Interim Results

OMG PLC
5 June 2002

OMG PLC

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 31 MARCH 2002

Highlights

  • Revenues up 10% to £5.0million
  • Science & engineering sales up 33%
  • Entertainment sales below expectations
  • Visual geometry sales on target
  • Investment and operating costs up 49% to £3.7million
  • Operating loss of £454,000

Trading Results

We are pleased to report that, despite weakness in one of our market sectors,
sales growth in all others was on, or ahead of, targets. Development plans,
funded largely out of gross profits, are proceeding well.


Turnover rose to £5,009,000 (2001: £4,560,000), an increase of 10% over the same
period last year. Gross profit rose closely in line to £3,261,000 (2001:
£3,041,000). As a result of planned increased investment in new and existing
businesses, the group's operating loss was £454,000 (2001: £586,000 profit).


The 10% growth in turnover is the net result from three market sectors in which
the group operates. The group's motion capture businesses, Vicon Motion Systems
Ltd and Vicon Motion Systems Inc (USA), increased sales to medical, research,
and engineering customers by 33%. The group's visual geometry business, 2d3 Ltd,
grew sales in line with the target for the period (2d3 was not trading in the
equivalent period last year). However, motion capture sales in the entertainment
industry, where rapid growth had been anticipated particularly in the USA,
declined.


Despite the lower sales growth than had been originally anticipated, the
consolidated Vicon business was profitable over the half year. OMG's operating
loss results from continuing investment in its new business, 2d3.


Dividends

In accordance with the statement contained in the company's Admission Document
issued in April 2001 the directors are not recommending the payment of an
interim dividend, but dividend policy will be kept under review.

Current Trading

OMG sells highly specialised products into a wide range of markets in medical,
engineering, entertainment and research industries. Over the two years leading
up to September 2001, there had been clear evidence of substantial growth in all
these global markets. Following a short hiatus in late 2001, in three out of its
four markets growth has continued in line with, or above, previous trends. OMG
believes its share of these markets has increased.


Over the past 6 months suppliers of equipment and software for the creation of
image content for entertainment have reported substantial falls in global
revenues. Game, film, and TV production projects have been postponed or
cancelled. Purchase decisions dependent on those projects have suffered in
direct and immediate consequence. The market for sales of motion capture systems
to new customers in the entertainment sector has suffered in line with the rest
of the market. However, several key contracts have sustained OMG's market share.


The diversification of OMG's business means that, despite the entertainment
market's current problems, the company's overall revenues have continued to
grow.


Current Costs

As soon as it became clear that the shortfall in budgeted revenue would last
longer than three months, OMG took steps to reduce costs. A major expenditure
review was undertaken covering every department of every business.


Savings totalling £1.2 million over the current year have been applied to
budgeted expenditure. Key savings in budgeted costs are: 29% reduction in Vicon
entertainment marketing and sales, 19% reduction in Vicon development costs, and
48% reduction in 2d3 sales and marketing. These savings have been identified
without cuts to permanent staff. In addition, plans to move to new integrated
office, laboratory, and studio space near Oxford have been postponed, reducing
capital expenditure and rent deposit budgets for the current year by £1 million.

Vicon Motion Systems

The substantial sales growth for Vicon in the period reported has been in the
core science and engineering business which, with over-target growth of 33%,
accounted for over 70% of motion capture revenues.


There has been substantial repeat business with gait analysis customers in the
USA upgrading their Vicon systems. Of particular note is the Shriners group of
endowment-funded hospitals for disabled children, 5 out of 10 of which upgrading
their systems with the latest versions of hardware and software during the
period.


Several key engineering ergonomics sales were made in Japan, including to Nissan
Motor Co. Elite sports biomechanics was represented by a major hardware and
software update at the Australian Institute of Sport in Canberra and the
Deutsche Sportschule in Cologne.


Significant new entertainment sales were made to Microsoft Games Division in
Salt Lake City, Triple E television studios in Germany, and China Central
Television Studios (CCTV) in Beijing.


Development of new motion capture systems to meet the future requirements in all
markets has accelerated dramatically with a near doubling of development staff
compared with the year before. A new version of Vicon's market-leading camera,
MCam2, with 1.3 million pixels and capable of up to 1,000 frames per second was
introduced just after the half year and is now shipping.


2d3

2d3's first product, boujou, is emerging as market leader for high-quality
automated camera tracking in the film, TV and video industry.


Leading post production companies now use boujou on a high proportion of their
visual effects projects. Many boujou customers have found dramatic increases in
productivity and are installing multiple licenses. At a time when the
entertainment industry is hesitant about high levels of capital expenditure, a
$10,000 boujou license which pays for itself over a few weeks of saved
production costs is a much simpler purchasing decision.


During the 6 month period, boujou sales were made to Dreamworks, Mill Film,
Ardman Animations, BBC, Lucas Film, and Fuji Television, among many others.
Harry Potter and the Philosopher's Stone made extensive use of boujou, which was
also used in the later stages of post production of Lord of the Rings part I.


A major update of boujou was announced shortly after the half year and the
company's second product, pixeldust, automatic software for removing unwanted
objects from moving images, was previewed. 2d3 is a partner in an EU-funded
project to permit the visualisation of historic buildings and landmarks for
tourists.


Staff

The planned increase in OMG staff was largely complete by the start of the
current financial year. At the half-year total staff numbers stood at 79 (2001:
57). Of this total 15 are based in Lake Forest, California and the remainder in
Oxford.


The present workforce is a highly qualified and motivated group, all now expert
in their field. Over 75% of OMG staff are university graduates, many with higher
degrees, and the great majority in scientific and engineering disciplines. The
collective knowledge and experience of OMG's staff now represents the company's
greatest asset and potential for growth. For this reason, the full-year
re-budget aimed to preserve that asset and to provide all staff with the
essential resources necessary to contribute to the company's continuing growth.


Outlook

In the 14 months since OMG's flotation, to many in the UK financial community
and press, the company has become known solely as 'the supplier of software to
the special effects industry'. Although this description has the advantage of
simplicity, the past six months have demonstrated that a more useful description
would be 'supplier of image-based tracking systems to medicine, engineering,
entertainment and research'.


The image-content entertainment industry is currently suffering a significant
loss of confidence. The widely held view is that it will return to its former
rate of growth, but the timing for this remains uncertain. However, this sector
contributes less than one third of OMG's revenues. OMG's other markets have
continued to grow.


OMG is continuing to invest in technology and market development allowing it to
exploit the potential of a wide range of opportunities with the right products
and market presence. It has sufficient cash to continue its development and
diversification programme prudently and without recourse to additional funding
in the foreseeable future.


Market conditions remain uncertain and we cannot be sure that revenues in the
second half will match the strong sales in the same period last year. As a
consequence the company is unlikely to return to profit in the current year.
However, we expect that the decisions taken to reduce costs and to re-focus
development and marketing will lead to a significant advance in shareholder
value over the next 2 years.


Sir Peter Thompson                                      Julian Morris
Chairman                                                Chief Executive



GROUP PROFIT AND LOSS ACCOUNT

FOR THE SIX MONTHS ENDED 31 MARCH 2002
                                                                Unaudited six     Unaudited six  Audited Twelve months
                                                              months ended 31   months ended 31     ended 30 September
                                                                   March 2002        March 2001                   2001
                                                                        £'000             £'000                  £'000

Turnover                                                                5,009             4,560                  9,850
Cost of sales                                                           1,748             1,519                  3,274
Gross profit                                                            3,261             3,041                  6,576
Administrative expenses                                               (3,824)           (2,579)                (6,176)
Grants receivable                                                         109               124                    260
Operating (loss)/ profit                                                (454)               586                    660
Interest receivable and similar income                                     74                22                    145
(Loss)/profit on ordinary activities before taxation                    (380)               608                    805
Tax on (loss)/profit on ordinary activities                               102             (201)                  (263)
Retained (loss)/ profit for the period                                  (278)               407                    542
Basic (loss)/earnings per share (Note 2)                              (0.56)p             0.99p                  1.21p
Diluted earnings per share (Note 2)                                         -             0.79p                  1.03p



GROUP BALANCE SHEET

AS AT 31 MARCH 2002

                                                                Unaudited at 31      Unaudited at 31       Audited at 30
                                                                     March 2002           March 2001      September 2001
                                                                          £'000              £'000               £'000
                                                                          
Fixed assets
Tangible assets                                                             668                369                 544
Current assets
Stocks                                                                    1,703                674               1,337
Debtors                                                                   2,936              2,323               3,157
Cash and short term deposits                                              4,286              1,383               4,686
                                                                          8,925              4,380               9,180
Creditors - amounts falling due within one year
Trade and other creditors                                                 1,405              1,183               1,144
Corporation tax                                                              99                589                 213
                                                                          1,504              1,772               1,357
Net current assets                                                        7,421              2,608               7,823
Total assets less current liabilities                                     8,089              2,977               8,367
Capital and reserves
Share capital                                                               123                103                 123
Share premium account                                                     5,249                 14               5,249
Merger reserve                                                                1                  1                   1
Profit and loss account                                                   2,716              2,859               2,994
                                                                          8,089              2,977               8,367



GROUP CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 31 MARCH 2002
                                                                Unaudited six     Unaudited six  Audited Twelve months
                                                                 months to 31      months to 31   to 30 September 2001
                                                                   March 2002        March 2001
                                                                        £'000             £'000                  £'000

Net cashflow from operating activities                                  (184)               750                  (541)
Returns on investments and servicing of finance
Interest received                                                          74                22                    145
Taxation                                                                 (12)              (38)                  (476)
Capital expenditure
Purchase of tangible fixed assets                                       (281)             (267)                  (615)
Sale of tangible fixed assets                                               3                 -                      2
Financing
Issue of share capital                                                      -                16                  5,271
Increase/(decrease) in cash                                             (400)               483                  3,786



NOTES TO THE INTERIM STATEMENT

FOR THE SIX MONTHS ENDED 31 MARCH 2002


1.     PREPARATION OF THE INTERIM FINANCIAL INFORMATION

The financial information for each of the six month periods ended 31 March 2001
and 31 March 2002 is unaudited and does not constitute statutory accounts within
the meaning of the Companies Act 1985. It has been prepared using accounting
policies consistent with those set out in the statutory accounts of OMG plc for
the year ended 30 September 2001. Accounting pronouncements up to and including
FRS 19 which became mandatory for the group's current financial year have been
adopted in the preparation of the interim financial information. The effect of
adopting such pronouncements was not material to either the interim period or to
prior periods.

The interim financial statements have been reviewed by the group's auditors. A
copy of the auditors' review report is attached to this interim report.


2.     (LOSS)/EARNINGS PER SHARE

The calculation of the basic (loss)/earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the period. The calculation of diluted earnings per share
is based on the basic earnings per share, adjusted to allow for the issue of
shares on the assumed conversion of all dilutive options.

3.     RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATING
       ACTIVITIES
                                                                Unaudited six     Unaudited six  Audited Twelve months
                                                                 months to 31      months to 31        to 30 September
                                                                        March             March
                                                                                                                  
                                                                         2002              2001                   2001
                                                                        £'000             £'000                  £'000

Operating (loss)/ profit                                                (454)               586                    660
Depreciation                                                              152                50                    221
Loss on sale of tangible fixed assets                                       2                 -                      -
Increase in stock                                                       (366)             (260)                  (923)
Reduction/ (increase) in debtors                                          221             (207)                (1,041)
Increase in creditors                                                     261               581                    542
Net cash (outflow)/inflow from operating activities                     (184)               750                  (541)





4.     RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
                                                                Unaudited six     Unaudited six  Audited Twelve months
                                                                 months to 31      months to 31        to 30 September
                                                                        March             March
                                                                                                                  
                                                                         2002              2001                   2001
                                                                        £'000             £'000                  £'000
Change in net funds for the period:
Increase/(decrease) in cash for the period                              (400)               483                  3,786
Opening net funds                                                       4,686               900                    900
Closing net funds                                                       4,286             1,383                  4,686
                                                                        =====             =====                  =====

5.     COPIES OF THE INTERIM STATEMENT

Copies of the interim statement will be sent to shareholders. Further copies of
this announcement will be available from Smith & Williamson Corporate Finance,
No 1 Riding House Street, London W1A 3AS for one month from today.


INDEPENDENT REVIEW REPORT TO OMG PLC

Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 March 2002 which comprise the profit and loss account,
the balance sheet, the cash flow statement and the related notes 1 to 5. We have
read the other information contained in the interim report which comprises only
the Chairman and Chief Executives' Interim Statement and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.


Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. They are
responsible for preparing the interim report and ensuring that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.


Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.


Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2002.


GRANT THORNTON
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS

OXFORD

5 June 2002


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