Oxford Metrics Regulatory News (OMG)

15 Jun 2006 07:08

OMG PLC15 June 2006 15 June 2006 OMG PLC INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31 MARCH 2006 OMG plc, Oxford Metrics Group (LSE: OMG), ("OMG" or "the Group") the technologygroup providing image understanding products for the entertainment, defence,life science and engineering industries, announces record interim results forthe six months ended 31 March 2006. FINANCIAL HIGHLIGHTS: • Record turnover, up 71% to £8.2m (H1 2005: £4.8m)• Record operating profits of £1.1m (H1 2005: £0.6m loss)• Earnings per share up significantly to 1.63p (H1 2005: loss per share of 0.96p)• Strong cash generation with cash balances at 31 March 2006 up 20% to £5.3m OPERATIONAL HIGHLIGHTS: • Re-organisation of the Group into three operational business units to focus on their individual markets and products: Vicon, 2d3 and Geospatial Vision• Delivery on stated strategy of expansion through leveraging existing technology in new vertical markets: • Defence market under 2d3 progressing well • New division, Geospatial Vision, established to focus on street-level geospatial imagery• Focus on cost control with consequent drop in overheads, from second half of 2005• Vicon has strengthened its leading position in the games market, with major customers now including Ubisoft, Square Enix, Eurocom Entertainment and Electronic Arts• 2d3's Entertainment products continue to be used in many of the leading box office films with recent examples being X-Men: The Last Stand and The Da Vinci Code Nick Bolton, Chief Executive of OMG plc, commented: "Since becoming Chief Executive of OMG in May 2005, I have implemented a numberof initiatives focused on keeping costs down, leveraging our existingtechnology, and ensuring consistency of sales execution. I am pleased toannounce that we are delivering on these initiatives and, as a result, thebusiness is performing strongly and is demonstrating significant tradingimprovements. The Group reported a record performance in the second half of the last financialyear which I am delighted to announce continued into the first half of thecurrent financial year. This excellent first half performance represents arecord in the Group's history and the strong performance of our core business isunderpinning our drive for growth in significant complementary markets." OMG plc 01865 261800Nick Bolton, Chief ExecutivePeter Wharton, Finance Director Financial Dynamics 020 7831 3113Giles Sanderson / Juliet Clarke / Hannah Sloane CHAIRMAN & CHIEF EXECUTIVE'S JOINT STATEMENT We are pleased to report good progress for the Group for the six months ended 31March 2006. The business has delivered excellent trading figures, is deliveringon its promising technology resources and, in the context of the exciting newvertical markets, is well set for future growth. DELIVERING THE NUMBERS The Group achieved strong trading in the period across all key metrics, withrecord revenues and profits generated. Turnover for the first half achieved arecord £8.2m, 71% ahead of the same period last year (H1 2005: £4.8m). Thisgrowth resulted from strong trading in all geographies. Revenues from NorthAmerica rose 110%, UK rose by 179% and the Far East was up 46%. In addition, theperiod saw a consistency of revenues, assisted by a good volume of businesswithout dependency on any unusually large deals. Gross margins of 63% continued to show improvement (H1 2005: 57%) due to highervolume of units sold, a greater take up of Vicon's premium MX40 product andfurther cost control. As part of the turnaround strategy implemented in H2 2005, there has been afocus on careful cost control, which has resulted in a sequential drop inoverheads from the previous six months. Operating profits rose significantly to a record £1.1m (H1 2005: £0.6m loss),achieving a strong operating margin level of 13%, despite investments for growthin new markets. Earnings per share increased considerably to 1.63p (H1 2005: loss per share of0.96p). Diluted earnings per share was 1.57p (H1 2005: loss per share of 0.96p). Cash flow was positive, with the cash balances increasing by 20% to £5.3m (30September 2005: £4.4m). This record performance across all key metrics follows on from an equally strongperformance in the second half of last year. The effect of this improvement canbe seen more clearly by considering the change in business performance for the12 month period to the 31 March 2006. During this period, revenues are up by 55%to £17.6m (12 months ended 31 March 2005: £11.3m), although, as reported in thefull year statement, the second half of 2005 included an unusually large systemsale amounting to $3m in the US Entertainment sector. Furthermore, operatingprofit turned around from a loss of £0.4m to a profit of £2.3m, and cashbalances more than doubled from £2.5m at 31 March 2005. DELIVERING ON THE PROMISE In addition to growing the established business during the first half, the Groupbegan to access new markets by exploiting the deep technology resources withinthe business. As mentioned in our full year statement, after detailed consideration twopromising opportunities are being actively pursued: the first in defence and thesecond in street-level geospatial imaging, providing new technologies for themanagement and maintenance of key national infrastructures. Defence Bringing the Group's advanced machine vision technologies and proven highcomplexity opto-electronic engineering skills to bear for defence applicationsrepresents a significant market opportunity for OMG subsidiary 2d3. The Group'scapabilities in this regard have been proven by our work with QinetiQ, announcedin December 2005, which relates to recovering 3D information from airborne videoimagery. One area of particular market interest is the growing use of Unmanned AerialVehicles ("UAVs"). UAVs are already widely used for reconnaissance andsurveillance based on video and related technologies. The processing of UAVimagery makes increasing use of many of the same specialised technologies thatOMG has developed for motion capture and image-based tracking. The UK Ministryof Defence is currently committed to UAV development and deployment programmeswith a total budget in excess of £800 million. The US Department of Defenseprogrammes are considerably larger. Defence procurement, particularly in the UK and the US, is undergoing atransformation. In the search for better performance, faster delivery and lowercost, the UK Government has committed, where relevant, to engage SMEs directlyin defence research and procurement and make greater use of technologiestransferred from other industries. This will increase the opportunity forcompanies such as OMG to compete within an industry more commonly supplied bylarge scale entities. 2d3 is now approaching the successful completion of the QinetiQ project, and isnegotiating for wider participation on other UK and US projects. The companywill exhibit its capabilities for the first time at Farnborough Air Show in July2006. Geospatial Vision By applying OMG's existing sophisticated image understanding techniques togeospatially located video information, we can address an existing market usinga new technological approach. The owners and operators of road networks areresponsible for the management and maintenance of a very large number ofroadside assets and are required to keep accurate records of their location andcondition. The market for street-level geospatial imaging and information has many layers,all of which are global, large, growing and significant in size (the UK alonehas over 400,000 km of road and the US in excess of 6 million km). Onceacquired, datasets are potentially of value to a number of groups, includinggovernment (highways departments), commercial (utilities, marketing andinsurance companies), consumer web businesses (Microsoft, Google, Amazon) andmapping organisations (Ordnance Survey). Execution in this market is progressing well. The first UK-based vehicle, fittedwith special-purpose video and GPS digital recording equipment, is being used todemonstrate the system's capability for acquiring and processing of data. We arecurrently conducting a number of pilot studies in collaboration with potentialcustomers. Initial reactions are very positive and given the relatively shorttime frame in which this project has been underway, we are pleased with theprogress so far. We believe there to be a significant addressable market andwill be increasing our level of investment. Our expectation is to be able tomove from the pilot stage to first commercial contracts within the second half. Both the Defence and Geospatial Vision opportunities have made a promising startand we look forward to reporting further progress in our full year statement. DELIVERING MORE The Group is focused on continuing to improve the operational consistency andprofitability achieved over the last 12 months in the core business activities.This will be realised through management initiatives to improve the quality andpredictability of revenue streams whilst maintaining the tight line on costcontrol and sales execution. To assist this further, we have re-organised the Group into three operationalbusiness units to focus on their individual markets and products: Vicon, 2d3 andGeospatial Vision. Vicon now contains all of the Group's motion capture business - the originalVicon Motion Systems, the business acquired from Peak Performance Technologies,Inc. (acquired in February 2005) and House of Moves Inc. (acquired in June2004). To enhance Vicon Entertainment performance in North America, a new expanded LosAngeles facility now houses all capture services and systems staff, togetherwith a dedicated Entertainment development group. This commitment reflectsVicon's strengthening position in the games market with more than 800 Vicon MX40cameras installed since June of last year at market leaders, including Ubisoft,Square Enix, Eurocom Entertainment and Electronic Arts. Moreover the MX40 camerawas awarded Game Developer Magazine's Frontline Award for Best Hardware. Viconwill continue to leverage its technology and innovate to maintain this marketleading position in all the markets it serves. As noted above, 2d3 has now added defence to its existing Entertainment focus.2d3's Entertainment products boujou and SteadyMove continue to sell well. Boujoucontinues to be used in many of the successful box office films with recentexamples being X-Men: The Last Stand and The Da Vinci Code. A third product linewas added to the 2d3 line-up during the first half, called Moujou, which opensup a new higher volume, lower cost product which allows access all of thefunctionality of boujou directly within Autodesk Maya, thereby broadening thepotential customer base for 2d3's leading technology. Geospatial Vision, as already discussed, is our newest business unit and offersstreet-level imaging and information, leveraging various OMG technology strands.It brings exciting opportunities for expansion into new markets and potential togrow revenues further. MANAGEMENT STRENGTHENING In order to further enhance the Group's development we are seeking a secondNon-executive Director, ideally with experience and skills in a relevant marketsector. DIVIDEND POLICY The Board has reviewed the dividend policy and has concluded, for the timebeing, to continue with the policy of not paying a dividend. This decision takesinto account the opportunities for growth and investment which the Group ispursuing. OUTLOOK The Vicon business continues its positive outlook with a strong sales pipelinefor the second half year. The 2d3 business is pursuing the opportunity toaugment its Entertainment revenue through its Defence market activities,although this may not have a significant effect during the current year.Revenues from Geospatial Vision's infrastructure surveying business are also apossibility within the second half. Research and development continues to add valued enhancements to our products,which together with improvements in process and production capability shouldensure that good gross margins will continue to be achieved. While operatingcosts across the Group remain in check, investment in new business opportunitiesis set to increase and is expected to exceed income generated from theseventures during the second half. In support of all three business units and the objective of adding toshareholder value, the Group is actively investigating possibilities foraccelerating growth through acquisitions. In summary, we have had an excellent first half: record revenues, recordprofits, good progress with new opportunities and trading ahead of marketexpectations. We therefore look forward to reporting further progress with thisexciting growth opportunity in our full year statement. Anthony Simonds-Gooding, Chairman Nick Bolton, Chief Executive ABOUT OMG OMG plc (Oxford Metrics Group. LSE: OMG) is a group of technology companieswhich produce image understanding solutions for the entertainment, defence, lifescience and engineering industries. Be it for capturing actors (for the movieindustry), sportsmen (for video games or improving team performance), childrenwith Cerebral Palsy, rehab patients and animals (for medical, life science andresearch industries) or virtual reality displays (for engineering anddevelopment), the Group has the world leading market position and a stronginternational reputation for precision instruments. Founded in 1984, the Group has global headquarters in Oxford UK, and offices inCalifornia and Colorado USA. It has customers in over 35 countries and is aquoted company listed on AIM, a market operated by the London Stock Exchange.The Group trades through two core operating subsidiaries - Vicon, the world'sbiggest motion capture and movement analysis company and 2d3, a manufacturer ofspecialised visual effects software. 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 and Loughborough University, engineering industryleaders including Ford Motor Company, BMW, Airbus, Caterpillar, and Toyota, andin the entertainment sector, Sony, Industrial Light and Magic, The MovingPicture Company (MPC), Sega, Nintendo, UbiSoft, Electronic Arts, Square Enix andmany others. For more information about OMG and its subsidiaries, visit www.omg3d.com,www.vicon.com, or www.2d3.com. GROUP PROFIT AND LOSS ACCOUNT for the six months ended 31 March 2006 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 Turnover 8,184 4,797 14,213 Cost of sales (3,047) (2,047) (5,620) ---------- ---------- ----------- Gross profit 5,137 2,750 8,593 Sales, support and marketing costs (1,348) (1,250) (3,304)Research and development (1,056) (739) (1,607)Administrative expenses (1,653) (1,368) (3,089)Other income 9 - - ---------- ---------- ----------- Operating profit / (loss) before goodwillamortisation and exceptional items 1,153 (557) 923 Goodwill amortisation (64) (50) (114)Exceptional items - - (216) Operating profit / (loss) 1,089 (607) 593 Interest receivable and similar income 82 58 97 ----------- ---------- ----------- Profit / (loss) on ordinary activities beforetaxation 1,171 (549) 690 Tax on profit / (loss) on ordinary activities (202) - 46 ----------- ---------- ------------ Retained profit / (loss) for the period 969 (549) 736 =========== ========== ============ Basic earnings / (loss) per share (note 3) 1.63p (0.96)p 1.27p Diluted earnings / (loss) per share (note 3) 1.57p (0.96)p 1.22p All amounts relate to continuing activities. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the six months ended 31 March 2006 Unaudited Unaudited Audited twelve six months to six months to months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 Profit / (loss) for the financial period 969 (549) 736 Exchange differences on retranslation of openingnet assets of overseas subsidiaries 27 (40) 9 ---------- --------- --------- Total recognised gains and losses forthe period 996 (589) 745 ========== ========= ========= GROUP BALANCE SHEET at 31 March 2006 Unaudited at Unaudited at Audited at 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 (as restated (as restated See note 1) See note 1)Fixed assetsIntangible assets 1,288 1,334 1,353Tangible assets 945 1,142 970Investments 69 - 69 --------- ---------- -------- 2,302 2,476 2,392Current assetsStocks 1,452 2,409 1,739Debtors 4,428 2,967 3,637Cash and short term deposits 5,255 2,518 4,371 --------- ---------- -------- 11,135 7,894 9,747 Creditors: amounts falling due within one year (3,238) (2,406) (2,938) --------- ---------- -------- Net current assets 7,897 5,488 6,809 --------- ---------- -------- Total assets less current liabilities 10,199 7,964 9,201 Creditors: amounts falling due in morethan one year - (118) - --------- ---------- -------- Net assets 10,199 7,846 9,201 ========= ========== ======== Capital and reservesShare capital 149 146 147Share premium account 5,897 5,672 5,692Shares to be issued - 205 205Profit and loss account 4,153 1,823 3,157 --------- ---------- -------- 10,199 7,846 9,201 ========= ++++====== ======== GROUP CASH FLOW STATEMENT for the six months ended 31 March 2006 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 Net cash inflow/(outflow) from operatingactivities (note 4) 992 (929) 1,015 Returns on investments and servicing of financeInterest received 82 57 97 Taxation (1) (10) 8 Capital expenditurePurchase of tangible fixed assets (241) (517) (897)Proceeds on disposal of tangible fixed assets 35 30 282 AcquisitionsPurchase of subsidiary undertaking - (307) (342)Net cash acquired with subsidiary - 111 111Other investment acquired - - (69) ---------- ---------- ---------- Net cash inflow/(outflow) before financing andmanagement of liquid resources 867 (1,565) 205 Financing Issue of share capital 2 40 61 ---------- ---------- ----------- Increase/(decrease) in cash (note 5) 869 (1,525) 266 ========== ========== ========== NOTES TO THE INTERIM FINANCIAL INFORMATION for the six months ended 31 March 2006 1. Preparation of the interim financial information The financial information for the six months ended 31 March 2006 has beenprepared on the basis of the accounting policies set out in the financialstatements of the Group for the year ended 30 September 2005, except for theadoption by the Group of FRS 25 "Financial instruments: disclosure andpresentation" during the half year by means of a prior year adjustment. There isno effect on the current or prior periods' Group profit as a result of thischange 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 shares tobe issued included within shareholders' funds at 30 September 2005 and 31 March2005 and increase creditors within one year at 30 September 2005 and increasecreditors greater than one year at 31 March 2005 by £32,000 which relates tocontingent consideration in respect of the acquisition of House of Moves. The interim financial information is unaudited and the financial informationcontained in this report does not constitute statutory accounts with the meaningof the Companies Act 1985. The comparative figures for the year ended 30September 2005 have been extracted from the Group's financial statements whichhave been delivered to the Registrar of Companies (except where restated for theimplementation of FRS25 as noted above). The auditors' report on thosestatements was unqualified and did not include a statement under Section 237(2)or (3) of the Companies Act 1985. 2. Tax on profit on ordinary activities The tax charge for the six months ended 31 March 2006 of £202,000 is calculatedusing an estimate of the effective tax rate for the full year ended 30 September2006. The rate used of 17.2% is lower than the rate of corporation tax in theUnited Kingdom of 30%, principally due to the utilisation of tax losses broughtforward at 30 September 2005 and additional R&D tax credits to be claimed inrespect of the year ended 30 September 2006. The actual rate for the full yearmay vary due to a number of factors, including the amount and distribution ofprofits between subsidiary undertakings for the full year and the extent towhich brought forward losses can be utilised. Losses brought forward at 30 September 2005 were £904,000. 3. Earnings per share The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the period. The calculation of diluted earnings pershare is based on the basic earnings per share, adjusted to allow for the issueof shares on the assumed conversion of all dilutive options. At 31 March 2006 there were 59,752,944 allotted, called up and fully paidordinary shares of 0.25p each, and the weighted average number of shares was59,336,867 (30 September 2005: 58,065,827, 31 March 2005: 57,250,126). The diluted earnings per share is based on a weighted average number of sharesfor the six months ended 31 March 2006 of 61,564,182 after taking account of thedilutive effect of share options (30 September 2005: 60,331,038, 31 March 2005:57,250,126). 4. Reconciliation of operating profit / (loss) to net cash outflow fromoperating activities Unaudited Unaudited Audited six months to six months to Twelve months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 Operating profit / (loss) 1,089 (607) 593Depreciation and amortisation 325 301 692(Profit) / loss on sale of tangible fixed assets (4) (1) 14Decrease / (increase) in stock 290 (609) 68(Increase) / decrease in debtors (752) 327 (296)Increase / (decrease) in creditors 44 (340) (56) -------- -------- -------Net cash inflow / (outflow) from operatingactivities 992 (929) 1,015 ======== ======== ======= 5. Reconciliation of net cash flow to movement in net funds Unaudited Unaudited Audited six months to six months to Twelve months to 31 March 31 March 30 September 2006 2005 2005 £'000 £'000 £'000 Increase / (decrease) in cash for the period 869 (1,525) 266 Currency movements 15 (53) 9 --------- --------- --------- Change in net funds for the period 884 (1,578) 275 Opening net funds 4,371 4,096 4,096 --------- --------- --------- Closing net funds 5,255 2,518 4,371 ========= ========= ========= 6. Copies of the interim statement Copies of the interim statement will be sent to shareholders. Further copieswill be available from the Company's registered office at 14 Minns BusinessPark, West Way, Oxford OX2 0JB, and from the Company's website: www.omg3d.com. This information is provided by RNS The company news service from the London Stock Exchange