Interim Results
OMG PLC
15 June 2006
15 June 2006
OMG PLC
INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31 MARCH 2006
OMG plc, Oxford Metrics Group (LSE: OMG), ('OMG' or 'the Group') the technology
group providing image understanding products for the entertainment, defence,
life science and engineering industries, announces record interim results for
the six months ended 31 March 2006.
FINANCIAL HIGHLIGHTS:
• Record turnover, up 71% to £8.2m (H1 2005: £4.8m)
• Record operating profits of £1.1m (H1 2005: £0.6m loss)
• Earnings per share up significantly to 1.63p (H1 2005: loss per share of
0.96p)
• Strong cash generation with cash balances at 31 March 2006 up 20% to £5.3m
OPERATIONAL HIGHLIGHTS:
• Re-organisation of the Group into three operational business units to focus
on their individual markets and products: Vicon, 2d3 and Geospatial
Vision
• Delivery on stated strategy of expansion through leveraging existing
technology in new vertical markets:
• Defence market under 2d3 progressing well
• New division, Geospatial Vision, established to focus on
street-level geospatial imagery
• Focus on cost control with consequent drop in overheads, from second half of
2005
• Vicon has strengthened its leading position in the games market, with major
customers now including Ubisoft, Square Enix, Eurocom Entertainment and
Electronic Arts
• 2d3's Entertainment products continue to be used in many of the leading box
office films with recent examples being X-Men: The Last Stand and
The Da Vinci Code
Nick Bolton, Chief Executive of OMG plc, commented:
'Since becoming Chief Executive of OMG in May 2005, I have implemented a number
of initiatives focused on keeping costs down, leveraging our existing
technology, and ensuring consistency of sales execution. I am pleased to
announce that we are delivering on these initiatives and, as a result, the
business is performing strongly and is demonstrating significant trading
improvements.
The Group reported a record performance in the second half of the last financial
year which I am delighted to announce continued into the first half of the
current financial year. This excellent first half performance represents a
record in the Group's history and the strong performance of our core business is
underpinning our drive for growth in significant complementary markets.'
OMG plc 01865 261800
Nick Bolton, Chief Executive
Peter Wharton, Finance Director
Financial Dynamics 020 7831 3113
Giles Sanderson / Juliet Clarke / Hannah Sloane
CHAIRMAN & CHIEF EXECUTIVE'S JOINT STATEMENT
We are pleased to report good progress for the Group for the six months ended 31
March 2006. The business has delivered excellent trading figures, is delivering
on its promising technology resources and, in the context of the exciting new
vertical markets, is well set for future growth.
DELIVERING THE NUMBERS
The Group achieved strong trading in the period across all key metrics, with
record revenues and profits generated. Turnover for the first half achieved a
record £8.2m, 71% ahead of the same period last year (H1 2005: £4.8m). This
growth resulted from strong trading in all geographies. Revenues from North
America rose 110%, UK rose by 179% and the Far East was up 46%. In addition, the
period saw a consistency of revenues, assisted by a good volume of business
without dependency on any unusually large deals.
Gross margins of 63% continued to show improvement (H1 2005: 57%) due to higher
volume of units sold, a greater take up of Vicon's premium MX40 product and
further cost control.
As part of the turnaround strategy implemented in H2 2005, there has been a
focus on careful cost control, which has resulted in a sequential drop in
overheads from the previous six months.
Operating profits rose significantly to a record £1.1m (H1 2005: £0.6m loss),
achieving a strong operating margin level of 13%, despite investments for growth
in new markets.
Earnings per share increased considerably to 1.63p (H1 2005: loss per share of
0.96p). Diluted earnings per share was 1.57p (H1 2005: loss per share of 0.96p).
Cash flow was positive, with the cash balances increasing by 20% to £5.3m (30
September 2005: £4.4m).
This record performance across all key metrics follows on from an equally strong
performance in the second half of last year. The effect of this improvement can
be seen more clearly by considering the change in business performance for the
12 month period to the 31 March 2006. During this period, revenues are up by 55%
to £17.6m (12 months ended 31 March 2005: £11.3m), although, as reported in the
full year statement, the second half of 2005 included an unusually large system
sale amounting to $3m in the US Entertainment sector. Furthermore, operating
profit turned around from a loss of £0.4m to a profit of £2.3m, and cash
balances more than doubled from £2.5m at 31 March 2005.
DELIVERING ON THE PROMISE
In addition to growing the established business during the first half, the Group
began to access new markets by exploiting the deep technology resources within
the business.
As mentioned in our full year statement, after detailed consideration two
promising opportunities are being actively pursued: the first in defence and the
second in street-level geospatial imaging, providing new technologies for the
management and maintenance of key national infrastructures.
Defence
Bringing the Group's advanced machine vision technologies and proven high
complexity opto-electronic engineering skills to bear for defence applications
represents a significant market opportunity for OMG subsidiary 2d3. The Group's
capabilities in this regard have been proven by our work with QinetiQ, announced
in December 2005, which relates to recovering 3D information from airborne video
imagery.
One area of particular market interest is the growing use of Unmanned Aerial
Vehicles ('UAVs'). UAVs are already widely used for reconnaissance and
surveillance based on video and related technologies. The processing of UAV
imagery makes increasing use of many of the same specialised technologies that
OMG has developed for motion capture and image-based tracking. The UK Ministry
of Defence is currently committed to UAV development and deployment programmes
with a total budget in excess of £800 million. The US Department of Defense
programmes are considerably larger.
Defence procurement, particularly in the UK and the US, is undergoing a
transformation. In the search for better performance, faster delivery and lower
cost, the UK Government has committed, where relevant, to engage SMEs directly
in defence research and procurement and make greater use of technologies
transferred from other industries. This will increase the opportunity for
companies such as OMG to compete within an industry more commonly supplied by
large scale entities.
2d3 is now approaching the successful completion of the QinetiQ project, and is
negotiating for wider participation on other UK and US projects. The company
will exhibit its capabilities for the first time at Farnborough Air Show in July
2006.
Geospatial Vision
By applying OMG's existing sophisticated image understanding techniques to
geospatially located video information, we can address an existing market using
a new technological approach. The owners and operators of road networks are
responsible for the management and maintenance of a very large number of
roadside assets and are required to keep accurate records of their location and
condition.
The market for street-level geospatial imaging and information has many layers,
all of which are global, large, growing and significant in size (the UK alone
has over 400,000 km of road and the US in excess of 6 million km). Once
acquired, datasets are potentially of value to a number of groups, including
government (highways departments), commercial (utilities, marketing and
insurance companies), consumer web businesses (Microsoft, Google, Amazon) and
mapping organisations (Ordnance Survey).
Execution in this market is progressing well. The first UK-based vehicle, fitted
with special-purpose video and GPS digital recording equipment, is being used to
demonstrate the system's capability for acquiring and processing of data. We are
currently conducting a number of pilot studies in collaboration with potential
customers. Initial reactions are very positive and given the relatively short
time frame in which this project has been underway, we are pleased with the
progress so far. We believe there to be a significant addressable market and
will be increasing our level of investment. Our expectation is to be able to
move from the pilot stage to first commercial contracts within the second half.
Both the Defence and Geospatial Vision opportunities have made a promising start
and we look forward to reporting further progress in our full year statement.
DELIVERING MORE
The Group is focused on continuing to improve the operational consistency and
profitability achieved over the last 12 months in the core business activities.
This will be realised through management initiatives to improve the quality and
predictability of revenue streams whilst maintaining the tight line on cost
control and sales execution.
To assist this further, we have re-organised the Group into three operational
business units to focus on their individual markets and products: Vicon, 2d3 and
Geospatial Vision.
Vicon now contains all of the Group's motion capture business - the original
Vicon Motion Systems, the business acquired from Peak Performance Technologies,
Inc. (acquired in February 2005) and House of Moves Inc. (acquired in June
2004).
To enhance Vicon Entertainment performance in North America, a new expanded Los
Angeles facility now houses all capture services and systems staff, together
with a dedicated Entertainment development group. This commitment reflects
Vicon's strengthening position in the games market with more than 800 Vicon MX40
cameras installed since June of last year at market leaders, including Ubisoft,
Square Enix, Eurocom Entertainment and Electronic Arts. Moreover the MX40 camera
was awarded Game Developer Magazine's Frontline Award for Best Hardware. Vicon
will continue to leverage its technology and innovate to maintain this market
leading position in all the markets it serves.
As noted above, 2d3 has now added defence to its existing Entertainment focus.
2d3's Entertainment products boujou and SteadyMove continue to sell well. Boujou
continues to be used in many of the successful box office films with recent
examples being X-Men: The Last Stand and The Da Vinci Code. A third product line
was added to the 2d3 line-up during the first half, called Moujou, which opens
up a new higher volume, lower cost product which allows access all of the
functionality of boujou directly within Autodesk Maya, thereby broadening the
potential customer base for 2d3's leading technology.
Geospatial Vision, as already discussed, is our newest business unit and offers
street-level imaging and information, leveraging various OMG technology strands.
It brings exciting opportunities for expansion into new markets and potential to
grow revenues further.
MANAGEMENT STRENGTHENING
In order to further enhance the Group's development we are seeking a second
Non-executive Director, ideally with experience and skills in a relevant market
sector.
DIVIDEND POLICY
The Board has reviewed the dividend policy and has concluded, for the time
being, to continue with the policy of not paying a dividend. This decision takes
into account the opportunities for growth and investment which the Group is
pursuing.
OUTLOOK
The Vicon business continues its positive outlook with a strong sales pipeline
for the second half year. The 2d3 business is pursuing the opportunity to
augment its Entertainment revenue through its Defence market activities,
although this may not have a significant effect during the current year.
Revenues from Geospatial Vision's infrastructure surveying business are also a
possibility within the second half.
Research and development continues to add valued enhancements to our products,
which together with improvements in process and production capability should
ensure that good gross margins will continue to be achieved. While operating
costs across the Group remain in check, investment in new business opportunities
is set to increase and is expected to exceed income generated from these
ventures during the second half.
In support of all three business units and the objective of adding to
shareholder value, the Group is actively investigating possibilities for
accelerating growth through acquisitions.
In summary, we have had an excellent first half: record revenues, record
profits, good progress with new opportunities and trading ahead of market
expectations. We therefore look forward to reporting further progress with this
exciting growth opportunity in our full year statement.
Anthony Simonds-Gooding, Chairman
Nick Bolton, Chief Executive
ABOUT OMG
OMG plc (Oxford Metrics Group. LSE: OMG) is a group of technology companies
which produce image understanding solutions for the entertainment, defence, life
science and engineering industries. Be it for capturing 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 has global headquarters in Oxford UK, and offices in
California and Colorado USA. It has customers in over 35 countries and is a
quoted company listed on AIM, a market operated by the London Stock Exchange.
The Group trades through two core operating subsidiaries - Vicon, the world's
biggest motion capture and movement analysis company and 2d3, a manufacturer of
specialised visual effects software.
Oxford Metrics' global clients in science, medicine, sport, engineering, gaming,
film and broadcast include major hospitals and research facilities such as Guy's
Hospital, Nuffield Orthopaedic and Loughborough University, engineering industry
leaders including Ford Motor Company, BMW, Airbus, Caterpillar, and Toyota, and
in the entertainment sector, Sony, Industrial Light and Magic, The Moving
Picture Company (MPC), Sega, Nintendo, UbiSoft, Electronic Arts, Square Enix and
many others.
For more information about OMG and its subsidiaries, visit www.omg3d.com,
www.vicon.com, or www.2d3.com.
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 31 March 2006
Unaudited Unaudited Audited
six months to six months to twelve months to
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Turnover 8,184 4,797 14,213
Cost of sales (3,047) (2,047) (5,620)
---------- ---------- -----------
Gross profit 5,137 2,750 8,593
Sales, support and marketing costs (1,348) (1,250) (3,304)
Research and development (1,056) (739) (1,607)
Administrative expenses (1,653) (1,368) (3,089)
Other income 9 - -
---------- ---------- -----------
Operating profit / (loss) before goodwill
amortisation and exceptional items 1,153 (557) 923
Goodwill amortisation (64) (50) (114)
Exceptional items - - (216)
Operating profit / (loss) 1,089 (607) 593
Interest receivable and similar income 82 58 97
----------- ---------- -----------
Profit / (loss) on ordinary activities before
taxation 1,171 (549) 690
Tax on profit / (loss) on ordinary activities (202) - 46
----------- ---------- ------------
Retained profit / (loss) for the period 969 (549) 736
=========== ========== ============
Basic earnings / (loss) per share (note 3) 1.63p (0.96)p 1.27p
Diluted earnings / (loss) per share (note 3) 1.57p (0.96)p 1.22p
All amounts relate to continuing activities.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 31 March 2006
Unaudited Unaudited Audited twelve
six months to six months to months to
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Profit / (loss) for the financial period 969 (549) 736
Exchange differences on retranslation of opening
net assets of overseas subsidiaries 27 (40) 9
---------- --------- ---------
Total recognised gains and losses for
the period 996 (589) 745
========== ========= =========
GROUP BALANCE SHEET
at 31 March 2006
Unaudited at Unaudited at Audited at
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
(as restated (as restated
See note 1) See note 1)
Fixed assets
Intangible assets 1,288 1,334 1,353
Tangible assets 945 1,142 970
Investments 69 - 69
--------- ---------- --------
2,302 2,476 2,392
Current assets
Stocks 1,452 2,409 1,739
Debtors 4,428 2,967 3,637
Cash and short term deposits 5,255 2,518 4,371
--------- ---------- --------
11,135 7,894 9,747
Creditors: amounts falling due within one year (3,238) (2,406) (2,938)
--------- ---------- --------
Net current assets 7,897 5,488 6,809
--------- ---------- --------
Total assets less current liabilities 10,199 7,964 9,201
Creditors: amounts falling due in more
than one year - (118) -
--------- ---------- --------
Net assets 10,199 7,846 9,201
========= ========== ========
Capital and reserves
Share capital 149 146 147
Share premium account 5,897 5,672 5,692
Shares to be issued - 205 205
Profit and loss account 4,153 1,823 3,157
--------- ---------- --------
10,199 7,846 9,201
========= ++++====== ========
GROUP CASH FLOW STATEMENT
for the six months ended 31 March 2006
Unaudited Unaudited Audited
six months to six months to twelve months to
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Net cash inflow/(outflow) from operating
activities (note 4) 992 (929) 1,015
Returns on investments and servicing of finance
Interest received 82 57 97
Taxation (1) (10) 8
Capital expenditure
Purchase of tangible fixed assets (241) (517) (897)
Proceeds on disposal of tangible fixed assets 35 30 282
Acquisitions
Purchase of subsidiary undertaking - (307) (342)
Net cash acquired with subsidiary - 111 111
Other investment acquired - - (69)
---------- ---------- ----------
Net cash inflow/(outflow) before financing and
management of liquid resources 867 (1,565) 205
Financing
Issue of share capital 2 40 61
---------- ---------- -----------
Increase/(decrease) in cash (note 5) 869 (1,525) 266
========== ========== ==========
NOTES TO THE INTERIM FINANCIAL INFORMATION
for the six months ended 31 March 2006
1. Preparation of the interim financial information
The financial information for the six months ended 31 March 2006 has been
prepared on the basis of the accounting policies set out in the financial
statements of the Group for the year ended 30 September 2005, except for the
adoption by the Group of FRS 25 'Financial instruments: disclosure and
presentation' during the half year by means of a prior year adjustment. There is
no effect on the current or prior periods' Group profit as a result of this
change in accounting policy, the Group's balance sheet has been restated for
prior periods to reflect contractual amounts that could be settled for cash or a
variable amount of shares as a liability (previously included as shares to be
issued in equity). The effect of the adoption of FRS 25 is to decrease shares to
be issued included within shareholders' funds at 30 September 2005 and 31 March
2005 and increase creditors within one year at 30 September 2005 and increase
creditors greater than one year at 31 March 2005 by £32,000 which relates to
contingent consideration in respect of the acquisition of House of Moves.
The interim financial information is unaudited and the financial information
contained in this report does not constitute statutory accounts with the meaning
of the Companies Act 1985. The comparative figures for the year ended 30
September 2005 have been extracted from the Group's financial statements which
have been delivered to the Registrar of Companies (except where restated for the
implementation of FRS25 as noted above). The auditors' report on those
statements was unqualified and did not include a statement under Section 237(2)
or (3) of the Companies Act 1985.
2. Tax on profit on ordinary activities
The tax charge for the six months ended 31 March 2006 of £202,000 is calculated
using an estimate of the effective tax rate for the full year ended 30 September
2006. The rate used of 17.2% is lower than the rate of corporation tax in the
United Kingdom of 30%, principally due to the utilisation of tax losses brought
forward at 30 September 2005 and additional R&D tax credits to be claimed in
respect of the year ended 30 September 2006. The actual rate for the full year
may vary due to a number of factors, including the amount and distribution of
profits between subsidiary undertakings for the full year and the extent to
which brought forward losses can be utilised.
Losses brought forward at 30 September 2005 were £904,000.
3. Earnings per share
The calculation of the basic earnings per share is based on the 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.
At 31 March 2006 there were 59,752,944 allotted, called up and fully paid
ordinary shares of 0.25p each, and the weighted average number of shares was
59,336,867 (30 September 2005: 58,065,827, 31 March 2005: 57,250,126).
The diluted earnings per share is based on a weighted average number of shares
for the six months ended 31 March 2006 of 61,564,182 after taking account of the
dilutive effect of share options (30 September 2005: 60,331,038, 31 March 2005:
57,250,126).
4. Reconciliation of operating profit / (loss) to net cash outflow from
operating activities
Unaudited Unaudited Audited
six months to six months to Twelve months to
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Operating profit / (loss) 1,089 (607) 593
Depreciation and amortisation 325 301 692
(Profit) / loss on sale of tangible fixed assets (4) (1) 14
Decrease / (increase) in stock 290 (609) 68
(Increase) / decrease in debtors (752) 327 (296)
Increase / (decrease) in creditors 44 (340) (56)
-------- -------- -------
Net cash inflow / (outflow) from operating
activities 992 (929) 1,015
======== ======== =======
5. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
six months to six months to Twelve months to
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Increase / (decrease) in cash for the period 869 (1,525) 266
Currency movements 15 (53) 9
--------- --------- ---------
Change in net funds for the period 884 (1,578) 275
Opening net funds 4,371 4,096 4,096
--------- --------- ---------
Closing net funds 5,255 2,518 4,371
========= ========= =========
6. Copies of the interim statement
Copies of the interim statement will be sent to shareholders. Further copies
will be available from the Company's registered office at 14 Minns Business
Park, West Way, Oxford OX2 0JB, and from the Company's website: www.omg3d.com.
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