   
    assets and liability                                                                   
    items:                                                                                 
                                                                                           
                                                                                           
                                                                                           
    Decrease in trade                                                                      
    receivables, other                                                                     
    accounts receivable and                                                                
    long-term receivables            113         914             632         449      1,231
                                                                                           
    Increase in inventory          (112)       (103)             (6)        (59)       (42)
                                                                                           
    Decrease in trade payables                                                             
    and other accounts payable   (1,076)     (1,371)           (707)       (509)      (603)
                                                                                           
                                                                                           
                                                                                           
                                   (907)         453            (53)        (16)      1,658
                                                                                           
                                                                                           
                                                                                           
(b) Sale of previously                                                                     
    consolidated subsidiary:                                                               
                                                                                           
                                                                                           
                                                                                           
    Assets and liabilities of                                                              
    the subsidiary at date of                                                              
    sale:                                                                                  
                                                                                           
                                                                                           
                                                                                           
    Working capital (excluding                                                             
    cash and cash equivalents)     (145)     (1,061)           (145)           -    (1,061)
                                                                                           
    Fixed assets, net                 57       1,085              57           -      1,085
                                                                                           
    Investments in affiliates,                                                             
    net                                -        (98)               -           -       (98)
                                                                                           
    Loss on sale of subsidiary      (15)           -            (15)           -          -
                                                                                           
                                                                                           
                                                                                           
                                   (103)        (74)           (103)           -       (74)
                                                                                           
    Payables (receivables)                                                                 
    from sale of previously                                                                
    consolidated subsidiary,                                                               
    net                               95         (7)              95                    (7)
                                                                                           
                                                                                           
                                                                                           
                                     (8)        (81)             (8)           -       (81)
                                                                                           
                                                                                           
                                                                                           
(c) Significant non-cash                                                                   
    activity:                                                                              
                                                                                           
                                                                                           
                                                                                           
    Purchase of fixed assets           -           -               -           -         22
                                                                                           

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1:-   GENERAL

 

These financial statements have been prepared as of September 30, 2003 and for
the nine months and three months then ended. These financial statements are to
be read in conjunction with the audited annual financial statements of the
Company as of December 31, 2002, and their accompanying notes.

 

 

NOTE 2:-   SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies applied in the audited annual financial
statements of the Company as of December 31, 2002 are applied consistently in
these financial statements.

 

 

NOTE 3:-   FINANCIAL STATEMENTS IN BRITISH POUNDS

 

a.       The financial statements are prepared in accordance with generally
accepted accounting principles in Israel.

 

b.       The Company's transactions are recorded in new Israeli shekels.
However, the Company's management has determined the British pound as its
primary reporting currency since the majority of the Group revenues are in
foreign currency and a substantial portion of the fixed assets is purchased in
foreign currency. Accordingly, monetary accounts maintained in currencies other
than the British pound are remeasured using the foreign exchange rate at
balance sheet date. Operational accounts and non-monetary balance sheet
accounts are measured and recorded at the exchange rate in effect at the date
of the transaction. The effects of foreign currency remeasurement are reported
in current operations.

 

 

NOTE 4:-   SEGMENTS

                  Nine months ended September 30, 2003 (unaudited)        
                                                                          
               Human     Distribution                                     
           resources      of software                  Adjustments   Total
                                                                          
                                        British pounds                    
                                          in thousands                    
                                                                          
                                                                          
                                                                          
Total                                                                     
revenues       5,901            2,661                        (590)   7,972
                                                                          
                                                                          
                                                                          
Segment                                                                   
results        (375)               25                            -   (350)
                                                                          

 

                      Three months ended September 30, 2003 (unaudited)   
                                                                          
                                                                          
                                                                          
Total revenues           1,695         867          (212)            2,350
                                                                          
                                                                          
                                                                          
Segment results          (202)        (25)              -            (227)
                                                                          

 

                              Year ended December 31, 2002 (audited)      
                                                                          
                                                                          
                                                                          
Total revenues                8,726      3,734      (984)           11,476
                                                                          
                                                                          
                                                                          
Segment results             (1,177)         41       (16)          (1,152)
                                                                          

 

 

NOTE 5:-   IMPLEMENTATION OF NEW ACCOUNTING STANDARDS AND THEIR IMPACT ON THE
FINANCIAL STATEMENTS

 

During October 2001, the Israel Accounting Standards Board published Accounting
Standard No. 12 with respect to the discontinuation of the adjustment of
financial statements, and Accounting Standard No. 13 with respect to the effect
of the changes in the exchange rates for foreign currencies. In December 2002,
Accounting Standard No. 17 was published with respect to the deferral of the
implementation of Accounting Standards No. 12 and No. 13 until January 1, 2004.

 

According to Standards No. 12 and No. 17, which deal with the discontinued
adjustment of financial statements, financial statements will discontinue to be
adjusted for inflation in Israel commencing January 1, 2004. Until December 31,
2003, the Company will continue to prepare adjusted financial statements in
conformity with Opinion No. 36 of the Institute of Certified Public Accountants
in Israel. The adjusted amounts included in the financial statements as of
December 31, 2003, will serve as the starting point for nominal financial
reporting beginning January 1, 2004.

 

Management does not anticipate that the new Standards, as discussed above, will
have a significant effect on its results of operations, financial position and
cash flows.

 

During the reported period, the Company has initially applied Accounting
Standard No. 14 of the Israel Accounting Standards Board, which deals with
fiscal reporting for interim periods and which supersedes Opinion 43 issued by
the Institute of Certified Public Accountants in Israel. Comparable data for
interim periods prior to the effective date of the Standard (January 1, 2003)
was not restated since the provisions of Standard 14, as far as applicable to
these financial statements, are not materially different from Opinion 43.

 

 

NOTE 6:-   TRANSACTIONS WITH INTERESTED PARTIES

 

On 5 August 2003, subsequent to shareholder approval at the AGM, the Board
authorised the allocation of 75,000 option warrants ("Options") (Series C) of
the Company to Mr. Chaim Helfgott ("Helfgott"), a director of the Company and
Chief Financial Officer.  The Options, which are not registered for trade, are
exercisable into up to 75,000 Ordinary shares NIS 0.01 par value each of the
Company.

 

As of the date of the financial statements, the Options have not yet been
issued.

 

The terms of the Options are listed in the Company's annual report and accounts
for the year ended 31 December 2002, and among them are the following:

 

The Options may be exercised in exchange for payment in cash, in the amount of
�0.08 per Ordinary share.

 

Once issued, Mr Helfgott shall be entitled to realise the Options allocated
thereto on the following dates:

 

(a)     Commencing 13 June 2003    * one-third of the Options allocated
thereto.

 

(b)     Commencing 13 June 2004    * an additional third of the Options
allocated thereto.

 

(c)     Commencing 13 June 2005    * all Options allocated thereto.

 



END