Oxford Metrics Regulatory News (OMG)

7 Dec 2006 07:01

OMG PLC07 December 2006 7 December 2006 OMG plc ("OMG" or "the Company") Preliminary results for the year ended 30 September 2006 OMG (Oxford Metrics Group. LSE: OMG) the leading supplier of image understandingsystems to the entertainment, defence, life science and engineering industries,announced today its preliminary results for the year ended 30 September 2006. Highlights • Turnover up by 14.5% to £16.3m (2005: £14.2m) • Operating profit (after goodwill amortisation and exceptional items) up by 157% to £1,522,000 (2005: £593,000) • Profit after tax up by 112% to £1,560,000 (2005: £736,000) • Earnings per share up by 106% to 2.62p (2005: 1.27p) • Strong cash generation with cash balances up by £2.1m from £4.4m to £6.5m • Maiden final dividend proposed of 0.1p per share • Continued global expansion - with customers now in over 50 countries • Technological leadership maintained with successful launch of innovative new products, such as Vicon Nexus and 2d3 boujou 4 • OMG Group restructured into three market-focused business units, with all motion capture business now integrated into Vicon • Encouraging progress with 2d3 diversification into defence and new Geospatial Vision 3D mapping business Nick Bolton, Chief Executive, commented: "This has been a record year - in revenue and profits. In our existing markets,we've continued to strengthen our position. At the same time, we've not onlyestablished that exciting opportunities exist in new and potentially much biggermarkets, we've made measurable progress towards capitalising on them." For further information please contact:OMG plc 01865 261800Nick Bolton, Chief ExecutivePeter Wharton, Finance Director Financial Dynamics 020 7831 3113Juliet Clarke / Hannah Sloane About OMG OMG plc (Oxford Metrics Group. LSE: OMG) is a group of technology companiesproducing image understanding solutions for the entertainment, defence, lifescience and engineering industries. Be it for capturing the movements of actors(for the movie industry), sportsmen (for video games or improving teamperformance), children with Cerebral Palsy, rehab patients and animals (formedical, life science and research industries) or virtual reality displays (forengineering and development), the Group has the world leading market positionand a strong international reputation for precision instruments. Founded in 1984, the Group's headquarters are in Oxford, UK, and has offices inCalifornia and Colorado, USA. It has customers in over 50 countries and is aquoted company listed on AIM, a market operated by the London Stock Exchange.The Group trades through three operating subsidiaries - Vicon, the world'sbiggest motion capture and movement analysis company, 2d3, a manufacturer ofspecialised image understanding software for entertainment and defenceapplications and Geospatial Vision, our 3D mapping business. Oxford Metrics' global clients in science, medicine, sport, engineering, gaming,film and broadcast include major hospitals and research facilities such as Guy'sHospital, Nuffield Orthopaedic Centre and Loughborough University, engineeringindustry leaders including Ford Motor Company, BMW, Airbus, Caterpillar, andToyota, and in the entertainment sector, Sony, Industrial Light and Magic, TheMoving Picture Company (MPC), Sega, Nintendo, UbiSoft, EA, Square Enix and manyothers. For more information about OMG and its subsidiaries, visit www.omg3d.com,www.vicon.com, www.2d3.com or www.geospatialvision.com. CHAIRMAN'S STATEMENT ACHIEVING "INCREDIBLE THINGS" I'm not a scientist by training, so I would be hard pressed to provide adetailed and accurate account of how OMG's technology works, or what, precisely,its capabilities are. But I do understand how business works, and I've neverbeen in any doubt that the incredible things this company does - some of whichyou'll see in this report - have enormous commercial value, enabling customersall over the world to achieve goals which would otherwise be out of reach. The truth is, though, that until very recently, OMG has been a very big playerwithin niche markets. Recognising this, we've become increasingly aware of theneed for a major strategic shift: while continuing to strengthen our corebusiness, our aim now must be to establish new markets where we can capitaliseon our existing technology base to achieve the kind of consistent andpotentially exciting long term growth expected of a public company. Back in May 2005, we took a vital first step towards making this vision realitywhen we appointed Nick Bolton as our new chief executive, with a clear brief tosharpen OMG's commercial focus and transform the company's marketing awareness. We're delighted with what Nick's focused and energetic leadership has enabledOMG to achieve so far. True, it's too soon to say that we've achieved our majorstrategic goals. But, as you will read below, we've made important progress inour efforts to diversify during 2005/06, while achieving outstanding resultsacross all our existing markets. A record year's results As we reported in June, our strong trading performance in the second half oflast year continued into 2005/06, when we achieved a record first half year. SoI'm pleased to report that our excellent performance was maintained through thesecond half, enabling the Group to achieve a record turnover and profits for theyear as a whole. Overall, turnover increased 14.5% to £16.3m (up from £14.2m in 2005). Thisincludes the first full year of Peak Performance Technologies business (Peak),acquired five months into 2005. In addition, I should emphasise that our 2006 figures do not include anyunusually large film deals, such as the £1.7m sale reported towards the end of2005. So a more representative like-for-like comparison (taking into account afull year of Peak in 2005 and excluding the large film deal) shows a growth inrevenues of 24%. This strong underlying growth can be attributed to a highvolume of deals across the wide range of markets and geographical territories inwhich OMG operates. Gross profits increased to 63% of turnover (compared to 60% last year) thanks tohigher volume, better buying and a continued strengthening of our competitiveposition - with strong sales of Vicon's flagship MX40 cameras, and successfullaunches of new software including an upgraded version of 2d3's market-leadingboujou package. We've continued to tighten control of operating costs. During the year, theyrose by less than 10% to £8,745,000 (2005: £8,000,000), the increase largelyaccounted for by major investment in our new Defence and Geospatial Visionbusinesses, as well as in expansion of our Los Angeles studio facilities. Despite the additional investments we made during the year, our very goodtrading performance has resulted in a big increase in operating profit, up from£593,000 in 2005 to £1,522,000 - a leap of 157%. Strong cash generation has continued with cash balances increasing £2.1m to£6.5m over the year - enabling us to more than double our earnings from cashdeposits, with interest receivable of £217,000 (2005: £97,000). The tax charge has remained low with an effective rate of 10% due to theutilisation of tax losses, research and development tax credits and the effectof share option exercises. The net result of the above is a profit after tax increasing by 112% to£1,560,000 (2005: £736,000) and earnings per share increasing by 106% to 2.62p(compared to 1.27p last year). To deliver figures like these in a year when so much of our commercial focus wason building for the future represents a remarkable achievement, I hope you'llagree. Restructuring for growth As Nick explains in more detail overleaf, the year's most exciting developmentshave been our successful first steps to establishing OMG in two completely newmarkets. At high altitude, our aim is to transform the visual imaging capabilities of theUnmanned Aerial Vehicles which play an increasingly important role in modernmilitary operations. While, on the ground, our move into three dimensional (3D)street level mapping has already begun to win us business from road owners andoperators, with many other potential applications now starting to look verypromising indeed. As the overall shape of our business has begun to evolve, we have reorganisedthe Group, in order to ensure market-focused and consistent performance acrossall our activities - new and long established. All our motion capture business has been fully integrated, with Peak (acquiredin February 2005) and House of Moves (acquired in June 2004), now forming partof Vicon, by far the strongest brand in its market. To further reinforce ViconEntertainment's position in the US film and games industries, a new expanded LosAngeles facility now houses all our capture services and systems people, as wellas a dedicated Entertainment development group. Our new defence business sits alongside entertainment within 2d3; and GeospatialVision is our new 3D mapping subsidiary. Strengthening our team I've already mentioned the enormously valuable contribution Nick Bolton has madein his first full year as chief executive. But I'd also like to take thisopportunity to pay tribute to his predecessor, Julian Morris. We're incrediblylucky that OMG's founder - and the most accomplished entrepreneur within ourbusiness - remains 100% committed to the company, and continues to play a vitalrole in leading our technological development. I'm also pleased to report that we achieved our aim of appointing a secondnon-executive director. Jonathon Reeve joined the board in October 2006,bringing with him extensive experience of the defence industry, acquired overthe course of a distinguished 35 year career in the Royal Navy. Dividend policy Reflecting OMG's continued strong financial performance and the Directors'confidence in the future of the business, it is now the Board's intention toensure shareholders benefit from the success of the Group with a progressivedividend policy whilst also balancing the continuing investment needed toincrease earnings. Consequently a maiden final dividend of 0.1p per ordinaryshare is being declared today. Subject to approval at the next AGM, thisdividend will be paid on 9 March 2007 to shareholders on the register at theclose of business on 9 February 2007. On the brink of a new era It's been an exciting year for OMG. In particular, we're delighted that both ofour new ventures have made real headway. But we're very conscious that ourambitions for this company will not be achieved overnight. Having acknowledged that, there's every reason to be confident about our futureprospects. There's no doubt whatever that we have the necessary technologicalexpertise and capacity for innovation. We now have the right people andmanagement structure in place to capitalise on the opportunities we'veidentified. And a further major advantage we hold over most businesses of oursize is that we have a well established global platform on which to build amajor international business. We have balance sheet strength and, in addition tofurther anticipated organic growth, we continue to evaluate acquisitions thatwill enhance earnings. All in all, it's a great launch-pad. I believe OMG could hardly be better placedfor continued success in our long established business areas, accompanied bypotentially explosive growth in massive new markets. Anthony Simonds-GoodingChairman CHIEF EXECUTIVE'S STATEMENT REALISING OUR POTENTIAL When I rejoined OMG in 2005, I saw a company with a really impressive record ofachievement, but an enormous amount of unfulfilled potential. At the end of myfirst full year in charge, we've added significantly to that record ofachievement; but what excites me even more is that we're perceptibly closer torealising our full potential. Having worked for OMG for four years earlier in my career, I'm as proud asanyone of this company's long history of success. After all, how many Britishtechnology companies can say that they have traded profitably for over 20 years,with exports consistently accounting for over 80% of sales? Or that they employroughly as many people in the US as in the UK? Or - and here I'm pretty certainwe stand alone - that they have achieved the hat-trick of an Oscar, an Emmy anda Queen's Award for Innovation? Yet, despite all this, I firmly believe that OMG has so far only scratched thesurface. And while 2005/06 was a record year for this quietly successful Britishtechnology company, it was also one in which we recognised the need for asignificant change of outlook, in order to take our business to the next level. A major cultural shift We need to think bigger. We need to project and explain ourselves better, sothat people outside the business can share our excitement about the incrediblethings we do. We need to be prepared to take risks, and occasionally to fail,since innovation can't thrive in a "safety first" environment. Put very simply, we need to become as strong commercially as we already aretechnologically. And the good news is that, over the last 12 months, we've madereal progress in bringing about this major cultural shift. A year ago, we reported on the major internal technology review we conducted, toidentify the most exciting opportunities for diversification, from literallydozens of ideas already generated by our brilliantly innovative R&D team. In2005/06, we've carried out a parallel exercise aimed at identifying the latententrepreneurial talent within our existing workforce. Doing things differently Of course, the kind of step-change we are aiming for, in the scope and scale ofour business, will depend on more than just a change of outlook. As you've read, we've now reorganised the OMG group into three operationalbusinesses, each responsible for maximising the potential of a specific aspectof our technology, across a range of markets. I report below on progress withinVicon, an expanded 2d3 and our new Geospatial Vision business. Alongside this corporate restructuring, we've streamlined our R&D programme, ouraim being to achieve greater market focus by increasing our investment whilerationalising the number of products under development. Similarly, we've made important improvements in sales management, in order tomake OMG more responsive to customer needs. And we've started to raise our gamein terms of marketing and communications, taking the view that what this companyneeds now is not just to be successful, but to be widely recognised assuccessful. Let's turn our attention to key developments across our three businesses overthe past 12 months. VICON: FROM STRENGTH TO STRENGTH So far, you've read quite a bit about our focus on new markets and new horizons,but no one could accuse OMG of having neglected our longest establishedbusiness. Since we last reported, Vicon has further strengthened its position asglobal leader in motion capture, shipping more systems than any year in itshistory. In fact, sales have grown by very nearly 50% over the last two years. Thoseimprovements in sales management, together with new and better products, arepartly responsible. But Vicon's dynamic performance, in terms of both revenueand profit, also reflects our success in integrating our two recent acquisitions- Peak and House of Moves - into the business, thereby further strengthening ourmotion capture offering to customers all over the world. It's worth noting, too, that in 2005/06 Vicon's greatly increased sales wereachieved without relying upon a single major film deal, unlike in previousyears. Gearing up to meet increasing demand During the second half of the year, we shifted to a production system based onforecast sales; a clear indication of the steady and increasing demand for Viconsystems. Faster delivery and improved quality control are the customer benefits. And, for a business with a truly global outlook, it's encouraging to report thatthis demand is more geographically widespread than ever. Sales in Australia grewrapidly in 2005/06, and we also received orders from customers in countrieswhere we had never previously done business, such as Qatar, Venezuela andVietnam. One achievement we were particularly proud of was the award of ISO9001:2000,which we received in August 2006. As our business continues to grow, thisrecognition of assured quality in production is gratifying for us and reassuringfor our customers all over the world. Motion analysis: the next step forward Launched in June 2006, Nexus is a milestone product for Vicon; the nextgeneration motion capture and analysis tool for all Life Science markets. Put simply, Nexus enables professionals using Vicon MX to capture and analyzemotions in ways that previously were not possible - providing ground-breakingnew features, such as native real time, seamless integration of digital videoand unprecedented ease of use. Whether used by researchers in universities, medical staff in hospitals orsports professionals, Nexus delivers the highest quality 3D data fullysynchronized with forceplates, EMG and digital reference video - all in realtime. As the first product on the market capable of overlaying 3D dataaccurately onto 2D digital reference video, it provides an extremely powerfulvisualization tool. Vicon Nexus isn't just a revolutionary product in its own right; it alsorepresents a platform on which we'll be able to build further new products andfunctionality. It's the clearest possible signal of our commitment to stayingone step ahead in the field of motion analysis. Last year, Vicon systems helped to: • Animate characters in movies such as "Monster House", "Pirates of the Caribbean: The Curse of the Black Pearl" and "Barnyard". • Create Ubisoft's "Tom Clancy's Ghost Recon: Advanced Warfighter" which won Best Game and Best Technical Achievement at the British Academy Video Games Awards. • Analyse the performance of potential Olympic sprinters at the University of Wales Institute of Cardiff 2012 - Centre for Excellence. • Evaluate repair procedures which successfully fixed damage to a NASA shuttle, ensuring the crew returned safely to Earth. 2D3: FROM ENTERTAINMENT TO DEFENCE With so much of our current focus on the enormous potential we see in newmarkets, it's worth making the point that successful diversification is nothingnew for OMG. Our 2d3 business, now an established world leader in its field, wasthe result of a lateral leap into the relatively unknown just half a dozen yearsago, when we saw the opportunity to apply our expertise in extracting 3Dinformation from the moving image, to create the world's first viable automaticcamera tracking system for the movie industry. Launched in 2001, our boujou system was an overnight sensation, enablingfilm-makers to combine live action and computer-generated animation far moreeasily than ever before, and at a fraction of the cost. Naturally, we were delighted by 2d3's success in the world of entertainment;but, from the outset, the business always intended to explore other applicationsof this technology. And during 2005/06, having begun in earnest to develop thenecessary entrepreneurial skills, we were ready and able to make significantheadway with the first of these. Defence: a more sophisticated "eye in the sky" In recent years, Unmanned Aerial Vehicles (UAVs) have played an increasinglyvital role in military surveillance and reconnaissance operations. Yet,currently, these highly sophisticated and somewhat futuristic aircraft lack theability to provide really high quality visual information, their on-boardimaging equipment often amounting to little more than standard shopping mallsecurity video cameras. For 2d3, the opportunity is clear. The UK Ministry of Defence is committed todeploying multiple new generations of UAVs, with funding of around £800 millionfor just one programme. Equipped with our advanced machine vision technology,these new UAVs would be able to supply a much wider range of video-basedinformation for military reconnaissance, as well as civilian applications suchas air-sea rescue and monitoring of land use. Our first steps into this new market have been met with a very positiveresponse. Our initial project with QinetiQ was successfully completed inSeptember 2006, effectively demonstrating our capabilities in recovering 3Dinformation from airborne video imagery. Building on this, we attended the Farnborough Air Show in July; and at theAssociation for Unmanned Vehicle Systems International (AUVSI) show in Floridain August 2006, our presentation outlining the potential capabilities of 2d3systems in UAV applications was a standing room only event. And it's worth emphasising that the climate in the world of defence procurement,in both the UK and the US, is very favourable to smaller technology companies,like OMG. The mood of the time - expressed most recently in the MoD DefenceTechnology Strategy (October 2006) - is to shop for innovation wherever it isfreshest, and most relevant to defence needs. As 2005/06 ends, we're in a strongposition to take maximum advantage of this trend. Meanwhile, back in Hollywood In 2005/06 2d3's entertainment business continued to flourish, with our boujoucamera tracking system in use all day, every day, in movie and TVpost-production studios worldwide. Think of a film with dazzlingcomputer-generated (CG) visual effects you've enjoyed in the past 12 months, andthere's an excellent chance that our technology made it possible. It's true we face a bit more competition these days; but, with the launch ofboujou 4, which started shipping in August 2006, we've given customers yet morereasons to choose 2d3 over any rival matchmoving system. For busy CG houses, working under ever-increasing pressure, the new systemrepresents a real step forward, offering greatly increased ease-of-use and theability to "solve" a much wider range of shots - enabling them to achieveextraordinary results with maximum speed and efficiency. At the same time, we've also continued to widen the market, with our boujoubullet 2 package offering a more affordable matchmoving software option andmoujou providing the automatic tracking power of boujou from directly withinAlias Maya, the market-leading CG software package. Roll credits... Just a few of the recent movies in which 2d3's boujou software has played aleading role: • The Da Vinci Code• Harry Potter I-IV• King Kong• The Day After Tomorrow• The Lord of the Rings: the Return of the King GEOSPATIAL VISION: ON THE ROAD TO SUCCESS And so we come to what may well be, in terms of growth potential, the mostexciting development of the last 12 months; the best opportunity we have so faridentified to apply our unmatched expertise in extracting 3D from the movingimage to establish a position of strength in an enormous new market. In the UK, there are over 400,000 kilometres of roads; in the USA, around 6million. For the owners and operators of these huge networks, the task ofmonitoring and maintaining the condition of their roads and all their "assets" -such as signposts, road-markings, bridges, lamp-posts, bollards - currentlypresents major difficulties. Put simply, they have no efficient way of recordingwhere these assets are or what state they are in; so managing them effectivelyis virtually impossible. Enter OMG, and our newly formed Geospatial Vision business. By taking ourtechnology out onto the road, we can provide highway authorities (and others)with a complete visual record of their network, linked to a map, which they canview instantly on their PC screens. Compared to the present situation, where thetraditional way to learn the location and condition of specific road assets isto send someone out with a trundle wheel and a mobile phone, this represents aquantum leap forward. Now on a street near you Having set up Geospatial Vision in June 2006, we've made exciting progress overthe second half of the year. Our first van, equipped at a cost of around£200,000, is now on the road in the UK; and our first contracts have now beensigned, with mapping projects underway. Of course, it's still very early days. But the response we've had to thisincredibly effective application of our technology has been universallyenthusiastic. And during the coming year, we'll be launching a major salesdrive, from which we expect great results. In terms of future growth, it's worth stressing not just the scale of theopportunity, but also the quality of the business we hope to gain, with everypossibility of building long term, ongoing relationships with customers. InBirmingham, for example, there were around 30,000 changes to the road networkthis year - a permanently changing picture which we could quickly and easilyupdate at regular intervals. Mapping out a profitable future In itself, our move into road maintenance and management would be amouth-watering commercial prospect; but we see it as just the first step towardseven greater prizes. Because once we start to acquire a mass of 3D street levelmapping data, there will be opportunities for making it available to a widerange of other interested parties. Consider, for example, satellite navigation (sat nav). While rapidly increasingin popularity, currently available systems have significant shortcomings, interms of the usefulness of the information they provide. It's not at alluncommon for lorry drivers to find themselves being directed along narrowcountry lanes, or under low bridges. With our input, sat nav would plan routesbased on all the relevant information, relating to matters such as weight andheight restrictions. And even that could be just the beginning. From utilities and insurancecompanies to consumer web businesses like Google or Amazon, there's animpressive range of potential customers who could clearly benefit from this kindof data. And ultimately, we believe there's an opportunity to transform theworld's mapping databases, by adding a third dimension. The outlook for OMG Looking ahead, what makes OMG's position both exciting and challenging is thatwe have three businesses at very different stages of maturity - each presentingus with different opportunities, and requiring different levels of support andinvestment in order to maximise their potential. In Vicon, our aim is to build on a strong position. A recognised world marketleader, this business has shown real stability, with consistent growth in bothturnover and profitability. In the year ahead, we expect particularly strongperformance in the life sciences market, as the technological advances and manyuser benefits offered by Nexus win business from both new and existingcustomers. And we'll continue to invest for the longer term, building on ourexisting technology base and remaining open to the possibility of furtheracquisitions. For 2d3, the picture is a little more complicated. While our entertainmentbusiness is well established and profitable, our move into defence - potentiallya far bigger market - is just on the starting blocks. Although the defencesector in known for its long time scales in procurement, we are activelypursuing opportunities which could come to fruition in the year ahead. Meanwhile, our freshly minted Geospatial Vision business - just six months oldat the time of writing - has recently signed its first contract with a localauthority and we are hopeful of further contract wins. Potentially, this marketis significantly larger than our existing businesses and requires investmentbefore revenue streams are established. The rate of investment will need to becarefully judged in relation to our continued progress in converting stronginitial interest into firm contracts. Overall for OMG, we expect to see advances in revenue and profits from Viconbeing invested in the new business opportunities during the year. While suchinvestments may have a negative impact on short term profit growth, ourconfidence in OMG's future is underlined by our change in dividend policy. From a shareholder's perspective, all this means OMG offers an intriguing spreadof attributes, ranging from proven, highly profitable performance to bold newentrepreneurial ventures and growth opportunities. A not-so-quietly successful British technology company All in all, I think that everyone associated with OMG can be very satisfied withwhat we've achieved over the past 12 months. Naturally, we don't want to exaggerate what we've achieved so far; very largely,we've been engaged in laying foundations on which to build. But, as I began bysaying, where we can claim to have accomplished a major transformation in ourbusiness is in terms of attitudes and outlook. This is now a new Oxford Metrics Group. Throughout our 20 year history, we'veconsistently done business profitably and led the way technologically. Bydeveloping a new and much sharper commercial focus - by discovering our "innerentrepreneur", you might say - we've added the one missing ingredient that willenable OMG, over the next few years, to realise its unlimited potential. And I can personally guarantee that we won't be shy about telling the world whatwe achieve. OMG has been a quietly successful British technology company for fartoo long. Nick BoltonChief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 SEPTEMBER 2006 2006 2005 Note £'000 £'000 Turnover 3 16,274 14,213 Cost of sales (6,019) (5,620) Gross profit 10,255 8,593 Sales, support and marketing costs (3,001) (3,304)Research and development (2,338) (1,607)Administrative expenses (3,406) (3,089)Other income 12 - Operating profit before goodwillamortisation and exceptional items 1,650 923 Goodwill amortisation (128) (114) Exceptional items - (216) Operating profit 1,522 593 Interest receivable and similar income 217 97 Profit on ordinary activities before taxation 1,739 690 Tax (charge) / credit on profit on ordinary activities 4 (179) 46 Retained profit for the financial year 1,560 736 Basic earnings per ordinary share 5 2.62p 1.27p Diluted earnings per ordinary share 5 2.51p 1.22p There is no material difference between the retained profit on ordinaryactivities before taxation and the retained profit for the financial year statedabove and their historical cost equivalents. All amounts relate to continuing activities. The Directors are proposing a final dividend in respect of the financial yearending 30 September 2006 of 0.1p per share which will absorb an estimated£60,000 of shareholders' funds. This dividend will be paid on 9 March 2007 toshareholders who are registered on the register of members at the close ofbusiness on 9 February 2007, subject to approval at the next AGM. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 30 SEPTEMBER 2006 2006 2005 £'000 £'000 Retained profit for the financial year 1,560 736 Exchange differences on retranslation of opening net assetsof overseas subsidiaries (121) 9 Total recognised gains and losses for the year 1,439 745 CONSOLIDATED AND COMPANY BALANCE SHEETSAT 30 SEPTEMBER 2006 Group Group Company Company Note 2006 2005 2006 2005 £'000 £'000 £'000 £'000 (as restated See note 1)Fixed assetsIntangible assets 998 1,353 91 132Tangible assets 921 970 122 169Investments 69 69 1,183 978 1,988 2,392 1,396 1,279 Current assetsStocks 934 1,739 - -Debtors 4,721 3,637 1,312 2,366Cash at bank and short term deposits 6,494 4,371 6,071 3,525 12,149 9,747 7,383 5,891 Creditors: amounts falling due within one year (3,483) (2,938) (1,707) (279) Net current assets 8,666 6,809 5,676 5,612 Net Assets 10,654 9,201 7,072 6,891 Capital and reservesShare capital 150 147 150 147Shares to be issued - 205 - -Share premium account 5,908 5,692 5,908 5,692Profit and loss account 4,596 3,157 1,014 1,052 Total equity shareholders' funds 6 10,654 9,201 7,072 6,891 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 30 SEPTEMBER 2006 Note 2006 2005 £'000 £'000 Net cash inflow from operating activities 7 2,646 1,015 Returns on investments and servicing of financeInterest received 217 97 Taxation (179) 8 Capital expenditure and financial investmentPurchase of tangible fixed assets (610) (897)Disposal of tangible fixed assets 128 282 (482) (615)AcquisitionsPurchase of subsidiary undertaking (44) (342)Net cash acquired with new subsidiary - 111Other investment acquired - (69) (44) (300) Net cash inflow before financing 2,158 205 FinancingIssue of ordinary share capital 13 61 Increase in cash 2,171 266 NOTES TO THE PRELIMINARY ANNOUNCEMENTFOR THE YEAR ENDED 30 SEPTEMBER 2006 1. BASIS OF PREPARATION The financial information in this preliminary announcement is un-audited and hasbeen prepared on the going concern basis, under the historical cost conventionand applicable accounting standards in the United Kingdom and is consistent withthe policies set out in the Group's statutory accounts for the year ended 30September 2005, except for the adoption by the Group of FRS 25 "Financialinstruments: disclosure and presentation" during the year by means of a prioryear adjustment. There is no effect on the current or prior periods' Group profit as a result ofthe change in accounting policy, the Group's balance sheet has been restated forprior periods to reflect contractual amounts that could be settled for cash or avariable amount of shares as a liability (previously included as shares to beissued in equity). The effect of the adoption of FRS 25 is to decrease sharesto be issued included with shareholders' funds at 30 September 2005 and increasecreditors within one year at 30 September 2005 by £36,000. 2. BASIS OF CONSOLIDATION The consolidated financial statements consolidate those of the Company and allof its subsidiary undertakings drawn up to 30 September 2006. Acquisitions ofsubsidiaries are dealt with by the acquisition method of accounting from thedate of acquisition. 3. TURNOVER AND SEGMENTAL ANALYSIS The directors consider there to be only one class of business, that of motioncapture. An analysis of turnover destination by geographical market is given below: 2006 2005 £'000 £'000 United Kingdom 1,899 673Continental Europe 2,018 2,021North America 8,248 8,245Asia Pacific 3,666 3,089Other 443 185 16,274 14,213 An analysis of turnover by origin is given below: 2006 2005 £'000 £'000 United Kingdom 8,039 6,166North America 8,235 8,047 16,274 14,213 An analysis of operating profit and net assets by geographical origin is givenbelow: Operating profit Net Assets 2006 2005 2006 2005 £'000 £'000 £'000 £'000 United Kingdom 1473 494 10,228 8,731North America 49 99 426 470 1,522 593 10,654 9,201 4. TAX ON PROFIT ON ORDINARY ACTIVITIES The tax (credit) / charge is based on the profit for the year and represents: 2006 2005 £'000 £'000 United Kingdom corporation tax at 30% (2005: 30%) 8 8Overseas taxation 66 -Adjustments in respect of prior year 105 (54) 179 (46) At 30 September 2006, the Group had an undiscounted deferred tax asset of£352,000 (2005: £283,000), which has not been recognised. The asset comprisesaccelerated capital allowances of £170,000 (2005: £41,000), and the accumulatedunrelieved tax losses of £1,003,000 (2005: £904,000) available to subsidiaryundertakings of the Group, to offset against future taxable trading profits ofthe same trade. Unrelieved tax losses in respect of prior years were increasedby £1,415,000, principally due to the submission of claims for R&D tax credits.Tax losses amounting to £1,690,000 have been utilised during the year andadditional unrelieved losses of £374,000 arose during the year relating to thecommencement of trade by a new subsidiary. Due to the risks and uncertainty overthe subsidiaries' timing and extent of future trading profits, the deferred taxasset has not been recognised. The tax assessed for the year is lower than the standard rate of corporation taxin the UK of 30% (2005: 30%). The differences are explained as follows: 2006 2005 £'000 £'000 Profit on ordinary activities before tax 1,739 690 Profit on ordinary activities multiplied by the standard rate of corporationtax in the UK of 30% (2005: 30%) 522 207 Effect of:Expenses not deductible for tax purposes 31 62Accelerated capital allowances 3 (5)Utilisation of losses (507) (179)Adjustments to tax charge in respect of prior year 105 (54)Higher rates on overseas taxation 11 -Unrecognised deferred tax on losses 112 -Research and development tax credit (98) (77)Current (credit) / charge for the year 179 (46) 5. EARNINGS PER SHARE 2006 2005 weighted weighted average average number of Per share number of Per share Earnings shares amount Earnings shares amount £'000 pence £'000 penceBasic earnings per shareEarnings attributable toordinary shareholders 1,560 59,597,690 2.62 736 58,065,827 1.27 Dilutive effect ofsecuritiesOptions - 2,475,826 (0.11) - 2,265,211 (0.05) Diluted earnings perShare 1,560 62,073,516 2.51 736 60,331,038 1.22 6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group Group Company Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Retained profit / (loss) for the financial year 1,560 736 (38) (42)Issue of shares 219 331 219 331Contingent shares to be issued (205) - - -Currency movements (121) 9 - -Net movements in shareholders' funds 1,453 1,076 181 289Shareholders' funds at 1 October 2005(originally £9,237,000 before deducting prioryear adjustment of £36,000) 9,201 8,125 6,891 6,602Shareholders' funds at 30 September 2006 10,654 9,201 7,072 6,891 7. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 2005 £'000 £'000 Operating profit 1,522 593Depreciation & amortisation 695 692(Profit) / loss on disposal of fixed assets (16) 14Decrease in stock 794 68Increase in debtors (1,255) (296)Increase / (decrease) in creditors 906 (56)Net cash inflow from operating activities 2,646 1,015 8. PUBLICATION OF NON-STATUTORY ACCOUNTS The preliminary results for the year ended 30 September 2006 are un-audited.The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985 for the years ended 30 September 2006 or 30 September 2005. The financialinformation for the year ended 30 September 2005 is derived from the AnnualReport for that year which was delivered to the Registrar of Companies. Theauditors, PricewaterhouseCoopers LLP, reported on those accounts: their reportwas unqualified and did not contain a statement under either Section 237(2) or237(3) of the Companies Act 1985. 9. COPIES OF ANNOUNCEMENT Copies of this announcement will be available from the Company's registeredoffice at 14 Minns Business Park, West Way, Oxford OX2 0JB. This information is provided by RNS The company news service from the London Stock Exchange