Preliminary Results

RNS Number : 2174X

OMG PLC

02 December 2010

 



Thursday, 2 December 2010

OMG plc

Preliminary results for the twelve months ended 30 September 2010

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 preliminary results for the twelve months ended 30 September 2010.

Financial Highlights:

·      Revenue up 19% to £31.2m (FY09: £26.2m)

·      Adjusted profit before tax* of £3.2m (FY09: £1.1m)

·      Reported profit before tax of £1.0m (FY09: £0.6m)

·      Healthy cash position of  £6.2m (FY09: £2.8m)

·      Proposed dividend doubled to 0.3p

Operational Key Points:

·      Record sales and profits ahead of expectations

o  The signing of the biggest single contract in the history of the group by Yotta DCL

o  Growth across all divisions in a patchy and partial economic recovery

o  Successful strategy of diversifying into new markets and investing in new products

·      Vicon saw a strong rebound:

o  Recovery in North American market

o  House of Moves up 76%

o  Rest of World revenues up 13%

o  House of Moves contract for animation project with Stan Lee, co-creator of Spider-Man, X-Men, Iron Man and The Hulk

·      Strong end to the year for Yotta:

o  Recovery in the UK in H2

o  Market conditions continue to hit Yotta USA, leading to £1.9m impairment charge

o  Contracts won with Welsh Assembly Government, Bury Metropolitan Borough Council, Nottingham County Council and Leicestershire County Council

·      2d3 continues to grow:

o  Revenues up 37%

o  Very close to break-even (before allocation of Group overheads)

o  First reseller agreement for TacitView with American Aerospace Advisors

o  Enthusiastic response to launch of TacitView 2.0

*before share-based payments, amortisation of intangibles arising on acquisition and non-recurring costs - see note 5

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

"2009/10 has been, by any measure, OMG's best ever year. We registered record sales and profits, signed the biggest single contract in the history of the Group, and saw our businesses achieve some notable successes across their various markets. We won long-term business that guarantees significantly greater security and stability of income and we've ended the year with over £6 million in the bank.  This performance is particularly pleasing given the difficult market conditions last year, with all three divisions showing good growth and strengthening pipelines.

"Looking ahead to 2010/11, the Board and I remain committed to building shareholder value and continued growth, both within our existing businesses and through acquisition.  Whilst the economic outlook remains uncertain, the Group's performance over the last year entitles us to feel confident about the future.  With our strategy tested in the toughest conditions imaginable, and with innovative products and services establishing positions of strength in an increasingly wide range of markets around the world, there's every reason to believe that OMG can achieve even more in 2010/11, and over the years to come."

For further information please contact:

OMG plc	[phone]
Nick Bolton, CEO David Deacon, CFO
Financial Dynamics	[phone]
Juliet Clarke / Matt Dixon / Emma Appleton
Evolution Securities (NOMAD to OMG)	[phone]
Jeremy Ellis

Chairman's statement

OMG! Astonishing stuff

Following on from a record half, I'm very pleased to report that 2009/10 has been, by any measure, OMG's best ever year. We registered record sales and profits. We signed the biggest single contract in the history of the Group, and saw our businesses achieve some notable successes across their various markets. We won long-term business that guarantees significantly greater security and stability of income and we've ended the year with over £6 million in the bank.

Not bad at all, I think you will agree. But what makes this not just "pleasing" or "gratifying", as Chairmen usually remark in similar circumstances, but little short of astonishing, is that just 12 months ago we had such a different story to tell. You may remember that, with the world still in the grip of the worst recession in decades, we described 2008/09 as the toughest year we had ever experienced - and we definitely weren't overstating the case.

Tested and toughened

When you examine the facts more closely, this improvement in OMG's fortunes is actually easier to understand than it first appears. Like many businesses, we were forced by the recession to sharpen up our act and we achieved this by improving efficiency and reducing costs. And, as we said all along, we always believed that our strategy of using our brilliant technology to open up new markets with long-term growth potential would pay dividends, not least in enabling us to ride out turbulence better than a business with all its eggs in one basket.

So, even in the bleakest moments of the global downturn, we always remained confident that we were on the right course. Our diversified portfolio has undoubtedly served us well and with our resilience and strategy tested and toughened by the recession, we emerged in better shape than ever to take advantage of the slowly improving conditions.

I hardly need say, though, that we are far from complacent about the recovery in the global recession, which at this point is both partial and patchy. In the US, in particular, we've encountered extremely variable conditions over the last year, which have been clearly reflected in the contrasting performance of different parts of our business. As you'll read in Nick's review, there's been good growth in our engineering and life sciences markets, and a more gradual improvement in entertainment, enabling our Vicon business - and especially our House of Moves division - to turn in excellent results. Meanwhile, Yotta USA has struggled, because of the continuing problems in the US property market. In recognition of these difficulties, the Group has provided in full for the £1.9m carrying value of Goodwill and Intangibles in relation to the acquisition of Yotta USA (MVS) following an impairment review.

Sharing the rewards of our success

Having sounded that important note of caution, I'm happy to be in a position to announce some good news for our shareholders. I'm very conscious that, since I became Chairman in 2002, I have continually been asking for your patience, in regarding OMG as an investment with great long-term potential.

At last, we are reaching a point where that potential and the endless possibilities we have talked about so enthusiastically are starting to turn into solid performance, reflected this year in a significantly increased dividend. Since introducing a progressive dividend policy in 2006, we've tried to maintain a steady, year-on-year increase. This year, in recognition of our record-breaking performance, we are proposing to double the dividend to 0.3p.

Of course, I recognise that, even with this "accelerated" increase, the dividend is hardly going to make anyone rich overnight; and it remains as important as ever to us that shareholders should take a long-term view. Nevertheless, I hope you will see this not just as a token of our appreciation for your continued support, but a strong indication of our confidence in the future and our prospects for continued growth.

Financial performance: in close-up

Reporting a good financial performance begins with a great revenue performance and we delivered this across most of the Group, with revenues of £31.2m representing overall growth of 19% compared to 2008/09.

This growth was driven by a recovery in Vicon's North American market, which saw systems revenues grow by 25%, as well as a buoyant services market, which helped House of Moves grow 76% compared to last year. Outside the USA, Vicon continued to grow, recording rest of world revenues of £9.9m, up 13% year on year. 

Elsewhere in the Group, Yotta UK had a tough time during the winter but bounced back in the second half to report an overall improvement in revenues to £4.8m. Yotta USA continued to struggle in a depressed US property market and was our only business not to report growth in the financial year. Meanwhile, 2d3 continues to go from strength to strength, reporting revenues of £1.2m - up 37% compared with last year.

Impressive revenue performance coupled with on-going cost control enabled the Group to report a profit before tax of £1.0m, compared with £0.6m a year ago. On an adjusted basis, before share-based payments, amortisation of intangibles and other non-recurring costs including the impairment of Yotta USA, the year saw profits jump to £3.2m, compared with £1.1m in 2008/09 (see Note 5).

Foreign exchange rates behaved themselves during 2010, so the comparison between the reported figures this year and last is not materially affected. The one exception to this is that 2008/09 did include a significant revaluation of UK-based dollar assets, which benefited the Income Statement by £0.8 million - and this has not been repeated in 2009/10, which makes the improvement in adjusted profit compared to last year (after adding back this book gain) even more impressive.

Our positive trading performance during the financial year is reflected in our balance sheet, which includes a healthy cash position of £6.2m, compared with £2.8m a year ago. This improvement was underpinned by working capital management, which saw inventory reduce significantly, and also by prudent investment in capital-related assets of £0.9m. The balance sheet also reflects a full impairment of Goodwill and Intangibles in relation to Yotta USA of £1.9m which has been necessary in light of the trading performance in a very tough US property market and a review of future prospects in the medium term.

Looking ahead

Looking ahead to 2010/11, the Board and I remain committed to building shareholder value and continued growth, both within our existing businesses and through acquisition.

It's worth emphasising that although we didn't complete any acquisitions in 2009/10, this remains a vital part of our plans for continued growth. As we have explained in previous reports, we have a clearly defined strategy for making such additions, based on "acquiring to amplify" - that's to say, buying businesses with skills and expertise that we believe can achieve more when combined with our fantastic technology. And we don't buy unless we're certain that the fit is right and financially accretive.

In closing, I can only reiterate that, whilst the economic outlook remains uncertain, the Group's performance over the last year entitles us to feel confident about the future. To say the least, 2009/10 was a year in which we exceeded our own high expectations. With our strategy tested in the toughest conditions imaginable, and with innovative products and services establishing positions of strength in an increasingly wide range of markets around the world, there's every reason to believe that OMG can achieve even more in 2010/11, and over the years to come.

Chief executive's review

New, improved OMG!

Looking back over the last 12 months, what excites me most about our record results is the proof they provide of how much OMG has changed in recent years. It's not just that we've grown rapidly, though it's certainly true that we have: our 2009/10 revenue of £31.2 million is more than double the figure we reported five years ago. It's the fact that today's OMG is such a massively different business from the one we were running back then.

Just consider the evidence. The single most notable achievement of 2009/10? Probably the signing of the Group's biggest ever contract, by Yotta DCL - a business that's only existed since 2007. The most impressive all-round performance by any of our business units? A strong contender would be the remarkable results turned in by House of Moves, acquired by OMG in 2004. The most significant development in terms of long-term growth potential? That would be the news that our defence industry venture 2d3 is very close to break-even before allocation of Group overheads in just its third full year of trading as a stand-alone division. Or, hang on, maybe it would be Vicon's worldwide system sales growing by 18% year on year.

In any case, whatever our most startling successes and biggest breakthroughs over the past year, one thing that's indisputable is the fantastic energy, commitment and creativity shown by all our 200 plus people over the last 12 months. And I'd like to take this opportunity to thank them - and, of course, all our customers - very warmly indeed for their part in making 2009/10 our best ever year.

Delivering on diversity

Of course, when you look a bit more closely at what we achieved last year, not everything has changed. The Vicon T-Series, for example, continues to dominate in the field of motion capture, as it and its predecessors have for over 20 years. But even here, in the traditional heartland of our business, we've renewed and transformed our offering - widening the market by introducing a new, more accessibly priced Vicon product, Bonita, which has become our fastest ever selling camera.

In short, our strategy of diversifying - both into new markets and within existing ones - is now delivering exciting results, while ensuring that OMG never stands still. For me, that sounds like just about the most essential prerequisite for running a successful technology business.

Nichebusters!

Playing devil's advocate for just a moment, I know that some might see a possible flaw in our diversification strategy: the fact that all OMG products and services, existing and new, compete in niche markets. But we're increasingly clear that this represents a strength rather than a weakness.

For us, niche definitely isn't a dirty word: being the biggest player in a relatively small market is the perfect position to be in. In a cluttered and overcrowded world, it's the easiest way to achieve real cut-through. By compelling us to be serious about understanding and responding to customer needs, it helps ensure that we successfully differentiate our products and services from those of our competitors.

And the good news is that being a specialist "nichebuster" doesn't impose any restriction on potential growth. On the contrary, we see an almost unlimited number of niche markets out there in which our brilliant technology could enable us to establish a position of strength. For us, this is a proven principle on which our past success has been based, and which will continue to guide our future growth, both organic and by acquisition.

Now, back to the year under review: let's take a closer look at how our three main businesses performed.

Vicon: back in the USA - and looking good around the world

Established way back in 1984, Vicon may be the oldest subsidiary within the Group, but in 2009/10 it demonstrated a vibrancy, vitality and determination to stay relevant that would put many a start-up business to shame.

The headline news in relation to Vicon is that US sales are back on track, after last year's recession-induced nose-dive. And elsewhere too things are looking decidedly rosy for our market-leading motion capture business, with overall Vicon group revenues up by 26% and a whole host of reasons to be cheerful, ranging from the unbelievable performance of our new Bonita camera to a strongly resurgent Japanese market.

From entertainment to engineering

In the US entertainment market, conditions remained tough (though, as we explain below, House of Moves achieved remarkable things). But overall, our good US performance, with system sales up 25% on 2008/09, was based on strong growth in life sciences and engineering, which outsold entertainment for the first time.

Elsewhere, probably the most encouraging development for Vicon was a dramatic improvement in Japan, where sales were up three fold on last year. But generally, around the world, results were very positive indeed, with sales in numerous countries including Russia, Australia and Taiwan, adding up to overall growth outside the US of 13%.

House of Moves: powerhouse performance

Within Vicon, our Los Angeles-based House of Moves motion capture and animation services studio deserves a special mention for its outstanding performance in 2009/10, exceeding its fairly ambitious revenue target by over 76%. In view of the continuing slowdown in the US entertainment sector, warm congratulations are definitely due to Brian Rausch and his team.

When Brian joined us less than three years ago, House of Moves was well established as a world leader in motion capture services. But since then, the business has developed dramatically, as we've seized the opportunity to move into animation, building a multi-talented team that blends technological expertise and creative skills of the highest order - a very rare combination indeed.

As a result, House of Moves is now a centre of excellence for the US entertainment industry, offering a truly end-to-end production service, from character design through to rendering, as well as facilities including what we believe is the world's largest motion capture sound stage, with 200 Vicon T160 cameras.

The best example yet of what this transformation means in practice is a hugely exciting animation project that House of Moves is currently working on, in collaboration with legendary comic book writer Stan Lee, co-creator of Spider-Man, the X-Men, Iron Man and the Hulk.

What makes this such an incredible opportunity is the depth and breadth of our involvement. Presented with the concept and character designs created by Stan Lee, we've done the rest - from modeling the characters and their environments, through storyboarding, to motion capture, lighting, rendering and final output.

Vicon cameras: always a better choice 

Launched towards the end of 2008/09, our more compact entry level camera Bonita made an enormous impact in its first full year - outselling any previous Vicon camera in its first 90 days, and shipping to 17 different countries, including Saudi Arabia, the Czech Republic and Australia.

What makes this outstanding performance so particularly pleasing is that things have worked out precisely as we hoped and planned. We've been entirely successful in positioning Bonita as our "Mini" in relation to the T-Series "BMW"; a claim substantiated by the fact that T-Series sales have not been cannibalised by the new arrival. In fact, on the contrary, we've found Bonita invaluable in helping us to "up-sell" to customers in need of even higher levels of sophistication and performance.

Meanwhile, the multi-award winning T-Series sails serenely on, dominating the upper end of the motion capture camera market as completely as ever; the natural first choice for every application, from creating blockbuster visual effects in movies such as Iron Man 2 and the forthcoming Tron: Legacy, to teaming up with sportscotland to help their "iron men and women" prepare for the Olympics.

In short, more than ever before, our customers across the entertainment, engineering and life sciences industries can be sure there is a Vicon camera that is exactly right for the specific motion capture task they have in mind.

Golf: our latest drive for increased sales

Ever met a golfer who wouldn't dearly like to drive the ball 30 or 40 yards further? Neither have we. Which is why we're so excited about Vicon's new venture into this large and highly lucrative market.

In collaboration with Fujikura, the world's premier golf shaft manufacturer, our technology is transforming the science of club-fitting, offering players at all levels dramatic improvements in their game. Our new Enso system was launched to a rapturous response at the PGA Show in Orlando in January, and we hope will soon be in use at fitting centres across the US - analysing each customer's golf swing, enabling the optimum shaft to be recommended.

Vicon Revue: the "Best of What's New"

In our last annual report, we told you about the enormous potential we saw in a completely new departure for Vicon. Having signed a licensing agreement with Microsoft to develop their SenseCam technology and market it worldwide, we had just launched Vicon Revue, a wearable camera that automatically captures thousands of pictures a day.

At the time, we were particularly excited about the role we believed this innovative new product could play in helping Alzheimer's patients to recover "lost" memories. And we're pleased to say that others have proved to share our enthusiasm, with Revue recently winning Popular Science magazine's prestigious "Best of What's New" award.

Further detailed research is currently being pursued, to establish how best Revue can help not just Alzheimer's sufferers, but many other patients with memory loss. But meanwhile, we're more convinced than ever that we are onto something big, and that the concept of "moment capture" has transformative potential across a range of markets, some of which we are currently exploring. For now, it's very much a case of "watch this space".

The Vicon difference: as strong as ever

All in all, then, it was a year of really excellent progress for our most mature business, which continued to break new ground technologically while moving into whole new markets with the single-minded aim of establishing a dominant position.

This growth into new markets, especially its use in engineering, has meant Vicon systems are increasingly being seen as a generic test and measurement tool. In other words, the market is recognising when you need to measure something which is moving, easily and to very high levels of accuracy, you should be using a Vicon system.

Amid all this forward movement and change, though, one thing that has remained constant is "the Vicon difference". We still offer the market's only 16 megapixel motion capture camera, and the only system with dedicated software applications for each of its markets. A quarter of a century on, the longest established rule of motion capture still holds good: if you want the very best, you buy Vicon.

2d3: a watershed year for our highest flying business

After just three years as a stand-alone division, our defence and aerial imaging business returned revenues of £1.2 million, achieving a first half break-even performance for the first time; a major milestone for the Group and, we firmly believe, a strongly positive indication of 2d3's enormous long-term growth potential.

We continued to make real headway on both sides of the Atlantic, building ever closer relationships with key defence contractors in the US, strengthening links with the UK Ministry of Defence, and launching well received new products into a market that is rapidly gaining knowledge and understanding of the unique capabilities provided by OMG technology.

US: progress through partnership

2d3 is now firmly established as a credible player within the US ISR (Intelligence, Surveillance, Reconnaissance) market, where there is a fast growing recognition of the need to manage intelligence from video. But, as a foreign-owned business, we will always find it hard to establish direct relationships with government. So using our technological expertise to make 2d3 an indispensable partner is key to our strategy for continued growth in this market.

Specifically, over the last year, we've been very successful in creating "demand pull" among government programme managers, who put pressure on prime contractors to involve us in high profile projects.

For example, we successfully participated in a US Air Force project called CRATR, focusing on the rapid assessment of damaged runways. Using our TacitView software, we performed the complex computer vision tasks of acquiring full motion video and creating geo-located mosaics - enabling decision-makers to rapidly compare images of the same runway across time, in order to identify critical repairs with minimum turnaround time.

More prestigious still, 2d3 has recently been awarded a sub-contract to supply critical computer vision capabilities to DARPA, the US Department of Defense's Advanced Research Projects Agency. This places us at the cutting edge of technologically-led innovation within the US defence establishment, an extraordinary achievement for a relatively small newcomer on the scene.

Fighting fire with visual intelligence

While 2d3's focus in the US has mainly been capitalising on our technology in the defence arena, there are many more applications just waiting to be explored. What we do better than anyone is enable users to exploit their imagery - to locate, measure, track and record what's happening in the world today. Which means that TacitView and our other software capabilities have enormous potential across markets such as pipeline patrol, border protection, law enforcement, and forestry services - including forest fire-fighting. In 2009/10 we achieved a notable success, signing our first reseller agreement with American Aerospace Advisors for use on US Forestry and Fire Fighting Programs.

For this application, we have shown how aerial imaging can play a valuable role in fighting the fires that regularly ravage huge tracts of forest across the US, by providing intelligence on how the fire is spreading, where it's hottest, what stands in its way, and so on.

UK: high performance research

Meanwhile, in the UK, 2d3 continued to make excellent progress, with increased revenues of £0.6 million largely attributable to the research services we provided to the Ministry of Defence, where our team of vision experts successfully delivered a further eight research projects.

We're also proud to be playing a part in safeguarding the nation against terrorist threats. 2d3 has recently been contracted by the Counter Terrorism Centre (CTC) to engage in work related to the automatic tracking and location of people and objects during the sweeping of premises and roadways for explosive or other devices. The projects make use of our experience in image-based tracking and will incorporate innovative methods of presenting information to the operator, based on augmented reality.

TacitView 2.0: building a product business

Arguably the single most significant development of the year for 2d3 was the launch in January of a new improved version of our TacitView software application for processing and understanding imagery from Unmanned Aerial Vehicles (UAVs) and other sources. Based upon our fast-growing understanding of military requirements and priorities, this provides a host of new capabilities, which make it even more flexible and easy-to-use, in all kinds of situations. For users, the major benefit is, quite simply, quicker, better informed decision-making.

But from our point of view, the key significance of TacitView 2.0 is that it represents an important step towards our goal of making 2d3 a product-based business, rather than merely a supplier of services. Currently, we're still largely in the business of selling OMG's expertise, in the form of consultancy. But we're perfectly clear that real profitability and long-term growth will depend on product sales, and we're committed to shifting the balance of our business in that direction.

So far, response to TacitView 2.0 has been highly positive, with every prospect of some significant orders in 2010/11.

Same product, different package

As an off-the-shelf product, TacitView 2.0 is primarily of interest to manufacturers of UAVs, enabling them to offer a fully equipped aerial imaging platform. But we've also been quick to recognise that we can package many of the key components that make up TacitView in ways that meet large defence contractors' need for greater modularity.

By offering software libraries, from which they can pick and choose, we're giving them the option of integrating 2d3 image understanding expertise into the solutions they are developing. Yet another way in which we are creating ever closer links with the prime contractors who represent our passport to the top table.

Taking 2d3 to the next level

Overall, we are delighted with the progress 2d3 has continued to make over the last year. We always said that it would take time to build relationships and to establish our credibility in the vast and conservatively-minded defence industry. But just three years in, we've done precisely that, whilst nearly achieving a full year break-even performance before allocation of Group overheads for the first time.

So, definitely happy . . . but far from satisfied. So far, our level of investment in 2d3 has been relatively modest. We know that if we are prepared to put more in, we stand to get a deal more in return. In short, our highest flying business is ready to go to the next level.

Yotta: a rather bumpy road, but with more ups than downs

Our hi-tech surveying business experienced decidedly mixed fortunes, with the continuing troubles of the US property market and the British climate on the negative side, more than outweighed by some very exciting developments, including a deal worth £4-5 million over the next four years - the biggest single contract the Group has ever won.

Disappointing US performance

Yotta USA revenues in the US were down to £2.0 million, resulting in an operating loss of £0.7 million. There's a straightforward explanation for this: our American business is focused on providing street-level surveys used by county governments to assess property values for taxation purposes; and as long as the property market remains severely depressed, there is simply no incentive for the county governments to carry out revaluations. Given these conditions the slowdown has focused our attention on reducing costs and increasing efficiency - for example, by concentrating our efforts on stronger local markets, sizing our fleet to meet current needs, and leasing vehicles as and when needed.

Our biggest ever deal

Back in the UK, the year got off to a cold start, with the exceptionally bad weather making surveying impossible for a large part of December and January.

But things brightened up dramatically when Yotta was awarded a four year contract by the Welsh Assembly Government to carry out a comprehensive condition survey of the country's roads; an enormous piece of work covering around 15,000 km of roads, and enabling 22 local authorities around Wales to benefit from better highways information.

Naturally, we are delighted to have won such a large and prestigious contract. But, above all, it's the long-term financial visibility it provides that is of greatest value to us: put simply, we know that two of our state-of-the-art surveying vehicles are fully booked for 6 months in advance, and that we have a significant income stream assured until 2014.

Elsewhere in the UK

More generally, the second half of the year turned out very well indeed, with Yotta continuing to win other sizeable contracts from highways authorities around the country, including Bury Metropolitan Borough Council, Nottingham County Council and Leicestershire County Council.

In total, we carried out our highest value and most technologically advanced SCANNER surveys on almost 50,000 km of roads throughout the country, while our more labour-intensive visual surveys provided authorities with detailed information on a further 30,000 plus km.

As we announced in our last annual report, a key development in 2010 was the launch of the Footway Network Survey (FNS). Having successfully trialled our dedicated FNS software in 2008/09, Yotta became the first UK surveyor to be accredited for surveying methodology and software. And we've worked on seven contracts to date, which gives us a dominant position in this important new sub-market, with a pipeline of prospective business indicating continued strong growth.

Innovating to deliver real benefits

As in every area of OMG's business, technological innovation is a high priority - specifically the kind that delivers real benefits to our customers. The best example of this in 2009/10 was the launch of NotaVia, our new "zero human touch" data collection software, which enables surveyors to collect precisely the data they want faster, more accurately and more efficiently than ever before.

Largely, of course, it's our own surveyors who will be using NotaVia, enabling them to provide our local authority customers with significantly higher standards of service. But we're also looking to generate income by selling this innovative software; and so far response has been positive, with Transport for London one of the bigger customers already using NotaVia.

Raising our environmental game

One other achievement last year that we're particularly proud of: in July, we became the first highways surveying company in the UK to achieve ISO 14001: 2004 accreditation, in recognition of our ever improving environmental management systems.

Very few companies of our size achieve this certification, which is based on a rigorous assessment of all areas within the business likely to have an environmental impact. As well as setting a framework for us to continually raise our game in this important respect, we expect it to result in valuable commercial benefits, such as reduced energy consumption and waste management costs.

With our vans covering tens of thousands of kilometres a year, our CO2 output is inevitably higher than we would wish. By way of off-setting the impact, we have also started a tree planting scheme - planting trees in every region we survey.

The road ahead . . .

Where next for Yotta? After a year in which the positives comfortably outweighed the negatives, we're looking ahead with real optimism. Having won the biggest contract in OMG's history, and proved we can handle the enormous amount of work it has generated, we're convinced that there is an addressable market to go for and believe there are other similarly large projects just around the corner.

In addition, we've ended 2009/10 with not just one income stream, but three: as you've read, whilst providing surveying services, we have started to sell our expertise in the form of software. And another significant source of income that we haven't yet mentioned is our fast expanding consultancy service: working with local authorities to devise cost-effective highway management strategies. This important part of our business grew by around 20% last year, and with the public sector under greater pressure than ever to save money in the current climate, we're confident there's plenty more where that came from in the year ahead.

Fairly amazing? Whatever next?

In our last annual report, at the end of OMG's toughest ever year in business, you may remember that our cautiously positive verdict on our own performance was "Pretty good, considering".

We've come a very long way since then. It's true, of course, that we've been helped by a slow and gradual recovery in the global economy, as many of our markets around the world have shaken off the crippling effects of the recession. But nevertheless, we hope you'll agree that what we've achieved in 2009/10 - record results, continued dominance of established markets, and exciting progress in new ones - does indeed deserve to be described as "fairly amazing".

What next? With the economic outlook still far from certain, you can be sure we're taking absolutely nothing for granted. But one firm promise we can make is that our incredible technology will continue to transform people's lives, and that OMG will continue to grow, to prosper, and to set itself new challenges, as it has throughout its history.

consolidated INCOME statement

for the year ended 30 september 2010

		2010	2009
	Note	£'000	£'000
Revenue	3	31,179	26,190
Cost of sales		(14,224)	(11,940)
Gross profit		16,955	14,250
Sales, support and marketing costs		(4,750)	(4,278)
Research and development costs		(2,335)	(3,351)
Administrative expenses - exceptional	5	(1,920)	-
- other		(7,153)	(6,181)
Other income		168	178
Operating profit		965	618
Finance income		11	14
Finance expense		(22)	(22)
Profit before taxation	3,4	954	610
Taxation	6	(632)	(128)
Profit for the financial year attributable  to ordinary owners of the parent during the year		322	482
Basic earnings per ordinary share (pence)	7	0.47p	0.74p
Diluted earnings per ordinary share (pence)	7	0.45p	0.71p

COnsolidated statement of comprehensive income FOR THE YEAR ENDED 30 sEPTEMBER 2010

		2010	2009
		£'000	£'000
Net profit for the year		322	482
Other comprehensive income
Exchange differences on retranslation of overseas subsidiaries		(75)	167
Deferred tax in respect of employee share options		(14)	(53)
Total other comprehensive income		(89)	114
Total comprehensive income for the year attributable to owners of the parent		233	596

consolidated statement of financial position AS AT 30 september 2010

		2010	2009
	Note	£'000	£'000
Non-current assets
Goodwill and intangible assets		5,175	7,226
Property, plant and equipment		2,367	2,718
Financial asset - investments		69	69
Deferred tax asset		505	566
		8,116	10,579
Current assets
Inventories		1,475	2,309
Trade and other receivables		9,413	7,627
Cash and cash equivalents		6,198	2,776
		17,086	12,712
Current liabilities
Trade and other payables		(5,651)	(4,451)
Current tax liabilities		(783)	(94)
		(6,434)	(4,545)
Net current assets		10,652	8,167
Total assets less current liabilities		18,768	18,746
Non-current liabilities
Financial liabilities		(9)	-
Deferred tax liability		(120)	(405)
		(129)	(405)
Net Assets		18,639	18,341
Capital and reserves attributable to owners of the parent
Share capital		171	171
Share premium account	8	6,773	6,773
Merger reserve	8	2,928	2,928
Retained earnings	8	8,677	8,304
Foreign currency translation reserve	8	90	165
Total equity shareholders' funds		18,639	18,341

consolidated STATEMENT of CASHFLOws for the year ended 30 september 2010

		2010	2009
		£'000	£'000
Cash flows from operating activities
Operating profit / (loss)		965	618
Depreciation and amortisation		1,358	1,575
Impairment of intangibles		1,920	28
(Profit) / loss on disposal of property, plant and equipment		(2)	11
Share-based payments		167	67
Exchange adjustments		(53)	(168)
Decrease in inventories		846	840
(Increase) / decrease in receivables		(1,704)	2,594
Increase / (decrease) in payables		1,574	(4,060)
		5,071	1,505
Tax paid		(179)	(380)
Net cash from operating activities		4,892	1,125
Cash flows from investing activities
Purchase of property, plant and equipment		(864)	(1,029)
Purchase of intangible assets		(753)	(114)
Proceeds on disposal of property, plant and equipment		284	309
Interest received		11	14
Acquisition of subsidiary undertaking net of cash acquired		-	(236)
Net cash used in investing activities		(1,322)	(1,056)
Cash flows from financing activities
Payment of finance lease liabilities		(32)	(144)
Interest element of finance lease repayments		(4)	(22)
Other interest paid		(18)
Equity dividends paid		(102)	(75)
Net cash used in financing activities		(156)	(241)
Net increase / (decrease) in cash and cash equivalents		3,414	(172)
Cash and cash equivalents at beginning of the period		2,776	2,877
Effect of exchange rate changes		8	71
Cash and cash equivalents at end of the period		6,198	2,776

Major non-cash transactions

Part of the consideration paid during the prior year for the purchase of Mobile Video Services Inc comprised shares. Also during the prior year shares relating to the deferred consideration for the purchase of Data Collection Limited were issued.

consolidated STATEMENT of CHANGES in EQUITY For the year ended 30 september 2010

	Share Capital	Shares to be issued	Share premium account	Merger reserve	Retained earnings	Foreign currency translation reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 September 2008	163	1,470	6,620	1,464	7,883	(2)	17,598
Total comprehensive income for the period	-	-	-	-	429	167	596
Transactions with owners:
Dividends	-	-	-	-	(75)	-	(75)
Shares issued	8	(1,470)	153	1,464	-	-	155
Movement in relation to share options	-	-	-	-	67	-	67
Balance as at 30 September 2009	171	-	6,773	2,928	8,304	165	18,341
Total comprehensive income for the period	-	-	-	-	308	(75)	233
Transactions with owners:
Dividends	-	-	-	-	(102)	-	(102)
Movement in relation to share options	-	-	-	-	167	-	167
Balance as at 30 September 2010	171	-	6,773	2,928	8,677	90	18,639

1.   Basis of preparation of the financial statements

The financial information in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in December 2010.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise judgement in the process of applying the Group's accounting policies which affect the reported amount of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reported period.  Although the estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. There have been no significant changes to the Group's accounting policies during the year.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 for the years ended 30 September 2010 and 30 September 2009, but is derived from those accounts.  The statutory accounts for the year ended 30 September 2009 have been delivered to the Registrar of Companies and those for the year ended 30 September 2010 will be delivered following the company's annual general meeting.  The auditors have reported on those accounts: their report was unqualified, did not contain references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 of the Companies Act 2006 for the year ended 30 September 2010 or 30 September 2009.

2.   Basis of consolidation

The consolidated financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 September 2010. 

3.     Segmental analysis

The Group comprises the following business segments:

·      Vicon Group: This is the development, production and sale of computer software and equipment for the entertainment and life science markets;

·      Yotta Group: This is services for the management of infrastructure and taxation; and

·      2d3 Group: This is the development and sale of computer software for the defence market.

Business segments are analysed below:

	Revenue		Profit before tax		Adjusted profit before tax		Non-current assets
	2010	2009	2010	2009	2010	2009	2010	2009
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Vicon UK	9,936	8,829	4,940	2,296	4,962	2,342	1,565	1,140
Vicon USA	8,789	7,002	(438)	(15)	(438)	68	1,381	1,179
House of Moves USA	4,448	2,524	936	37	936	63	771	989
Vicon Group	*23,173	*18,355	5,438	2,318	5,460	2,473	3,717	3,308
Yotta UK	4,791	4,653	(747)	(649)	(638)	(501)	3,791	4,018
Yotta USA	1,976	2,229	(2,698)	(311)	(681)	(217)	114	2,756
Yotta Group	6,767	6,882	(3,445)	(960)	(1,319)	(718)	3,905	6,774
2d3 UK	610	370	(796)	(386)	(796)	(386)	44	44
2d3 USA	629	535	113	20	113	20	141	181
2d3 Group	1,239	905	(683)	(366)	(683)	(366)	185	225
Unallocated	-	48	(356)	(382)	(227)	(278)	309	272
OMG Group	31,179	26,190	954	610	3,231	1,111	8,116	10,579

By origin
UK	15,337	13,900
USA	15,842	12,290
	31,179	26,190

By destination
UK	6,891	6,874
Europe	2,525	3,289
North America	15,255	12,074
Asia Pacific	5,762	3,589
Other	746	364
	31,179	26,190

*The following additional information is provided to the Chief Operating Decision Maker.  Further analysis by market is not available.

	£'000	£'000
Revenue by market
Entertainment	9,213	8,771
Life sciences	13,960	9,584
	23,173	18,355

	Carrying amount of segment assets		Carrying amount of segment  liabilities		Segment depreciation and amortisation
	2010	2009	2010	2009	2010	2009
	£'000	£'000	£'000	£'000	£'000	£'000
Vicon UK	7,235	4,803	(2,894)	(1,579)	370	358
Vicon USA	5,123	4,533	(1,293)	(958)	191	269
House of Moves USA	1,730	1,220	(344)	(60)	134	117
Vicon Group	14,088	10,556	(4,531)	(2,597)	695	744
Yotta UK	7,967	7,817	(1,142)	(1,147)	468	555
Yotta USA	1,171	3,462	(188)	(873)	139	141
Yotta Group	9,138	11,279	(1,330)	(2,020)	607	696
2d3 UK	1,137	449	(53)	(16)	18	27
2d3 USA	734	504	(99)	(95)	18	25
2d3 Group	1,871	953	(152)	(111)	36	52
Other unallocated	105	503	(550)	(222)	20	83
OMG Group	25,202	23,291	(6,563)	(4,950)	1,358	1,575

4.     Profit before taxation

The profit before taxation is stated after charging / (crediting):

	2010	2009
	£'000	£'000
(Profit) / loss on disposal of property, plant and equipment	(2)	11
Depreciation of property, plant and equipment - owned	825	1,084
- under hire purchase/finance lease	128	126
Amortisation of customer relationships	174	171
Amortisation of intellectual property	9	18
Amortisation of brand name	7	6
Amortisation of development costs	215	170
Impairment of intangible fixed assets	1,920	28
Share based payments - equity settled	167	67
Operating lease charges - other than plant and machinery	638	652
Foreign exchange	(33)	(759)
Research and development costs	2,335	3,351

5.     Reconciliation of adjusted profit before tax

	2010	2009
	£'000	£'000
Profit before tax	954	610
Share based payments - equity settled	167	67
Amortisation of intangibles arising on acquisition	190	195
Exceptional costs	1,920	239
Adjusted profit before tax	3,231	1,111

Exceptional costs comprise the impairment of intangible fixed assets in the year ended 30 September 2010 and redundancy and restructuring costs in the year ended 30 September 2009.

6.     Taxation

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

	2010	2009
	£'000	£'000
United Kingdom corporation tax at 28% (2009: 28%)	782	130
Overseas taxation	186	154
Adjustments in respect of prior year	(100)	18
Current taxation	868	302
Deferred taxation	(236)	(174)
Total taxation expense	632	128

At 30 September 2010, the Group had an undiscounted deferred tax asset of £505,000 (2009: £566,000).  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.

Deferred tax assets and liabilities have been measured at an effective rate of 27% and 36% in the UK and USA, respectively (2009: 28% and 36%).

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 28% (2009: 28%). The differences are explained as follows:
	2010	2009
	£'000	£'000
Profit on ordinary activities before tax	954	610
Expected tax charge based on the standard rate of corporation tax in the UK of 28% (2009: 28%)	267	171
Effect of:
Expenses not deductible for tax purposes	233	67
Impairment of intangible fixed assets	537	-
Utilisation of losses	-	(44)
Adjustments to tax charge in respect of prior year current tax	(100)	18
Adjustments to tax charge in respect of prior year deferred tax	(202)	-
Higher rates on overseas taxation	56	34
Research and development tax credit	(165)	(118)
Effect of rate change	6	-
Total tax expense	632	128

7.     Earnings per share

		2010			2009
	Earnings	weighted average number of shares	Per share amount	Earnings	weighted average number of shares	Per share amount
	£'000		(pence)	£'000		(pence)
Basic earnings per share
Earnings attributable to ordinary shareholders	322	68,306,306	0.47	482	65,577,369	0.74
Dilutive effect of employee share options	-	3,005,229	(0.02)	-	2,656,313	(0.03)
Diluted earnings per share	322	71,311,535	0.45	482	68,233,682	0.71

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares (share options).  For share options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscriptions rights and outstanding share based payment charges attached to outstanding share options.  The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise price of the share options.

8.     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 2009	6,773	2,928	8,304	-	165	18,170
Retained profit for the year	-	-	322	-	-	322
Currency translation differences on foreign currency net investment	-	-	-	-	(75)	(75)
Deferred tax in respect of employee share options	-	-	(14)	-	-	(14)
Shares issued	-	-	-	-	-	-
Premium on issue of shares			-	-	-	-
Dividend paid	-	-	(102)	-	-	(102)
Share-based payments	-	-	167	-	-	167
At 30 September 2010	6,773	2,928	8,677	-	90	18,468

	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 year	-	-	482	-	-	482
Currency translation differences on foreign currency net investment	-	-	-	-	167	167
Deferred tax in respect of employee share options	-	-	(53)	-	-	(53)
Shares issued	-	-	-	(6)	-	(6)
Premium on issue of shares	153	1,464	-	(1,464)	-	153
Dividend paid	-	-	(75)	-	-	(75)
Share-based payments	-	-	67	-	-	67
At 30 September 2009	6,773	2,928	8,304	-	165	18,170

The following describes the nature and purpose of each reserve within owner's equity.

Reserve	Description and purpose
Share capital	Amount subscribed for share capital at nominal value.
Share premium account	Amount subscribed for share capital in excess of nominal value
Foreign currency translation	Gains/losses arising on retranslation of the net assets of overseas operations into sterling.
Retained earnings	Cumulative net gains and losses recognised in the consolidated income statement.
Merger reserve	Excess of the fair value of the shares issued for the acquisition made in the year to 30 September 2007 over the aggregate of the nominal value of shares issued by the Company to the former shareholders of the acquired company, which qualify for merger relief under Section 612(2) of the Companies Act 2006.
Shares to be issued	Deferred contingent share consideration for the acquisition of Data Collection Limited in the year ended 30 September 2007.

9.   Dividend

The directors are proposing a final dividend in respect of the financial year ended 30 September 2010 of 0.3pence per share (2009: 0.15pence per share) which will absorb an estimated £205,000 of shareholders' funds.  This dividend will be paid on 1 March 2011 to shareholders who are on the register of members at close of business on 18 December 2010 subject to approval at the AGM. This dividend has not been accrued in these financial statements.

10.  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.

 

END

 

 

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