Preliminary Results

RNS Number : 1857Z

OMG PLC

09 December 2014

 

Tuesday, 9 December 2014

OMG plc

("OMG" or the "Group")

Preliminary Results for the financial year ended 30 September 2014

OMG plc (LSE: OMG), the technology group providing image understanding solutions for the entertainment, defence, life science, engineering and consumer electronics markets, announces preliminary results for the financial year ended 30 September 2014.

Financial Key Points

·      Group Revenue from continuing operations up 13.6% to  £31.2m (FY13: £27.5m)

·      Profit before Tax from continuing operations of £0.4m (FY13 Profit: £0.3m), Adjusted* Profit before Tax from continuing operations of £1.3m (FY13: £2.0m)

·      Adjusted* Profit Before Tax excluding OMG Life of £5.7m (FY13: £4.3m)

·      Stable Net Cash balance at 30 September 2014 of £7.6m (FY13: £7.8m)

·      Proposed dividend increased by 25% to 0.50p (FY13: 0.40p), in line with our stated progressive dividend policy

Operational Key Points

·      Vicon

o  Celebrated its 30th year in business

o  New products launched in all three main market sectors

o  Motion capture used most recently in the films Paddington, Transformers: Age of Extinction and Teenage Mutant Ninja Turtles and the video game - Alien: Isolation

o  Bonita, Vicon's entry-level camera, delivered record sales

o  Post period end the Group disposed of its House of Moves subsidiary by way of a management-led buyout

·      Yotta

o  Revenue growth of 38% versus the prior year

o  Strong growth of 35% in customers using Software as a Service Horizons platform

o  Mayrise integration exceeded our expectations, on a financial basis, and has increased value of recurring revenues

o  New contracts secured including The Highways Agency, Surrey County Council, Telford and Wrekin Council and East Sussex Council amongst others

·      2d3

o  Secured record order for US$5.7m from an existing defence customer

o  Signed a number of strategically important contracts in both the UK and US

o  Two major releases of software improvements to TacitView & Catalina product lines

·      OMG Life

o  New strategy adopted. Following interest from a number of market-leading consumer technology brands, the business is now focused solely on the development and licensing of the unique Autographer IP

o  Focussed R&D team retained to maintain and develop IP and its capabilities

* Profit Before Tax from continuing operations before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, fair value adjustment to contingent consideration, unwinding of discount on contingent consideration, acquisition costs and redundancy costs. The statutory equivalents of the adjusted numbers shown in this statement are disclosed in notes 3 and 5.

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

"With our three established businesses collectively delivering improved profitability, we enter the year ahead with a solid pipeline of prospects and increasing momentum as each business moves to the next stage of its development. Notwithstanding changes in macro-economic conditions, we expect our business to develop and grow.

We made some important strategic decisions around our OMG Life and our House of Moves subsidiaries which demonstrate that we are flexible when it comes to finding new ways to realise value in order to deliver sustained growth. We're making headway to realise latent value in OMG's IP and this will remain a focus for the Group in the year ahead."

For further information please contact:

OMG plc	[phone]
Nick Bolton, CEO
David Deacon, CFO
FTI Consulting	[phone]
Matt Dixon / Emma Appleton / Charles Palmer / Harry Staight
N+1 Singer (NOMAD to OMG)	[phone]
Shaun Dobson / Jen Boorer

About OMG plc

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,  engineering industries and consumer electronics markets.

The Group's technology is used to capture the movements of actors (for the movie industry), sportsmen and women (for video games or improving team performance), and children with cerebral palsy, rehab patients and animals (for medical, life science and research industries). The technology is also used for the management of infrastructure assets or even for providing image intelligence and situational awareness from unmanned aircraft. Through this diverse offering the Group has earned its strong international reputation for precision from pixels.

Founded in 1984, the Group is headquartered in Oxford, UK, and has four offices in the US and four in the UK. 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 four subsidiaries: Vicon, the world's largest motion capture and movement analysis company, 2d3, a manufacturer of specialised image understanding software for defence applications, Yotta, a provider of software and services for infrastructure asset management and OMG Life our IP licensing business.

The Group's global clients spanning the worlds of science, medicine, sport, engineering, gaming, film and broadcast include: major hospitals and research facilities such as Guy's Hospital, Nuffield Orthopaedic Centre and Loughborough University, engineering industry leaders including: Ford Motor Company, BMW, Airbus and Toyota, and in the entertainment sector; Sony, Industrial Light and Magic, Sega, Nintendo, UbiSoft, EA and Square Enix. In infrastructure asset management, clients include Highways Agency, East Sussex, Kent, Lancashire, Transport for London, UK Power Network, Cheshire East and West as well as many others. In Defence our customers include ultimately the Department of Defense in the USA and the Ministry of Defence in the UK.

For more information about OMG, visit www.omgplc.com.

Chairman's Statement

In summary, 2013/14 was a year which saw the new shape of OMG beginning to emerge. We saw three of our four subsidiaries report encouraging levels of profitability. We signed the largest deal in the Group's history within our 2d3 business, lined up the successful disposal of the House of Moves operation, which completed after the year-end, and made some important strategic decisions around our OMG Life subsidiary.

Overall the Group saw revenues from continuing operations grow by 13.6%. On a divisional basis, Vicon had a solid year achieving revenues and adjusted* profits on a similar level to last year. Yotta reported revenue and adjusted* profits growth due to an improved mix in favour of software and increasing the quality of its recurring revenue base. 2d3 achieved both revenue and adjusted* profits growth.

The hard work at OMG Life - our direct to consumer technology venture - has continued during the year. We are proud of our product here and particularly pleased that we have not only created the world's first wearable camera but have also taken a lead role in creating the entire product category in which the Autographer device now sits. It is a genuinely innovative product and one which our existing user base has engaged enthusiastically with. However we are yet to see significant consumer traction outside of the core user base to match the investments being made in marketing, media and sales channels. We have therefore taken the decision to discontinue sales, consumer marketing and manufacturing activities.

In parallel with our product efforts, we have received interest from and engaged in conversation with a number of consumer technology businesses: each of whom has seen promise and potential in the technology behind Autographer and its application. These initial conversations have since evolved into more formal licensing discussions, which remain on-going.

Based on these changes, the Board has resolved to pursue a licensing strategy for the OMG Life business, whereby the IP inherent within this division is monetised by organisations better scaled to ensure consumer success. The Board is confident that the core IP within OMG Life retains significant value, with that value being held on the statement of financial position at a sum of £1.6m (FY13: £2.0m). Further the Board is confident that a focus on generating license and royalty revenue from this IP will yield benefit in future years. To this end, a focussed R&D team has been retained to maintain and develop this IP and its capabilities. We expect, going forward, that the cost base within OMG Life will therefore reduce to an annualised level of £0.9m.

In terms of headline results for continuing operations, overall revenue was £31.2m (FY13: £27.5m) and an adjusted* profit before tax result of £1.3m (FY13: £2.0m) is reported. On an unadjusted basis including the disposal of House of Moves the Group reported a loss before tax of £0.6m (FY13: Loss of £0.4m). As at 30 September 2014, cash remained stable at £7.6m (FY13: £7.8m).

Later Nick Bolton, our Chief Executive, will go into more depth on the individual businesses and their trading performance, but noteworthy achievements in 2013/14 include:

-       A significant US$5.7m defence deal for 2d3 Inc. with an existing customer which saw the business exceed expectations.

-       Yotta achieved revenue growth of 37.8% helped by further take-up of the Horizons platform which as of yearend has 42 customers (FY13: 31 customers). Mayrise, acquired in July 2013 continued to perform well which helped to increase the value of recurring revenues to £2.7m (FY13: £2.2m).

-       Vicon (excluding House of Moves) reported a slight decline in revenues but through diligent cost control reported an adjusted* profit similar to last year. During the year Vicon successfully released new products in Life Sciences, Engineering and Entertainment segments which further cemented Vicon's leadership in the market place.

Undoubtedly, one of the key strengths to our Group is its  diversity. This diversity has offered us a wider spread of opportunity and better balance to our revenue than would have been the case if we were a single business, competing in a single market, using just one business model.

We have always believed that there is significant shareholder value to be gained through adapting our technology, experience and leadership in imaging to multiple commercial opportunities. That belief is evident in the Group we have today, with everything from the most advanced and powerful Vicon camera to our Yotta surveying system, and the software that surrounds it - all evolved from our core IP.

At the half year, we highlighted that there is significant latent value in some of OMG's IP which is not currently being captured. We are pleased to report that we're making progress to find new ways to realise this latent value, particularly in OMG Life, and this is where our attention squarely rests. The Board continues to explore a range of opportunities across all subsidiaries, which may involve the licensing of certain technologies where external companies see value in deploying our IP to pursue their own business goals or, as in the most recent case of House of Moves, the sale of certain assets, where we believe that greater shareholder value can be realised in the near term.

Financial Performance

Key performance indicators (KPIs) for the Group from continuing operations are as follows:

KPI	FY14	FY13	Change
Group revenue	£31.2m	£27.5m	+£3.7m
Group cash position	£7.6m	£7.8m	-£0.2m
Group adjusted* profit before tax	£1.3m	£2.0m	-£0.7m

The loss reported from discontinued operations (House of Moves) consisted of £0.4m trading losses for the year plus £0.6m impairment of Goodwill.

Foreign exchange rates, in particular the US Dollar-Sterling rate, have been relatively stable during 2013/14, and have not made any real impact on year-on-year Group profit before tax performance.

The Group continues to invest in Research and Development (R&D) and spent £6.8m (FY13: £5.9m) during the year. A number of key projects were completed and launched during the year detailed in the Chief Executive's statement. From this total spend, we expensed £4.3m (FY13: £3.8m) and capitalised £2.5m (FY13: £2.1m) in this year's results.

The Statement of Financial Position shows a decrease in non-current assets which includes the pending disposal of House of Moves Goodwill (£0.6m) and Fixed Assets (£0.5m). The increase in Current Assets is due to particularly strong revenues in September 2014, which contributed to an increase in Trade Receivables to £11.1m (FY13: £9.2m). The Group finished the year with a cash balance of £7.6m (30 September 2013: £7.8m, 31 March 2014: £6.5m). Assets held for sale is the book value attributed to House of Moves. The final earn-out in relation to the Sensing Systems acquisition was settled in the financial year so trade and other payables have declined accordingly. As a whole, the Statement of Financial Position remains robust.

There is a small current tax charge for the year due to the group making a taxable profit in the US resulting in an  overall effective tax rate of 3.2%.

In view of the Group's underlying progress, I am pleased to report the Board's proposal to increase the dividend for the year to 0.50p (FY13: 0.40p) in line with our stated progressive dividend policy.

All this would not be possible without the dedicated and brilliant team of people within OMG whom I would like to thank very warmly, and for the continued support of all the Group's customers and shareholders.

Looking ahead

Notwithstanding changes in macro-economic conditions, we expect our businesses to develop and grow in the year ahead. In Vicon's case, the business is entering a period of investment underpinned by the award of a grant by Innovate UK which will see the emergence of new and innovative technology over the next two years. The grant will be leveraged to help drive future growth in revenues and profits. Yotta will continue its evolution into a software and services business driven largely by Horizons which is expected to achieve further growth. The Group's SaaS orientated approach to revenue growth within Yotta will continue to help the division to be more predictable, providing increased visibility and higher quality income. 2d3 continues to gain reputational traction in the marketplace and is now embedded in key defence programmes in the USA and UK so the expectation is to see further revenue and profit growth as demonstrated by performance over the past few years. We continue to support OMG Life but as discussed earlier, the Board has actively decided to re-focus here so the quantum of investment will from now on be less of a burden on the Group's resources.

As we enter a new financial year, all four businesses are fit and healthy and ready to move forward to the next stage of their development.

* Profit Before Tax from continuing operations before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, fair value adjustment to contingent consideration, unwinding of discount on contingent consideration, acquisition costs and redundancy costs. The statutory equivalents of the adjusted numbers shown in this statement are disclosed in notes 3 and 5.

Chief Executive's Statement

Collectively 2013/14 has been a year of progress for OMG. Vicon, a solid profit performer, continues to deliver reliably. The Yotta business, transformed over the past couple of years, now has a solid platform for growth and can be relied on to produce profits from a growing software business with increasing recurring revenues. 2d3 has gained traction this year and has certainly broken out in its marketplace, where the business and its technology is recognised as the 'go to' place for Intelligence Surveillance Reconnaissance ("ISR") solutions. As for OMG Life, the innovative technology that made Autographer the world's first intelligent, wearable camera possible may well have a future as part of other third party branded products.

OMG Vicon: continuing to dominate the motion capture market

This year Vicon celebrated its 30th year of trading and demonstrated once again its ability to deliver revenues, profits and cash to the Group.

KPI	Revenue		PBT		Adjusted* PBT
	FY14	FY13	FY14	FY13	FY14	FY13
Vicon UK/ROW	£9.6m	£9.3m	£3.7m	£3.0m	£2.4m	£2.2m
Vicon US	£7.6m	£8.1m	£0.6m	£0.7m	£2.6m	£2.9m
Total Vicon	£17.2m	£17.4m	£4.3m	£3.7m	£5.0m	£5.1m

Vicon continues to define what is best in its market place and had a busy year launching new products spanning our three main market sectors - Life Sciences, Entertainment and Engineering.

In Life Sciences, Nexus 2 was launched in July 2014 to very positive market reception. Key new features broaden the software's appeal in the sectors of biomechanical modelling and data sharing. The use of third party modelling and visualisation software in biomechanics and gait analysis has grown over recent years and Nexus 2 allows seamless interaction with these packages, keeping Vicon technology at the heart of the solution. Vicon has continued its long and successful association with the Shriners Group of Hospitals with upgrades to several sites during the year. Indeed, demand continues for Vicon system upgrades. The Oxford Gait Lab, one of Vicon's longest-standing customers purchased its fifth Vicon system during the year highlighting the company's technological leadership and innovation.

For Entertainment users, two new iterations of Vicon Blade software were released during the year providing further improvements to this globally popular software solution. The Cara facial animation system launched in the previous fiscal year has been selling well to both high end production houses and animation educational facilities. An enhanced system was launched in August 2014 providing greater accuracy and flexibility together with improved robustness to cope with the challenging conditions found on film sets. At the time of writing the system is being used on several blockbuster movies as well as training the next generation of motion capture technicians and animation artists. Notable sales have been made to TV Globo, the Brazilian TV conglomerate, Quantic Dream upgraded their Vicon system for the third time and we received stage upgrade and expansion orders from Konami and the White Studio.

In the Engineering space, Vicon launched a product which was developed with a long term technology partner, Ikinema. The increased usage of game engine technology alongside the use of third party avatar software in the Engineering market has increased demand for a solving and retargeting tool that seamlessly links Vicon systems to these products. Vicon Pegasus was developed to address this need and was launched in the summer. Pegasus is already proving a popular choice in these key sectors.

Our Vicon Bonita entry-level camera, which has become synonymous with reliability, capability and affordability, continues to gain traction and delivered record sales during this year, shipping over 2,200 units.

This broad range of products alongside Vicon's renowned global support has helped establish key partnerships with turnkey system providers such as Motek Medical, EON Reality, DJI and Clearpath Robotics.

We move into FY15 with further strategic partnerships in negotiation.

Our Vicon systems continue to be featured in top video game and film releases. Indeed, most recently, Vicon was used to help create the recent productions Transformers: Age of Extinction, Teenage Mutant Ninja Turtles, Paddington (currently in cinemas) and video game Alien: Isolation.

OMG Yotta: evolving into a great business

KPI	Revenue		PBT		Adjusted* PBT
	FY14	FY13	FY14	FY13	FY14	FY13
Yotta DCL	£5.4m	£5.2m	(£0.4m)	(£0.4m)	£0.0m	£0.4m
Mayrise **	£2.5m	£0.5m	£0.8m	£0.2m	£1.5m	£0.3m
Yotta	£7.9m	£5.7m	£0.4m	(£0.2m)	£1.5m	£0.7m

** - FY13 is for 2 months trading post acquisition

Yotta, our infrastructure software and services business, reported a headline revenue increase of £2.2m, up 37.8%. The improvement in Yotta's business was achieved through a significant upturn in sales of its Mayrise software, growth in Professional Services and further traction with its Horizons SaaS platform, which grew its subscriber numbers by 40% in 2013/14. Whilst the wet weather did affect surveying the impact was lessened given 43.2% (FY13: 18.6%) of revenues are now being derived from software related activities.

Yotta grew its technology footprint through the acquisition of Mayrise Systems Limited completed in July 2013. I am pleased to report that the integration of the Mayrise business has proven to be successful, improving visibility and providing a solid platform for future growth. We highlighted the clear strategic fit and the benefits of an increased focus on sales, marketing, support and professional services associated with the Mayrise product. These factors have all contributed to the full year results. Our offering is stronger and broader with Mayrise and the union is delivering combined wins such as with Telford and Wrekin council. Other notable wins include Tower Hamlets and Gloucestershire councils. The continued demand from customers for hosted software also saw its Mayrise online offering (where Mayrise software is hosted on its own infrastructure, rather than that of the customer) grow to support over 450 users from over 35 customers.

The Horizons product was deployed as a decision support tool within the Highways Agency and is being used to incorporate data gathered from a package of condition surveys. Much of that survey data is captured by Yotta for the Highways Agency and includes traffic speed condition surveys, skid resistance and deflectograph data for England's trunk roads and motorways, covering approximately 18,650 lane miles. The decision support tool helps the Highways Agency to visualise its asset data and to run analyses to develop programmes of pavement renewals work. This contract was a real achievement for Yotta.

There have been great examples of synergistic cross-selling between the historic customer bases of Mayrise and Yotta product portfolios. For example at Halton, Warrington and Cheshire East. This has enabled Yotta to provide its customers with further insight and use for their data, as well as help it to continue to positively differentiate in its market-place. The growth in both sales and recurring revenues is very encouraging and we expect to see further benefits to Yotta and its customers as the links between its products continue to strengthen.

Yotta achieved software licence sales of £1.3m (FY13: £0.5m) and had on-going contracted software and maintenance revenues in 2013/14 of £2.7m, up from £2.2m in 2012/13. Yotta had, during 2013/14, 150 active customers in the UK.

Yotta has also strengthened the performance in its Professional Services group. Yotta provides services to its customers for the installation and configuration of its software, and delivers training and support to assist customers in gaining the maximum return on investment. Through continued focus in this area, Yotta has seen revenues grow in 2013/14 to £0.9m up from £0.6m in 2013/14.

The requirements on Yotta to meet the evolving and demanding quality management and security needs of its customers has seen the division invest in its infrastructure to ensure it can comply. During 2013/14 Yotta was awarded ISO27001:2013 (the provision of trusted and managed information security services), which is vital to its performance in the delivery of SaaS applications.

Yotta saw surveying revenues strengthen considerably in the second half of 2013/14 and ended 2013/14 having surveyed 132,176 lane km (2012/13: 128,736 lane km) across all surveying lines.

Overall an encouraging Yotta result in 2013/14 with the prospect of another good performance in 2014/15.

OMG Life: a new direction for Life

KPI	Revenue		PBT		Adjusted* PBT
	FY14	FY13	FY14	FY13	FY14	FY13
Total OMG Life	£0.5m	£0.1m	(£4.7m)	(£2.6m)	(£4.3m)	(£2.4m)

As our Chairman alluded to earlier, we are immensely proud of our technical achievements in OMG Life and with Autographer. We have played a key role in bringing both a new product and a new product category to market. It is evident, however, that the level of consumer interest we have been able to generate so far has been hampered by the level of sales and marketing spend we are able to direct at the initiative. This combined with lower unit volumes did not enable the planned for economies of scale to be achieved. The revenue and profit results for the year reflect that clearly.

As a result, we have resolved to adopt a new strategy for generating returns from the investments made to date in OMG Life and the IP behind Autographer. The time and investment that would be required on our part to meaningfully break through with consumer adoption is higher than can be accepted. This acceptance, however, does not diminish the excellence of the IP, the attractiveness of its application to the market nor the value of our efforts to date. A number of well-known and market leading consumer technology brands have expressed interest in our IP and its application. Like us, these brands believe that the concepts developed around wearable automated imaging can - and will - succeed at a consumer level. Our focus now is to work with these and other brands to see that come to fruition in a manner that sees OMG deliver a return to shareholders via a licensing and royalty model. 

OMG 2d3: Record performance, continuing to win

KPI	Revenue		PBT		Adjusted* PBT
	FY14	FY13	FY14	FY13	FY14	FY13
UK	£0.6m	£0.3m	(£0.1m)	(£0.4m)	£0.2m	(£0.3m)
US	£5.0m	£3.9m	£0.6m	(£0.2m)	£1.1m	£0.8m
Total 2d3	£5.6m	£4.2m	£0.5m	(£0.6m)	£1.3m	£0.5m

FY14 proved to be a tremendous year for 2d3 - while certain areas of the market are still reeling from the shock of sequestration, we have succeeded in landing several key accounts and building upon existing accounts. Once again, 2d3 has delivered the single largest order in the Group's history at $5.7m ($1.3m of which is pre-paid maintenance), fuelling $9m in recognised revenue while successfully balancing cost growth with revenue growth.

In addition to strong growth from the US operation, our UK business unit reversed its position from a loss in FY13 to a record adjusted* profit in FY14, delivering on an array of UK MoD Defence Science and Technology Laboratory ("DSTL") contracts, and landing some key international software license sales to the Netherlands and the German Navy, contributing significantly to 2d3's positive performance.

In addition to landing additional sales with our lead customer, USAF RPA-SOC, 2d3 also continued to achieve other significant milestones, including introduction into the US Navy's P-8 program as the on-board Full Motion Video ("FMV'") software solution. This is expected to produce a stream of orders in the future for its flagship TacitView and Catalina software suites. FY14 also saw increased professional services revenue, including contract work from the UK DSTL on a key NATO project to manage streaming intelligence data on government networks, and the US Joint Special Operations Command ("JSOC") for the integration of our software and Catalina into their FMV software pipeline. 

Progress made in several other areas of the business including our cooperative research and development agreement ("2CRADA"') with the US National Geospatial- Intelligence Agency ("NGA"), exploring the application of our commercial off-the-shelf 3D reconstruction and real-time video geo-registration capabilities, as well as achieving full ISO 9001 certification.

Our product development team continues to generate incredible capabilities in line with being an agile and flexible software organization. We had two major releases of our TacitView and Catalina software in 2014, including new and improved features, plus four incremental releases.  Our software investment in 2012 to re-design our software into a plug-in architecture has started to pay off, allowing us and our customers to rapidly integrate new features and capabilities without requiring the compilation and testing of entirely new builds of software. We continue to prove to our existing and prospective customers that we "lean forward" when it comes to providing solutions to their problems, anticipating market demand, and delivering software that is robust and easy to use.

In 2006, we set out to introduce our brand of computer vision powered solutions to the aerial imaging market. Although the "larger players" chose to compete head-to-head with each other, we took a different tack - one of commercial off-the-shelf speed and responsiveness combined with software that was intuitive, easy to use and very powerful. That approach has helped us land cornerstone accounts during the financial year in both the US and the UK, providing a solid baseline for expansion into those and adjacent accounts in the future. While we plan to continue our efforts in our key markets, we are also investigating adjacent aerial imaging markets, especially those enabled by the commercialisation of Unmanned Aerial Vehicles. These new markets and the simplification of the tools for geospatial information production will provide additional opportunities for alternate business models and complementary revenue streams.

Stepping up in 2015 

2013/14 saw all three of our established business collectively delivering improved profitability and we made some important strategic decisions around our OMG Life subsidiary. We enter 2014/15 with increasing momentum as all four businesses are fit and healthy and ready to move forward to the next stage of their development. We anticipate that 2014/15 momentum will largely be driven by Yotta's evolution into a software and services business offering increased visibility and higher quality income, 2d3's continued traction in the marketplace, sustained demand for Vicon's products and additional progress made to find new ways to realise latent value in OMG's IP. Given this momentum we expect our businesses to develop and grow in the year ahead.

* Profit Before Tax from continuing operations before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, fair value adjustment to contingent consideration, unwinding of discount on contingent consideration, acquisition costs and redundancy costs. The statutory equivalents of the adjusted numbers shown in this statement are disclosed in notes 3 and 5.

consolidated INCOME statement

for the year ended 30 september 2014

		2014			2013
		Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	3	31,196	2,245	33,441	27,470	1,986	29,456
Cost of sales		(11,149)	(1,601)	(12,750)	(10,603)	(1,669)	(12,272)
Gross profit		20,047	644	20,691	16,867	317	17,184
Sales, support and marketing costs		(6,486)	(80)	(6,566)	(5,271)	(152)	(5,423)
Research and development costs		(4,260)	-	(4,260)	(3,777)	(4)	(3,781)
Administrative expenses		(8,949)	(1,553)	(10,502)	(7,156)	(909)	(8,065)
Other operating income		62	-	62	46	-	46
Operating profit/(loss)		414	(989)	(575)	709	(748)	(39)
Finance income	6	6	-	6	11	-	11
Finance expense	6	(15)	-	(15)	(416)	-	(416)
Profit/(loss) before taxation	3,4	405	(989)	(584)	304	(748)	(444)
Taxation	7	(110)	124	14	223	69	292
Profit/(loss) for the financial year attributable  to owners of the parent during the year		295	(865)	(570)	527	(679)	(152)
Earnings per share for profit/(loss) attributable to owners of the parent during the year
Basic earnings/(loss) per ordinary share (pence)	8	0.27p	(0.78)p	(0.51)p	0.67p	(0.86)p	(0.19)p
Diluted earnings/(loss) per ordinary share (pence)	8	0.26p	(0.78)p	(0.51)p	0.57p	(0.86)p	(0.19)p

COnsolidated statement of

comprehensive income FOR THE YEAR

ENDED 30 sEPTEMBER 2014

		Group	Group
		2014	2013
		£'000	£'000
Net loss for the year		(570)	(152)
Other comprehensive income
Exchange differences on retranslation of overseas subsidiaries		20	(54)
Tax recognised directly in equity		23	53
Total other comprehensive income/(expense)		43	(1)
Total comprehensive expense for the year attributable to owners of the parent		(527)	(153)

consolidated statement of financial position AS AT 30 september 2014

COMPANY NUMBER: 3998880		Group	Group
		2014	2013
		£'000	£'000
Non-current assets
Goodwill and intangible assets		16,686	17,913
Property, plant and equipment		1,387	2,198
Financial asset - investments		69	69
Deferred tax asset		614	897
		18,756	21,077
Current assets
Inventories		1,691	1,836
Trade and other receivables		13,176	10,972
Cash and cash equivalents		7,579	7,803
		22,446	20,611
Assets classified as held for sale		720	-
Current liabilities
Trade and other payables		(8,640)	(9,749)
Current tax liabilities		(139)	(348)
		(8,779)	(10,097)
Liabilities directly associated with assets classified as held for sale		(45)	-
Net current assets		14,342	10,514
Total assets less current liabilities		33,098	31,591
Non-current liabilities
Financial liabilities		-	(51)
Deferred tax liability		(2,280)	(2,559)
		(2,280)	(2,610)
Net assets		30,818	28,981
Capital and reserves attributable to owners of the parent
Share capital		283	260
Shares to be issued		65	65
Share premium account		15,443	15,443
Merger reserve		6,589	4,008
Retained earnings		8,493	9,280
Foreign currency translation reserve		(55)	(75)
Total equity shareholders' funds		30,818	28,981

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 30 SEPTEMBER 2014

		Group	Group
		2014	2013
		£'000	£'000
Cash flows from operating activities - continuing operations
Operating profit		414	(39)
Depreciation and amortisation		3,511	1,796
Impairment of intangibles		287	-
Loss on the sale of property, plant and equipment		4	1
Share-based payments		189	389
Exchange adjustments		27	(23)
Decrease in inventories		145	34
Increase in receivables		(2,008)	(1,358)
Increase in payables		1,240	309
Cash generated from continuing operations		3,809	1,109
Discontinued operations		(221)	-
Cash generated from operating activities		3,588	1,109
Tax paid		(261)	(41)
Net cash from operating activities		3,327	1,068
Cash flows from investing activities
Purchase of property, plant and equipment		(712)	(655)
Purchase of intangible assets		(2,533)	(2,102)
Proceeds on disposal of property, plant and equipment		292	60
Interest received		6	11
Acquisition of subsidiary undertaking net of cash acquired		-	(3,003)
Net cash used in investing activities		(2,947)	(5,689)
Cash flows from financing activities
Payment of finance lease liabilities		(111)	(137)
Interest element of finance lease repayments		(10)	(11)
Bank interest paid		(5)	-
Issue of ordinary shares		-	9,006
Share issue costs		-	(514)
Equity dividends paid		(429)	(255)
Net cash used in financing activities		(555)	8,089
Net decrease in cash and cash equivalents		(175)	3,468
Cash and cash equivalents at beginning of the period		7,803	4,341
Effect of exchange rate changes		-	(6)
Cash and cash equivalents at end of the period		7,628	7,803
Amount included in cash and cash equivalents		7,579	7,803
Amount included in assets classified as held for sale		49	-
Total cash and cash equivalents at end of the period		7,628	7,803

Major non-cash transactions

During the current and prior year shares relating to the deferred consideration for the purchase of Sensing Systems Inc. were issued. 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2014

Group	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 1 October 2012	179	65	7,028	3,546	9,245	(21)	20,042
Net loss for the year	-	-	-	-	(152)	-	(152)
Exchange differences on retranslation of overseas subsidiaries	-	-	-	-	-	(54)	(54)
Tax recognised directly in equity	-	-	-	-	53	-	53
Transactions with owners:
Dividends	-	-	-	-	(255)	-	(255)
Issue of share capital	81	-	8,929	462	-	-	9,472
Costs of share issue deducted from equity	-	-	(514)	-	-	-	(514)
Movement in relation to share options	-	-	-	-	389	-	389
Balance as at 30 September 2013	260	65	15,443	4,008	9,280	(75)	28,981
Net loss for the year	-	-	-	-	(570)	-	(570)
Exchange differences on retranslation of overseas subsidiaries	-	-	-	-	-	20	20
Tax recognised directly in equity	-	-	-	-	23	-	23
Transactions with owners:
Dividends	-	-	-	-	(429)	-	(429)
Issue of share capital	23	-	-	2,581	-	-	2,604
Movement in relation to share options	-	-	-	-	189	-	189
Balance as at 30 September 2014	283	65	15,443	6,589	8,493	(55)	30,818

(1)   Basis of preparation of the financial information

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 IFRS on 9^th December 2014.

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 2014 and 30 September 2013, but is derived from those accounts. The statutory accounts for the year ended 30 September 2013 have been delivered to the Registrar of Companies and those for the year ended 30 September 2014 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 and did not contain a statement under Section 498 of the Companies Act 2006 for the year ended 30 September 2014 or 30 September 2013.

(2)   Basis of consolidation

The consolidated financial information incorporates the results of the Company and all of its subsidiary undertakings drawn up to 30 September 2014.

(3)   Segmental analysis

Segment information is presented in the financial statements in respect of the Group's business segments, which are reported to the Chief Operating Decision Maker (CODM).  The Group has identified the Board of Directors of OMG plc ("the Board") as the CODM. The business segment reporting reflects the Group's management and internal reporting structure.

The Group comprises the following business segments:

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

·      Yotta Group: This is services for the management of infrastructure, highway surveying and associated software development;

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

·      OMG Life: This is the consumer electronics segment.

Other unallocated costs represent head office expenses not recharged to subsidiary companies.

Inter segment transfers are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources.  This policy was applied consistently throughout the current and prior year.  There were no significant inter segment sales during the current or prior year.

Intra segment sales between Vicon UK and Vicon USA are eliminated prior to management and internal reporting, and hence are not shown separately in the analysis below.  The total sales from Vicon UK to Vicon USA in the year ended 30 September 2014 are £3,721,000 (2013: £3,213,000).

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories and trade and other receivables.  Unallocated assets comprise deferred taxation, investments and cash and cash equivalents.

Business segments are analysed below:

	Revenue
	2014		2013
	£'000		£'000
Vicon UK	9,626		9,267
Vicon USA	7,556		8,132
Vicon Group	*17,182		*17,399
Yotta UK	5,397		5,247
Yotta Mayrise	2,505		488
Yotta Group	7,902		5,735
2d3 UK	631		278
2d3 USA	4,934		3,939
2d3 Group	5,565		4,217
OMG Life UK	325		119
OMG Life US	222		-
Life Group	547		119
Continuing operations	31,196		27,470
House of Moves - discontinued operation	2,245		1,986
OMG Group	33,441		29,456
	Revenue
	2014	2013
	£'000	£'000
By destination
UK	9,846	7,101
Europe	3,140	2,729
North America	11,516	11,020
Asia Pacific	5,861	5,823
Other	833	797
Continuing operations	31,196	27,470
UK	20	-
North America	1,729	976
Asia Pacific	496	1,010
Discontinued operations	2,245	1,986
OMG Group	33,441	29,456
By origin
UK	18,484	15,399
North America	12,712	12,071
Continuing operations	31,196	27,470
North America - discontinued operation	2,245	1,986
OMG Group	33,441	29,456

	2014	2013
	£'000	£'000
Vicon revenue by market
Engineering	3,177	3,659
Entertainment	4,329	3,460
Life sciences	9,676	10,280
Vicon Group	*17,182	*17,399

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

	2014				2013
	Adjusted profit/(loss) before tax	Adjusting items	Group recharges	Profit/(loss) before tax	Adjusted profit/(loss) before tax	Adjusting items	Group recharges	Profit/(loss) before tax
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Vicon UK	2,373	(8)	1,359	3,724	2,162	(35)	872	2,999
Vicon USA	2,607	-	(2,054)	553	2,907	-	(2,163)	744
Vicon Group	4,980	(8)	(695)	4,277	5,069	(35)	(1,291)	3,743
Yotta UK	56	(114)	(306)	(364)	440	(453)	(440)	(453)
Yotta Mayrise	1,487	(424)	(301)	762	297	(71)	-	226
Yotta Group	1,543	(538)	(607)	398	737	(524)	(440)	(227)
2d3 UK	241	(10)	(378)	(147)	(259)	(50)	(133)	(442)
2d3 USA	1,092	(233)	(253)	606	792	(789)	(213)	(210)
2d3 Group	1,333	(243)	(631)	459	533	(839)	(346)	(652)
OMG Life UK	(4,208)	14	(402)	(4,596)	(2,357)	(37)	(175)	(2,569)
OMG Life US	(138)	-	-	(138)	-	-
Life Group	(4,346)	14	(402)	(4,734)	(2,357)	(37)	(175)	(2,569)
Unallocated	(2,170)	(160)	2,335	5	(2,027)	(216)	2,252	9
Continuing operations	1,340	(935)	-	405	1,955	(1,651)	-	304
House of Moves - discontinued operation	(373)	(616)	-	(989)	(748)	-	-	(748)
OMG Group	967	(1,551)	-	(584)	1,207	(1,651)	-	(444)

Adjusted profit before tax is detailed in note 5.

	Non-current assets		Additions to non-current assets		Carrying amount of segment  assets		Carrying amount of segment  liabilities		Segment depreciation and amortisation
	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Vicon UK	2,748	2,464	1,552	676	8,459	6,700	(2,346)	(2,204)	863	563
Vicon USA	701	1,234	43	49	3,787	3,964	(1,561)	(1,377)	45	51
Vicon Group	3,449	3,698	1,595	725	12,246	10,664	(3,907)	(3,581)	908	614
Yotta UK	4,477	4,839	407	651	10,497	8,482	(1,702)	(1,504)	594	77
Yotta Mayrise	4,586	5,033	23	5,108	9,371	9,490	(1,833)	(1,942)	458	477
Yotta Group	9,063	9,872	430	5,759	19,868	17,972	(3,535)	(3,446)	1,052	554
2d3 UK	11	15	2	3	2,353	1,684	(48)	(60)	4	9
2d3 USA	4,297	4,410	313	229	8,665	8,094	(2,163)	(4,109)	390	363
2d3 Group	4,308	4,425	315	232	11,018	9,778	(2,211)	(4,169)	394	372
OMG Life UK	1,633	2,081	862	1,123	(2,470)	733	(777)	(784)	1,137	200
OMG Life USA	-	-	-	-	380	-	(2)	-	-	-
Life Group	1,633	2,081	862	1,123	(2,090)	733	(779)	(784)	1,137	200
House of Moves - retained assets	-	-	-	-	534	-	-	-	-	-
Unallocated	303	257	17	4	(400)	1,147	(622)	(473)	20	14
Continuing operations	18,756	20,333	3,219	7,843	41,176	40,294	(11,054)	(12,453)	3,511	1,754
Yotta USA	-	-	-	-	26	26	(5)	(5)	-	-
House of Moves	-	744	26	22	720	1,368	(45)	(249)	27	42
Discontinued operations	-	744	26	22	746	1,394	(50)	(254)	27	42
OMG Group	18,756	21,077	3,245	7,865	41,922	41,688	(11,104)	(12,707)	3,538	1,796

(4)   (Loss)/profit before taxation

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

	2014	2013
	£'000	£'000
Loss on disposal of property, plant and equipment	4	1
Depreciation of property, plant and equipment - owned	584	520
- under hire purchase/finance lease	105	111
Amortisation of customer relationships	429	182
Amortisation of intellectual property	310	217
Amortisation of development costs	2,110	766
Impairment of intangible fixed assets	903	-
Share based payments - equity settled	189	389
Operating lease charges - other than plant and machinery	906	843
Fair value adjustment to contingent consideration	-	150
Foreign exchange	27	(23)
Research and development costs	4,260	3,781

(5)   Reconciliation of adjusted (loss)/profit before tax

A reconciliation of (loss)/profit before tax to adjusted (loss)/profit before tax, which the Board consider better reflects operational performance is provided below. This measure complements the statutory measure as reported in the Consolidated Income Statement and is a performance indicator provided to the Chief Operating Decision Maker.

	Group	Group
	2014	2013
	£'000	£'000
Profit before tax - continuing operations	405	304
Share based payments - equity settled	189	389
Amortisation of intangibles arising on acquisition	737	397
Fair value adjustment to contingent consideration	-	150
Unwinding of discount on contingent consideration	-	405
Acquisition costs	-	293
Redundancy costs	9	17
Adjusted profit before tax - continuing operations	1,340	1,955
Loss before tax - discontinued operations	(989)	(748)
Impairment of goodwill	616	-
Adjusted loss before tax - discontinued operations	(373)	(748)

Acquisition costs in the year ended 30 September 2013 comprise costs relating to the acquisition of Mayrise Limited.

The redundancy costs in the year ended 30 September 2014 are associated with the Yotta UK business and those in the year ended 30 September 2013 are associated with the restructuring of the 2d3 UK business.

(6)   Finance income and expense

	2014	2013
	£'000	£'000
Finance expense - Hire purchase liabilities	(10)	(11)
-  Bank interest paid	(5)	-
- Unwinding of discount on contingent consideration (note 27)	-	(405)
	(15)	(416)
Finance income - Interest income on short term bank deposits	6	11

(7)   Taxation

The tax is based on the (loss)/profit for the year and represents:

	2014	2013
	£'000	£'000
United Kingdom corporation tax at 22.0% (2013: 23.5%)	-	-
Overseas taxation	66	-
Adjustments in respect of prior year	(16)	-
Current taxation	50	-
Deferred taxation (note 22)	(64)	(292)
Total taxation income	(14)	(292)

At 30 September 2014, the Group had an undiscounted deferred tax asset of £678,000 (2013: £897,000).  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 20% and 38% in the UK and USA, respectively (2013: 21% and 38%, respectively).

The inclusion of legislation to reduce the main rate of corporation tax from 23% to 21% from 1 April 2014 and then a further reduction to 20% from 1 April 2015 was substantively enacted on 3 July 2013.  

For the purposes of deferred tax, the rate change from 21% to 20% had been substantively enacted before the balance sheet date.

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 22.0% (2013: lower than the standard rate of 23.5%).The differences are explained as follows:

	2014	2013
	£'000	£'000
Loss on ordinary activities before tax	(584)	(444)
Expected tax income based on the standard rate of corporation tax in the UK of 22.0% (2013: 23.5%)	(128)	(104)
Effect of:
Expenses not deductible for tax purposes	(47)	(309)
Unrelieved current year losses	241	327
Utilisation of losses brought forward	142	(357)
Adjustments to tax charge in respect of prior year current tax	(16)	-
Adjustments to tax charge in respect of prior year deferred tax	-	(134)
Higher rates on overseas taxation	47	532
Research and development tax credit	(245)	(194)
Effect of rate change	(8)	(53)
Total tax income	(14)	(292)

(8)  Earnings/(loss) per share

	2014			2013
	Earnings/ (loss)	Weighted average number of shares	Per share amount	Earnings/ (loss)	Weighted average number of shares	Per share amount
	£'000		(pence)	£'000		(pence)
Continuing operations
Basic earnings per share
Earnings attributable to ordinary shareholders	295	111,334,397	0.27	527	78,609,466	0.67
Dilutive effect of employee share options	-	3,912,111	(0.01)	-	13,504,414	(0.10)
Diluted earnings per share	295	115,246,508	0.26	527	92,113,880	0.57
Discontinued operations
Basic earnings per share
Earnings attributable to ordinary shareholders	(865)	111,334,397	(0.78)	(679)	78,609,466	(0.86)
Dilutive effect of employee share options	-	-	-	-	-	-
Diluted earnings per share	(865)	111,334,397	(0.78)	(679)	78,609,466	(0.86)
Total operations
Basic loss per share
Loss attributable to ordinary shareholders	(570)	111,334,397	(0.51)	(152)	78,609,466	(0.19)
Dilutive effect of employee share options	-	-	-	-	-	-
Diluted loss per share	(570)	111,334,397	(0.51)	(152)	78,609,466	(0.19)

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.

(9)   Dividend

	2014	2013
Equity - ordinary	£'000	£'000
Final 2013 paid in 2014 (0.40 pence per share)	429	-
Final 2012 paid in 2013 (0.35 pence per share)	-	255

The directors are proposing a final dividend in respect of the financial year ended 30 September 2014 of 0.50 pence per share (2013: 0.40 pence per share) which will absorb an estimated £567,000 of shareholders' funds.  This dividend will be paid on 11 March 2015 to shareholders who are on the register of members at close of business on 19 December 2014 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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