Final Results

RNS Number : 3357J

OMG PLC

02 December 2008

 



Tuesday, 2 December 2008

OMG plc

Preliminary Results statement for the twelve months ended 30 September 2008

- Record revenue growth, record investment in future growth -

OMG plc, (LSE: OMG) ('OMG' or the 'Group'), the technology group providing image understanding products for the entertainment, defence, life science and engineering industries, announces preliminary results for the twelve months ended 30 September 2008.

Financial Highlights:

• 4th year of record revenue growth - up 34% at £26.2m, ahead of expectations (2007: £19.6m) 

• Reported Profit before Tax of £1.6m (2007: £2.0m)

• Adjusted Profit Before Tax1 of £2.1m - similar, as expected, to 2007 profit performance (2007: £2.2m)

• Diluted Earnings Per Share of 1.80p (2007: 2.65p)

• Cash balance healthy at £2.9m (2007: £6.2m) following record investment in future growth and Group remains debt-free

• Dividend maintained at 0.115p

Operational Highlights:

• Record revenue growth for Vicon

  • Record revenue performance of £19.1m, shipping more cameras than ever before 

  • US operations driving revenue growth - Vicon systems up 16%, House of Moves up 14%

• Yotta - no longer the 'start-up'

  • Now contributing 25% of Group revenue - up from 5% in 2007

  • Delivered a breakeven performance for the full year 

  • Acquisition of MVS completed and added to profits

• 2d3 - a transformational year

  • Overall revenue growth of over 600%

  • First US revenue recorded with Northrop Grumman

  • Forward order book stands at £0.7m

• Springboard - breakeven in year 1

  • First two customer engagements successfully completed

1 Adjusted PBT excludes Share based payments, Intangible amortisation and non-recurring costs per Note 6 of the accompanying financial statements.

Commenting on the results Nick Bolton, Chief Executive Officer said:

'I am very pleased with how our business has performed in 2008, delivering what is a fourth consecutive record-breaking year for OMG. We have broken records right across the board, from revenue performance and unit shipments in Vicon to the contribution Yotta now makes to our group turnover. These are significant achievements, all of which have been achieved against the backdrop of the record investment we have made this year to underpin our future growth prospects.  

'We enter 2009 well positioned for the year ahead and have a great deal to be excited about despite the economic climate. Of course we cannot know exactly how the changes in the global economy will impact our markets but trading at the beginning of this financial year is comparable to that of the same period last year. Furthermore, we can control the way we serve our markets - the products we offer, the differentiation we create, the service we provide. It is this execution focus that has achieved this fourth record-breaking year and it is this that will drive our success in 2009.' 

For further information please contact:

OMG plc	[phone]
Nick Bolton, Chief Executive David Deacon, Finance Director
Financial Dynamics	[phone]
Juliet Clarke / Matt Dixon
Evolution Securities (Nominated Advisor to OMG)	[phone]
Jeremy Ellis

About OMG

OMG plc (Oxford Metrics Group. LSE: OMG) is a group of technology companies producing image understanding products and services for the entertainment, defence, life science and engineering industries. Be it for capturing the movements of actors (for the movie industry), sportsmen (for video games or improving team performance), children with Cerebral Palsy, rehab patients and animals (for medical, life science and research industries) or virtual reality displays (for engineering and development), the Group has the world leading market position and a strong international reputation for precision instruments.

Founded in 1984, the Group's headquarters are in Oxford, UK, and it has offices in California and Colorado, USA. It has customers in over 50 countries and is a quoted company listed on AIM, a market operated by the London Stock Exchange. The Group trades through three operating subsidiaries - Vicon, the world's biggest motion capture and movement analysis company, 2d3, a manufacturer of specialised image understanding software for entertainment and defence applications and Yotta, our 3D mapping business, which collects and analyses highway data and street level imaging and which, following the acquisition of Mobile Video Services, Inc. in April 2008 is a leading US provider of data collection services for the assessment of property taxation. 

Oxford Metrics' global clients in science, medicine, sport, engineering, gaming, film, broadcast and 3D mapping include major hospitals and research facilities such as Guy's Hospital, Nuffield Orthopaedic Centre and Loughborough University, engineering industry leaders including Ford Motor Company, BMW, Airbus and Toyota, and in the entertainment sector, Sony, Industrial Light and Magic, The Moving Picture Company (MPC), Sega, Nintendo, UbiSoft, EA, Square Enix and in 3D mapping and highway surveys: Mouchel Parkman, Atkins, and Oxfordshire, Cumbria, Derbyshire and Pembrokeshire County Councils as well as many others. 

For more information about OMG and its subsidiaries, visit www.omg3d.com, www.vicon.com, www.2d3.com or www.yotta.tv  

- Ends -

  CHAIRMAN'S STATEMENT

PERFORMANCE WITH INVESTMENT

Two years ago, when we first started to report our drive for growth, I talked about the incredible things OMG does. I talked of the amazing technology and our desire to exploit this in new, untapped markets. Today, it's clear this approach is starting to deliver as we report another year of record revenues - that makes it four record years in a row. But perhaps the most significant point about this revenue result is 25% of it comes from Yotta. An impressive result for a business which has just completed its second full year of trading.

In fact, it was a year of expansion for all our businesses. This year Vicon shipped more cameras than ever before, Yotta delivered more highway assets than ever before and 2d3 undertook more defence contracts than ever before. Our technology tracked more of everything - actors and athletes, crashes and cracks, drains and drones. Touching more people in more markets all over the world. True to the plans we mapped out, OMG continues to grow by bringing our common core of imaging technology to bear in multiple markets through a range of products and services.

But in addition to this growth in performance, the business equally has been investing for future growth. As a Group we invested more than ever before. The Group continued to invest in R&D, a total of £3.6m (2007: £3.5m) plus a further £0.6m (2007: £0.2m) of development costs were capitalised, productive assets for our businesses £2.3m (2007: £0.7m) and the strategic growth of the business by acquiring Mobile Video Services (MVS) in April 2008. This gives Yotta its first foothold in the US, and further expands the Group's breadth in terms of both geography and market.

The strategy to pursue profitable performance and investment continues to build strength in our existing markets while capitalising on our technology to build successful businesses in new, much bigger markets. Performance with investment puts us in a great position for 2009.

FINANCIAL HEADLINES

2007/08 was our first full year under the International Financial Reporting Standards (IFRS), so all the numbers reported together with comparatives have been restated where appropriate. The adoption of IFRS has not had a material accounting impact on the Group. Details of the transition adjustments and accounting policy changes were published in our Interim Statement in June 2008.

The Group enjoyed another record year of revenue, up 34% to £26.2m (2007: £19.6m). Excluding the effect of acquisitions organic growth of our established Vicon business was up 3%. The Group also has significant sales in US Dollars. However, for comparative purposes, the fall of Sterling against the Dollar late in the financial year did not materially affect the average exchange rate compared with last financial year.

The Group reported an adjusted pre-tax profit £2.1m (2007: £2.2m) before share-based payments, amortisation of intangible assets and non-recurring charges (see note 6 to the attached financial information).

Qualifying Development costs of £0.6m in relation to the T-series camera launched during the year have been capitalised and will be amortised over the next four years consistent with previous treatment of key product developments.

The Group cash position stood at £2.9m (2007: £6.2m) at year end. During the year the Group deployed cash resources to grow the business and invested £2.3m (2007: £0.7m) on property, plant & equipment in all our businesses in order to provide capacity and technology for future growth. In addition the Group utilised £0.8m of cash to acquire MVS in April 2008. The Group generated £0.8m (2007: £1.4m) in operating cash during the year. This is lower than might have been expected due to a greater number of agreements being signed in September 2008 compared to the prior year - agreements that will contribute to cash generation in the next period.

The source of Group revenues is geographically spread which provides some protection against economic difficulties in any particular market. The USA remains the Group's primary market accounting for 48% of revenues which also demonstrated strong growth in the financial year.

VICON

Vicon reported revenues of £19.1m (2007: £18.5m) representing a record year for this business. The growth was driven by our US operations where Vicon system revenues increased 16% whilst House of Moves, our motion capture studio based in Los Angeles, achieved revenues of £2.5m (2007: £2.2m), up 14% compared to last year. 

Vicon remains the dominant profit generator within the Group recording a divisional operating profit of £4.2m (2007: £4.5m) before Group recharges of £1.8m (2007 : £1.4m). This modest decrease was due to slightly lower Vicon system Gross Margins of 61% (2007: 64% 2006: 60%) arising from the introduction of a the new T-series model which temporarily affected production efficiency and also T-Series launch costs of £0.2m.

YOTTA

Yotta reported revenues of £6.5m (2007: £1.0m) and now represents a significant and growing revenue stream for the Group. This additional revenue stream, which is more predictable and contractual in nature, now provides a balance to overall Group revenues.

Our Yotta business produced a breakeven result (2007: Loss £0.7m) for the full year before Group recharges of £0.3m (2007: £0.2m) representing a significant improvement over last year. This achievement was driven by revenue growth and on-going operational improvements.

Yotta successfully completed the acquisition of Mobile Video Services (MVS) based in the US in April 2008. This operation achieved revenues of £0.9m and an operating profit before Group charges of £0.1m in the period post acquisition. On a go forward basis this acquisition now gives Yotta the opportunity to expand in this market and bring to bear technologies that have revolutionised the UK market.

2D3

Revenues of £0.5m (2007: £0.1m) were reported for the year. The business continued to gain traction in the Defence market and has a healthy order book of £0.7m going into the new financial year.

The business reported a divisional operating loss of £0.5m (2007: Loss £0.3m). This loss increased overall due to the expansion of our US operations during the financial year.

ACQUISITIONS

The Group remains committed to augmenting growth through acquisition that satisfies our objectives. We will continue to explore opportunities in 2009 and will seek to complete transactions that will enhance shareholder value and earnings.

DIVIDEND

In 2006 we announced the introduction of a progressive dividend policy. The Board remains committed to this policy. The Board has concluded that that it would be appropriate to maintain the dividend at the same level as last year and I am therefore pleased to announce that the Board proposes a dividend for 2008 of 0.115p.

The Group dividend will be paid on 12 March 2009 to shareholders on the register of members at the close of business on 12December 2008. 

OUTLOOK

So what of 2009? Well, no one can know the precise detail of how the global economy will fare in the year ahead, but we feel OMG is positioned well. The Group strategy is demonstrably working. In relative terms, the Group's markets are reasonably protected (Nick Bolton, our CEO, explains this in greater depth later). The Group's businesses stand stronger today than ever before. The Group has tightened its financial and operational controls and reduced costs early in the new financial year.

From a tactical standpoint, the Group has tightened its financial and operational controls and implemented cost reductions early in the new financial year. The Group does benefit from a strengthening US dollar and is likely to do so in 2008/09, given the status quo. However, currency markets are volatile so the full impact over the year cannot be estimated or assumed. The business remains focused on execution of business plans and achieving targets which is a matter we can do something about. 

We enter 2009 well positioned for the year ahead and have a great deal to be excited about despite the economic climate. Of course we cannot know exactly how the changes in the global economy will impact our markets but trading at the beginning of this financial year is comparable to that of the same period last year. Furthermore, we can control the way we serve our markets - the products we offer, the differentiation we create, the service we provide. It is this execution focus that has achieved this fourth record-breaking year and it is this that will drive our success in 2009

Anthony Simonds-Gooding

Chairman

CEO STATEMENT

The past year has been another exciting period for the Group and all our subsidiary businesses. Operationally we have achieved much and I would like to thank everyone in each of our teams for their enormous contributions over this past 12 months.

To understand these results and appreciate the opportunities for the Group in the future, we must look at each of the businesses individually as they all serve different markets and all are at differing stages of development. 

VICON - FILMS, FENCING AND FLY FISHING

Vicon had a busy year in 2007/08 with record revenues, the introduction of our next generation motion capture platform - the Vicon T-Series and a wide range of amazing customer work.

Of course there was more film work - 10,000 BC, the Oscar-winning Golden Compass and also the Summer blockbuster Prince Caspian. Longstanding Vicon customer Audiomotion delivered almost two hours of motion capture footage for Prince Caspian, using 100 MX40+ cameras and filming over seven days on location. They captured a huge volume of complex data from eight performers and six horses, rearing, jumping and moving at speed. The animation was then retargeted to a variety of mythical creatures including centaurs, fauns and telmarine cavalry. 

In addition to its use in film making, Vicon systems were used across the world to track an enormous variety of movements, including a number of unusual studies in chewing, fencing and fly-fishing.

The Dento-Munch trials at the University of Bristol used the Vicon system to provide a more realistic way to test materials for use in dentistry. The temporomandibular joint (TMJ), connecting the lower jaw to the temporal bone at the side of the head, is one of the most complex joints in the human body. It had previously proved impossible to track with six degrees of freedom - the jaw moves up and down and side to side, allowing us to chew food, talk and yawn - but now they can through the accuracy of their Vicon system. 

Fencing is a very demanding sport due to the precise movement, reaction and speed required by the athlete. The University of Basel has been using their Vicon system to capture the movements of the Swiss National Fencing Team. Analysing the data has enabled the team to improve their performance and reduce their risk of injury.

In September, The Outdoor Channel's series 'Fly Fishing The World' featured the Fly Casting Institute's (FCI) use of Vicon motion capture cameras during its latest fly casting clinic. FCI partners with the Montana State University Biomechanics Lab, home to a Vicon system, which enables the FCI to view the body/rod/line interactions of fly casting at 200 frames-per-second in full 3D space.

These are just three of Vicon's thousands of Life Sciences customers using their systems for a broad variety of research and analysis. In 2007/08 Life Science sector represented 58% of total Vicon revenues, with 42% in Entertainment and Engineering. In 2007/08 we shipped almost 3000 cameras in 342 systems, with 227 going to Life Sciences customers and 115 into Engineering and Entertainment.

House of Moves, our Los Angeles-based animation services business, achieved record revenues in 2007/08 by expanding the services it provides - notably a new sound stage and new keyframe animation services. The sound-controlled stage added to the facility means we can now capture simultaneously final quality audio with motion captured animation. Through this new stage, we were able to deliver final facial animation for two major titles from a leading video game company.

The addition of traditional keyframe animation services led to the delivery of three full keyframe projects without any motion capture base. This broadening of services means we can build parallel profitable revenue streams for the business from the one cost base. With customers including THQ, Paramount Pictures and Sony Computer Entertainment America, 2007/08 was a great year for House of Moves.

Having run our Denver operation for three years, Doug Reinke stepped up in April 2008 to be Vicon CEO. Doug is an accomplished individual with a broad set of skills which he has already brought to bear with the successful introduction of the new T-Series cameras.

Launched in May, the T-Series offers a clear capability difference from its competitors. The top-of-the-range T160 camera sports the unique 16 megapixel Avalon sensor providing full frame resolution at 120 frames per second. No motion capture competitor has a resolution above four megapixels. 

With the launch of T-Series, House of Moves expansion and systems continually being used in new applications, Vicon looks set to continue its position as motion capture market leader in 2009.

2D3 - GAINING ALTITUDE

2007/08 was a transformational year for our defence business 2d3, established in 2006. The start-up business passed several significant milestones, including launching its first product, posting £0.5m of revenue (2007: £0.1m) and recording its first US sales and revenues. 2d3 now has momentum and we expect much of it in 2008/09.

2d3 provides image intelligence (IMINT) and situational awareness products and services for Unmanned Aerial Vehicles (UAVs). UAVs are key to modern defence systems as they enable the rapid deployment of cameras in the sky which can loiter over an area for extended periods without putting an operator's life at risk.

Both the UK Ministry of Defence (MoD) and the US Department of Defense (DoD) are very active in this field. Indeed DoD will spend more than $3.2 billion on unmanned systems this year. This includes air, ground and sea-borne systems, but the air segment dominates with more than $2 billion allocated.

In all but the very largest UAV platforms, the quality of the video produced is below that of standard definition television and is, in most cases, more comparable with Internet streaming video. This is due to many factors, including quality of the cameras themselves, the compression algorithms used, and the bandwidth available to transmit the video from the UAV to the ground control station, and beyond.

There are further limitations, however. Even if troops on the ground receive video of acceptable quality, it is likely to be watched once or twice, and then either archived or deleted. With appropriate processing and indexing, there is often valuable information that can be extracted from the video and exploited.

2d3's opportunities in this market fall into three main areas: 1. Software to enhance and exploit existing video, 2. Algorithms that can be embedded onboard UAV (or even manned) aircraft to process imagery at the point of acquisition. 3. Camera and video processing hardware to improve the quality of the imagery acquisition process.

To exploit the first of these three areas 2d3 launched its first product, TacitView, in June 2008. TacitView enables the user to enhance, exploit, export and manage video from unmanned systems through a suite of advanced image processing tools.

TacitView has generated a great deal of user interest in both US & UK. One consequence was an invitation to participate in US Special Operations Command's (SOCOM) Tactical Network Topology (TNT) experiments at Camp Roberts, California. TNT consists of active duty special forces, academic, and commercial participants performing battlefield-related tasks in a large-scale and realistic environment that simulates conditions in theatre. SOCOM uses the venue to test and evaluate technologies for usability, functionality, interoperability in the hands of the soldier and as such represented a unique high level marketing opportunity.

2d3 TacitView was a crowd favourite and successfully acquired, processed and provided enhanced and exploited video from the Raven, ScanEagle, Maveric and Rascal UAV platforms. During the week, 2d3 delivered tens of hours of enhanced video from those platforms, created a 3D map of a hill from the video from a short overflight, and automatically generated many square miles of geo-accurate maps based on high-resolution still images from a low flying UAV. Our capabilities were so well received that the organizers asked us to participate in an ad-hoc experiment to map the entire base.

During the year, 2d3 provided research services on three UK MOD-sponsored projects. The Crosshair project aims to increase the precision with which objects can be geo-located on the ground from aerial imagery. This major project runs for two years and will be completed during 2008/9.

Two other research projects undertaken during the year have clear application to current UK military engagements. Aerial video reconnaissance is often used to monitor a planned road or cross-country route. In a newly-funded project, 2d3 is researching methods to allow comparisons between imagery obtained from slightly different reconnaissance flight paths. With a renewal of funding, work continued on another project aimed at automatic recognition from reconnaissance video of fixed and moving objects on the ground.

2d3 US recorded its first revenues of £0.1m in 2007/08, providing research services to Northrop Grumman on 'Sense and Avoid' technology for unmanned aircraft using computer vision and the Defense Threat Reduction Agency (DTRA) for terrain generation from video for forensic analysis of radiologically contaminated areas.

2d3 goes into 2008/09 with new product, an excited market, a good pipeline and a forward order book for services work of £0.7M. 2008/09 will be an important year for this growing company.

YOTTA - NO LONGER THE START-UP

As the Chairman has pointed out, in only its second full year of trading Yotta provided 25% of Group revenues (2007: 5%) at £6.5m (2007: £1.0m). It took Vicon over 15 years to achieve the same level of revenue. In 2007/08 Yotta ceased to be a start-up and really started to grow.

During the year, we completed the integration of the acquired DCL business and consolidated from 3 sites (Oxford, Bognor and Leicester) to a single location in Leamington Spa. This central location provides us with cost effective office space and an adjoining garage for survey vehicle development and maintenance. Having a single location has delivered efficiency gains and helped us manage and deliver projects with a higher level of customer service and complete and invoice jobs faster than ever before.

Since the acquisition of DCL our customer base has grown and our customers are ordering more services from us. Yotta's original asset survey customers are now adding condition surveys and indeed some of DCL's original condition survey customers are asking for assets. In addition to this cross-selling, our big customers are continuing to renew their contracts. For example Cheshire County Council has recently extended its multi-year contract for a further two years.

Moreover our customers are seeing real commercial benefits through using our services. For example a prominent Highways Agency partner contracted Yotta to undertake an asset survey of a road network it was responsible for. We conducted the survey, delivered the asset data and identified a series of previously unknown and chargeable assets. This enabled our customer to claim back almost £300,000 per year for the five year contract. 

This year Yotta developed and launched what we believe to be the world's highest resolution 360° street view system operating at 50 megapixels and capturing every two metres. The system gives our customers unprecedented detail of their environment and the assets they are responsible for managing. We are also equipping Yotta's condition vehicles with a 180° street view system operating at 15 megapixels every two metres. This will enable our customers to gain a detailed view of their network where we have provided condition surveys and deliver asset inventory data for an additional fee.

The focus for Yotta in 2008/09 will continue to be in its core markets and delivering operational efficiencies and a strong platform for growth through the development and implementation of OMG's 3D vision technologies. Furthermore the year ahead is looking positive for asset surveying. The Department for Transport (DfT) recently announced £15m in special funding for local authorities for transport asset management including inventory collection.

April 2008 saw the arrival of Yotta into the US market through the acquisition of Mobile Video Services (MVS) of Kansas City, Missouri. MVS is one of the leading providers of street view and property data verification for property tax revenue collection for county level jurisdiction in the US. The annual market for property data verification is estimated to be $40m annually, based on 120 million land parcels in the US needing to be re-assessed every six years at $2 per parcel. MVS enables clients to accurately identify and value all the properties in the county for less than a tenth of the cost of traditional methods and complete the assessments in weeks rather than years. New tax revenue is identified and rapidly collected. 

In a recent project in Washington DC we discovered more than $948m of new taxable property value from 125,000 parcels with a known taxable value of $105 billion. At an average tax rate of 0.91% this equated to $8.7m of new tax revenue a year for a project which cost only $800,000.

Integration is progressing well. The cross-fertilisation of vision science and software development expertise and 360° street view technologies has begun. Equally, MVS bring to Yotta many years of valuable operational and market experience which can be applied to our business in the UK. Into 2009 MVS is our platform for growth in the US for both property data, highways surveying and mapping.

SPRINGBOARD - LEAPING AHEAD

In April 2008 we launched a Professional Services arm to the Group, called OMG Springboard, to take advantage of latent business opportunities for our technology which don't naturally fit into one of our existing businesses.

Springboard successfully completed two customer engagements - one for a UK-based manufacturer of high performance road cars and the other for GE Global Research in the US. Given the highly innovative nature of the projects Springboard is asked to undertake, our clients require us to keep all work confidential, so unfortunately we cannot reveal any more detail here. What we can say, is through these two contracts, Springboard was break-even in its first half year of operations. We expect to continue working with these first two clients and to add further contracts during 2008/09.

EQUIPPED FOR 2009

Looking forward to 2008/09, OMG has a great deal to be excited about despite the financial turmoil and the talk of recession in recent months.

Firstly reviewing the markets OMG serves, we are better positioned than many. We are broadly spread geographically - 48% in North America, 30% in the UK (now Yotta UK is such a strong force), 11% from Asia Pacific and 8% in Continental Europe. We are in multiple economically unconnected markets (highways, biomechanics, video games, defence etc.). So our risk is spread more broadly than a single sector business.

Furthermore, the majority of our business comes either directly or indirectly from public sector, which at the very least would be expected to lag any spending contraction in the private sector. For example public funding for both highways and defence are already broadly fixed on long-term funding rounds. Furthermore, as a smaller player in what are two very large potential markets, we believe we remain well placed to grow our market share in these areas, in spite of external market changes.

Into these markets, all subsidiaries have new, highly differentiated products and services: Yotta's unique asset surveys, Vicon's T160 - the world's only 16 megapixel motion capture camera, and 2d3's all new TacitView - IMINT software designed for video from the ground up.

Reflecting the growing importance of the two newer businesses, Yotta and 2d3, the Group today has significantly improved revenue visibility compared with three years ago. Major contracts at Yotta UK give that business an order book distance of approximately five months going into the new fiscal year. And 2d3 goes into 2008/09 with £0.5m order book in the UK and $0.3m in the US - a combined order book greater than total 2d3 2007/08 revenues.

So with these order books and new product, the emphasis for the Group has shifted. The significant investments made in 2d3 and Yotta in recent years to build top lines, market position and differentiated product are starting to bear fruit. So we can now move the focus to one of growing profitability. To assist in the delivery of these profits, costs have been lowered and control processes enhanced across all subsidiaries. All three businesses now have the potential to generate divisional operating profits (before Group charges) in 2008/09 and are being planned and operated on this basis. 

This positions the Group well for the year ahead. In 2007/08 OMG saw record revenues and record contributions from the new businesses. 2008/09 can build on this to create a stronger, more profitable OMG. An OMG even more capable of pursuing growth. An OMG in control of its future and delivering on its promise.

Nick Bolton

CEO

preliminary announcement

consolidated income statement for the year ended 30 september 2008

		Unaudited 2008	Audited 2007
	Note	£'000	£'000
Revenue	4	26,203	19,618
Cost of sales		(11,242)	(6,826)
Gross profit		14,961	12,792
Sales, support and marketing costs		(4,373)	(3,932)
Research and development		(3,646)	(3,533)
Administrative expenses		(5,708)	(3,716)
Other income		142	50
Operating profit	4	1,376	1,661
Finance income		249	307
Finance expense		(28)	(4)
Profit before taxation	5	1,597	1,964
Taxation	7	(348)	(252)
Profit for the financial year attributable to equity holders of the Company		1,249	1,712
Basic earnings per ordinary share (pence)	8	1.95p	2.83p
Diluted earnings per ordinary share (pence)	8	1.80p	2.65p

preliminary announcemenT

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

FOR THE YEAR ENDED 30 SEPTEMBER 2008

		Unaudited	Audited
		2008	2007
		£'000	£'000
Exchange differences on retranslation of overseas subsidiaries		118	(120)
Deferred tax in respect of employee share options		(177)	5
Net income and expense recognised directly in equity		(59)	(115)
Profit for the financial year		1,249	1,712
Total recognised income and expense for the year		1,190	1,597

 PRELIMINARY ANNOUNCEMENT 

consolidated BALANCE SHEEt at 30 september 2008

		Unaudited	Audited
		2008	2007
		£'000	£'000
Non-current assets
Intangible assets		1,960	936
Goodwill		4,967	3,262
Property, plant and equipment		3,088	1,847
Financial asset - investments		69	69
Deferred tax asset		475	600
		10,559	6,714
Current assets
Inventories		2,993	1,786
Trade and other receivables		9,503	7,566
Cash and cash equivalents		2,877	6,179
		15,373	15,531
Current liabilities
Trade and other payables		(7,346)	(5,664)
Current tax liabilities		(173)	(428)
		(7,519)	(6,092)
Net current assets		7,854	9,439
Total assets less current liabilities		18,413	16,153
Non-current liabilities
Financial liabilities		(409)	(187)
Deferred tax liability		(406)	(277)
		(815)	(464)
Net Assets		17,598	15,689
Capital and reserves attributable to equity holders of the Company
Share capital		163	157
Shares to be issued		1,470	1,470
Share premium account		6,620	5,963
Merger reserve		1,464	1,464
Retained earnings		7,883	6,755
Foreign currency translation reserve		(2)	(120)
Total equity shareholders' funds		17,598	15,689

  preliminary announcement

consolidated CASH FLOW STATEMENT

For the year ended 30 September 2008

		Unaudited	Audited
		2008	2007
		£'000	£'000
Cash flows from operating activities
Operating profit / (loss)		1,376	1,661
Depreciation and amortisation		1,244	672
Profit on disposal of property plant and equipment		1	(3)
Share-based payments		128	202
(Increase) / decrease in inventories		(1,103)	(749)
Increase in receivables		(1,415)	(1,675)
Increase in payables		534	1,280
		765	1,388
Tax paid		(681)	(117)
Net cash from operating activities		84	1,271
Cash flows from investing activities
Purchase of property plant and equipment		(2,251)	(727)
Purchase of intangible assets		(605)	(164)
Proceeds on disposal of property plant and equipment		119	84
Interest received		249	303
Acquisition of subsidiary undertaking net of cash acquired		(845)	(1,013)
Net cash used in investing activities		(3,333)	(1,517)
Cash flows from financing activities
Proceeds from the issue of share capital		134	57
Payment of finance lease liabilities		(169)	(32)
Interest element of finance lease repayments		(28)	(4)
Equity dividends paid		(72)	(60)
Net cash used in financing activities		(135)	(39)
Effect of exchange rate changes		82	(30)
Net decrease in cash and cash equivalents		(3,302)	(315)
Cash and cash equivalents at beginning of the period		6,179	6,494
Cash and cash equivalents at end of the period		2,877	6,179

Major non-cash transactions

Part of the consideration for the purchase of Mobile Video Services Inc comprised shares.

preliminary annoucement for the year ended 30 september 2008

1.  changes in accounting policies

This is the first year that OMG plc has prepared financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union for both the consolidated and parent company financial statements. Prior to the adoption of IFRS the financial statements had been prepared in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP). UK GAAP differs in certain respects from IFRS and certain accounting and valuation methods have been adjusted when preparing these financial statements to comply with IFRS. The comparative amounts in respect of 2007 have been adjusted to reflect these adjustments from 1 October 2006, the date of transition to IFRS.

IFRS 1, 'First time adoption of International Financial Reporting Standards' sets out the requirements for companies preparing financial statements under IFRS for the first time and, in general, requires the accounting policies to be applied retrospectively with certain mandatory exceptions and exemptions.

2.  BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial information in this preliminary announcement is unaudited and has been prepared on the going concern basis.   Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in December 2008.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies which affect the reported amount of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reported period. Although the estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. 

Publication of non-statutory accounts

The preliminary results for the year ended 30 September 2008 are un-audited. The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985 for the years ended 30 September 2008 and 30 September 2007. The financial information for the year ended 30 September 2007 is derived from the Annual Report for that year which was delivered to the Registrar of Companies. The former auditors, PricewaterhouseCoopers LLP, reported on those accounts: their report was unqualified, did not contain references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under either Section 237(2) or 237(3) of the Companies Act 1985.

The audit of the statutory accounts for the year ended 30 September 2008 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

3.  BASIS OF CONSOLIDATION       

The consolidated financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 September 2008. Subsidiary undertakings are those entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiary undertakings are fully consolidated from the date on which control is transferred to the Group. Acquisitions of subsidiaries are dealt with by the acquisition method of accounting from the date of acquisition. Inter-company balances and transactions are eliminated on consolidation.

4. SEGMENTAL ANALYSIS

At 30 September 2008 the Group is organised into three main business segments:

• Vicon and 2d3 entertainment: This is the development production and sale of computer software and equipment for the entertainment and life science market;

• 2d3 AIG: This is the development and sale of computer software for the defence market; and

• Yotta: This is services for the management of infrastructure and taxation.

Business segments are analysed as the primary reporting format below:

	Year ended 30 September 2008
	Unaudited
Continuing operations	Vicon & 2d3 entertainment			2d3 AIG		Yotta		Other		Unallocated	Group
	£'000			£'000		£'000		£'000		£'000	£'000
Revenue
Total segment revenue	25,301			482		6,537		67		-	32,387
Inter segment revenue	(6,184)			-		-		-		-	(6,184)
	19,117			482		6,537		67		-	26,203
Segment result
Operating profit/(loss)	2,444			(446)		(290)		(10)		(322)	1,376
Interest receivable											249
Finance costs											(28)
Profit/(loss) before tax											1,597
Tax											(348)
Profit/(loss) after tax											1,249
Other segment items included in the income statement are as follows:
Depreciation	574		31		395		-		56		1,056
Amortisation		63	-		125		-		-		188

	Year ended 30 September 2007
	Audited
Continuing operations	Vicon & 2d3 entertainment	2d3 AIG			Yotta		Other	Unallocated		Group
	£'000	£'000			£'000		£'000		£'000	£'000
Revenue
Total segment revenue	23,436	66			1,008		-		-	24,510
Inter segment revenue	(4,892)	-			-		-		-	(4,892)
	18,544	66			1,008		-		-	19,618
Segment result
Operating profit/(loss)	3,149	(266)			(869)		-		(353)	1,661
Interest receivable										303
Finance costs										-
Profit/(loss) before tax										1,964
Tax										(252)
Profit/(loss) after tax										1,712
Other segment items included in the income statement are as follows:
Depreciation	424		-	110		-			82	616
Amortisation	41		-	15		-			-	56

Inter segment transfers are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources. This policy was applied consistently throughout the current and prior year.

Unallocated costs represent head office expenses not recharged to subsidiary companies.

Segment assets consist primarily of property plant and equipment, intangible assets, inventories and trade and other receivables. Unallocated assets comprise deferred taxation, investments and cash and cash equivalents.

Segment liabilities comprise operating liabilities. Unallocated liabilities comprise items such as taxation.

Capital expenditure comprises additions to property plant and equipment and intangible assets, including additions resulting from acquisitions.

Segment assets and liabilities at 30 September 2008 and capital expenditure for the year then ended are as follows:

	2008
	Unaudited
	Vicon & 2d3 entertainment	2d3 AIG	Yotta	Other	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Assets	12,847	460	9,906	68	2,651	25,932
Liabilities	(4,953)	(65)	(3,040)	(13)	(263)	(8,334)
Capital expenditure	2,002	52	2,918	-	87	5,059

Segment assets and liabilities are reconciled to entity assets and liabilities as follows:

	Assets	Liabilities
	£'000	£'000
Segment assets / (liabilities)	23,281	(8,071)
Unallocated:
Deferred tax	248	-
Non-current assets / (liabilities)	114	(263)
Investments	69	-
Cash and cash equivalents	1,979	-
Other financial assets	241	-
	25,932	(8,334)

Segment assets and liabilities at 30 September 2007 and capital expenditure for the year then ended are as follows:

	2007
	Audited
	Vicon and 2d3 entertainment	2d3 AIG	Yotta	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000
Assets	10,027	95	5,942	6,181	22,245
Liabilities	(4,358)	(37)	(1,708)	(453)	(6,556)
Capital expenditure	751	-	4,226	34	5,011

Segment assets and liabilities are reconciled to entity assets and liabilities as follows:

	Assets	Liabilities
	£'000	£'000
Segment assets / (liabilities)	16,064	(6,103)
Unallocated:
Deferred tax	439	-
Non-current assets/(liabilities)	125	(453)
Investments	69	-
Cash and cash equivalents	5,355	-
Other financial assets	193	-
	22,245	(6,556)

The Group's three business segments operate in five main geographical areas but are managed on a worldwide basis. These geographical segments are analysed as the secondary reporting segment below.

An analysis of revenue by destination, total assets and capital expenditure is given below:

	Revenue		Total assets		Capital expenditure
	2008	2007	2008	2007	2008	2007
	£'000	£'000	£'000	£'000	£'000	£'000
United Kingdom	7,928	2,435	15,188	15,978	2,130	4,704
Europe	2,179	2,957	-	-	-	-
North America	12,674	9,881	10,744	6,267	2,929	307
Asia Pacific	2,770	3,739	-	-	-	-
Other	652	606	-	-	-	-
	26,203	19,618	25,932	22,245	5,059	5,011

Total assets and capital expenditure is based on where the assets are located.

	Unaudited	Audited
Analysis of revenue by category	2008	2007
	£'000	£'000
Sale of goods	19,117	18,543
Revenue from services	7,086	1,075
	26,203	19,618

5.   PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

The profit on ordinary activities before taxation is stated after charging / (crediting):

	Unaudited	Audited
	2008	2007
	£'000	£'000
Profit on disposal of property plant and equipment	1	(3)
Depreciation of property plant and equipment - owned	925	612
- under hire purchase/finance lease	131	4
Amortisation of customer contracts	119	15
Amortisation of intellectual property and software	66	41
Amortisation of brand name	3	-
Share based payments - equity settled	128	202
Operating lease charges - other than plant and machinery	756	506
Foreign exchange	(146)	(16)
Research and development costs	3,646	3,533

6.   RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX

	Unaudited	Audited
	2008	2007
	£'000	£'000
Profit before tax	1,597	1,964
Share based payments - equity settled	128	202
Amortisation of intangibles	188	56
Non recurring charges	200	-
Adjusted profit before tax	2,113	2,222

7. TAXATION

The tax charge is based on the profit for the year and represents:

	Unaudited	Audited
	2008	2007
	£'000	£'000
United Kingdom corporation tax at 29% (2007: 30%)	271	345
Overseas taxation	118	43
Adjustments in respect of prior year	37	42
Current taxation	426	430
Deferred taxation	(78)	(178)
Total taxation expense	348	252

At 30 September 2008, the Group had an undiscounted deferred tax asset of £475,000 (2007: £600,000). The asset comprises principally accelerated capital allowances, the accumulated unrelieved tax losses available to Group undertakings to offset against future taxable trading profits of the same trade and future tax relief available on the exercise of outstanding employee share options in OMG plc.

Deferred tax assets and liabilities have been measured at an effective rate of 28% (2007:28%).

 

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 29% (2007: 30%). The differences are explained as follows:
	2008	2007
	£'000	£'000
Profit on ordinary activities before tax	1,597	1,964
Expected tax charge based on the standard rate of corporation tax in the UK of 29% (2007: 30%)	463	589
Effect of:
Share options exercised	(122)	-
Expenses not deductible for tax purposes	71	(113)
Utilisation of losses	-	(149)
Adjustments to tax charge in respect of prior year	38	42
Higher rates on overseas taxation	8	7
Research and development tax credit	(110)	(124)
Total tax expense	348	252

8.  EARNINGS PER SHARE

	Unaudited			Audited
	Earnings	2008 weighted average number of shares	Per share amount	Earnings	2007 weighted average number of shares	Per share amount
	£'000		pence	£'000		pence
Basic earnings per share
Earnings attributable to ordinary shareholders	1,249	64,015,679	1.95	1,712	60,533,180	2.83
Dilutive effect of employee share options	-	5,317,405	(0.15)	-	4,016,893	(0.18)
Diluted earnings per share	1,249	69,333,084	1.80	1,712	64,550,073	2.65

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares (share options). For share options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscriptions rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise price of the share options.

9. MOVEMENT IN RESERVES

	Share premium account	Merger reserve	Profit  and loss account	Shares to be issued	Foreign currency translation reserve	Total
Group	£'000	£'000	£'000	£'000	£'000	£'000
At 1 October 2007	5,963	1,464	6,755	1,470	(120)	15,532
Retained profit for the year	-	-	1,249	-	-	1,249
Currency translation differences on foreign currency net investment	-	-	-	-	118	118
Deferred tax in respect of employee share options			(177)			(177)
Premium on issue of shares	657	-	-	-	-	657
Dividend paid	-	-	(72)	-	-	(72)
Share-based payments	-	-	128	-	-	128
At 30 September 2008	6,620	1,464	7,883	1,470	(2)	17,435

The following describes the nature and purpose of each reserve within owner's equity.

Reserve	Description and purpose
Share capital	Amount subscribed for share capital at nominal value.
Share premium	Amount subscribed for share capital in excess of nominal value.
Foreign currency translation	Gains/losses arising on retranslation of the net assets of overseas operations into sterling.
Profit and loss account	Cumulative net gains and losses recognised in the consolidated income statement.
Merger	Excess of the fair value of the shares issued for the acquisition made in the year to 30 September 2007 over the aggregate of the nominal value of shares issued by the Company to the former shareholders of the acquired company, which qualify for merger relief under Section 131 of the Companies Act 1985.
Shares to be issued	Deferred contingent share consideration for the acquisition of Data Collection Limited in the year ended 30 September 2007.

10. BUSINESS COMBINATIONS

During the year the Group incorporated a wholly owned US subsidiary, Yotta MVS Inc, with an issued and fully paid share capital of 1,000 shares of common stock, for the purposes of acquiring the business assets of Mobile Video Services Inc.

On 24 April 2008 the Group completed the acquisition of the trade and assets of Mobile Video Services Inc for a total consideration with a provisional fair value of £2,053,000. This includes deferred consideration of £758,000 which is contingent upon certain revenue milestones being generated by the purchased assets within the two year period following the date of acquisition.

The acquired business contributed revenues of £928,000 and net profit of £11,000 to the Group for the period from 24 April 2008 to 30 September 2008. If the acquisition had occurred on 1 October 2007, Group revenue would have been £27,502,000 and net profit would have been £1,731,000. These amounts have been calculated using the Group's accounting policies.

The total goodwill arising on acquisition was £1,550,000 which is subject to an annual impairment review.

The fair value of the business assets acquired was as follows:

		Book value	Fair value adjustments	Fair value
		£'000	£'000	£'000
Intangible assets		-	607	607
Property plant and equipment		46		46
Accounts receivable		98		98
Prepayments		14		14
Amounts recoverable on contracts		25		25
Cash		2		2
Accruals		(20)		(20)
Customer deposits		(28)		(28)
Deferred tax liability		-	(161)	(161)
Net business assets acquired		137	446	583

				£'000
Consideration:
Cash				767
Share consideration				528
Deferred contingent consideration				758
Total provisional consideration				2,053
Costs of acquisition				80
Provisional purchase consideration and costs of acquisition				2,133
Provisional goodwill arising				1,550

The fair value adjustment relates to the recognition of separately identifiable intangible assets.

The share consideration consists of 1,045,671 ordinary shares. The fair value of the shares issued was determined by reference to their quoted market price of 50.50pence at the date of acquisition.  

The goodwill is attributable to the presence of certain intangible assets such as the assembled workforce which do not qualify for separate recognition and the significant synergies expected to arise after the Group's acquisition of the business trade and assets of Mobile Video Services Inc.

The contingent consideration is dependent upon certain revenue based performance criteria being met in the period commencing from the date of acquisition and ending on 24 April 2010. If the performance conditions are not met then the conditional portion is not payable.

11. DIVIDEND

The directors are proposing a final dividend in respect of the financial year ended 30 September 2008 of 0.115pence per share (2007: 0.115pence per share) which will absorb an estimated £75,000 of shareholders' funds. This dividend will be paid on 12th March 2009 to shareholders who are on the register of members at the close of business on 12th December 2008 subject to approval at the AGM.

12. COPIES OF ANNOUNCEMENT

Copies of this announcement will be available from the Company's registered office at 14 Minns Business Park, West Way, Oxford OX2 0JB.

 

END

 

 

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