Interim Results

RNS Number : 8502W

OMG PLC

17 June 2008

 



17 June 2008

OMG plc 

Interim Statement for the six months ended 31 March 2008

- Profitable growth, continued investment -

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 interim results for the six months ended 31 March 2008. These are the first results to be published under International Reporting Standards ('IFRS').

Financial Highlights:

• Turnover up 49% at £12.7m (including a full six months of DCL acquired July 2007) against the backdrop of a record breaking first half in 2007 (H1 2007: £8.5m)

• Profit before tax up 31% at £1.2m (H1 2007: £0.9m*)

• Earnings per share up 29% at 1.53p (H1 2007: 1.19p*). 

• Continuing healthy cash balance at £5.5m. (30 September 2007: £6.2m) 

Operational Highlights:

• Yotta continues to gain momentum:

  • DCL integration continuing well, delivering synergies

  • Strong sales performance with first half revenues at £2.6m

  • Acquisition of Mobile Video Services, Inc. (MVS) post period-end gives Yotta a strong platform for expansion into the North American 

• 2d3 progressing well:

  • First contract win by US division secured with Northrop Grumman

  • First product, TacitView, launched at AUVSI 2008

  • Order book for defence projects now stands at £0.7m

• Best ever Vicon performance:

  • Shipped more cameras in period than in any previous first half, with business particularly strong in US where sales were up 49%

  • Newly launched T-Series camera marks a significant step forward in Vicon technology and strengthens Vicon's market leading position

• Launch of OMG Springboard:

  • New Professional Services offering

  • Gives clients access to breadth of OMG technical skills

Commenting on the results Nick Bolton, Chief Executive of OMG plc, said:

'We have made excellent progress during the first half in all areas of our Group, delivering increases in turnover and profitability whilst at the same time continuing to invest in the newer areas of our business.  

'Vicon continues to dominate the motion capture market: a position further secured by the recent launch of our new T-Series range of cameras. Yotta, our 3D mapping business continues to gain momentum and is now seeing real benefits from its integration with the DCL business we acquired in July 2007. This gives us high hopes of what our acquisition of MVS can do for Yotta in the US. Elsewhere, 2d3's amazing software capability continues to impress and our contract announced last week with Northrop Grumman is a clear indication of the potential for OMG in the defence arena. 

'As I have said before, anything is possible for OMG. I truly believe we are beginning to realise some of the group's huge potential and I look forward with confidence to the remainder of the year. '

 *Restated for the implementation of International Financial Reporting Standards ('IFRS'): see note 1

For further information please contact:

OMG plc	01865 261800
Nick Bolton, Chief Executive
Peter Wharton, Finance Director
Financial Dynamics	020 7831 3113
Juliet Clarke / Matt Dixon
Evolution Securities (NOMAD to OMG)	020 7071 4300
Jeremy Ellis

 About OMG

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

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

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

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

  CHAIRMAN'S STATEMENT

Numbers speak louder than words

In recent statements I've spoken at some length about our achievements to date, our ambitions for the Group, and the almost unlimited potential of OMG's incredible technology to deliver sustained growth. But, on this occasion, the facts we have to report are so persuasive that I'm very happy to let the numbers do most of the talking.

A record first half (x3)

Just before we jump into the numbers, it should be noted the Group has adopted the International Financial Reporting Standards (IFRS) for the period being reported. Accordingly, figures used for prior periods have been restated for IFRS as appropriate.

That said, revenue was up 49% at £12.7m, on last year's record breaking first half of £8.5m. That makes three record first halves in a row. In fact, this was a record half for turnover, full stop - never before has OMG turned over as much in a single half.

Profit before tax up 31% at £1.2m, compared to £0.9m in the first half of 2007. This profit growth has been achieved despite the increasing levels of investment in the development of Yotta and 2d3's defence operations. 

Earnings per share have risen 29% to 1.53p compared to 1.19p in the first half of last year, and cash continued at healthy levels with a balance of £5.5m at the end of the period. Although cash is £0.6m lower than the beginning of the period, in the two months to the end of May cash balances increased to £6.1m, after taking account of the payment of £0.75m in initial consideration for the acquisition of Mobile Video Services Inc on 28 April 2008. 

These numbers speak volumes about the success of our Group in the first half. Now let's look at the numbers for each of our businesses.

Lotta Yotta

Yotta, our 3D mapping business, reported first half revenues of £2.6m. These revenues included a full six month contribution for the first time from Data Collection Limited (DCL), acquired in July last year. As DCL is now fully integrated it is difficult to give like-for-like comparisons. However, the business combination has clearly accelerated the growth in both DCL's traditional survey business and Yotta's new business in 3D mapping. This growth is all the more impressive when you consider it has been achieved in what is traditionally the quieter part of the year due to fewer daylight hours and less favourable weather conditions.

It's worth noting the net operating loss for Yotta has been reduced to £0.3m from a loss of £0.5m in the first half of last year, representing a profitable period for the acquired business and an increase in investment in the development of 3D mapping technology and asset surveying techniques. 

The future looks good too. With the acquisition of Mobile Video Services in April 2008 we now have a presence in the USA and a strong order book across two continents as we continue to grow the sales prospect pipeline. As a result we are seeing clear potential for Yotta moving into profitability in the near future. 

Yotta completed a further important milestone for the business by closing its maiden secondary data sale. We successfully resold 400km of previously captured data to a further customer - Ordnance Survey - for a pilot study to measure the accuracy and reliability of the data. Although this is a very small dataset, the sale shows our data is valuable to multiple customers.

2d3 growing

2d3 defence revenues were £135,000 in the first half, having grown 105% on the second half of last year, the first period in which this business generated revenues. In the second quarter of this year, the defence part of 2d3 in fact generated more revenue than 2d3's more established entertainment business - modest revenues but important steps of growth for this business.

Investment in the 2d3 defence business has accelerated with the opening of a US office in the second half of last year. The net investment was £249,000 in the period (H1 2007: £144,000). While we are very pleased with progress from this modest level of investment, defence related revenues do not yet reflect the high level of interest generated in the defence community.

Building on this good first half performance, 2d3 signed its first US defence deal last week with Northrop Grumman Corporation (NGC), a key US prime contractor for the US Department of Defense. NGC has engaged 2d3 to deliver a 'Proof of Concept' which, upon completion, will assist in allowing an Unmanned Aerial Vehicle (UAV) to sense and avoid other aircraft.

Also last week, 2d3 announced its first product aimed specifically at the defence sector during the Association of Unmanned Vehicles and Systems exhibition in San Diego, California. Under the banner, 'transforming motion imagery into actionable intelligence', TacitView is designed to process the thousands of hours of aerial video and stills generated each month by operational UAVs. The product is expected to be evaluated by UK Armed Forces in the near future. The 2d3 order book for defence projects now stands at £0.7m.

Best ever Vicon

Vicon has performed strongly with revenues up 17% to £10m, with an increase in operating profit of 14% to £1.6m at a net operating margin of 16%. This is particularly impressive as it comes just ahead of a major revolution in product capability launched after the first half had closed. Nick has more to say on the significance of this later.

This strong performance has been led by the US both in the Life Science and Entertainment markets where product revenues are up 49%. Similarly our LA studio, House of Moves has performed well with revenues up 40%.

Vicon's global reach was further extended with sales to Romania for the first time - at the Polytechnic University of Bucharest and the University of Iasi.

Dividend policy

We announced a progressive dividend policy in 2006, reflecting the Group's strong financial performance and the Directors' confidence in its future. In March of this year, we paid an increased year-on-year dividend of 0.115p, which is up 15% on the previous year. We intend to continue with this policy and will announce the proposed dividend for the current year with the annual results.

Outlook

There is much to be excited about at OMG - the numbers are stronger than ever and each business is better positioned for growth than ever before. We have healthy-looking sales pipelines across all of our businesses. We have recently introduced new innovative products and services. And we continue to open up new possibilities through acquisitions. We look forward to the remainder of the year with confidence. And I look forward to reporting numbers which speak even more eloquently on the Group's behalf at the full year.

Anthony Simonds-Gooding

Chairman

CHIEF EXECUTIVE'S STATEMENT

Keep on keeping on

Anthony has illustrated comprehensively how well the business is progressing. All the numbers point to the success of the strategy developed three years ago when I became Chief Executive.

Over that time, revenues are up 164% from the first half three years ago. A loss before tax of £0.5m three years ago has been turned into a profit before tax today of £1.2m for the half year. Three years ago the majority of the Group was concentrated in one business and now we have three growing divisions. In the first half, 22% of revenues came from non-Vicon sources compared to almost nothing three years ago. 

I believe the numbers demonstrate we are succeeding in our vision to create dramatic and profitable change by transforming multiple global markets through the application of our deep pool of technology.

To deliver this vision, internally we focus on three driving themes: 

1. Execute for growth

A business is nothing with intention alone - execution is everything.

Yes, sales should strategise and target but they must also sell. Marketing should research and hypothesise but they must run effective campaigns. Development should think through technology platform choices but they must build product. There is no substitute for action. And for OMG this means action to achieve organic growth from the businesses we already have.

For Yotta in the first half, this meant new sales orders grew by over 350% and we drove more kilometres than ever before. And the wheels are in motion for this to keep on growing.

For Vicon this meant shipping more cameras in a first half than any previous first half and more recently this meant the development and launch of the new generation Vicon camera - the T-series, which we expect to drive sales through the second half and beyond.

Launched on 3 June 2008, the new camera range includes the world's first 16 megapixel motion capture camera (T160) introduced to a market where 4 megapixels was the previous highest resolution performer. The whole of the T-series also uniquely offers 2D on-board tracking which our Vicon team believe will make a real difference to a wide range of customer applications. The T-series gives Vicon real and clear market differentiation.

For House of Moves, the production services division of Vicon, execute for growth meant increasing 'shoot days' by 16% year-on-year. For 2d3 in the first half, it meant winning follow-on defence contracts in the UK and the signing of the first US defence contract in June 2008.

In April 2008 we broadened our execution capability by adding a Professional Services arm to OMG, called OMG Springboard. Springboard's goal is to take advantage of the latent business opportunity for our technology which doesn't naturally fit into one of our existing businesses.

Led by Dr Geoff Cross, one of the technical brains behind the Yotta start-up, Springboard provides vision science services to organisations outside our current markets, leveraging the experience and knowledge of technologists across the Group with access to the whole OMG intellectual property base. Demonstrating the need for these services and the Group's execution orientation, Springboard has already begun work on its first contract with a UK-based manufacturer of high performance road cars.

2. Acquire to amplify

In addition to growing through the execution of our existing businesses, we also look to amplify our value by making appropriate acquisitions - purchases which augment our existing talents and/or market capabilities. We have demonstrated the value of this approach in the growth of Vicon following the acquisition of House of Moves in June 2004 and Peak Performance Technologies in February 2005.

In more recent times, Yotta has been the focus of the Group's acquisition activity and I am excited to report the benefits we achieved in the first half following of the acquisition of Data Collection Limited (DCL) in July last year.

Just as we had hoped, DCL's experienced highways team combined with Yotta's business approach accelerated the growth of Yotta's inventory survey revenues. Equally, DCL's operational expertise has borne fruit - the second dedicated inventory van took eight weeks to commission compared to the first inventory van pre-acquisition which took four months.

Building on this success, Yotta's most recent acquisition is Mobile Video Services (MVS) of Kansas City, Missouri, completed in April 2008. MVS provides field data collection services for property tax administrators, GIS (Geographical Information Systems) departments and 911 agencies by capturing high-resolution geospatially referenced images of properties from 16 vans across the US.

There are approximately 120 million properties in the US - all of which (with the exception of California) by State law have to be re-valued on average every five years because local taxation is dependent on property value. Currently, the majority of valuations are completed on foot, where the average assessor can complete about ten re-valuations every day. Yotta MVS can capture data for 600 re-valuations per day.

Unaudited MVS financial statements for the year ended 31 December 2007 show revenues of $4.2m (£2.1m) and profit before tax of $0.84m (£0.42m). MVS has a talented and knowledgeable team and will provide a solid base for Yotta's North American expansion.

Building on our acquisition success, the drive to find more acquisitions continues across all areas of the Group. The acquisition pipeline is full and our focus remains to find the right deals - those offering good value, strong talent and deep market expertise.

3. Invest in talent

The Group now stands at about 280 employees worldwide (up from 100, three years ago). We are a global company with people in three continents, with over 40% of the team based in the US. Yotta, born only two years ago is now about the same size as Vicon. Today, we are a bigger company and consequently, we have greater potential.

To access this potential we must continue to invest and develop talent. As we said in last year's report, OMG people are 'fusion people' - the kind who bring together an unusual blend of commercial and technical skills. This heady mix gives OMG its edge. It is this difference that means we can take advantage of new market and new technology opportunities faster than others.

But we don't just have to grow fusion talent, we can hire it ready-made too.

In February 2008 we were delighted to welcome Brian Rausch as Vice-President of House of Moves Production. As the former Senior Manager of Sony Computer Entertainment America, running one of the world's largest full-time motion capture production units as well as the Cinematics and scanning departments, Brian is a perfect fit for OMG. He offers great technical skills, bringing over ten years' production experience, specialising in motion capture and animation, combined with real commercial savvy.

As we grow we must work hard to ensure this 'fusion' quality continues. To this end we are making investments (including Springboard) to develop our team's skills and experience, so OMG can continue to benefit from a plentiful supply of special talent.

Keep on keeping on

So we will keep on executing - sweating the details and transforming the markets, solving new problems and driving the technology. We will keep on seeking the right acquisitions - the ones which offer good value, and which can amplify our existing capabilities, with the right mix of people. And we will keep on developing the OMG talent machine through each of our businesses. 

In all these ways we will continue to drive the business. For us and for you, we will keep on keeping on. 

Nick Bolton

Chief Executive

CONSOLIDATED INCOME STATEMENT

for the six months ended 31 March 2008 

(illustrating the classification of expense by function)

	Unaudited	Unaudited	Unaudited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2008	2007	2007
		(as restated see note 1)	(as restated see note 1)
	£'000	£'000	£'000
Revenue	12,687	8,520	19,618
Cost of sales	(5,510)	(3,002)	(6,826)
	----------	----------	-----------
Gross profit	7,177	5,518	12,792
Sales, support and marketing costs	(1,878)	(1,754)	(3,932)
Research and development	(1,728)	(1,347)	(3,533)
Administrative expenses	(2,551)	(1,669)	(3,716)
Other income	41	25	50
	----------	----------	-----------
Operating profit before share based payments and intangible asset amortisation	1,199	896	1,919
Share based payments	(71)	(102)	(202)
Amortisation of intangible assets	(67)	(21)	(56)
Operating profit	1,061	773	1,661
Interest receivable	138	144	303
	-----------	----------	-----------
Profit before taxation	1,199	917	1,964
Taxation (note 3)	(232)	(201)	(252)
	-----------	----------	------------
Retained profit for the period	967	716	1,712
	=======	======	=======
Basic earnings per share (note 4)	1.53p	1.19p	2.83p
Diluted earnings per share (note 4)	1.40p	1.12p	2.65p

All amounts relate to continuing activities.

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

for the six months ended 31 March 2008

	Unaudited	Unaudited	Unaudited twelve
	six months to	six months to	months to
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
		(as restated see note 1)	(as restated see note 1)
Profit for the financial period	967	716	1,712
Exchange differences on retranslation of opening net assets of overseas subsidiaries	27	(59)	(120)
Deferred tax in respect of employee share options	(145)	261	5
	----------	---------	---------
Total recognised income for  the period	849	918	1,597
	======	======	======

GROUP BALANCE SHEET

at 31 March 2008

	Unaudited at	Unaudited at	Unaudited at
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
		(as restated see note 1)	(as restated see note 1)
Non-current assets
Intangible assets	1,132	71	939
Goodwill	3,089	853	3,057
Property, plant and equipment	1,978	959	1,847
Financial asset - investment	69	69	69
Deferred tax asset	571	478	600
	---------	---------	--------
	6,839	2,430	6,512
Current assets
Inventories	2,105	1,472	1,786
Trade and other receivables	9,301	4,884	7,566
Cash and cash equivalents	5,504	6,619	6,179
	---------	---------	---------
	16,910	12,975	15,531
Current liabilities
Trade and other payables	(6,146)	(3,477)	(5,664)
Current tax liabilities	(787)	(211)	(428)
	----------	----------	---------
	(6,933)	(3,688)	(6,092)
Net current assets	9,977	9,287	9,439
	-----------	-----------	---------
Total assets less current liabilities	16,816	11,717	15,951
Non-current liabilities
Financial liabilities - finance leases	(100)	-	(187)
Deferred tax liability	(260)	-	(277)
	-----------	-----------	---------
Net assets	16,456	11,717	15,487
	======	======	======
Capital and reserves
Share capital	159	150	157
Shares to be issued	1,470	-	1,470
Share premium account	6,082	5,913	5,963
Merger reserve	1,464	-	1,464
Profit and loss account	7,374	5,713	6,553
Foreign currency translation reserve	(93)	(59)	(120)
	----------	----------	----------
Total equity	16,456	11,717	15,487
	======	======	======

GROUP CASH FLOW STATEMENT

for the six months ended 31 March 2008

	Unaudited	Unaudited	Unaudited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
Cash flows from operating activities (note 6)
Cash generated from operations	176	380	1,388
Tax paid	(1)	-	(117)
	----------	----------	----------
Net cash from operating activities	175	380	1,271
Cash flows from investing activities
Purchase of property, plant and equipment	(659)	(358)	(727)
Purchase of intangible assets	(259)	-	(164)
Proceeds on disposal of property, plant and equipment	1	30	84
Interest received	150	144	303
Acquisition of subsidiary undertaking	-	-	(1,616)
Net cash acquired with new subsidiary	-	-	603
	----------	----------	----------
Net cash used in investing activities	(767)	(184)	(1,517)
Cash flows from financing activities
Proceeds from the issue of share capital	121	6	57
Payment of finance lease liabilities	(91)	-	(32)
Interest element of finance lease repayments	(13)	-	(4)
Equity dividends paid	(72)	(60)	(60)
	----------	----------	----------
Net cash used in financing activities	(55)	(54)	(39)
Effect of exchange rate changes	(28)	(17)	(30)
	----------	----------	----------
Net (decrease)/increase in cash and cash equivalents	(675)	125	(315)
Cash and cash equivalents at beginning of the period (note 7)	6,179	6,494	6,494
	----------	----------	-----------
Cash and cash equivalents at end of the period	5,504	6,619	6,179
	======	======	=======

  NOTES TO THE INTERIM FINANCIAL INFORMATION

for the six months ended 31 March 2008

1.       Preparation of the interim financial information

OMG plc will adopt International Financial Reporting Standards (IFRS) for the first time in its financial statements for the year ending 30 September 2008. Therefore the financial information for the six months ended 31 March 2008 has been prepared on the basis of International Financial Reporting Standards (IFRS) and in accordance with IFRS 1, 'First time adoption of International Financial Reporting Standards' as adopted by the European Union. As required by IFRS 1, detailed reconciliations between previously reported amounts under UK Generally Accepted Accounting Principles ('UK GAAP') and restated comparative amounts under IFRS are presented in note 12.

The interim financial information is unaudited and the financial information contained in this report does not constitute statutory accounts within the meaning of the Companies Act 1985. The comparative figures for the year ended 30 September 2007 have been extracted from the Group's financial statements which have been delivered to the Registrar of Companies and have been restated under IFRS. 

2.      Revenue and segmental analysis

An analysis of turnover and operating profit by business segment is given below:

	Revenue			Operating profit/(loss)
	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
	six months to	six months to	twelve months to	six months to	six months to	twelve months to
	31 March	31 March	30 September	31 March	31 March	30 September
	2008	2007	2007	2008	2007	2007
	£'000	£'000	£'000	£'000	£'000	£'000
		(as restated see note 1)	(as restated see note 1)		(as restated see note 1)	(as restated see note 1)
Vicon & 2d3 entertainment	9,952	8,484	18,544	1,609	1,410	2,849
2d3 AIG	135	-	66	(249)	(144)	(280)
Yotta	2,600	36	1,008	(299)	(493)	(908)
	12,687	8,520	19,618	1,061	773	1,661

All amounts relate to continuing activities.

3.      Taxation

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

	Unaudited six months to 31 March  2008	Unaudited six months to 31 March 2007	Unaudited twelve months to 30 September 2007
	£'000	£'000	£'000
United Kingdom corporation tax at 29% (2007: 30%)	288	171	345
Overseas taxation	73	32	43
Adjustments in respect of prior year	-	-	42
Current taxation	361	203	430
Deferred taxation	(129)	(2)	(178)
	232	201	252
The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 29% (2007: 30%). The differences are explained as follows:
	Unaudited six months to 31 March 2008	Unaudited six months to 31 March 2007	Unaudited twelve months to 30 September 2007
	£'000	£'000	£'000
Profit on ordinary activities before tax	1,199	917	1,964
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 29% (2007: 30%)	348	275	589
Effect of:
Expenses not deductible for tax purposes	11	29	35
Accelerated capital allowances	46	15	30
Utilisation of losses	-	(61)	(149)
Adjustments to tax charge in respect of prior year	-	-	42
Higher rates on overseas taxation	14	5	7
Research and development tax credit	(58)	(60)	(124)
Deferred tax	(129)	(2)	(178)
Tax charge on profit on ordinary activities	232	201	252

At 31 March 2008, the Group had an undiscounted deferred tax asset of £571,000 (30 September 2007: £600,000, 31 March 2007: £478,000). The asset comprises principally accelerated capital allowances, the accumulated unrelieved tax losses available to Group undertakings to offset against future taxable trading profits of the same trade and future tax relief available on the exercise of outstanding employee share options in OMG plc. The make up of the deferred tax asset at each of these dates is detailed below.

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

Taxation (continued)

	31 March 2008	31 March 2007	30 September 2007
	£'000	£'000	£'000
Deferred tax Asset comprises:
Accelerated capital allowances	93	-	44
Tax relief on unexercised employee share options	326	443	450
Other timing differences	36	35	44
Unrelieved trading losses available for future offset against trading profits	116	-	62
Total deferred tax asset	571	478	600
Deferred tax liability comprises:
Recognition of intangible asset in business combination	189	-	202
Other timing differences	71	-	75
Total deferred tax liability	260	-	277

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. 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 2008 there were 63,712,808 allotted, called up and fully paid ordinary shares of 0.25p each, and the weighted average number of shares was 63,380,929 (30 September 2007: 60,533,180, 31 March 2007: 60,067,616).

The diluted earnings per share is based on a weighted average number of shares for the six months ended 31 March 2008 of 69,219,282 after taking account of the dilutive effect of share options and future shares to be issued (30 September 2007: 64,550,073, 31 March 2007: 63,986,164).

5.     Consolidated statement of changes in shareholders' equity

	Unaudited	Unaudited	Unaudited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
		(as restated see note 1)	(as restated see note 1)
Profit for the financial period	967	716	1,712
Dividends paid to shareholders	(72)	(60)	(60)
Issue of shares	2	-	1,519
Premium on issue of shares	119	5	7
Contingent shares to be issued	-	-	1,470
Share based payments	71	102	202
Currency translation differences	27	(59)	(120)
Deferred tax in respect of employee share options	(145)	261	5
	--------	--------	-------
Net movement on equity shareholders' funds	969	965	4,735
Opening equity shareholders' funds	15,487	10,752	10,752
	--------	--------	-------
Closing equity shareholders' funds	16,456	11,717	15,487
	=====	=====	=====

6.        Reconciliation of operating profit to cash generated from operating activities

	Unaudited	Unaudited	Unaudited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
		(as restated see note 1)	(as restated see note 1)
Operating profit	1,061	773	1,661
Depreciation and amortisation	547	292	672
Share based payments	71	102	202
Loss / (profit) on sale of plant, property and equipment	8	1	(3)
Increase in inventories	(332)	(519)	(749)
Increase in receivables	(1,603)	(329)	(1,675)
Increase in payables	424	60	1,280
	--------	--------	-------
Cash generated from operating activities	176	380	1,388
	=====	=====	=====

7.        Reconciliation of net cash flow to movement in net funds

	Unaudited	Unaudited	Unaudited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
		(as restated see note 1)	(as restated see note 1)
(Decrease)/increase in cash for the period	(647)	142	(285)
Currency movements	(28)	(17)	(30)
Payment of capital element of hire purchase arrangements	91	-	32
Increase in debt arising from acquisition	-	-	(404)
	---------	---------	---------
Change in net funds for the period	(584)	125	(687)
Net funds at 1 October 2007	5,807	6,494	6,494
	----------	----------	---------
Net funds at 31 March 2008	5,223	6,619	5,807
	=====	=====	=====

8.        Share capital

	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
Authorised
100,000,000 ordinary shares of 0.25p	250	250	250
Allotted, called up and fully paid
63,712,808 shares of 0.25p (30 September 2007: 62,845,162 ordinary shares of 0.25p)	159	150	157

During the six month period ended 31 March 2008 867,646 ordinary shares of 0.25p were issued for cash in respect of share options exercised at exercise prices of 25.00p and 12.75p.

9.        Dividend

During the six months ended 31 March 2008 a dividend of 0.115pence per share was paid in respect of the financial year ended 30 September 2007 totalling £72,000. During the six months ended 31 March 2007 a dividend of 0.1pence per share was paid in respect of the financial year ended 30 September 2006 totalling £60,000.

10.       Post balance sheet events

On 28 April 2008 Yotta Limited, a wholly owned subsidiary of OMG plc, acquired the trade and assets of Mobile Video Services Inc. for a total consideration of £2,000,000 ($4,000,000).

The acquisition comprises an initial consideration of £1,250,000 ($2,500,000) of which £750,000 ($1,500,000) is in cash and £500,000 ($1,000,000) in OMG shares. The initial cash consideration is subject to an adjustment for the closing net assets position. The deferred consideration is subject to Mobile Video Services Inc. meeting minimum revenue targets over the next two years.

11.        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.

12.        Transition from UK GAAP to IFRS

Reconciliation of prior period income statements

		Unaudited	Unaudited
		six months to	twelve months to
		31 March	30 September
		2007	2007
		£'000	£'000
Profit after tax under UK GAAP		659	1,574
IFRS impacting on operating profit;
IAS 19 - Employee benefits		(9)	(40)
IFRS 3 - Write back of previously amortised goodwill		64	178
IFRS 3 - Amortisation of intangible asset		-	(15)
IFRS impacting on taxation
Deferred tax on employee benefits		2	11
Deferred tax on amortisation of intangible asset		-	4
		----------	---------
Profit after tax under IFRS		716	1,712
		=====	=====

Reconciliation of prior period equity

		Unaudited at	Unaudited at	Unaudited at
		30 September	31 March	30 September
		2006	2007	2007
		£'000	£'000	£'000
Total shareholders' funds as reported under UK GAAP		10,654	11,301	15,246
IAS 19 - Employee benefits		(117)	(126)	(157)
IFRS 3 - Write back of previously amortised goodwill		-	64	178
IFRS 3 - Amortisation of intangible asset		-	-	(15)
IAS 12 - Deferred tax on employee share options		215	478	437
IAS 12 - Deferred tax liability on intangible asset		-	-	(202)
		----------	---------	---------
Total shareholders' funds as reported under IFRS		10,752	11,717	15,487
		=====	=====	=====

The tables above set out how the Group's reported opening balance sheet under UK GAAP at 1 October 2006, its financial results for the six months ended 31 March 2007 and financial position at that date and its audited financial results for the year ended 30 September 2007 and financial position at that date would have been reported under IFRS.  

The material accounting policy changes resulting from the adoption of IFRS, including the optional exceptions from retrospective application of IFRS that the Group has applied are set out below. 

Notes to the reconciliation between previously reported UK GAAP and IFRS

         a)      Presentation of financial statements

The primary statements have been presented in accordance with the guidelines set out in IAS 1: Presentation of financial statements.  

          b)    First time adoption of International Financial Reporting Standards

IFRS 1: First time adoption of international financial reporting standards, establishes exemptions from the full requirements of IFRS for companies complying with them for the first time. OMG plc has elected to use the following exemptions; 

IFRS 3: Business combinations

The Group has elected not to apply IFRS 3 retrospectively to business combinations occurring prior to the transition to IFRS on 1 October 2006.

IAS 21: Cumulative translation differences

The Group has elected to set the cumulative translations differences arising on retranslation of opening net assets of overseas subsidiaries to zero at 1 October 2006. Exchange differences arising since this date are accounted for in a separate reserve within equity.

         c)       Employee benefits

Under UK GAAP no accrual was made by the Group for holiday pay.

IAS 19: Employee benefits requires the expected cost of compensated short term absences (e.g. holidays) to be recognised when the employee rendered the service that increases their entitlement. As a result, an accrual should be made for holidays earned but not taken.

The effect of adopting IAS 19 is to increase operating profit for the period ended 31 March 2008 by £30,000 (30 September 2007: reduction of £40,000, 31 March 2007: reduction of £9,000) and increase profit after tax for the period ended 31 March 2008 by £24,000 (30 September 2007: reduction of £32,000, 31 March 2007: reduction of £7,000). The effect on the balance sheet of adopting IAS 19 was to reduce net assets at 31 March 2008 by £127,000 (30 September 2007: £157,000, 31 March 2007: £126,000). 

         d)       Goodwill and intangible assets 

Under IFRS 3: Business combinations, goodwill is carried at cost and subject to an annual impairment review. Previously goodwill was amortised over its useful economic life in accordance with UK GAAP. Under the transitional arrangements of IFRS 1: First time adoption of IFRS, the Group has elected to apply IFRS 3 prospectively from the date of transition to IFRS. Accordingly goodwill is retained at its net book value at that date and subject to an impairment review. However, for acquisitions since 1 October 2006 goodwill amortisation has been written back and the resultant goodwill balance subject to an impairment review under IAS 36: Impairment of assets.

IAS 38: Intangible assets, requires certain intangible assets acquired in business combinations since the date of transition to IFRS to be recognised separately from goodwill. A value of £737,000 has been applied to customer contracts and relationships of Data Collection Limited acquired on 26 July 2007. This is being amortised over a period of eight years.

         e)        Taxation

Under IAS 12: Income taxes, the Group has elected to recognise in full the potential future corporation tax deductions available in respect of the intrinsic value of unexercised employee share options. The intrinsic value is measured as the difference between the option exercise price and the market value of the shares at each period end. Previously the deferred asset recognised did not take into account the difference between the intrinsic value and the timing difference on the accounting charge. The effect of adopting IAS12 is to increase the deferred tax asset by £182,000 at 31 March 2008 (30 September 2007: £393,000, 31 March 2007: £443,000) with a corresponding credit to shareholders' equity.

Other changes of accounting policy not impacting on previously reported UK GAAP

         f)       Capitalisation of development costs

External costs are capitalised if the expected future benefits are probable and the costs can be reliably measured. IAS 38 also requires internal development costs to be capitalised when the criteria to do so have been met. This removes the option that existed under UK GAAP to either capitalise or expense such costs.

A review of all major development projects has been made and there have been no additional development costs identified which meet the criteria to capitalise under IAS 38 that have not already been accounted for in this way under UK GAAP.

         g)       Financial instruments

The Group's policy is to use derivative financial instruments ('derivatives') such as forward currency contracts to hedge risks associated with foreign currency. From 1 October 2006, such derivative financial instruments are initially recognised at fair value on the date on which a derivate contract is entered into and subsequently measured at fair value at each balance sheet date. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. 

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. 

For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective. 

For the purposes of hedge accounting, hedges are classified as: 

fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability; or 

cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction. 

Any gains or losses arising from changes in the fair values of derivatives that do not qualify for hedge accounting are taken to the income statement

This change of accounting policy has had no financial impact.

         h.      Government grants

Under UK GAAP government grants of a revenue nature were credited to the profit and loss account in the same period as the related expenditure. Under IAS 20: Government grants, a grant should not be recognised until there is reasonable assurance that the group will comply with the conditions attached to it and that the grant will be received. This change of accounting policy has had no financial impact.

Independent review report to OMG plc

Introduction

We been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2008, which comprises the consolidated income statement, group balance sheet, consolidated statement of changes in shareholders' equity, group statement of recognised income and expense, group cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements. 

This interim report has been prepared in accordance with the basis set out in Note 1. As disclosed in note 1, the next annual financial statements of the company will be prepared in accordance with IFRS as adopted by the European Union. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2008 is not prepared, in all material respects, in accordance with the basis set out in Note 1 and the AIM Rules for Companies.

PricewaterhouseCoopers LLP
Chartered Accountants
17 June 2008
West London 


Notes 

The maintenance and integrity of the OMG plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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