Oxford Metrics Regulatory News (OMG)

13 Jun 2007 07:01

OMG PLC13 June 2007 13 June 2007 OMG plc Interim Statement for the six months ended 31 March 2007 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 interim results for the sixmonths ended 31 March 2007. FINANCIAL HIGHLIGHTS: • Turnover of £8.5m, up 4% on last year's record breaking first half (H1 2006: £8.2m) - up 9% at constant exchange rates. • Profit before tax of £0.9m (H1 2006: £1.1m), but represents an increase of 23% excluding £0.6m investment (H1 2006: negligible) in Yotta (formerly Geospatial Vision) and 2d3 Defence operations. • Operating profit margin increased to 16% of revenues (H1 2006: 14%), excluding the effect of investment in Yotta and 2d3 Defence. • Earnings per share at 1.1p (H1 2006: 1.58p) lower due to increased investment. Stripping out investments, earnings per share increases to 1.8p - up 14% on the first half of last year. • Continuing healthy cash balance at £6.6m. (30 September 2006: £6.5m) OPERATIONAL HIGHLIGHTS: • Continuing solid growth of Vicon: • Major sales success for ground-breaking Nexus software, launched into life sciences market June 2006. • 2d3 progressing well: • New defence business offering encouraging progress, establishing strong links with MoD and major contractors. • 3D mapping business, Geospatial Vision, entering next phase: • Successfully completed first 5 contracts. • Business now re-branded as Yotta. • Technological leadership maintained: • Launch of new Vicon F Series camera. • Launch of "real time boujou" service. Nick Bolton, Chief Executive of OMG plc, commented: "We're starting to realise our potential, and get results. In every area of ourbusiness - both in markets where we lead the way and those where we are justfinding our feet - we're doing things differently and better. Vicon continues todominate the motion capture market, aided by the launch of Nexus into the lifescience sector, while our investments in 2d3 defence and Geospatial Vision, nowYotta, are paying off, with progress in both divisions giving us confidence inthe future growth of the company as a whole." OMG plc 01865 261800 Nick Bolton, Chief ExecutivePeter Wharton, Finance Director Financial Dynamics 020 7831 3113 Juliet 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 Yotta (formerly 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 ANYTHING IS POSSIBLE II Six months ago, we told you that for OMG, Anything is Possible. Now, ladies andgentlemen, please take your seats for Anything is Possible II. Well, we are inthe movie business, among others. And we have won an Oscar. And it is fair tosay that this interim report is very much a sequel to our last annual report.Same characters. Same basic plot (quietly successful British technology companydevelops new commercial focus and takes over world). And a few rather excitingnew developments, to keep the audience on the edge of their seats. Getting results In December, I talked about a major strategic shift that OMG needed to make; asideways leap into new, bigger markets, where we would be able to capitalise onour technology base, to transform the company's long term growth potential. AndI ended by saying that we were on the brink of an exciting new era. Now it's begun. Of course, it's still early days; but, during this first half,we've started to see hard evidence that our new ventures can deliver the kind ofreturns we predicted - as Nick reports later. And, at the same time, we'vedemonstrated we can continue to improve the performance of our establishedbusinesses, through innovation, better execution, and a more customer-focusedapproach to sales. A record first half (again) Turning to the figures, first half turnover was £8.5m, up 4% on last year'srecord first half performance; and up 9% at constant exchange rates, removingthe effect of the weakened dollar. We invested £0.6m in operating our two main new ventures (2d3 Defence and Yotta,formerly Geospatial Vision); and while both have made good progress, they havenot yet made any significant impact on turnover. Yet, despite this, profitbefore tax remained healthy at £0.9m. This is down from £1.1m in the first halfof last year; but, when our investment in new markets is taken into account, wesee that underlying profitability has actually increased by £0.3m or 23%. Operating expenses increased by £0.7m overall; but, thanks to improved salesperformance and tight cost control, operating profit increased to 16% ofrevenues, when the effect of the new venture investments is stripped out,compared to 14% in the comparable period. Basic earnings per share were 1.10p compared with 1.58p last year. Once again,the £0.6m spent on 2d3 Defence and Yotta accounts for the decrease. Strippingout these investments, this figure increases to 1.8p - up 14% on the first halfof last year. We continue to hold the view that employee share options are appropriateincentives. However, the adoption of FRS 20 has led to the cost of these optionsbeing charged to the profit and loss account during the period and comparativeperiod results being restated. The cost during the six month period ended 31March 2007 was £102,000, and £31,000 in the comparable period. While these costsare charged to the profit and lost account it is worth noting that there is anequal and opposite credit to the profit and loss reserve in the balance sheetand that there is no impact on the Group's cash flow. Our cash balance remains very healthy, up slightly from the beginning of theyear at £6.6m. Dividend policy In last year's annual report we announced the intention to implement aprogressive dividend policy, reflecting the Group's continued strong financialperformance and the Directors' confidence in the future. Consequently, a maidendividend of 0.1p was paid in March of this year. This change of policy has beenwell received, differentiating OMG from the vast majority of AIM listedcompanies that do not pay dividends. We intend to continue with this policy andwill announce the proposed dividend for the current year with the annualresults. Management changes Brian Nilles has advised the Board of his intent to leave the business at theend of the year. His resignation from the Board will take effect on thisannouncement, and for the coming months he will work closely with the USmanagement team to ensure a smooth transition of his responsibilities. It is tooearly for goodbyes, but we'd like to thank him for his 10 years of leadershipand his significant contribution to OMG's growth, and we wish him well in hisfuture endeavours. A wider impact on the world Overall, I'm hugely optimistic about this company's future. True, as I said sixmonths ago, it will take time to achieve all of our major strategic ambitions -particularly in the defence market, where patience is an absolute prerequisitefor success. But our progress so far this year has been everything we hoped for,as the incredible things made possible by OMG's technology begin to make a widerimpact on the world. To return briefly to our movie theme, we've been a hit withthe critics; now we're looking for major box office success. Anthony Simonds-GoodingChairman 13 June 2007 CHIEF EXECUTIVE'S STATEMENT POTENTIAL INTO PERFORMANCE My theme back in December was the vast unrealised potential I could see in OMG,and the steps we were taking to make possible its fulfilment. More specifically,I focused on our efforts to bring about a significant change of outlook withinthe company which would enable us to turn potential into performance. Like the Chairman, I'm very pleased that I can tell you we're starting to getresults. In every area of our business - both in markets where we lead the wayand those where we are just finding our feet - we're doing things differentlyand better. And if "anything is possible" sounded like an extravagant claim sixmonths ago, I'm more certain than ever now that we can make it stick. Developing our "inner entrepreneur" Before I turn to the performance of our businesses, I want to update you on ourongoing efforts to discover and liberate the entrepreneurial talent with thecompany. During the first half, we've increased both the energy and the money we'reinvesting in developing individuals and teams. In fact, we've spent more oncommercial skills training in recent months than in the previous five yearsadded together. This has been not just for our sales and marketing people, but awide cross-section of management, backroom and even technological personnel.It's made an enormous impact on the company, the key lesson learned being thatwe need to listen more closely to our clients and understand their needs better,before attempting to dazzle them with our incredible technology. (Perhaps thatsounds obvious, but too many technology companies seem to forget it.) VICON: LEADING THE MARKET, BETTER Our longest established business has continued to strengthen its position asglobal leader in motion capture. Here, we're pursuing sustained growth by meansof a classic market leader strategy: ensuring it's Vicon that innovates;developing new products that offer something different and better to existingcustomers; and investing in great service. We've ticked all those boxes over the last six months. On the life sciences sideof this market, our ground-breaking Nexus software - launched last June - isenabling customers to capture and analyze movement in ways that previously werenot possible. In the first half, Nexus shipped with over 60% of all Viconsystems. And to help Nexus maintain its clear technological advantage, we'verecently moved its development to Denver, putting ourselves at the heart of theUS market that is key in driving the pace of progress in this field. Staying on the other side of the pond, I mentioned in our annual report that wehad strengthened Vicon Entertainment's position in the US film and gamesindustries by integrating all our Vicon motion capture systems and House ofMoves service into a single facility in Los Angeles. It's paid offimpressively, with sales up by well over 100% on the first half of last year. Looking at performance by geography, North America continues to be our largestmarket, accounting for 43% of revenues with growth during the period of 10%,although the benefit of this was negated by the weakened dollar. ContinentalEurope experienced particularly strong growth at over 60%, and combined with theUK, accounted for 29% of revenues. By market, the life science sector continues to represent slightly more thanhalf of revenues at 56% of the total. This represents a small increase over lastyear, helped by the success of Nexus. But undoubtedly the biggest Vicon news story in recent times was the launch ofour all-new F Series cameras in April. The F stands for "Faster Full Frame"motion capture; and, in terms of speed and accuracy, this latest addition to ouraward winning MX platform, raises the bar yet again. Featuring the world's firstcamera sensors designed specifically for motion capture, the new F40 and F20enable performance data to be captured at higher speeds than ever before. Maybe less exciting, but still important, we've beefed up our customer serviceoffering, adding more heads to the Vicon support and back-up team. Again, Vicon has been used in a large number of the top movies and video gamesincluding Spiderman 3, Brian Lara Cricket 2007 and the soon to be releasedUncharted: Drakes Fortune. 2d3: AN ESTABLISHED STAR, AND A PROMISING NEWCOMER Our 2d3 business is unusual in being both a long term market leader and a brandnew market entrant. Let's start with entertainment, where the story is simple:Boujou remains one of the movie industry's favourite and best selling cameratracking systems. As with Vicon, we've continued to build on a dominant position and to extend thefranchise. Launched in April, silver bullet and bullet SD are new derivatives ofBoujou 4, offering many of the same tracking and solving capabilities at lowerprices. And during the half, we also advanced the state of play in this marketby introducing a new camera that piggy-backs on a normal film camera, enablingus to offer a "real time boujou" service. New Boujou credits in the first half include the films 300, Spiderman 3,Charlotte's Web and the popular TV series Lost. Turning to our new venture in defence, our 2d3 Advanced Imaging Group (AIG) hascontinued to advance the case for our technology to transform the imagingcapabilities of the next generation of Unmanned Aerial Vehicles (UAVs). As anyone who knows anything at all about MoD procurement will understand, we'reengaged in a long game here. Major contracts for technology won't fall into ourlaps just because we have a "better mousetrap". We always knew that would be thecase; and we have started to see real reasons for optimism in our developingrelationship with MoD. At the same time, we've been building closer links with prime defencecontractors, both in the UK and the US. And in the US, especially, we've beengetting a very positive response. We've already delivered prototypes, and hopeto make further announcements soon. As a reflection of our confidence in thismarket, we have appointed Jon Damush, who has been running our Vicon LAEntertainment, to lead 2d3's growth into the US defence industry. Of course, until we start generating serious revenue, we can't claim success forthis venture. But we're more convinced than ever that the investment - in money,energy and time - will deliver significant returns over the next few years. YOTTA: A NEW NAME THAT WILL SOON BE VERY FAMILIAR In June 2006, we launched Geospatial Vision - a boring name for an incrediblyexciting new business that revolutionises the collection and analysis of highwaydata and street level imaging. A yotta, as you probably know, is 10 to the 24th power, and the largest unitthere is for measuring data, roughly equivalent to the number of grains of sandon the planet. The relevance to the business formerly known as Geospatial Visionis our unique ability to extract tiny details from unimaginably vast data-sets. The name and smart new image are brand new at the time of writing; but thebusiness itself is now very much up and running. In fact, during this firsthalf, we've completed our first five projects, capturing over 15 million imagesin total and delivering data on around 500,000 assets to local authorities allover the UK, from Carlisle to Bournemouth. One of our agreements was withAtkins, the largest European multidisciplinary consultancy group, a strongendorsement of the Yotta offering. Feedback has been highly positive, as clients begin to explore the many ways inwhich data supplied by Yotta can help them manage and maintain highway networksbetter and more cost-effectively - from improving road safety by ensuringwarning signs are correctly placed, to negotiating better deals with contractorscharged with looking after road assets. By way of example, Nottinghamshire County Council recently decided to recorddetails of all the assets within their 4,200 km road network. They realisedthat, using traditional "manual" methods of data collection, this wouldrepresent an enormous challenge. So they embraced the potential of Yotta'stechnology and commissioned a trial covering 250km of A, B and C roads. Theresult: we proved that Yotta can efficiently deliver all the necessary data, andthe Council are now considering whether to extend the process to every road, orwhether they just want A road data. Future prospects? Very promising indeed: we have lots of leads, many directlyresulting from our successfully completed UK projects, plus some excitingpossibilities in the UK, and other overseas markets. And bear in mind that sofar, we've done virtually no promotion. With our first serious sales campaignabout to get underway, we firmly believe that Yotta will soon start to live upthe size of its name. What next for OMG? Looking to the immediate future, we have a healthy-looking sales pipeline forthe second half. As I said in December, we're in the unusual position of havingbusinesses at very different stages of maturity, from long term market leader tostart-up. And we believe that makes OMG a very attractive proposition, asimproved business execution enables us to build on existing positions ofstrength and capitalise on new opportunities. One other aspect of our strategy I should briefly mention: our desire to pursuegrowth through appropriate acquisitions. This continues to be an important partof our plans, and we're making good progress. I was intending to build to a rousing conclusion; but, looking back over whatI've already written, I think a bit of modesty and British understatement mightbe the appropriate note to end on. There's still a lot of work to be done torealise OMG's unlimited potential. But, on the basis of our progress over thelast six months, I think it's fair to say that anything remains distinctlypossible! Nick BoltonChief Executive 13 June 2007 GROUP PROFIT AND LOSS ACCOUNT for the six months ended 31 March 2007 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September 2007 2006 2006 (as restated see (as restated see note 1) note 1) £'000 £'000 £'000 Turnover 8,520 8,184 16,274 Cost of sales (3,001) (3,047) (6,019) ---------- ---------- ----------- Gross profit 5,519 5,137 10,255 Sales, support and marketing costs (1,747) (1,350) (3,021)Research and development (1,345) (1,062) (2,354)Administrative expenses (1,734) (1,676) (3,451)Other income 25 9 12 ---------- ---------- ----------- Operating profit before share basedpayments and goodwill amortisation 884 1,153 1,650 Share based payments (note 1) (102) (31) (81)Goodwill amortisation (64) (64) (128) Operating profit 718 1,058 1,441 Interest receivable and similar income 144 82 217 ----------- ---------- ----------- Profit on ordinary activities beforetaxation 862 1,140 1,658 Tax on profit on ordinary activities (note 2) (203) (202) (179) ----------- ---------- ------------ Retained profit for the period 659 938 1,479 ======= ====== ======= Basic earnings per share (note 3) 1.10p 1.58p 2.48p Diluted earnings per share (note 3) 1.03p 1.52p 2.38p All amounts relate to continuing activities. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the six months ended 31 March 2007 Unaudited Unaudited Audited twelve six months to six months to months to 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 (as restated see (as restated see note 1) note 1) Profit for the financial period 659 938 1,479 Exchange differences on retranslation of openingnet assets of overseas subsidiaries (59) 27 (121) --------- --------- --------- Total recognised gains and losses for the period 600 965 1,358 ========= ========= ========= GROUP BALANCE SHEET at 31 March 2007 Unaudited at Unaudited at Audited at 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000Fixed assetsIntangible assets 860 1,288 998Tangible assets 959 945 921Investments 69 69 69 ---------- ---------- --------- 1,888 2,302 1,988Current assetsStocks 1,472 1,452 934Debtors 4,884 4,428 4,721Cash and short term deposits 6,619 5,255 6,494 ---------- ---------- --------- 12,975 11,135 12,149 Creditors: amounts falling due within one year (3,562) (3,238) (3,483) ---------- ---------- --------- Net current assets 9,413 7,897 8,666 ---------- ---------- ---------Net assets 11,301 10,199 10,654 ========== ========== ========= Capital and reservesShare capital 150 149 150Share premium account 5,913 5,897 5,908Profit and loss account 5,238 4,153 4,596 ---------- ---------- ---------- 11,301 10,199 10,654 ========== ========== ========== GROUP CASH FLOW STATEMENT for the six months ended 31 March 2007 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 Net cash inflow from operatingactivities (note 5) 380 992 2,646 Returns on investments and servicing of financeInterest received 144 82 217 Taxation - (1) (179) Capital expenditurePurchase of tangible fixed assets (358) (241) (610)Proceeds on disposal of tangible fixed assets 30 35 128 AcquisitionsPurchase of subsidiary undertaking - - (44) Equity dividends paid (60) - - ---------- ---------- ---------- Net cash inflow before financing 136 867 2,158 Financing Issue of share capital 6 2 13 ---------- ---------- ----------- Increase in cash (note 6) 142 869 2,171 ========== ========== =========== NOTES TO THE INTERIM FINANCIAL INFORMATION for the six months ended 31 March 2007 1. Preparation of the interim financial information The financial information for the six months ended 31 March 2007 has beenprepared on the basis of the accounting policies set out in the financialstatements of the Group for the year ended 30 September 2006, except foradoption by the Group of FRS 20 "Share-based payment" during the half year bymeans of a prior year adjustment. The adoption of the standard represents achange in accounting policy and the comparative figures have been restatedaccordingly. The adoption of FRS 20 has led to the cost of employee shareoption schemes being charged to operating expenses within the profit and lossaccount, with an equal and opposite credit to profit and loss reserves. As aresult there is no impact on the opening balance sheet. The charge for the sixmonths ended 31 March 2007 is £102,000 (six months ended 31 March 2006 £31,000,twelve months ended 30 September 2006 £81,000). 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 2006 have been extracted from the Group's financial statements whichhave been delivered to the Registrar of Companies and have been amended for achange of accounting policy. The auditors' report on those statements wasunqualified and did not include a statement under Section 237(2) or (3) of theCompanies Act 1985. 2. Tax on profit on ordinary activities The tax charge for the six months ended 31 March 2007 of £203,000 is calculatedusing an estimate of the effective tax rate for the full year ended 30 September2007. The rate used of 23.5% (six months ended 31 March 2006: 17.7%) is lowerthan the rate of corporation tax in the United Kingdom of 30%, principally dueto the utilisation of tax losses brought forward at 30 September 2006 andadditional R&D tax credits to be claimed in respect of the year ended 30September 2007. The actual rate for the full year may vary due to a number offactors, including the amount and distribution of profits between subsidiaryundertakings for the full year and the extent to which brought forward lossescan be utilised. Losses brought forward at 30 September 2006 were £1,003,000. 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 2007 there were 60,067,616 allotted, called up and fully paidordinary shares of 0.25p each, and the weighted average number of shares was60,017,910 (30 September 2006: 59,597,690, 31 March 2006: 59,336,867). The diluted earnings per share is based on a weighted average number of sharesfor the six months ended 31 March 2007 of 63,986,164 after taking account of thedilutive effect of share options (30 September 2006: 62,073,516, 31 March 2006:61,564,182). 4. Movement in reserves Share premium Profit and account loss account Total £'000 £'000 £'000 At 1 October 2006 as restated 5,908 4,596 10,504Retained profit for the period - 659 659Currency translation differences onforeign currency net investment - (59) (59)Dividend paid - (60) (60)Premium on issue of shares 5 - 5Share based payments - 102 102 -------- -------- --------At 31 March 2007 5,913 5,238 11,151 ======== ======== ======== 5. Reconciliation of operating profit to net cash outflow from operating activities Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 (as restated see (as restated see note 1) note 1) Operating profit 718 1,058 1,441Depreciation and amortisation 356 325 695Share based payments 102 31 81Loss / (profit) on sale of tangible fixed assets 1 (4) (16)(Increase) / decrease in stock (519) 290 794Increase in debtors (329) (752) (1,255)Increase in creditors 51 44 906 -------- -------- --------Net cash inflow from operatingactivities 380 992 2,646 ======== ======== ======== 6. 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 2007 2006 2006 £'000 £'000 £'000 Increase in cash for the period 142 869 2,171 Currency movements (17) 15 (48) --------- --------- --------- Change in net funds for the period 125 884 2,123 Opening net funds 6,494 4,371 4,371 --------- -------- --------Closing net funds 6,619 5,255 6,494 ========= ======== ======== 7. Dividend During the six months ended 31 March 2007 a dividend of 0.1pence per share waspaid in respect of the financial year ended 30 September 2006 totalling £60,000. 8. 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