Interim Results

OMG PLC 23 June 2005 OMG plc ('OMG' or 'the Company') Interim Statement for the six months ended 31 March 2005 OMG, the global leader in the three-dimensional capture and analysis of movement, providing tools and services for life sciences, entertainment and engineering applications, announced today its interim results for the six months ended 31 March 2005. Highlights: * Revenues increased by 10% to £4.8m (2004: £4.4m) including the effect of acquisitions. * Operating loss of £0.6m (2004: operating profit of £0.1m) resulting principally from US revenues being below expectations. * Business outside of the US in line with expectations with strong growth in important Japanese market. * Integration of Peak Performance Technologies business, acquired in February 2005, progressing well with combined businesses now trading globally as Vicon Peak. * Appointment of Nick Bolton as Chief Executive and Julian Morris as Deputy Chairman in May 2005. * Order received from Electronic Arts, the world's leading independent developer and publisher of interactive software, for a number of large MX systems for delivery in the second half. * Vicon's optical motion capture technology honoured with Academy Award(R). Nick Bolton, Chief Executive commented: 'The Company has made some significant steps forward during the first half of the year which are not immediately apparent from the financial performance. While the first half got off to a slow start, recent large system orders will help improve performance during the second half. I look forward to guiding OMG towards reaching its full potential.' For further information please contact: Nick Bolton, Chief Executive, nick.bolton@omg3d.com Peter Wharton, Finance Director, peter.wharton@omg3d.com Tel: 01865 261800 Tim Thompson / Nicola Cronk Buchanan Communications Tel: 020 7466 5000 About OMG OMG plc (LSE: OMG) is the global leader in the three-dimensional capture and analysis of movement, providing tools and services for life science, entertainment and engineering applications. Based in Oxford UK, California USA and Colorado USA, OMG has customers in over 35 countries and is listed on AIM, a market operated by the London Stock Exchange. The group trades through a number of operating subsidiaries in the name of Vicon Peak, 2d3 and House of Moves in the UK and USA, and through a network of distributors in other major countries. Vicon Peak provides professionals with the latest tools to capture accurately three-dimensional human motion for research, medicine, sport, engineering, game development, broadcast and film. 2d3 produces innovative visual geometry software deriving 3D data from moving images. House of Moves is the world's most experienced motion capture service studio, producing high quality motion capture data for entertainment production companies For more information about OMG, or its subsidiaries, visit www.omg3d.com, www.viconpeak.com, www.2d3.com or www.moves.com. CHAIRMAN & CHIEF EXECUTIVE'S JOINT STATEMENT The six months to 31 March 2005 follows a record finish to last year. However, as indicated at the AGM in February, in the US, our largest market, trading experienced a slow start and performance for the first half and full year depended critically on the timing of a number of major contracts. Business prospects are good with potential for a significant recovery in the US market and therefore the results for the first half of the year may not be a good indication of the underlying activity within the Company. Financial Results Turnover was 10% ahead of the same period last year at £4.8m (2004: £4.4m), helped by the acquisition of House of Moves in May 2004 and Peak Performance Technologies Inc. ('Peak') business in February of this year. Revenues were below expectation in the US and as a result of continuing investments and planned expenditure, the Company incurred an operating loss of £0.6m (2004: operating profit of £0.1m). Cash balances remain healthy at £2.5m, although this represents a decrease of £1.5m during the six month period. Cash decreased by £0.9m from operating activities and £0.7m from investment in fixed assets and the effect of acquisitions. Lower than expected sales in the first half resulted in higher stocks of finished goods and work in progress, contributing to the net cash outflow from operating activities. Board Changes As announced on 27 May 2005, Nick Bolton was appointed as Chief Executive. Dr Julian Morris, founder and former Chief Executive, continues as an Executive Director in the role of Deputy Chairman. Chris Steele, Director of UK Operations, left the Company with effect from 25 May. Business Developments The MX product range, launched last year, has continued to be enhanced with the release of lower priced MX3 which started shipping in January 2005. This market leading product range has continued to generate strong interest from our customer base and potential new customers. The recent order from Electronic Arts, the world's leading independent developer and publisher of interactive entertainment software, for a number of large MX systems to replace competitive products and the commitment to a long term relationship underlines the advances made in our technology and product offering. In February, the Company was honoured with a Scientific and Technical Academy Award(R) from The Academy of Motion Picture Arts & Sciences. Moreover, four of the seven films which competed for the Best Visual Effects Oscar(R) award ('The Day After Tomorrow', 'Harry Potter and the Prisoner of Azkaban', 'Lemony Snicket's A Series of Unfortunate Events' and 'Spider-Man 2') used products or services from OMG group companies. In the US, the year started with a strong prospect list with a noticeable shift toward the opportunity for large systems and multiple system orders. Typically, the timing of large orders or multiple system orders is more difficult to predict and there is a longer gestation period. During the first half, none of these larger prospects were concluded and buying decisions have continued to be deferred, although none of these larger prospects were lost to competitors. As a result, US revenues were significantly lower than the same period of last year and well below management expectations. In the rest of the world, overall revenues increased by 15% compared to the same period last year. Of particular note, strong revenue growth was experienced in Japan as this important market continued its recovery. House of Moves (acquired in May 2004), which provides motion capture services to the film and games sector, has achieved its first gross revenue target and, under the terms of the purchase agreement, the Company is due to issue 965,927 ordinary shares to the vendors. In addition, further contingent cash and share consideration is payable following each of two subsequent twelve month periods following acquisition. Preliminary estimates indicate that a small amount of additional consideration will be payable following the end of the first twelve month period. The integration of Peak, acquired in February 2005, is continuing to be successful and it has made a profitable contribution in the two months since acquisition. The proposition of the leading optical motion capture capability combined with the leading video based motion capability under the new brand of Vicon Peak has been well received. Work has already been completed to enable the MX system to be operated using Peak's Motus software system with the first customer delivery in June. Dividend Policy The current policy is not to pay a dividend and none will be paid in relation to the interim period. However, this policy will be kept under review. Outlook Following a disappointing first half result, the immediate priority for the Company is to deliver a significant improvement in the second half. To this end, Nick Bolton, our new Chief Executive, has started and is leading a review focused on sales execution and delivery against a strong prospect list. This increased focus on sales together with a programme of improving internal process and cost control is expected to continue into the next financial year and represents an increase in emphasis on delivery of profits from our core business. The Company continues to invest in product development and has identified opportunities for improving the release of new products and product features which will help to increase differentiation of our product offering. Whilst we are confident that business will be stronger during the second half of our financial year, given the first half performance, the Company has moderated its expectations for the full year result as a whole. Anthony Simonds-Gooding, Chairman Nick Bolton, Chief Executive 23 June 2005 GROUP PROFIT AND LOSS ACCOUNT For the six months ended 31 March 2005 Unaudited Unaudited Unaudited Unaudited Audited Six months Six months Six months Six months Twelve to to to to months to 31 March 31 March 31 March 31 March 30 2005 2005 2005 2004 September Continuing Continuing Continuing (As 2004 Operations Operations- Operations- restated Acquisitions Total See Note 1) £'000 £'000 £'000 £'000 £'000 Turnover 4,551 246 4,797 4,350 10,895 Cost of (1,965) (82) (2,047) (1,827) (4,818) sales ---------- --------- ---------- ---------- ----------- Gross profit 2,586 164 2,750 2,523 6,077 Sales, support and marketing costs (1,209) (41) (1,250) (927) (2,360) Research and development (724) (15) (739) (597) (1,399) Administrative expenses (1,284) (84) (1,368) (982) (2,146) Grant income - - - 44 114 ---------- --------- ---------- ---------- ----------- Operating (loss) / profit (631) 24 (607) 61 286 Interest receivable and similar income 58 93 171 ----------- ---------- ----------- (Loss) / profit on ordinary activities before taxation (549) 154 457 Tax on (loss) / profit on ordinary activities - (21) (51) ----------- ---------- ------------ Retained (loss) / profit for the period (549) 133 406 =========== ========== ============ Basic (loss) / earnings per share (Note 4) (0.96p) 0.26p 0.77p Diluted (loss) / earnings per share (Note 4) (0.96p) 0.23p 0.71p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the six months ended 31 March 2005 Unaudited Unaudited Audited Twelve Six months to Six months to months to 31 March 31 March 30 September 2005 2004 2004 £'000 £'000 £'000 (Loss) / profit for the financial period (549) 133 406 Exchange adjustments offset in reserves (40) (6) (7) ---------- --------- --------- Total recognised gains and losses for the period (589) 127 399 ========== ========= ========= GROUP BALANCE SHEET At 31 March 2005 Unaudited at Unaudited at Audited at 31 March 31 March 30 September 2005 2004 2004 £'000 £'000 £'000 Fixed assets Intangible assets 1,334 - 891 Tangible assets 1,142 457 863 --------- ---------- -------- 2,476 457 1,754 Current assets Stocks 2,409 1,521 1,712 Debtors 2,967 2,374 3,239 Cash and short term deposits 2,518 4,991 4,096 --------- ---------- --------- 7,894 8,886 9,047 Creditors: amounts falling due within (2,406) (1,750) (2,558) one year ---------- ----------- --------- Net current assets 5,488 7,136 6,489 ----------- ----------- --------- Total assets less current 7,964 7,593 8,243 liabilities Creditors: amounts falling due in more (82) - (82) than one year ----------- ------------ --------- Net assets 7,882 7,593 8,161 =========== ============ ========= Capital and reserves Share capital 146 132 138 Share premium account 5,672 5,321 5,370 Shares to be issued 241 - 241 Profit and loss account 1,823 2,140 2,412 ---------- ---------- ---------- 7,882 7,593 8,161 ========== ========== ========== GROUP CASH FLOW STATEMENT For the six months ended 31 March 2005 Unaudited Unaudited Audited six months six months Twelve months to to to 31 March 31 March 30 September 2005 2004 2004 £'000 £'000 £'000 Net cash (outflow) / inflow from operating activities (note 5) (929) 134 236 Returns on investments and servicing of finance Interest received 57 84 169 Taxation (10) 164 164 Capital expenditure Purchase of tangible fixed assets (517) (245) (780) Proceeds on disposal of tangible fixed assets 30 1 43 Acquisitions Purchase of subsidiary undertaking (307) - (629) Net cash acquired with subsidiary 111 - - ---------- ---------- ---------- Net cash (outflow)/inflow before financing and management of liquid resources (1,565) 138 (797) Financing Issue of share capital 40 23 78 ---------- ---------- ----------- (Decrease) / increase in cash (note 6) (1,525) 161 (719) ========== ========== =========== NOTES TO THE INTERIM FINANCIAL INFORMATION For the six months ended 31 March 2005 1. Preparation of the interim financial information The financial information for each of the six month periods ended 31 March 2005 and 31 March 2004 is unaudited and does not constitute statutory accounts within the meaning of the Companies Act 1985. It has been prepared on the basis of accounting policies set out in the Group's statutory accounts for the year ended 30 September 2004. As explained in the 2004 Group accounts, the directors have taken the view that clearer categorisation on the face of the profit and loss account would enhance the presentation to the user. Therefore costs relating to sales, support, and marketing have been separately analysed, where previously they were classified with administration expenses. Additionally, the Group's definition of costs of sales has been broadened to include all other production overheads, resulting in the cost of sales for the six months to 31 March 2005 increasing by £616,000 (31 March 2004: increasing by £251,000) with gross profit and administration expenses reducing by the same amount. In the previous interim financial statements a merger reserve of £1,000 was included in the Group reserves. At the year ended 30 September 2004, the directors disclosed this in the profit and loss account as it is de minimus. 2. Acquisition of Peak Performance Technologies, Inc On 9 February 2005 the Group completed the acquisition of the trade and assets of Peak Performance Technologies Inc for a total consideration of £593,000. This includes a deferred cash consideration element of up to £53,000 subject to certain performance conditions. The total provisional goodwill arising upon acquisition was £424,000, which is being written off over 10 years. The provisional fair value of the business assets acquired is set out below Book value Adjustment Fair Value £'000 £'000 £000 Tangible Fixed Assets 40 - 40 Intangible Fixed Assets - 108 108 Stock 89 - 89 Trade debtors 46 - 46 Prepayments and accrued income 9 - 9 Cash 111 - 111 Trade creditors (14) - (14) Accruals and deferred income (197) - (197) -------- -------- --------- Net business assets acquired at book and fair value 84 108 192 -------- -------- --------- Provisional consideration: Cash 270 Share consideration 270 Contingent cash consideration 53 -------- Total provisional consideration 593 Costs of acquisition 23 --------- Provisional purchase consideration and costs of acquisition 616 --------- Provisional goodwill arising 424 ========= The contingent cash consideration, is dependent upon a review of the fair value of the net assets acquired, to be performed after 30 September 2005. The maximum amount payable under this arrangement will be £53,000. The directors have made use of all the available information at the period end in order to estimate the likely value of the contingent cash consideration. This value will be subject to re-assessment at the year end. The provisional fair value of the intellectual property acquired amounted to £108,000. In its last financial year to 30 September 2004, Peak Performance Technologies Inc. had revenues of £1.8 million and made a profit before tax of £25,000. In the period from 1 October 2004 to 8 February 2005, Peak Performance Technologies Inc. had a loss after taxation of £34,000. 3. Tax on profit on ordinary activities There is no tax charge for the six month period ended 31 March 2005 due to the loss for the half year and brought forward UK tax losses. 4. 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. Due to the loss per share, the outstanding share options are non-dilutive at 31 March 2005. At 31 March 2005 there were 58,390,358 allotted, called up and fully paid ordinary shares of 0.25p each, and the weighted average number of shares was 57,250,126. 5. Reconciliation of operating profit to net cash outflow from operating activities Unaudited Unaudited Audited six months six months Twelve months to to to 31 March 31 March 30 September 2005 2004 2004 £'000 £'000 £'000 Operating (loss) / profit (607) 61 286 Depreciation and amortisation 301 102 268 Profit on sale of tangible fixed assets (1) (1) (4) Increase in stock (609) (156) (347) Decrease / (Increase) in debtors 327 (29) (837) (Decrease) / Increase in creditors (340) 157 870 -------- -------- ------- Net cash (outflow)/inflow from operating activities (929) 134 236 ======== ======== ======= 6. Reconciliation of net cash flow to movement in net funds Unaudited Unaudited Audited six months six months Twelve months to to to 31 March 31 March 30 September 2005 2004 2004 £'000 £'000 £'000 (Decrease) / increase in cash for the period (1,525) 161 (719) Currency movements (53) 4 (11) --------- --------- --------- Change in net funds for the period (1,578) 165 (730) Opening net funds 4,096 4,826 4,826 ---------- --------- --------- Closing net funds 2,518 4,991 4,096 ========== ========= ========= 7. 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. Independent review report to OMG plc Introduction We have been instructed by the company to review the financial information which comprises the profit and loss account, the statement of total recognised gains and losses, the balance sheet, the cash flow statement and the related notes. We have read the other information contained in the interim report 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. The directors are responsible for preparing the interim report in accordance with the AIM Rules which require that the accounting policies and presentation applied to the interim figures should be 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 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of OMG plc 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. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 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 2005. PricewaterhouseCoopers LLP Chartered Accountants West London 23 June 2005 This information is provided by RNS The company news service from the London Stock Exchange

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