Formula keeps growing

The IT group had $456.6 million revenue in 2004, 24% more than in 2003, and made an $8.1 million profit.

February 28, 2005

Information technology group Formula Systems (Nasdaq: FORTY; TASE: FORT) reported this morning that its revenue for the fourth quarter of 2004 totaled $127.2 million, compared with $96.8 million in the fourth quarter of 2003, representing an increase of 31%. Operating profit for the fourth quarter was $7.9 million compared with $5.7 million in the same period last year, representing an increase of 39%. Net profit in the fourth quarter totaled $3.1 million, or $0.28 per share, compared with $2.9 million or 0.30 per share in the same period last year.

Total revenue for 2004 was $456.6 million, compared with $366.8 million in the same period last year, representing an increase of 24%. Operating profit for the year 2004 totaled $18.1 million, compared with $11.9 million in the year 2003, representing an increase of 52%. Net profit for the year was $8.1 million, or $0.73 per share, compared with $3.1 million, or $0.29 per share, for 2003, representing an increase of 161%.

In the first quarter of 2004 Formula acquired 59% of Formula Vision Technologies (F.V.T) and is consolidating Formula Vision's results.

Formula president Gad Goldstein said, "2004 was a highly significant year for the company. The pace of sales in the fourth quarter reflected revenue of half a billion dollars on an annual basis and the operating profit for the fourth quarter enjoyed an increase of 39% compared with the same quarter in 2003. Although these measurements are less significant for a holding company, they bear witness to the fact that the vast majority of our subsidiaries have renewed their growth pattern, accompanied by a substantial increase in operating profit.

"The net profit for 2004 enjoyed an increase of 161% to about $8 million as compared with 2003, accomplished without any major capital transactions. We believe that together with the improvement in its business surroundings and in its assets it will be possible in the near future to increase the pace of capital raising and M&A activities regarding our portfolio companies accompanied by capital gain."

On February 17, 2005 , Formula shareholders approved a private placement of 2,400,000 Formula shares for an aggregate purchase price of $36,000,000. The shares will be issued to FIMIGold Limited Partnership, an entity owned in equal parts by Formula CEO and chairman Dan Goldstein and FIMI Opportunity Fund and parties related to it. Before the private placement, Dan Goldstein will transfer to FIMIGold all of his shares in Formula and Formula Vision Technologies (F.V.T) Ltd. Following the transaction FIMIGold will hold a total of 4,400,000 Formula shares, which will constitute a controlling interest comprising approximately 33% of Formula's outstanding shares, and 15,500,000 shares of Formula Vision, which constitutes approximately 24% of Formula Vision's outstanding shares.

Commenting on the allocation to FIMI, Gad Goldstein said, "I am delighted that Formula has a strong and stable controlling group. We could not have asked for a better addition. The improvement in the company's results and the addition of a strategic investor, have convinced large financial institutional holders to increase their holdings in the company, for instance Bank Hapoalim Group has increased its share in the company to over 5%, joining Bank Leumi Group's long standing financial holdings in the company.

"The improvement in the equity structure due to the capital raised and due to the increase in profits, will enable the company to expedite the value enhancement for its investors and to favorably consider a constant dividend distribution policy."

Formula Systems shares closed at $17.75 on Nasdaq on Friday, giving the company a market cap of $192 million. On the Tel Aviv Stock Exchange this morning, the company's shares are up 1.6%, at NIS 79.58.

Published by Globes [online], Israel business news - www.globes.co.il - on February 28,

About Formula
Formula Systems Ltd., is a global information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products and providing computer-based business solutions.

Statements made in this press release that are not historical facts are forward-looking statements. Such statements involve various risks that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to: market demand for the company's products, dependence on strategic partners, integration of new business, successful implementation of Formula's products, economic and competitive factors, international market conditions, management of growth, technological developments, the ability to finance operations and other factors which are detailed in Formula's Securities and Exchange Commission filings, including its most recent report on Form 20-F. Formula undertakes no obligation to publicly release any revision to any forward-looking statement