PILAT MEDIA (PGB)

Previous Stock Tip

These companies are all previous recommendations from the Red Hot Portfolio that I have subsequently recommended and then sold from the portfolio at a later date. By no means are these companies intended to be buy recommendations for you to go out and invest money towards their shares. For the opportunity to start making serious money from the recommendations I am making now, just start your no obligation trial!

PILAT MEDIA (PGB): Rising Costs Hit Flat Sales - Nov 2007

RHPS Recommendation – SELL

Pilat Media has described last year’s performance as ‘exceptional’ and said that revenues will be no higher this year. But it has been investing in extra resources in anticipation of rising sales, so this will squeeze profits. It is confident that things will pick up in 2008, but we cannot be certain.

PILAT MEDIA (PGB): Contract Delays - Oct 2007

RHPS Recommendation – HOLD

Pilat has suffered from contract delays, but is close to winning a contract for a new Internet Protocol TV service that is being launched by a telecommunications company. This could be the first of several such deals as telcos pursue their broadcasting ambitions. Having slipped back, the shares now look good value, but until I see some signs of strength, HOLD.

PILAT MEDIA (PGB): RTE Goes On Air - Aug 2007

RHPS Recommendation – BUY

RTE Television, Ireland's Public Service Broadcaster, has gone on air with its first Integrated Broadcast Management System supplied by Pilat Media. This software improves long-term planning and scheduling processes, and assists with the requirements of International Financial Reporting Standards. Pilat’s suffers from the weakness of the dollar, and the shares have come back to below 60p limit, so BUY.

PILAT MEDIA (PGB): Fifth Year of Growth - Apr 2007

RHPS Recommendation – HOLD

Pilat Media has reported a fifth successive year of profit growth. It signed 11 new clients in 2006, taking its total to 56. Maintenance income rose from £2.2m to £2.9m, but this will rise to £5.5m once it has completed its outstanding projects. This year several major projects are planned to move into their live roll-out phase, and Pilat Media will also complete a technology upgrade project for its IBMS Version 6.0 software.

PILAT MEDIA (PGB): Another new contract – Dec 2006

RHPS Recommendation – HOLD

Pilat Media has signed another new contract, this time for the supply of its business management software to ESPN STAR Sports, a leading Asian sports broadcaster. ESPN STAR becomes Pilat’s third Asian client, and is further good news following the award of a contract with a major US broadcaster last month. The shares have moved to another new high. HOLD

PILAT MEDIA (PGB): $5m contract with US broadcaster - Nov 2006

RHPS Recommendation – HOLD

Pilat Media has signed a $5m contract with a major USA-based broadcaster for the supply of a content scheduling and media distribution management system based on its IBMS product. This will be customized for the broadcaster and implemented over 18 months. This is Pilat’s tenth North American client, and its success in this most competitive of markets is real evidence of the strength of its programming software product. The shares have made a nice move up through my 60p buy limit, so HOLD.

PILAT MEDIA (PGB): Contract Delays - Oct 2006

RHPS Recommendation – HOLD

Pilat has suffered from contract delays, but is close to winning a contract for a new Internet Protocol TV service that is being launched by a telecommunications company. This could be the first of several such deals as telcos pursue their broadcasting ambitions. Having slipped back, the shares now look good value, but until I see some signs of strength, HOLD.

PILAT MEDIA (PGB): How you could make 66% gains beating Radio 2 cock-ups - Sep 2006

RHPS Recommendation – BUY

The other Sunday I was listening to Radio 2. The final song on the Elaine Paige Show was “America” from West Side Story, a rather long and frankly irritating number in which two girls taunt each other in verse. This was immediately followed by the Russell Davies Show, and the very first song he played was...you’ve guessed it...”America”. This sort of cock-up is not supposed to happen! It shows how complex running a radio or TV station can be. You do not expect to see an advertisement for

McDonalds immediately followed by one for Burger King, but working out the day’s schedule takes more than a simple spreadsheet.

More than 2,000 potential clients

Broadcasters use specialist software to plan their schedules. They need to fill every second of air time, and above all maximise their revenue. And this task is becoming ever more complex. Revenue can come from advertising, from subscription, from “on-demand” or interactive services. Programmes can be delivered to your PC or mobile handset, as well as to your TV. And the laissez-faire attitude of regulators means that broadcasters can transmit their programmes across national boundaries,

and own more than one station.

There are more than 2,000 broadcasters around the world. Some, such as BSkyB, are multi-channel distributors. Others, like Disney, produce their own content and put together the channels. There are free to-air national networks like the BBC, and there are groups such as Fox, which owns local stations in several different cities and regions.

Plus there are now telecom companies like Orange and Vodafone. Keen to replace the diminishing revenues they make from telephone and internet services, they want to get into broadcasting, too. But all are facing the same challenge – how to

maximise profit.

This calls for clever scheduling, carefully timed programme promotions, and advertising slots that hit the maximum number of interested eyeballs. It also

calls for good copyright administration, up-to-the-minute management reports, and slick financial control of subscription services and advertising revenues.

Winning 1-in-3 contracts...with only one major competitor

One of the leading providers of software for managing the business of broadcasting is Pilat Media. It has offices in Denver, Amsterdam and Sydney, but it was in Pilat’s high-rise office overlooking Wembley Stadium that I met founder Avi Engel and Finance Director Martin Blair.

Pilat began by developing a software product specifically for BSkyB, called IBMS. In 1998 Pilat Media was formed to exploit its potential with other broadcasters. IBMS allows broadcasters to increase revenues and maximise operational efficiency by

integrating their entire content programming, channel/station management and airtime sales operations in a single centralised, digital system.

Today Pilat has 46 customers right around the world, and has only ever lost two – one which was closed down by its parent, and another that was acquired by a bigger broadcaster. It offers project management, and installs the software. This requires

customisation, integration and data conversion, and Pilat then provides user training and long-term support and maintenance.

The up front licence fee for a major installation can be worth several million pounds. The annual maintenance fees are worth about 20% of the licence fee.

Take note – there is no shortage of competition in this industry. But only Encoda, owned by the Harris Corporation of the USA is significantly larger. Pilat wins about one in three of the jobs that it pitches for, losing out mainly for reasons of price – especially in cost-conscious Asia – or because customers only want to install one of the various software modules. Its strength is in large, comprehensive projects requiring the assimilation of existing software.

Last year, in an important breakthrough into the US market, Pilat won a deal worth $15m (plus ongoing maintenance revenues) from Fox Television to integrate

content programming and airtime sales across its 46 TV stations and sports networks. Other customers include Australia’s Network Ten, which used Pilat to integrate 32

separate systems into one. CTV in Canada, the country’s largest privately-owned network and station group, selected IBMS to replace a dozen existing systems.

Turnover’s up 160% in 5 years

RHPS Verdict: The Discovery Channel, which broadcasts in 150 countries, is deploying IBMS to become the first global programming content, sales and traffic system, supporting a central content base and multiple airtime selling and pricing models. And in a £2.7m contract for the BBC World Service, one of four new deals signed this year, IBMS will be used to schedule the distribution to 150m listeners of 1,400 programmes in 33 languages. Over the last five years Pilat has seen turnover grow, without acquisitions, from just over £5m to £13m.

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The figures refer to the past and past performance is not a reliable indicator of future results. The past recommendation highlighted here is a small company share.By their nature, such investments can be relatively illiquid and, as a result, hard to trade. This makes such shares more risky than other investments. Please seek independent financial advice if necessary. These figures do not include the bid-offer spread, unless otherwise stated. Since the service began on 01/12/98 running through to 31/07/07, the average overall performance of the shares recommended is up 19.91%.All gains exclude dividend payments and dealing costs, unless otherwise stated. Profits from share dealing are a form of income and subject to taxation. Levels and bases of, and reliefs from, taxation are subject to change, and depend on individual circumstances. Full portfolio available on request. Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. FSA No. 115234.

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