Final Results
OMG PLC
07 December 2006
7 December 2006
OMG plc ('OMG' or 'the Company')
Preliminary results for the year ended 30 September 2006
OMG (Oxford Metrics Group. LSE: OMG) the leading supplier of image understanding
systems to the entertainment, defence, life science and engineering industries,
announced today its preliminary results for the year ended 30 September 2006.
Highlights
• Turnover up by 14.5% to £16.3m (2005: £14.2m)
• Operating profit (after goodwill amortisation and exceptional items)
up by 157% to £1,522,000 (2005: £593,000)
• Profit after tax up by 112% to £1,560,000 (2005: £736,000)
• Earnings per share up by 106% to 2.62p (2005: 1.27p)
• Strong cash generation with cash balances up by £2.1m from £4.4m to
£6.5m
• Maiden final dividend proposed of 0.1p per share
• Continued global expansion - with customers now in over 50 countries
• Technological leadership maintained with successful launch of
innovative new products, such as Vicon Nexus and 2d3 boujou 4
• OMG Group restructured into three market-focused business units, with
all motion capture business now integrated into Vicon
• Encouraging progress with 2d3 diversification into defence and new
Geospatial Vision 3D mapping business
Nick Bolton, Chief Executive, commented:
'This has been a record year - in revenue and profits. In our existing markets,
we've continued to strengthen our position. At the same time, we've not only
established that exciting opportunities exist in new and potentially much bigger
markets, we've made measurable progress towards capitalising on them.'
For further information please contact:
OMG plc 01865 261800
Nick Bolton, Chief Executive
Peter Wharton, Finance Director
Financial Dynamics 020 7831 3113
Juliet Clarke / Hannah Sloane
About OMG
OMG plc (Oxford Metrics Group. LSE: OMG) is a group of technology companies
producing image understanding solutions 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 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 Geospatial Vision, our 3D mapping business.
Oxford Metrics' global clients in science, medicine, sport, engineering, gaming,
film and broadcast include major hospitals and research facilities such as Guy's
Hospital, Nuffield Orthopaedic Centre 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, EA, Square Enix and many
others.
For more information about OMG and its subsidiaries, visit www.omg3d.com,
www.vicon.com, www.2d3.com or www.geospatialvision.com.
CHAIRMAN'S STATEMENT
ACHIEVING 'INCREDIBLE THINGS'
I'm not a scientist by training, so I would be hard pressed to provide a
detailed and accurate account of how OMG's technology works, or what, precisely,
its capabilities are. But I do understand how business works, and I've never
been in any doubt that the incredible things this company does - some of which
you'll see in this report - have enormous commercial value, enabling customers
all over the world to achieve goals which would otherwise be out of reach.
The truth is, though, that until very recently, OMG has been a very big player
within niche markets. Recognising this, we've become increasingly aware of the
need for a major strategic shift: while continuing to strengthen our core
business, our aim now must be to establish new markets where we can capitalise
on our existing technology base to achieve the kind of consistent and
potentially exciting long term growth expected of a public company.
Back in May 2005, we took a vital first step towards making this vision reality
when we appointed Nick Bolton as our new chief executive, with a clear brief to
sharpen OMG's commercial focus and transform the company's marketing awareness.
We're delighted with what Nick's focused and energetic leadership has enabled
OMG to achieve so far. True, it's too soon to say that we've achieved our major
strategic goals. But, as you will read below, we've made important progress in
our efforts to diversify during 2005/06, while achieving outstanding results
across all our existing markets.
A record year's results
As we reported in June, our strong trading performance in the second half of
last year continued into 2005/06, when we achieved a record first half year. So
I'm pleased to report that our excellent performance was maintained through the
second half, enabling the Group to achieve a record turnover and profits for the
year as a whole.
Overall, turnover increased 14.5% to £16.3m (up from £14.2m in 2005). This
includes the first full year of Peak Performance Technologies business (Peak),
acquired five months into 2005.
In addition, I should emphasise that our 2006 figures do not include any
unusually large film deals, such as the £1.7m sale reported towards the end of
2005. So a more representative like-for-like comparison (taking into account a
full year of Peak in 2005 and excluding the large film deal) shows a growth in
revenues of 24%. This strong underlying growth can be attributed to a high
volume of deals across the wide range of markets and geographical territories in
which OMG operates.
Gross profits increased to 63% of turnover (compared to 60% last year) thanks to
higher volume, better buying and a continued strengthening of our competitive
position - with strong sales of Vicon's flagship MX40 cameras, and successful
launches of new software including an upgraded version of 2d3's market-leading
boujou package.
We've continued to tighten control of operating costs. During the year, they
rose by less than 10% to £8,745,000 (2005: £8,000,000), the increase largely
accounted for by major investment in our new Defence and Geospatial Vision
businesses, as well as in expansion of our Los Angeles studio facilities.
Despite the additional investments we made during the year, our very good
trading performance has resulted in a big increase in operating profit, up from
£593,000 in 2005 to £1,522,000 - a leap of 157%.
Strong cash generation has continued with cash balances increasing £2.1m to
£6.5m over the year - enabling us to more than double our earnings from cash
deposits, with interest receivable of £217,000 (2005: £97,000).
The tax charge has remained low with an effective rate of 10% due to the
utilisation of tax losses, research and development tax credits and the effect
of share option exercises.
The net result of the above is a profit after tax increasing by 112% to
£1,560,000 (2005: £736,000) and earnings per share increasing by 106% to 2.62p
(compared to 1.27p last year).
To deliver figures like these in a year when so much of our commercial focus was
on building for the future represents a remarkable achievement, I hope you'll
agree.
Restructuring for growth
As Nick explains in more detail overleaf, the year's most exciting developments
have been our successful first steps to establishing OMG in two completely new
markets.
At high altitude, our aim is to transform the visual imaging capabilities of the
Unmanned Aerial Vehicles which play an increasingly important role in modern
military operations. While, on the ground, our move into three dimensional (3D)
street level mapping has already begun to win us business from road owners and
operators, with many other potential applications now starting to look very
promising indeed.
As the overall shape of our business has begun to evolve, we have reorganised
the Group, in order to ensure market-focused and consistent performance across
all our activities - new and long established.
All our motion capture business has been fully integrated, with Peak (acquired
in February 2005) and House of Moves (acquired in June 2004), now forming part
of Vicon, by far the strongest brand in its market. To further reinforce Vicon
Entertainment's position in the US film and games industries, a new expanded Los
Angeles facility now houses all our capture services and systems people, as well
as a dedicated Entertainment development group.
Our new defence business sits alongside entertainment within 2d3; and Geospatial
Vision is our new 3D mapping subsidiary.
Strengthening our team
I've already mentioned the enormously valuable contribution Nick Bolton has made
in his first full year as chief executive. But I'd also like to take this
opportunity to pay tribute to his predecessor, Julian Morris. We're incredibly
lucky that OMG's founder - and the most accomplished entrepreneur within our
business - remains 100% committed to the company, and continues to play a vital
role in leading our technological development.
I'm also pleased to report that we achieved our aim of appointing a second
non-executive director. Jonathon Reeve joined the board in October 2006,
bringing with him extensive experience of the defence industry, acquired over
the course of a distinguished 35 year career in the Royal Navy.
Dividend policy
Reflecting OMG's continued strong financial performance and the Directors'
confidence in the future of the business, it is now the Board's intention to
ensure shareholders benefit from the success of the Group with a progressive
dividend policy whilst also balancing the continuing investment needed to
increase earnings. Consequently a maiden final dividend of 0.1p per ordinary
share is being declared today. Subject to approval at the next AGM, this
dividend will be paid on 9 March 2007 to shareholders on the register at the
close of business on 9 February 2007.
On the brink of a new era
It's been an exciting year for OMG. In particular, we're delighted that both of
our new ventures have made real headway. But we're very conscious that our
ambitions for this company will not be achieved overnight.
Having acknowledged that, there's every reason to be confident about our future
prospects. There's no doubt whatever that we have the necessary technological
expertise and capacity for innovation. We now have the right people and
management structure in place to capitalise on the opportunities we've
identified. And a further major advantage we hold over most businesses of our
size is that we have a well established global platform on which to build a
major international business. We have balance sheet strength and, in addition to
further anticipated organic growth, we continue to evaluate acquisitions that
will enhance earnings.
All in all, it's a great launch-pad. I believe OMG could hardly be better placed
for continued success in our long established business areas, accompanied by
potentially explosive growth in massive new markets.
Anthony Simonds-Gooding
Chairman
CHIEF EXECUTIVE'S STATEMENT
REALISING OUR POTENTIAL
When I rejoined OMG in 2005, I saw a company with a really impressive record of
achievement, but an enormous amount of unfulfilled potential. At the end of my
first full year in charge, we've added significantly to that record of
achievement; but what excites me even more is that we're perceptibly closer to
realising our full potential.
Having worked for OMG for four years earlier in my career, I'm as proud as
anyone of this company's long history of success. After all, how many British
technology companies can say that they have traded profitably for over 20 years,
with exports consistently accounting for over 80% of sales? Or that they employ
roughly as many people in the US as in the UK? Or - and here I'm pretty certain
we stand alone - that they have achieved the hat-trick of an Oscar, an Emmy and
a Queen's Award for Innovation?
Yet, despite all this, I firmly believe that OMG has so far only scratched the
surface. And while 2005/06 was a record year for this quietly successful British
technology company, it was also one in which we recognised the need for a
significant change of outlook, in order to take our business to the next level.
A major cultural shift
We need to think bigger. We need to project and explain ourselves better, so
that people outside the business can share our excitement about the incredible
things we do. We need to be prepared to take risks, and occasionally to fail,
since innovation can't thrive in a 'safety first' environment.
Put very simply, we need to become as strong commercially as we already are
technologically. And the good news is that, over the last 12 months, we've made
real progress in bringing about this major cultural shift.
A year ago, we reported on the major internal technology review we conducted, to
identify the most exciting opportunities for diversification, from literally
dozens of ideas already generated by our brilliantly innovative R&D team. In
2005/06, we've carried out a parallel exercise aimed at identifying the latent
entrepreneurial talent within our existing workforce.
Doing things differently
Of course, the kind of step-change we are aiming for, in the scope and scale of
our business, will depend on more than just a change of outlook.
As you've read, we've now reorganised the OMG group into three operational
businesses, each responsible for maximising the potential of a specific aspect
of our technology, across a range of markets. I report below on progress within
Vicon, an expanded 2d3 and our new Geospatial Vision business.
Alongside this corporate restructuring, we've streamlined our R&D programme, our
aim being to achieve greater market focus by increasing our investment while
rationalising the number of products under development.
Similarly, we've made important improvements in sales management, in order to
make OMG more responsive to customer needs. And we've started to raise our game
in terms of marketing and communications, taking the view that what this company
needs now is not just to be successful, but to be widely recognised as
successful.
Let's turn our attention to key developments across our three businesses over
the past 12 months.
VICON: FROM STRENGTH TO STRENGTH
So far, you've read quite a bit about our focus on new markets and new horizons,
but no one could accuse OMG of having neglected our longest established
business. Since we last reported, Vicon has further strengthened its position as
global leader in motion capture, shipping more systems than any year in its
history.
In fact, sales have grown by very nearly 50% over the last two years. Those
improvements in sales management, together with new and better products, are
partly responsible. But Vicon's dynamic performance, in terms of both revenue
and profit, also reflects our success in integrating our two recent acquisitions
- Peak and House of Moves - into the business, thereby further strengthening our
motion capture offering to customers all over the world.
It's worth noting, too, that in 2005/06 Vicon's greatly increased sales were
achieved without relying upon a single major film deal, unlike in previous
years.
Gearing up to meet increasing demand
During the second half of the year, we shifted to a production system based on
forecast sales; a clear indication of the steady and increasing demand for Vicon
systems. Faster delivery and improved quality control are the customer benefits.
And, for a business with a truly global outlook, it's encouraging to report that
this demand is more geographically widespread than ever. Sales in Australia grew
rapidly in 2005/06, and we also received orders from customers in countries
where we had never previously done business, such as Qatar, Venezuela and
Vietnam.
One achievement we were particularly proud of was the award of ISO9001:2000,
which we received in August 2006. As our business continues to grow, this
recognition of assured quality in production is gratifying for us and reassuring
for our customers all over the world.
Motion analysis: the next step forward
Launched in June 2006, Nexus is a milestone product for Vicon; the next
generation motion capture and analysis tool for all Life Science markets.
Put simply, Nexus enables professionals using Vicon MX to capture and analyze
motions in ways that previously were not possible - providing ground-breaking
new features, such as native real time, seamless integration of digital video
and unprecedented ease of use.
Whether used by researchers in universities, medical staff in hospitals or
sports professionals, Nexus delivers the highest quality 3D data fully
synchronized with forceplates, EMG and digital reference video - all in real
time. As the first product on the market capable of overlaying 3D data
accurately onto 2D digital reference video, it provides an extremely powerful
visualization tool.
Vicon Nexus isn't just a revolutionary product in its own right; it also
represents a platform on which we'll be able to build further new products and
functionality. It's the clearest possible signal of our commitment to staying
one step ahead in the field of motion analysis.
Last year, Vicon systems helped to:
• Animate characters in movies such as 'Monster House', 'Pirates of the
Caribbean: The Curse of the Black Pearl' and 'Barnyard'.
• Create Ubisoft's 'Tom Clancy's Ghost Recon: Advanced Warfighter' which won
Best Game and Best Technical Achievement at the British Academy Video Games
Awards.
• Analyse the performance of potential Olympic sprinters at the University
of Wales Institute of Cardiff 2012 - Centre for Excellence.
• Evaluate repair procedures which successfully fixed damage to a NASA
shuttle, ensuring the crew returned safely to Earth.
2D3: FROM ENTERTAINMENT TO DEFENCE
With so much of our current focus on the enormous potential we see in new
markets, it's worth making the point that successful diversification is nothing
new for OMG. Our 2d3 business, now an established world leader in its field, was
the result of a lateral leap into the relatively unknown just half a dozen years
ago, when we saw the opportunity to apply our expertise in extracting 3D
information from the moving image, to create the world's first viable automatic
camera tracking system for the movie industry.
Launched in 2001, our boujou system was an overnight sensation, enabling
film-makers to combine live action and computer-generated animation far more
easily than ever before, and at a fraction of the cost.
Naturally, we were delighted by 2d3's success in the world of entertainment;
but, from the outset, the business always intended to explore other applications
of this technology. And during 2005/06, having begun in earnest to develop the
necessary entrepreneurial skills, we were ready and able to make significant
headway with the first of these.
Defence: a more sophisticated 'eye in the sky'
In recent years, Unmanned Aerial Vehicles (UAVs) have played an increasingly
vital role in military surveillance and reconnaissance operations. Yet,
currently, these highly sophisticated and somewhat futuristic aircraft lack the
ability to provide really high quality visual information, their on-board
imaging equipment often amounting to little more than standard shopping mall
security video cameras.
For 2d3, the opportunity is clear. The UK Ministry of Defence is committed to
deploying multiple new generations of UAVs, with funding of around £800 million
for just one programme. Equipped with our advanced machine vision technology,
these new UAVs would be able to supply a much wider range of video-based
information for military reconnaissance, as well as civilian applications such
as air-sea rescue and monitoring of land use.
Our first steps into this new market have been met with a very positive
response. Our initial project with QinetiQ was successfully completed in
September 2006, effectively demonstrating our capabilities in recovering 3D
information from airborne video imagery.
Building on this, we attended the Farnborough Air Show in July; and at the
Association for Unmanned Vehicle Systems International (AUVSI) show in Florida
in August 2006, our presentation outlining the potential capabilities of 2d3
systems in UAV applications was a standing room only event.
And it's worth emphasising that the climate in the world of defence procurement,
in both the UK and the US, is very favourable to smaller technology companies,
like OMG. The mood of the time - expressed most recently in the MoD Defence
Technology Strategy (October 2006) - is to shop for innovation wherever it is
freshest, and most relevant to defence needs. As 2005/06 ends, we're in a strong
position to take maximum advantage of this trend.
Meanwhile, back in Hollywood
In 2005/06 2d3's entertainment business continued to flourish, with our boujou
camera tracking system in use all day, every day, in movie and TV
post-production studios worldwide. Think of a film with dazzling
computer-generated (CG) visual effects you've enjoyed in the past 12 months, and
there's an excellent chance that our technology made it possible.
It's true we face a bit more competition these days; but, with the launch of
boujou 4, which started shipping in August 2006, we've given customers yet more
reasons to choose 2d3 over any rival matchmoving system.
For busy CG houses, working under ever-increasing pressure, the new system
represents a real step forward, offering greatly increased ease-of-use and the
ability to 'solve' a much wider range of shots - enabling them to achieve
extraordinary results with maximum speed and efficiency.
At the same time, we've also continued to widen the market, with our boujou
bullet 2 package offering a more affordable matchmoving software option and
moujou providing the automatic tracking power of boujou from directly within
Alias Maya, the market-leading CG software package.
Roll credits...
Just a few of the recent movies in which 2d3's boujou software has played a
leading role:
• The Da Vinci Code
• Harry Potter I-IV
• King Kong
• The Day After Tomorrow
• The Lord of the Rings: the Return of the King
GEOSPATIAL VISION: ON THE ROAD TO SUCCESS
And so we come to what may well be, in terms of growth potential, the most
exciting development of the last 12 months; the best opportunity we have so far
identified to apply our unmatched expertise in extracting 3D from the moving
image to establish a position of strength in an enormous new market.
In the UK, there are over 400,000 kilometres of roads; in the USA, around 6
million. For the owners and operators of these huge networks, the task of
monitoring and maintaining the condition of their roads and all their 'assets' -
such as signposts, road-markings, bridges, lamp-posts, bollards - currently
presents major difficulties. Put simply, they have no efficient way of recording
where these assets are or what state they are in; so managing them effectively
is virtually impossible.
Enter OMG, and our newly formed Geospatial Vision business. By taking our
technology out onto the road, we can provide highway authorities (and others)
with a complete visual record of their network, linked to a map, which they can
view instantly on their PC screens. Compared to the present situation, where the
traditional way to learn the location and condition of specific road assets is
to send someone out with a trundle wheel and a mobile phone, this represents a
quantum leap forward.
Now on a street near you
Having set up Geospatial Vision in June 2006, we've made exciting progress over
the second half of the year. Our first van, equipped at a cost of around
£200,000, is now on the road in the UK; and our first contracts have now been
signed, with mapping projects underway.
Of course, it's still very early days. But the response we've had to this
incredibly effective application of our technology has been universally
enthusiastic. And during the coming year, we'll be launching a major sales
drive, from which we expect great results.
In terms of future growth, it's worth stressing not just the scale of the
opportunity, but also the quality of the business we hope to gain, with every
possibility of building long term, ongoing relationships with customers. In
Birmingham, for example, there were around 30,000 changes to the road network
this year - a permanently changing picture which we could quickly and easily
update at regular intervals.
Mapping out a profitable future
In itself, our move into road maintenance and management would be a
mouth-watering commercial prospect; but we see it as just the first step towards
even greater prizes. Because once we start to acquire a mass of 3D street level
mapping data, there will be opportunities for making it available to a wide
range of other interested parties.
Consider, for example, satellite navigation (sat nav). While rapidly increasing
in popularity, currently available systems have significant shortcomings, in
terms of the usefulness of the information they provide. It's not at all
uncommon for lorry drivers to find themselves being directed along narrow
country lanes, or under low bridges. With our input, sat nav would plan routes
based on all the relevant information, relating to matters such as weight and
height restrictions.
And even that could be just the beginning. From utilities and insurance
companies to consumer web businesses like Google or Amazon, there's an
impressive range of potential customers who could clearly benefit from this kind
of data. And ultimately, we believe there's an opportunity to transform the
world's mapping databases, by adding a third dimension.
The outlook for OMG
Looking ahead, what makes OMG's position both exciting and challenging is that
we have three businesses at very different stages of maturity - each presenting
us with different opportunities, and requiring different levels of support and
investment in order to maximise their potential.
In Vicon, our aim is to build on a strong position. A recognised world market
leader, this business has shown real stability, with consistent growth in both
turnover and profitability. In the year ahead, we expect particularly strong
performance in the life sciences market, as the technological advances and many
user benefits offered by Nexus win business from both new and existing
customers. And we'll continue to invest for the longer term, building on our
existing technology base and remaining open to the possibility of further
acquisitions.
For 2d3, the picture is a little more complicated. While our entertainment
business is well established and profitable, our move into defence - potentially
a far bigger market - is just on the starting blocks. Although the defence
sector in known for its long time scales in procurement, we are actively
pursuing opportunities which could come to fruition in the year ahead.
Meanwhile, our freshly minted Geospatial Vision business - just six months old
at the time of writing - has recently signed its first contract with a local
authority and we are hopeful of further contract wins. Potentially, this market
is significantly larger than our existing businesses and requires investment
before revenue streams are established. The rate of investment will need to be
carefully judged in relation to our continued progress in converting strong
initial interest into firm contracts.
Overall for OMG, we expect to see advances in revenue and profits from Vicon
being invested in the new business opportunities during the year. While such
investments may have a negative impact on short term profit growth, our
confidence in OMG's future is underlined by our change in dividend policy.
From a shareholder's perspective, all this means OMG offers an intriguing spread
of attributes, ranging from proven, highly profitable performance to bold new
entrepreneurial ventures and growth opportunities.
A not-so-quietly successful British technology company
All in all, I think that everyone associated with OMG can be very satisfied with
what we've achieved over the past 12 months.
Naturally, we don't want to exaggerate what we've achieved so far; very largely,
we've been engaged in laying foundations on which to build. But, as I began by
saying, where we can claim to have accomplished a major transformation in our
business is in terms of attitudes and outlook.
This is now a new Oxford Metrics Group. Throughout our 20 year history, we've
consistently done business profitably and led the way technologically. By
developing a new and much sharper commercial focus - by discovering our 'inner
entrepreneur', you might say - we've added the one missing ingredient that will
enable OMG, over the next few years, to realise its unlimited potential.
And I can personally guarantee that we won't be shy about telling the world what
we achieve. OMG has been a quietly successful British technology company for far
too long.
Nick Bolton
Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 2006
2006 2005
Note £'000 £'000
Turnover 3 16,274 14,213
Cost of sales (6,019) (5,620)
Gross profit 10,255 8,593
Sales, support and marketing costs (3,001) (3,304)
Research and development (2,338) (1,607)
Administrative expenses (3,406) (3,089)
Other income 12 -
Operating profit before goodwill
amortisation and exceptional items 1,650 923
Goodwill amortisation (128) (114)
Exceptional items - (216)
Operating profit 1,522 593
Interest receivable and similar income 217 97
Profit on ordinary activities before taxation 1,739 690
Tax (charge) / credit on profit on ordinary activities 4 (179) 46
Retained profit for the financial year 1,560 736
Basic earnings per ordinary share 5 2.62p 1.27p
Diluted earnings per ordinary share 5 2.51p 1.22p
There is no material difference between the retained profit on ordinary
activities before taxation and the retained profit for the financial year stated
above and their historical cost equivalents.
All amounts relate to continuing activities.
The Directors are proposing a final dividend in respect of the financial year
ending 30 September 2006 of 0.1p per share which will absorb an estimated
£60,000 of shareholders' funds. This dividend will be paid on 9 March 2007 to
shareholders who are registered on the register of members at the close of
business on 9 February 2007, subject to approval at the next AGM.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 SEPTEMBER 2006
2006 2005
£'000 £'000
Retained profit for the financial year 1,560 736
Exchange differences on retranslation of opening net assets
of overseas subsidiaries (121) 9
Total recognised gains and losses for the year 1,439 745
CONSOLIDATED AND COMPANY BALANCE SHEETS
AT 30 SEPTEMBER 2006
Group Group Company Company
Note 2006 2005 2006 2005
£'000 £'000 £'000 £'000
(as restated
See note 1)
Fixed assets
Intangible assets 998 1,353 91 132
Tangible assets 921 970 122 169
Investments 69 69 1,183 978
1,988 2,392 1,396 1,279
Current assets
Stocks 934 1,739 - -
Debtors 4,721 3,637 1,312 2,366
Cash at bank and short term deposits 6,494 4,371 6,071 3,525
12,149 9,747 7,383 5,891
Creditors: amounts falling due within one year (3,483) (2,938) (1,707) (279)
Net current assets 8,666 6,809 5,676 5,612
Net Assets 10,654 9,201 7,072 6,891
Capital and reserves
Share capital 150 147 150 147
Shares to be issued - 205 - -
Share premium account 5,908 5,692 5,908 5,692
Profit and loss account 4,596 3,157 1,014 1,052
Total equity shareholders' funds 6 10,654 9,201 7,072 6,891
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2006
Note 2006 2005
£'000 £'000
Net cash inflow from operating activities 7 2,646 1,015
Returns on investments and servicing of finance
Interest received 217 97
Taxation (179) 8
Capital expenditure and financial investment
Purchase of tangible fixed assets (610) (897)
Disposal of tangible fixed assets 128 282
(482) (615)
Acquisitions
Purchase of subsidiary undertaking (44) (342)
Net cash acquired with new subsidiary - 111
Other investment acquired - (69)
(44) (300)
Net cash inflow before financing 2,158 205
Financing
Issue of ordinary share capital 13 61
Increase in cash 2,171 266
NOTES TO THE PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2006
1. BASIS OF PREPARATION
The financial information in this preliminary announcement is un-audited and has
been prepared on the going concern basis, under the historical cost convention
and applicable accounting standards in the United Kingdom and is consistent with
the policies set out in the Group's statutory accounts for the year ended 30
September 2005, except for the adoption by the Group of FRS 25 'Financial
instruments: disclosure and presentation' during the year by means of a prior
year adjustment.
There is no effect on the current or prior periods' Group profit as a result of
the 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 with shareholders' funds at 30 September 2005 and increase
creditors within one year at 30 September 2005 by £36,000.
2. BASIS OF CONSOLIDATION
The consolidated financial statements consolidate those of the Company and all
of its subsidiary undertakings drawn up to 30 September 2006. Acquisitions of
subsidiaries are dealt with by the acquisition method of accounting from the
date of acquisition.
3. TURNOVER AND SEGMENTAL ANALYSIS
The directors consider there to be only one class of business, that of motion
capture.
An analysis of turnover destination by geographical market is given below:
2006 2005
£'000 £'000
United Kingdom 1,899 673
Continental Europe 2,018 2,021
North America 8,248 8,245
Asia Pacific 3,666 3,089
Other 443 185
16,274 14,213
An analysis of turnover by origin is given below:
2006 2005
£'000 £'000
United Kingdom 8,039 6,166
North America 8,235 8,047
16,274 14,213
An analysis of operating profit and net assets by geographical origin is given
below:
Operating profit Net Assets
2006 2005 2006 2005
£'000 £'000 £'000 £'000
United Kingdom 1473 494 10,228 8,731
North America 49 99 426 470
1,522 593 10,654 9,201
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax (credit) / charge is based on the profit for the year and represents:
2006 2005
£'000 £'000
United Kingdom corporation tax at 30% (2005: 30%) 8 8
Overseas taxation 66 -
Adjustments in respect of prior year 105 (54)
179 (46)
At 30 September 2006, the Group had an undiscounted deferred tax asset of
£352,000 (2005: £283,000), which has not been recognised. The asset comprises
accelerated capital allowances of £170,000 (2005: £41,000), and the accumulated
unrelieved tax losses of £1,003,000 (2005: £904,000) available to subsidiary
undertakings of the Group, to offset against future taxable trading profits of
the same trade. Unrelieved tax losses in respect of prior years were increased
by £1,415,000, principally due to the submission of claims for R&D tax credits.
Tax losses amounting to £1,690,000 have been utilised during the year and
additional unrelieved losses of £374,000 arose during the year relating to the
commencement of trade by a new subsidiary. Due to the risks and uncertainty over
the subsidiaries' timing and extent of future trading profits, the deferred tax
asset has not been recognised.
The tax assessed for the year is lower than the standard rate of corporation tax
in the UK of 30% (2005: 30%). The differences are explained as follows:
2006 2005
£'000 £'000
Profit on ordinary activities before tax 1,739 690
Profit on ordinary activities multiplied by the standard rate of corporation
tax in the UK of 30% (2005: 30%) 522 207
Effect of:
Expenses not deductible for tax purposes 31 62
Accelerated capital allowances 3 (5)
Utilisation of losses (507) (179)
Adjustments to tax charge in respect of prior year 105 (54)
Higher rates on overseas taxation 11 -
Unrecognised deferred tax on losses 112 -
Research and development tax credit (98) (77)
Current (credit) / charge for the year 179 (46)
5. EARNINGS PER SHARE
2006 2005
weighted weighted
average average
number of Per share number of Per share
Earnings shares amount Earnings shares amount
£'000 pence £'000 pence
Basic earnings per share
Earnings attributable to
ordinary shareholders 1,560 59,597,690 2.62 736 58,065,827 1.27
Dilutive effect of
securities
Options - 2,475,826 (0.11) - 2,265,211 (0.05)
Diluted earnings per
Share 1,560 62,073,516 2.51 736 60,331,038 1.22
6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Group Group Company Company
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Retained profit / (loss) for the financial year 1,560 736 (38) (42)
Issue of shares 219 331 219 331
Contingent shares to be issued (205) - - -
Currency movements (121) 9 - -
Net movements in shareholders' funds 1,453 1,076 181 289
Shareholders' funds at 1 October 2005
(originally £9,237,000 before deducting prior
year adjustment of £36,000) 9,201 8,125 6,891 6,602
Shareholders' funds at 30 September 2006 10,654 9,201 7,072 6,891
7. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
2006 2005
£'000 £'000
Operating profit 1,522 593
Depreciation & amortisation 695 692
(Profit) / loss on disposal of fixed assets (16) 14
Decrease in stock 794 68
Increase in debtors (1,255) (296)
Increase / (decrease) in creditors 906 (56)
Net cash inflow from operating activities 2,646 1,015
8. PUBLICATION OF NON-STATUTORY ACCOUNTS
The preliminary results for the year ended 30 September 2006 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 2006 or 30 September 2005. The financial
information for the year ended 30 September 2005 is derived from the Annual
Report for that year which was delivered to the Registrar of Companies. The
auditors, PricewaterhouseCoopers LLP, reported on those accounts: their report
was unqualified and did not contain a statement under either Section 237(2) or
237(3) of the Companies Act 1985.
9. 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.
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