Interim Results

RNS Number : 3157U

OMG PLC

23 June 2009

 



Tuesday, 23 June 2009

OMG plc

Interim Results statement for the six months ended 31 March 2009

OMG plc, (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 2009.

Financial Highlights:

• Revenue up 7.0% to £13.6m (H108: £12.7m)

• Adjusted profit before tax, pre-restructuring costs, of £1.1m (H108: £1.2m)

• Reported Profit before Tax of £0.9m (H108: £1.2m)

• Cash position remains healthy at £2.1m (H108: £2.9m) following Vicon and Yotta restructuring and further investment in the future growth of the business 

• Group remains debt-free

Operational Key Points:

• Mixed trading but improved operational efficiency and encouraging business pipelines

• Vicon showing a varied performance

• • North American operations impacted by economic weakness
  • Non-American revenues up 9.0%, with particular growth evident in China

• Yotta impacted slightly by pricing pressure

  • New contracts include Cheshire County Council and Newcastle 

• Further progress from 2d3

• • Continued expansion of our USA operations

  • Revenue mix continues to improve, with US revenue overtaking UK revenue for the first time

Commenting on the results Nick Bolton, Chief Executive Officer said:

'I am pleased that against the challenging economic backdrop we have continued to win new work across our business: both from new and existing clients and, particularly in the case of China, in exciting geographies for us.  

'At the same time, I and my Board colleagues are fully aware of the challenges that remain. Our focus continues to be taking the sensible, targeted actions necessary within our business to ensure that the fundamental strengths of OMG continue to shine through: our people, our technologies and our execution. In tough times, these foundations become even more significant in underpinning our prospects for future profitable growth.'

For further information please contact:

OMG plc	[phone]
Nick Bolton, Chief Executive David Deacon, Finance Director
Financial Dynamics	[phone]
Juliet Clarke / Matt Dixon / Emma Appleton
Evolution Securities (NOMAD to OMG)	[phone]
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 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 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 and Chief Executive's Statement

In these recessionary times, the Group has seen a mixed period of trading. The lengthening sales cycles and general economic weakness in the US has had a particular impact on the North American operations of both Vicon and Yotta, exacerbated by a strengthening dollar. In addition, Yotta suffered from pricing pressure in the UK. However, outside of the US, Vicon saw good growth and 2d3 continues to make good progress across all geographies as defence budgets remain solid.

As a result of these pressures the Group remains focused on maintaining its robust positioning and sound footing. Careful attention continues to be paid to reducing costs, verifying sales forecasting, deploying resources with precision and doing our utmost to protect our assets and market position. We cannot know what the future holds, however we can control what we do internally and we continue to monitor the economic situation closely. It is this operational focus which has served us well in the past, and which will ultimately deliver robust stability in the future.

Financial Summary

The Group reports total first half revenue of £13.6m (H108: £12.7m), including £1.0m in the first half from Yotta MVS, a business acquired in April 2008.  

The Group reports a pre-tax profit of £0.9m (H108: £1.2m), after non-recurring restructuring costs of £0.2m and a £0.2m loss made by the acquired Yotta MVS business in the first half. Excluding these costs, on a like-for-like basis overall pre-tax profit was slightly ahead of last year's performance.  Diluted Earnings per Ordinary share for the first half of 0.88p compares with 1.40p for the same period last year. 

Gross margins within Vicon, a key performance indicator for the Group have held up well at 72.0% (H108: 73.0%). 

Cash at bank as at 31 March 2009 stood at £2.1m compared with £2.9m as at 30 September 2008. The Group continues to focus on working capital management and has established a £0.5m revolving credit facility to provide extra headroom, although this facility has not been utilised.

While the strong dollar assisted the overall revenue number for the Group, the Group also has 47.0% of its costs denominated in US Dollars, so its strength damages profits especially at a time when the Vicon US business underperformed. As a result, we reported a consolidated loss from all US operations in the first half. Exchange rate volatility and the current uncertain economic environment make predicting the future exchange rate impact hard and the Group regularly reviews its currency hedging position.

In view of the current economic climate, the Group has implemented several cost saving initiatives. In October 2008, we took proactive steps in Vicon to reduce headcount and overheads resulting in a £0.7m saving on an annualised basis. In March 2009, we followed suit with Yotta reducing its headcount and overheads, yielding a further annualised saving of £0.8m.  As a technology firm, Research and Development ('R&D') remains an important focus for the Group. We continue to invest in R&D efforts but at a level 10.0% lower than the investments made in the comparative period last year post cost base reductions. At the same time we are focusing our investments on those projects where we currently see the highest potential return over the long term. 

Vicon

Our overall financial performance has been significantly affected by the weakness of the North American economy. Our Vicon activities in North America reported revenues of £5.0m (Adjusted H108: £7.6m) therefore down 34.0% at constant exchange rates. This has been mitigated to some extent by the strength of the dollar, meaning headline US revenues of £5.0m (H108: £5.7m) were down by 11.0%. As a consequence the operation reported an operating profit of £0.2m (H108: £1.2m) compared with £1.6m for the same period last year at constant exchange rates.

Performance over the period for Vicon US was characterised by extended sales cycles in both Life Sciences and Entertainment markets. 

Elsewhere Vicon performed better reporting non-North American revenues of £4.7m (H108: £4.3m), up 9.0% with three orders in excess of £200,000. China shipments were a particular high point with sales up to 12.0% of non-North American revenues (H108: 6.0%).

During the course of the first half the Vicon division restructured operations and removed £0.7m from the cost base on an annualised basis. The results for the first half include £0.1m of one-off restructuring costs.

Yotta

Yotta UK reported revenues of £2.4m (H108: £2.6m) and an operating loss of £0.4m (H108: breakeven). The business has experienced operational challenges in the first half including increased price competition and poor weather conditions over the winter months. In response, we restructured the business during the first half, removing £0.8m from the cost base on an annualised basis but only a small proportion of this was realised during the first half. The results for the first half include £0.1m of one-off restructuring costs. 

In terms of new business during the period Yotta has experienced particular success with footway surveys, winning a contract in Newcastle to undertake a bespoke survey during January and February. Furthermore, Cheshire County Council, our largest Yotta customer, has extended our contract by a further two years.  

Yotta USA, acquired in April 2008, reported revenues of £1.0m and an operating loss of £0.2m. The business was affected by the slow-down in the US economy, which resulted in a low new business intake during the first half. With the addition of the Miami deal (announced in December 2008) and improved market activity, there is evidence the operation will enjoy a better second half.

In Yotta US, Dallas Central Appraisal District has contracted for a second time with Yotta MVS and will use the imagery and field-verified data to capture new tax revenues from new properties and home improvements.  

Looking forward, Yotta still offers growth opportunities within the UK, US and in other unexploited geographies. In the first half the division conducted a number of surveys outside the UK, including contracted work in Hong Kong and in the Netherlands. In pursuing this growth, the focus on operational execution remains.

2d3

Our defence business 2d3 performed well, reporting revenues of £0.4m (H108: £0.1m) and an improved operating loss of £0.3m (H108: £0.4m). This performance included the continued expansion of our USA operations, which added £0.2m revenues in the first half and overtook UK 2d3 revenues for the first time, underlining the importance of the US market for the growth of this business. 

Given the nature of the defence market and the sensitivity of the projects we are involved in, it is becoming increasingly difficult to discuss our engagements openly. However it can be noted that 2d3's revenues in the first half were drawn from a total of 9 engagements (5 in the US and 4 in the UK), illustrating we are not dependent on a single large contract.

2d3's market interest remains high and the division continues to pursue significant sales opportunities.

Springboard

In 2008 the Group launched a new Professional Services offering called Springboard, giving clients access to the full breadth of OMG technical skills. This part of our business continues to work on a number of interesting projects and we are pleased with the progress being made in this newest of OMG ventures.

Group Costs

Non-allocated central Group costs including Springboard were a net credit to the P&L of £0.5m (H108: cost £0.9m) which included unrealised foreign exchange gains on dollar assets of £1.4m which reflects the increasing strength of the dollar over the period. Excluding this gain, corporate and other savings of £0.1m were achieved.

Outlook

In summary, the Board recognises that the Group's reported results reflect the benefit of foreign exchange gains and that, although there were bright spots of trading within the group, tougher market conditions in the US have taken their toll at the underlying level.  The pipelines for our businesses, including in the US with government R&D stimulus packages are encouraging but the timing of these opportunities remains difficult to predict.  The Board's prudent view is that currency will continue to have a significant bearing on our results and, as a consequence, our lower margin businesses may contribute a greater proportion of Group revenue in the coming period. Against this backdrop, the Group has taken proactive measures in all divisions to reduce costs and the Board will continue to assess the cost base, ensuring that we enter the second half a leaner business.

We remain a well equipped and robust business operating in diverse markets, which we believe puts us in a good position to weather this economic storm. We continue to spread ourselves across multiple markets (highways to video games), multiple geographies (Peru to Poland), and multiple products and services (camera hardware to defence consultancy services). Undoubtedly some of our markets have been impacted by the economic downturn, but as our diversified portfolio demonstrates in these results, not all.

To deliver improved levels of performance, we are focusing on operational efficiency and excellence. In other words, where we are applying resource, we are fully expecting to see the benefits delivered.   We would like thank our staff in all our divisions for their determination and commitment in these changing times.

The fundamental strengths of OMG remain - our people, our technologies and our execution. In tough times, these foundations become more significant in underpinning the Group's prospects for profit and for growth.

Anthony Simonds-Gooding, Non-Executive Chairman

Nick Bolton, Chief Executive

  CONSOLIDATED INCOME STATEMENT

for the six months ended 31 March 2009 

	Unaudited	Unaudited	Audited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2009	2008	2008
	£'000	£'000	£'000
Revenue	13,584	12,687	26,203
Cost of sales	(5,972)	(5,510)	(11,242)
	----------	----------	-----------
Gross profit	7,612	7,177	14,961
Sales, support and marketing costs	(2,369)	(1,878)	(4,373)
Research and development	(1,784)	(1,728)	(3,646)
Administrative expenses	(2,541)	(2,551)	(5,708)
Other income	3	41	142
	----------	----------	-----------
Operating profit	921	1,061	1,376
Finance income	12	151	249
Finance expense	(11)	(13)	(28)
	-----------	----------	-----------
Profit before taxation	922	1,199	1,597
Taxation (note 3)	(294)	(232)	(348)
	-----------	----------	------------
Profit for the period attributable to equity holders of the Company	628	967	1,249
	=======	======	=======
Basic earnings per ordinary share (note 4)	0.96p	1.53p	1.95p
Diluted earnings per ordinary share (note 4)	0.88p	1.40p	1.80p

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

for the six months ended 31 March 2009

	Unaudited	Unaudited	Audited twelve
	six months to	six months to	months to
	31 March	31 March	30 September
	2009	2008	2008
	£'000	£'000	£'000
Exchange differences on retranslation of opening net assets of overseas subsidiaries	326	27	118
Deferred tax in respect of employee share options	(52)	(145)	(177)
	----------	---------	---------
Net income and expense recognised directly in equity	274	(118)	(59)
Profit for the period	628	967	1,249
Total recognised income and expense for  the period	902	849	1,190
	======	======	======

  GROUP BALANCE SHEET

at 31 March 2009

	Unaudited at	Unaudited at	Audited at
	31 March	31 March	30 September
	2009	2008	2008
	£'000	£'000	£'000
Non-current assets
Intangible assets	2,036	1,132	1,960
Goodwill	5,839	3,089	4,967
Property, plant and equipment	3,070	1,978	3,088
Financial asset - investment	69	69	69
Deferred tax asset	398	571	475
	---------	---------	--------
	11,412	6,839	10,559
Current assets
Inventories	3,430	2,105	2,993
Trade and other receivables	7,723	9,301	9,503
Cash and cash equivalents	2,137	5,504	2,877
	---------	---------	---------
	13,290	16,910	15,373
Current liabilities
Trade and other payables	(5,192)	(6,146)	(7,346)
Current tax liabilities	(76)	(787)	(173)
	----------	----------	---------
	(5,268)	(6,933)	(7,519)
Net current assets	8,022	9,977	7,854
	-----------	-----------	---------
Total assets less current liabilities	19,434	16,816	18,413
Non-current liabilities
Financial liabilities	(524)	(100)	(409)
Deferred tax liability	(482)	(260)	(406)
	-----------	-----------	---------
	(1,006)	(360)	(815)
	-----------	-----------	---------
Net assets	18,428	16,456	17,598
	======	======	======
Capital and reserves attributable to equity holders of the Company
Share capital	163	159	163
Shares to be issued	1,470	1,470	1,470
Share premium account	6,620	6,082	6,620
Merger reserve	1,464	1,464	1,464
Profit and loss account	8,387	7,374	7,883
Foreign currency translation reserve	324	(93)	(2)
	----------	----------	----------
Total equity shareholders' funds	18,428	16,456	17,598
	======	======	======

  GROUP CASH FLOW STATEMENT

for the six months ended 31 March 2009

	Unaudited	Unaudited	Audited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2009	2008	2008
	£'000	£'000	£'000
Cash flows from operating activities
Operating profit	921	1,061	1,376
Depreciation and amortisation	823	547	1,244
Loss on disposal of property, plant and equipment	14	8	1
Share based payments	3	71	128
Increase in inventories	(119)	(332)	(1,103)
Decrease/(increase) in receivables	3,251	(1,603)	(1,415)
(Decrease)/increase in payables	(4,863)	423	534
	----------	----------	----------
	30	175	765
Tax paid	(330)	(1)	(681)
	----------	----------	----------
Net cash from operating activities	(300)	174	84
Cash flows from investing activities
Purchase of property, plant and equipment	(474)	(659)	(2,251)
Purchase of intangible assets	(47)	(259)	(605)
Proceeds on disposal of property, plant and equipment	110	1	119
Interest received	12	151	249
Acquisition of subsidiary undertaking net of cash acquired	-	-	(845)
	----------	----------	----------
Net cash used in investing activities	(399)	(766)	(3,333)
Cash flows from financing activities
Proceeds from the issue of share capital	-	121	134
Payment of finance lease liabilities	(100)	(91)	(169)
Interest element of finance lease repayments	(11)	(13)	(28)
Equity dividends paid	(75)	(72)	(72)
	----------	----------	----------
Net cash used in financing activities	(186)	(55)	(135)
Effect of exchange rate changes	145	(28)	82
	----------	----------	----------
Net decrease in cash and cash equivalents	(740)	(675)	(3,302)
Cash and cash equivalents at beginning of the period	2,877	6,179	6,179
	----------	----------	-----------
Cash and cash equivalents at end of the period	2,137	5,504	2,877
	======	======	=======

  NOTES TO THE INTERIM FINANCIAL INFORMATION

for the six months ended 31 March 2009

1.    Preparation of the interim financial information

The financial information for the six months ended 31 March 2009 has been prepared on the basis of the accounting policies set out in the financial statements of the Group for the year ended 30 September 2008.

The interim financial information has not been audited or reviewed and the financial information contained in this report does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The comparative figures for the year ended 30 September 2008 have been extracted from the Group's financial statements which have been delivered to the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain an emphasis of matter paragraph and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. 

2.    Revenue and segmental analysis

Business segments are analysed as the primary reporting format below:

	Unaudited six months to 31 March 2009
	Vicon & 2d3	2d3 AIG	Yotta	Other	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Total segment revenue	10,483	438	3,390	46	-	14,357
Inter segment revenue	(773)	-	-	-	-	(773)
	…………….	…………….	…………….	…………….	…………….	…………….
	9,710	438	3,390	46	-	13,584
	…………….	…………….	…………….	…………….	…………….	…………….
Segment result
Operating profit/(loss)	1,739	(290)	(372)	(157)	1	921
Finance income						12
Finance costs						(11)
						…………….
Profit before tax						922
Tax						(294)
						…………….
Profit after tax						628
						=======

	Unaudited six months to 31 March 2008
	Vicon & 2d3	2d3 AIG	Yotta	Other	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Total segment revenue	13,048	135	2,600	-	-	15,783
Inter segment revenue	(3,096)	-	-	-	-	(3,096)
	----------	----------	----------	----------	----------	----------
	9,952	135	2,600	-	-	12,687
	----------	----------	----------	----------	----------	----------
Segment result
Operating profit/(loss)	1,741	(236)	(261)	-	(183)	1,061
Finance income						151
Finance costs						(13)
						----------
Profit before tax						1,199
Tax						(232)
						----------
Profit after tax						967
						=======

	Audited twelve months to 30 September 2008
	Vicon & 2d3	2d3 AIG	Yotta	Other	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Total segment revenue	25,301	482	6,537	67	-	32,387
Inter segment revenue	(6,184)	-	-	-	-	(6,184)
	…………….	…………….	…………….	…………….	…………….	…………….
	19,117	482	6,537	67	-	26,203
	…………….	…………….	…………….	…………….	…………….	…………….
Segment result
Operating profit/(loss)	2,428	(446)	(308)	(10)	(288)	1,376
Finance income						249
Finance costs						(28)
						…………….
Profit before tax						1,597
Tax						(348)
						…………….
Profit after tax						1,249
						=======

3.    Taxation

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

	Unaudited six months to 31 March  2009	Unaudited six months to 31 March 2008	Audited twelve months to 30 September 2008
	£'000	£'000	£'000
United Kingdom corporation tax at 28% (2008: 29%)	209	288	271
Overseas taxation	26	73	118
Adjustments in respect of prior year	-	-	37
	…………….	…………….	…………….
Current taxation	235	361	426
Deferred taxation	59	(129)	(78)
	…………….	…………….	…………….
Total taxation expense	294	232	348
	=======	=======	=======

At 31 March 2009, the Group had an undiscounted deferred tax asset of £398,000 (30 September 2008: £475,000, 31 March 2008: £571,000). 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 tax assessed for the period is lower than the standard rate of corporation tax in the UK of 28% (2008: 29%). The differences are explained as follows:

	Unaudited six months to 31 March 2009	Unaudited six months to 31 March 2008	Audited twelve months to 30 September 2008
	£'000	£'000	£'000
Profit on ordinary activities before tax	922	1,199	1,597
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 28% (2008: 29%)	258	348	463
Effect of:
Share options exercised	-	-	(122)
Expenses not deductible for tax purposes	117	(72)	72
Adjustments to tax charge in respect of prior year	-	-	37
Higher rates on overseas taxation	8	14	8
Research and development tax credit	(89)	(58)	(110)
	…………….	…………….	…………….
Total tax expense	294	232	348
	=======	=======	=======

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 2009 there were 65,190,166 allotted, called up and fully paid ordinary shares of 0.25p each, and the weighted average number of shares was 65,190,166 (30 September 2008: 64,015,679, 31 March 2008: 63,380,929).

The diluted earnings per share is based on a weighted average number of shares for the six months ended 31 March 2009 of 71,408,213 after taking account of the dilutive effect of share options and future shares to be issued (30 September 2008: 69,333,084, 31 March 2008: 69,219,282).

5.    Movement in reserves

	Share premium account	Merger reserve	Retained earnings	Shares to be issued	Foreign currency translation reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 October 2008	6,620	1,464	7,883	1,470	(2)	17,435
Retained profit for the period	-	-	628	-	-	628
Currency translation differences on foreign currency net investment	-	-	-	-	326	326
Deferred tax in respect of employee share options	-	-	(52)	-	-	(52)
Premium on issue of shares	-	-	-	-	-	-
Dividend paid (note 8)	-	-	(75)	-	-	(75)
Share based payments	-	-	3	-	-	3
	……………	……………	……………	……………	……………	……………
Closing equity shareholders' funds	6,620	1,464	8,387	1,470	324	18,265
	=======	=======	=======	=======	=======	=======

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

	Unaudited	Unaudited	Audited
	six months to	six months to	twelve months to
	31 March	31 March	30 September
	2009	2008	2008
	£'000	£'000	£'000
Decrease in cash for the period	(885)	(647)	(3,384)
Currency movements	145	(28)	82
Payment of capital element of hire purchase arrangements	100	91	169
	……………	……………	……………
Movement in net funds in the period	(640)	(584)	(3,133)
Net funds at 1 October	2,674	5,807	5,807
	……………	……………	……………
Net funds at 31 March	2,034	5,223	2,674
	=======	=======	=======

7.    Share capital

	31 March	31 March	30 September
	2009	2008	2008
	£'000	£'000	£'000
Authorised
100,000,000 ordinary shares of 0.25p	250	250	250
	……………	……………	……………
Allotted, called up and fully paid
65,190,166 shares of 0.25p (30 September 2008: 65,190,166 ordinary shares of 0.25p)	163	159	163
	……………	……………	……………

During the six month period ended 31 March 2009 no ordinary shares of 0.25p were issued for cash in respect of share options exercised.

8.    Dividend

During the six months ended 31 March 2009 a dividend of 0.115 pence per share was paid in respect of the financial year ended 30 September 2008 totalling £75,000. During the six months ended 31 March 2008 a dividend of 0.115 pence per share was paid in respect of the financial year ended 30 September 2007 totalling £72,000.

9.    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.

 

END

 

 

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