The top line Q3 numbers for Pilat Media, who provides business process and content management software and services to the broadcast industry, look strong but the period did benefit from poor year ago comparatives.
This time last year performance was hit by servicing upgrades which caused it to miss targets (see here) and led to a fall in revenue and profits. For the quarter to September 20 2013 the company reversed its fortunes with an 18.4% increase in revenue to £6.29m. Most of the increase is from existing customers but revenue from new contracts signed through the year is starting to come through and will feed into Q4 and the next financial year. A further large new contract was signed in Q3.
The issue with Pilat Media is the cost of delivery and scaling its workforce to deliver its services. Expanding the workforce to address the backlog of work led to a drop in gross margin from 49% to 45%, although this is expected to improve as the new starters become productive. There was an operating profit this quarter of £140k, which is preferable to the £123k year ago loss but at these levels it is all too easy to slip backwards. Much of the profit for the year is slated for Q4, which is expected to significantly higher than Q3 last year. The company is generating cash so this line indicates a reasonable base but looking forward, Pilat Media’s prime consideration must be reducing the cost and time to service customers if it is to make marked progress.