Preliminary Results

RNS Number : 2804I

OMG PLC

08 December 2015

 

Tuesday, 8 December 2015

OMG plc

("OMG", "Oxford Metrics", or the "Group")

Preliminary Results for the financial year ended 30 September 2015

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 2015.

Financial Key Points

·      Group Revenue from continuing operations of £25.8m (FY14: £25.6m)

·      Profit before Tax ('PBT') from continuing operations of £1.4m (FY14 Loss: £0.1m). Group PBT including disposals of £10.5m (FY14: Loss £0.6m).

·      Sale in April 2015 of defence software division, 2d3, to Insitu Inc., a subsidiary of The Boeing Company, for $25 million in all cash transaction. Adjusted* PBT from continuing operations of £2.4m (FY14: £0.0m). Adjusted* PBT excluding OMG Life of £4.9m (FY14: £4.4m)

·      Strong Net Cash balance at 30 September 2015 of £11.7m (FY14: £7.6m)

·      A further special dividend of 3.75p per share, returning £4.4m to shareholders and recognising the progress made in the underlying business

·      Two previous special dividends declared, returning a total of £11m to shareholders during the year

·      Proposed final dividend increased by 30% to 0.65p (FY14: 0.50p), in line with our stated progressive dividend policy

Operational Key Points

·      Yotta

o   Record year with revenue up 9.3% to £8.6m (FY14: £7.9m)

o   Annual value of recurring revenues increased by 33% to £3.6m (FY14; £2.7m)

o   Adjusted* PBT up 32% to £2.0m (FY14: £1.5m) driven by rising revenues from software activities which now account for 54.9% (FY14: 43.2%) of the total

o   Strong direct sales in the UK, with wins at Tyne Tees consortium, Cheshire West, Lincolnshire and Hertfordshire County Councils and a new two-year contract for Horizons with Highways England

o   International expansion with five new engagements secured following the appointment of two new overseas distributors for the Horizons product: Wegdekmeten, in the Netherlands and an independent company, Yotta Australia, in New Zealand and Australia

o   Partnering with industry leaders, including Amey and Fulton Hogan, to drive customer uptake across multiple geographies and end markets

·      Vicon

o   Adjusted* PBT improved 5.6% to £5.3m (FY14: £5.0m) through product gross margin improvements, higher R&D Capitalisation and lower R&D amortisation and careful cost control

o   Launched the next generation of motion capture camera Vicon Vantage

o   Global sales to 67 different countries during the year

o   Motion capture used most recently in the films Everest, Jupiter Ascending and American Sniper

o   Vicon customer, The Imaginarium Studios, used its T-Series system on the recently launched Coldplay music video

o   Set a new Guinness World Record for the most people motion-captured in real-time

·      OMG Life

o   OMG Life reported an adjusted* Loss before Tax of £2.5m (FY14: Loss £4.3m).

o   Restructured the business in December 2014, which removed significant proportion of the cost base with full benefit to be realised in year ahead

o   OMG Life remains well positioned to realise value from its IP with a strong pipeline of opportunities

o   Technology has been well received by some significant global businesses across a range of consumer markets

o   Two specific engineering engagements now started with two global consumer electronics businesses

* Profit Before Tax before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, and exceptional costs including compensation to contractor manufacturer, Autographer inventory write-off 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:

"We set out at the start of 2015 to generate significant returns for our shareholders - and this we have done. First, we have ensured that the very core of our operations remain profitable, well positioned and cash generative. In addition, we have also proven through our sale of 2d3, our ability to deliver on the founding principle of Oxford Metrics: to identify, nurture and drive value from our core IP. This has been a year of clear progress in that regard and I look forward to the year ahead with confidence."

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, life science, engineering industries and consumer electronics markets.

The Group's technology is used globally 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 pavement and street furniture. Through this diverse offering the Group has earned its strong international reputation for precision from pixels and its unique expertise in imaging technology.

Founded in 1984, the Group is headquartered in Oxford, UK, and has two offices in the US and four in the UK. It has customers in over 65 countries and is a quoted company listed on AIM, a market operated by the London Stock Exchange. The Group trades through three subsidiaries: Vicon, the world's largest motion capture and movement analysis company, Yotta, a provider of software and services for infrastructure asset management and OMG Life, our IP licensing business, which is focused on unlocking latent value in Oxford Metrics's IP.

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, Headley Court and Loughborough University, engineering industry leaders including: Ford Motor Company, BMW, Toyota and European Space Agency and in the entertainment sector; The Imaginarium, Sony, Industrial Light and Magic, Sega, Nintendo, UbiSoft, EA and Square Enix. In infrastructure asset management, clients include Highways England, East Sussex, Kent, Lancashire, Transport for London, UK Power Network, Cheshire East and West as well as many others.

For more information about Oxford Metrics, visit www.omgplc.com.

Chairman's Statement

The past year has been an exciting period of significant and positive change for the Group; a year in which we demonstrated a clear focus on creating shareholder value. Following the successful planned disposal of 2d3 and House of Moves and by continuing to focus on organic growth in our core, we have been able to realise significant value for our shareholders. The shape of the Group going forward is also now quite different. Revenues are less volatile, profits more predictable and the Group's ability to generate cash is stronger than ever.

Overall, the Group saw revenues from continuing operations improve slightly to £25.8m (FY14: £25.6m) and adjusted* Profit before Tax ('PBT') also improve to £2.4m (FY14: £0.0m). On a divisional basis, Vicon had another solid year, with cash generation remaining strong and the business achieving revenues on a similar level to last year with an increase in the division's adjusted* PBT driven by margin improvements and careful cost management. Yotta reported revenue and adjusted* PBT ahead of last year with a further shift of revenue mix in favour of software, international expansion and a further increase in the annual value of the recurring contract revenues. OMG Life made significant progress in the development of relationships with a number of major consumer electronics businesses around the world, which are expected to lead to revenues in the future.  

The most significant corporate development was the sale of our 2d3 defence software division to Insitu Inc., a subsidiary of The Boeing Company on 10 April 2015, for $25m (approx. £16.8m). This move was a positive and important step for the Group as it delivered on the founding ambition of Oxford Metrics - to take great technology, nurture it, build it, amplify the value through acquisition and ultimately realise meaningful shareholder value from those efforts. The Group has successfully delivered two special dividends returning £11m to shareholders during the financial year in recognition of the support given since 2007 by long-standing shareholders to our investment in 2d3.

On an unadjusted basis, including the disposal of 2d3, the Group reported a PBT of £10.5m (FY14: Loss of £0.6m). As at 30 September 2015, our cash position was strong at £11.7m (FY14: £7.6m). We are distributing a third special dividend of 3.75p per share, returning a further £4.4m to shareholders, as well increasing our proposed final dividend by 30% to 0.65p (FY14: 0.50p) per share, recognising the progress made in the year.

Later Nick Bolton, our Chief Executive, will provide more depth on the individual businesses and their trading performance, but noteworthy achievements in 2014/15 include:

-       Yotta achieved revenue growth of 9.3% helped by further take-up of the Horizons platform, which as at year-end has 55 customers (FY14: 42 customers). The annual value of recurring revenues increased strongly to £3.6m (FY14: £2.7m).

-       Vicon reported a slight decline in revenues, but through product gross margin improvements, higher R&D Capitalisation and lower Amortisation and diligent cost control reported an adjusted* PBT 5.6% ahead of last year to £5.3m. In June 2015 Vicon successfully launched the next generation motion capture camera, Vicon Vantage, which sold well in the final quarter and fortifies the Group's competitive position for the years ahead.

-       OMG Life restructured in the first quarter of the year and is focused on deriving value from its technology by licensing it to consumer oriented businesses. Whilst this set of results includes no revenue benefit, our efforts have begun to be rewarded by two engineering engagements with leading global businesses which, if successful, are expected to lead to licensing agreements.

We have always believed that there is significant shareholder value to be gained through adapting our technology, experience and leadership in imaging and measurement to multiple commercial opportunities. Our long stated strategy is to generate shareholder value by taking world-class IP and monetizing it through commercial sales. This approach is something we have proven we can do throughout our history. We have established Vicon as a profitable market leader; scaled and sold 2d3 to a strong partner for a significant premium; and grown Yotta into an increasingly visible, dependable revenue and profit performer.

Post 2d3, our strategy has not changed. The sale of 2d3 and the cash it provided has illustrated the clear benefits of this approach and we will continue to seek maximum shareholder returns, evolving our routes to achieving those returns. This approach continues 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.

Financial Performance

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

KPI	FY15	FY14	Change
Group revenue	£25.8m	£25.6m	+£0.2m
Group cash position	£11.7m	£7.6m	+£4.1m
Group adjusted* profit before tax	£2.4m	£0.0m	+£2.4m

Foreign exchange rates, in particular the US Dollar-Sterling rate, have been relatively stable during 2014/15 and have not had a material impact on year-on-year Group profit before tax performance.

In order to innovate and adapt our technology for new commercial opportunities, and maintain our technology leadership, the Group continues to invest in Research and Development (R&D), continuing operations spent £6.6m (FY14: £6.4m) during the year. A number of key projects were completed and launched during the year as detailed in the Chief Executive's statement. From this total spend, we expensed £4.1m (FY14: £4.0m) including Amortisation and Impairment of R&D in the year of £1.8m (FY14: £2.4m).  Expenditure that was capitalised was £2.5m (FY14: £2.4m) in this year's results.

The Statement of Financial Position shows a decrease in non-current assets which includes the disposal of 2d3  Intangibles at £0.3m and 2d3 Goodwill at £3.4m. The decrease in Trade & other receivables is due to the disposal of 2d3 which accounted for £4.0m of Debtors at the previous year-end. Taking account of this there is an underlying increase in current assets (from continuing operations) driven by strong revenues in September 2015 compared to the same period last year. The disposal of HOM was concluded in October 2014 so Assets and Liabilities have now been removed accordingly. Trade and other payables have declined due to the disposal of 2d3 which accounted for £1.8m of Accounts Payable at the previous year-end, this however has been offset to some extent by an increase of £1.0m due to higher than normal Accounts Payable within Vicon associated with component stock replenishment for the Vantage camera. 

The Group finished the year with a cash balance of £11.7m (30 September 2014: £7.6m, 31 March 2015: £8.6m). As a whole, the Statement of Financial Position remains robust.

There is a current tax charge for the year due to the Group making a taxable profit in the US arising from the disposal of 2d3 resulting in an overall effective tax rate of 23.2%.

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

Looking ahead

We have a strong platform in place. Notwithstanding changes in macro-economic conditions, we expect our businesses to develop and grow in the year ahead.

In Vicon's case, the business will continue to invest in new product innovations and will complete the second year of the partially funded Innovate UK development project, aimed at developing new, innovative technologies to drive future product releases, growth and profits. Having successfully launched the next generation motion capture camera, Vantage, Vicon is expected to benefit from a full year of selling this new flagship platform and continue to be a solid profit performer.

Yotta will continue its evolution into a software and services business, with its market-leading product Horizons expected to achieve further growth. The Group's Software as a Service ("SaaS") approach to revenue growth within Yotta will continue to help the division's performance to be more predictable, providing increased visibility and higher quality income. Yotta is also expected to increase revenues through continued growth in UK direct sales, progressing relationships with international distributors and leveraging partnerships with large infrastructure consulting organisations.

OMG Life investment will continue at the reduced level, in line with current management expectations, and the development of key relationships with major consumer electronics businesses around the world are expected to yield revenues. In the coming year, it is envisaged that these revenues would be based initially on the integration of our IP into our customers' products and services, followed by license revenues as the technology is deployed in those solutions.

As we enter a new financial year, all three businesses are in a good position to move forward to the next stage of their development.

* Profit Before Tax before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, and exceptional costs including compensation to contractor manufacturer , Autographer inventory write-off 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 2014/15 has been another year of progress for Oxford Metrics. Vicon continued to perform well, delivering a reliable result and enhancing its competitive position for the year ahead. The Yotta business went from strength to strength achieving further traction of the Horizons SaaS solution through direct sales, international distributors and other partner relationships, and as a result improved the predictability and reliability of future revenues through the increase in the annual value of contracted revenues. Lastly, OMG Life has developed a strong pipeline of opportunities that are expected to deliver engineering and license revenues in the future as the technology is deployed in third party products.

Vicon: Consistently profitable

KPI	Revenue		PBT		Adjusted* PBT
	FY15	FY14	FY15	FY14	FY15	FY14
Vicon UK/ROW	£9.5m	£9.6m	£3.2m	£3.7m	£2.5m	£2.4m
Vicon US	£7.6m	£7.6m	£1.0m	£0.6m	£2.8m	£2.6m
Total Vicon	£17.1m	£17.2m	£4.2m	£4.3m	£5.3m	£5.0m

Starting with our most mature subsidiary, Vicon delivered another consistent performance this year. Revenues were largely unchanged at £17.1m (FY14: £17.2m) but adjusted* PBT improved 5.6% to £5.3m (FY14: £5.0m) through product gross margin improvements, higher R&D Capitalisation, lower R&D Amortisation and careful cost control. Vicon, selling both via direct and indirect channels, recorded an average product gross margin of 70.1% (FY14: 69.4%). Furthermore, this strong margin performance has been achieved in the face of a changing mix in product sales and a stronger competitive environment.

Vicon continues to enjoy broad market appeal, focusing on three vertical markets - in Life Sciences, 52% of revenues, Entertainment, 27% of revenues, and in Engineering, 21% of revenues during FY15. These markets are very much international and the company continues to execute well across the globe - shipping systems to 67 different countries during the fiscal year, up from 51 countries four years ago. This multiple vertical market demand and broad international appeal reduces the exposure to any single vertical or geographical marketplace.

Over the past couple of years, we have seen motion capture become applied to an increasing set of measurement applications - quadcopters, wearables, Virtual Reality, Augmented Reality, running injury analysis and so forth. Through this expanded set of applications and the price point accessibility of our Bonita camera range, the number of systems we are supplying has increased in FY15 to a record level of 248 systems during the year. This shift to shipping a larger number of smaller camera count systems has the advantage of reducing sales pipeline volatility whilst maintaining the company's ability to take advantage of large camera count system demand where it exists. This means a more predictable and more broadly spread Vicon business.

Demonstrating Vicon's capabilities at the large system end of the market, Vicon has delivered a number of larger systems to a total of 7 different countries during the year. For example, Vicon provided a system to La Universidad de San Martin (UNSAM) in Buenos Aires. The Vicon system is part of the first high end reference system for the animation industry in Argentina. It will be used for teaching, but also be open to private companies to use with the goal to elevate the quality of animation work in the country. The intention is that the system will be used for a wide variety of projects ranging from student work, short features and commercials through to full length feature movies.

Vicon continues to build long term relationships with its customers with the company installing its seventh system at the University of Loughborough School of Sport and Exercise, and a further system to Boeing, another repeat customer. Indeed it continues with Vantage, when the company secured its first large Vantage system order very soon after the camera launched to the public in June 2015. A longstanding Vicon Entertainment customer evaluated all competitive options before deciding to further invest in Vicon for its next generation of titles.

The Innovate UK funded Real Time Digital Acting (RTDA) project has made exciting progress during its first year. As we move into the second year, exploitation of the products generated becomes our key focus. The RTDA projects primarily appeal to our Entertainment market but with wider mass market applications forming a fundamental part of our exploitation strategy.

The uptake of Vicon Cara, our 3D facial tracking system has also grown this year and the system was selected to provide Computer Graphics (CG) content on three major film productions this year by three different visual effects houses. Further growth in the academic sector means the next generation of CG artists and technicians are training on the Cara system.

Lastly there is one highlight from the past 12 months that should not be overlooked - that is the award of the company's first official Guinness World Record. Working with longstanding customer studio, Audiomotion, a new world record for the most people motion-captured in real-time was set on 9 March 2015; 19 people, including two UK-based hip hop dance crews, were simultaneously captured using just 36 Vicon cameras. Congratulations to everyone involved. We look forward to breaking more records with the newly refreshed product line-up in the year ahead.

Yotta: Predictable and visible growth

KPI	Revenue		PBT		Adjusted PBT*
	FY15	FY14	FY15	FY14	FY15	FY14
Yotta DCL	£5.7m	£5.4m	£0.1m	(£0.4m)	£0.5m	£0.0m
Mayrise	£2.9m	£2.5m	£0.7m	£0.8m	£1.5m	£1.5m
Total Yotta	£8.6m	£7.9m	£0.8m	£0.4m	£2.0m	£1.5m

Yotta, our infrastructure software and services business, has had its best trading year ever - making predictable, visible progress during the year. The division reports a record headline revenue of £8.6m (FY14: £7.9m), an increase of 9.3%, and a record adjusted PBT of £2.0m (FY14: £1.5m), up 32%. This excellent performance was driven through the continued progress with our Horizons and Mayrise software solutions in the marketplace. With revenues arising from software activities now accounting for 54.9% (FY14: 43.2%), the business is growing on a profitable footing. This year Yotta has established three clear channels for revenue growth: strong direct sales in the UK; growing relationships with international distributors and partnering with large infrastructure consultancies to expand the reach of the software.

First, with regards to direct sales, we have seen many wins in the UK during the year. Some of the bigger ones include Tyne Tees consortium, Cheshire West, Lincolnshire and Hertfordshire County Councils. Of particular note was the new two-year contract for Horizons with Highways England - the organisation formerly known as the Highways Agency, responsible for the operation, maintenance and improvement of England's motorways and major A roads. Having used Horizons since 2013 as part of their Program Investment Tool, this contract enables Highways England to rely on Horizons as a crucial part of their approach to Asset Management. Alongside the software we are providing support, consultancy and regular data refreshes. As a result of these new wins and our customers' continued use of our full range of software, software revenues grew by 19% year-on-year to £4.7m (FY14: £3.9m).

Second, building on the growth in the UK market, 2015 saw Yotta make its first expansion internationally with the appointment of two new international distributors for the Horizons product: Wegdekmeten in the Netherlands and new independent company Yotta Australia in New Zealand and Australia. Both distributors signed customers almost immediately following appointment, with one customer up and running in the Netherlands and four engagements in Australia now secured. Expanding the international reach of Horizons software is important to accelerate Yotta's future growth and we hope to announce further positive news here as we increase our distribution network.

Third, this year has also seen Yotta successfully deliver on a core strategic aim - to partner with enabling businesses.  These are companies who are not direct competitors but who can benefit from our software capabilities to deliver a more efficient and effective solution for their end customers. Among those, Amey, one of the UK's leading engineering consultancies and distinguished public services provider, have been the leading light. We now have nine Horizons customers, both in the UK and in Australia, and several consulting and surveying contracts with Amey. We are now working hard with them to grow that even further. They are not the only organisation we are working well with - Fulton Hogan, who are a New Zealand company, are beginning to become an increasingly important partner to us, demonstrated by the recent win at Victoria Roads, announced in September 2015. On the back of that win, and our reputation because of it, we have had encouraging discussions with other potential partners in multiple geographies.

The professional services team at Yotta also had a strong year, growing revenues 24% to £1.17m (FY14: £0.89m). What is even more impressive here is these revenues have been delivered with almost the same number of people as the previous year through an increase in utilisation levels. Surveying contracts were won at, amongst others, Tyne Tees, Cheshire West and Barnsley contributing to total revenues of £3.9m (FY14: £4.0m).

One of our key objectives in Yotta is to increase the level of contracted revenue in the business. We focus on three areas to do this: SaaS, hosting and support. Annual recurring revenues, excluding surveying and consultancy grew 33% year-on-year to £3.6m (FY14 £2.7m). The support/hosting revenue stream has grown like-for-like, since the purchase of Mayrise two years ago, from £1.4m to £2.0m (growth of 43%). All of this growth on the software side of the business provides us with improved profitability and a strong foundation around which we can plan the next steps for the business.

In summary, it has been a great year for Yotta, which continues to provide increasingly valuable recurring-revenues and profitability to the Group.

OMG Life: Ready to realise value

KPI	Revenue		PBT		Adjusted* PBT
	FY15	FY14	FY15	FY14	FY15	FY14
Total OMG Life	£0.0m	£0.5m	(£3.4m)	(£4.7m)	(£2.5m)	(£4.3m)

OMG Life reported a reduction in trading loss over the previous trading year, following the restructuring of the business in December 2014. The restructuring, completed in the first quarter, removed a significant proportion of the cost base from the business although the full benefit of this cost reduction will only be realised in the new financial year. Through this restructuring, the business gained a revised focus on deriving value from the Company's growing portfolio of Intellectual Property (IP) through the deployment of the technology in third party products.

As reported in June 2015, our technology has been well received by some significant global businesses across a range of consumer markets. The technology enables the capture of optimal imagery, including both video and stills, regardless of environment, user ability and relatively independent of cost point. This means consumers can get a high quality image or video sequence regardless of camera motion, difficult lighting conditions and without the need for relatively expensive hardware components. During 2015, the company consulted with a wide range of companies to investigate the integration of our capabilities into smartphones, dedicated cameras, internet-enabled cameras, tablet devices and back-end imaging services, indicating the broad appeal of our IP. 

As a result of this work we are pleased to announce that post year end, two global consumer electronics companies have begun engineering engagements with OMG Life to integrate certain elements of our IP into their devices and services, which, if successful, would lead to a licensing agreement in due course. The nature of these integrations is commercially sensitive, but the Group looks forward to updating the market at such time as marketable products and services are subsequently released.

In addition there are other well-known consumer businesses who have expressed an interest in Life's IP and its application. Further licensing and integration discussions continue with an increased number of interested parties compared with the pipeline at the Interim Results in June. However, it is worth commenting that, given the potential broad scale of these opportunities and the multi-level sales process required, it can be difficult to forecast specific dates of formal engagements. That said, what is clear from our work in these markets is there is plenty of appetite for our solutions and we have a dedicated team in place to unlock the IP's potential.

Stepping up in 2016 

There is much to be positive about the Group's position going into the new fiscal year. Vicon has a new, highly differentiated product line-up to drive performance on the foundation of excellent profits. OMG Life can drive its revenues in the year ahead through its first tangible IP engagements and through the successful execution of its opportunity pipeline. Lastly, Yotta goes into 2016 with multiple vectors of growth - the opportunity to expand its UK market share, to grow its international business and to realise growth through its increasing range of important partnerships. In addition to these organic drivers of growth, the Group continues to look carefully at acquisition opportunities to expand the reach of the Yotta and Vicon businesses.

We have taken some proactive decisions during FY15 which saw the basic structure of the Group change with the premium disposal of the 2d3 business, but great value remains within Oxford Metrics. We will continue to build out the predictability and profitability of our Group revenue streams and as part of our strategy will consider licensing or partnerships to maximise the value of our IP. We enter the year ahead with a good pipeline of prospects, improving quality of earnings and multiple vectors of growth from multiple markets.

* Profit Before Tax before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, and exceptional costs including compensation to contractor manufacturer , Autographer inventory write-off 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 2015

		2015	2014
	Note	£'000	£'000
Revenue	3	25,765	25,631
Cost of sales		(9,479)	(9,704)
Gross profit		16,286	15,927
Sales, support and marketing costs		(4,479)	(6,194)
Research and development costs		(4,141)	(4,038)
Administrative expenses		(6,921)	(5,802)
Other operating income		601	56
Operating profit/(loss)		1,346	(51)
Finance income	7	40	6
Finance expense	7	(7)	(10)
Profit/(loss) before taxation	3,4	1,379	(55)
Taxation	6	(144)	(49)
Profit from continuing operations		1,235	(104)
Profit/(loss) from discontinued operations, net of tax		6,807	(466)
Profit/(loss) attributable to owners of the parent during the year		8,042	(570)
Earnings per share for profit/(loss) on continuing operations attributable to owners of the parent during the year
Basic earnings/(loss) per ordinary share (pence)	8	1.08p	(0.09)p
Diluted earnings/(loss) per ordinary share (pence)	8	1.05p	(0.09)p
Earnings per share for profit/(loss) on total operations attributable to owners of the parent during the year
Basic earnings/(loss) per ordinary share (pence)	8	7.02p	(0.51)9
Diluted earnings/(loss) per ordinary share (pence)	8	6.85p	(0.51)p

COnsolidated statement of comprehensive income FOR THE YEAR ENDED 30 sEPTEMBER 2015

		Group	Group
		2015	2014
		£'000	£'000
Net profit/(loss) for the year		8,042	(570)
Other comprehensive income
Exchange differences on retranslation of overseas subsidiaries		336	20
Tax recognised directly in equity		336	23
Total other comprehensive income/(expense)		672	43
Total comprehensive income/(expense) for the year attributable to owners of the parent		8,714	(527)

consolidated statement of financial position AS AT 30 september 2015

COMPANY NUMBER: 3998880	Group	Group
	2015	2014
	£'000	£'000
Non-current assets
Goodwill and intangible assets	12,838	16,686
Property, plant and equipment	984	1,387
Financial asset - investments	69	69
Deferred consideration receivable	1,971	-
Deferred tax asset	632	614
	16,494	18,756
Current assets
Inventories	1,876	1,691
Trade and other receivables	9,631	13,176
Cash and cash equivalents	11,738	7,579
	23,245	22,446
Assets classified as held for sale	-	720
Current liabilities
Trade and other payables	(8,013)	(8,640)
Current tax liabilities	(497)	(139)
	(8,510)	(8,779)
Liabilities directly associated with assets classified as held for sale	-	(45)
Net current assets	14,735	14,342
Total assets less current liabilities	31,229	33,098
Non-current liabilities
Deferred tax liability	(2,174)	(2,280)
Net assets	29,055	30,818
Capital and reserves attributable to owners of the parent
Share capital	294	283
Shares to be issued	65	65
Share premium account	16,326	15,443
Merger reserve	-	6,589
Retained earnings	12,315	8,493
Foreign currency translation reserve	55	(55)
Total equity shareholders' funds	29,055	30,818

consolidated STATEMENT of CASHFLOWS For the YEAR ended 30 september 2015

	Group	Group
	2015	2014
	£'000	£'000
Cash flows from operating activities - continuing operations
Operating profit	1,346	414
Depreciation and amortisation	2,438	3,511
Impairment of intangibles	415	287
(Profit)/loss on the sale of property, plant and equipment	(71)	4
Profit on the sale of investment	-	-
Share-based payments	154	189
Exchange adjustments	55	27
(Increase)/decrease in inventories	(85)	145
Decrease/(increase) in receivables	(513)	(2,008)
Increase in payables	1,296	1,240
Cash generated from continuing operations	5,035	3,809
Discontinued operations	1,277	(221)
Cash generated from operating activities	6,312	3,588
Tax paid	(1,530)	(261)
Net cash from operating activities	4,782	3,327
Cash flows from investing activities
Purchase of property, plant and equipment	(626)	(712)
Purchase of intangible assets	(2,514)	(2,533)
Proceeds on disposal of property, plant and equipment	346	292
Interest received	40	6
Proceeds from sale of subsidiary undertakings net of cash disposed	12,790	-
Net cash used in investing activities	10,036	(2,947)
Cash flows from financing activities
Payment of finance lease liabilities	(51)	(111)
Interest element of finance lease repayments	(6)	(10)
Bank interest paid	(4)	(5)
Issue of ordinary shares	894	-
Equity dividends paid	(11,541)	(429)
Net cash used in financing activities	(10,708)	(555)
Net increase/(decrease) in cash and cash equivalents	4,110	(175)
Cash and cash equivalents at beginning of the period	7,628	7,803
Cash and cash equivalents at end of the period	11,738	7,628
Amount included in cash and cash equivalents	11,738	7,579
Amount included in assets classified as held for sale	-	49
Total cash and cash equivalents at end of the period	11,738	7,628

Major non-cash transactions

During the 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 2015

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 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
Net profit for the year	-	-	-	-	8,042	-	8,042
Exchange differences on retranslation of overseas subsidiaries	-	-	-	-	-	336	336
Transfer between reserves	-	-	-	(6,589)	6,815	(226)	-
Tax recognised directly in equity	-	-	-	-	336	-	336
Transactions with owners:
Dividends	-	-	-	-	(11,541)	-	(11,541)
Issue of share capital	11	-	883		-	-	894
Movement in relation to share options	-	-	-	-	170	-	170
Balance as at 30 September 2015	294	65	16,326	-	12,315	55	29,055

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 8^th December 2015.

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 2015 and 30 September 2014, but is derived from those accounts. The statutory accounts for the year ended 30 September 2014 have been delivered to the Registrar of Companies and those for the year ended 30 September 2015 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 2015 or 30 September 2014.

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 2015.

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: Development and sale of software and hardware solutions for the consumer electronics market.

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 2015 are £3,416,000 (2014: £3,721,000).

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
	2015	2014
	£'000	£'000
Vicon UK	9,458	9,626
Vicon USA	7,637	7,556
Vicon Group	17,095	17,182
Yotta UK	5,708	5,397
Yotta Mayrise	2,930	2,505
Yotta Group	8,638	7,902
OMG Life Group	32	547
Continuing operations	25,765	25,631
House of Moves**	38	2,245
2d3 UK	380	631
2d3 USA	1,580	4,934
2d3 Group	1,960	5,565
Discontinued operations	1,998	7,810
OMG Group	27,763	33,441

 

	Revenue
	2015	2014
	£'000	£'000
By destination
UK	10,421	9,335
Europe	2,549	3,034
North America	7,271	6,582
Asia Pacific	4,869	5,847
Other	655	833
Continuing operations	25,765	25,631
UK	239	531
Europe	144	106
North America	1,615	6,663
Asia Pacific	-	510
Discontinued operations	1,998	7,810
OMG Group	27,763	33,441
By origin
UK	18,163	17,853
North America	7,602	7,778
Continuing operations	25,765	25,631
UK	380	631
North America	1,618	7,179
Discontinued operations	1,998	7,810
OMG Group	27,763	33,441

	2015	2014
	£'000	£'000
Vicon revenue by market
Engineering	3,605	3,177
Entertainment	4,595	4,329
Life sciences	8,895	9,676
Vicon Group*	17,095	17,182

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

**House of Moves was considered part of the Vicon Group prior to its sale on 15 October 2014.

	2015				2014
	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	2,489	(76)	791	3,204	2,373	(8)	1,359	3,724
Vicon USA	2,769	(5)	(1,796)	968	2,607	-	(2,054)	553
Vicon Group	5,258	(81)	(1,005)	4,172	4,980	(8)	(695)	4,277
Yotta UK	560	(107)	(424)	29	56	(114)	(306)	(364)
Yotta Mayrise	1,475	(424)	(298)	753	1,487	(424)	(301)	762
Yotta Group	2,035	(531)	(722)	782	1,543	(538)	(607)	398
OMG Life Group	(2,497)	(657)	(238)	(3,392)	(4,346)	14	(402)	(4,734)
Unallocated	(2,404)	(87)	2,308	(183)	(2,170)	(159)	2,333	4
Continuing operations	2,392	(1,356)	343	1,379	7	(691)	629	(55)
House of Moves**	(93)	(175)	-	(268)	(373)	(616)	-	(989)
2d3 UK	2,693	(8)	(208)	2,477	241	(11)	(376)	(146)
2d3 USA	(3,819)	10,840	(135)	6,886	1,092	(233)	(253)	606
2d3 Group	(1,126)	10,832	(343)	9,363	1,333	(244)	(629)	460
Discontinued operations	(1,219)	10,657	(343)	9,095	960	(860)	(629)	(529)
OMG Group	1,173	9,301	-	10,474	967	(1,551)	-	(584)

Adjusted profit before tax is detailed in note 5.

**House of Moves was considered part of the Vicon Group prior to its sale on 15 October 2014.

	Non-current assets		Additions to non-current assets		Carrying amount of segment assets		Carrying amount of segment liabilities		Segment depreciation and amortisation
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Vicon UK	3,501	2,748	1,752	1,552	16,262	8,459	(3,229)	(2,346)	797	863
Vicon USA	885	701	330	43	4,772	4,321	(1,332)	(1,561)	84	45
Vicon Group	4,386	3,449	2,082	1,595	21,034	12,780	(4,561)	(3,907)	881	908
Yotta UK	4,288	4,477	458	407	9,076	10,497	(2,531)	(1,702)	611	594
Yotta Mayrise	4,197	4,586	66	23	10,967	9,371	(1,757)	(1,833)	448	458
Yotta Group	8,485	9,063	524	430	20,043	19,868	(4,288)	(3,535)	1,059	1,052
OMG Life Group	1,532	1,633	776	862	(3,864)	(2,090)	(520)	(779)	893	1,137
Unallocated	2,091	303	32	17	2,498	(400)	(1,310)	(622)	21	20
Continuing operations	16,494	14,448	3,414	2,904	39,711	30,158	(10,679)	(8,843)	2,854	3,117
Yotta USA	-	-	-	-	28	26	(5)	(5)	-	-
House of Moves**	-	-	-	26	-	720	-	(45)	-	27
2d3 UK	-	11	23	2	-	2,353	-	(48)	3	4
2d3 USA	-	4,297	18	313	-	8,665	-	(2,163)	255	390
2d3 Group	-	4,308	41	315	-	11,018	-	(2,211)	258	394
Discontinued operations	-	4,308	41	341	28	11,764	(5)	(2,261)	258	421
OMG Group	16,494	18,756	3,455	3,245	39,739	41,922	(10,684)	(11,104)	3,112	3,538

**House of Moves was considered part of the Vicon Group prior to its sale on 15 October 2014.

4.     Profit/(loss) for the year

The profit/(loss) for the year is stated after charging / (crediting):

	2015	2014
	£'000	£'000
(Profit)/loss on disposal of property, plant and equipment	(71)	4
Depreciation of property, plant and equipment - owned	575	584
- under hire purchase/finance lease	82	105
Amortisation of customer relationships	397	429
Amortisation of intellectual property	228	310
Amortisation of development costs	1,415	2,110
Impairment of intangible fixed assets	415	903
Share based payments - equity settled	170	189
Operating lease charges - other than plant and machinery	721	906
Foreign exchange	41	27
Grant income received	490	227

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

A reconciliation of profit/(loss) before tax to adjusted profit/(loss) 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.

	2015	2014
	£'000	£'000
Profit/(loss) before tax - continuing operations	1,379	(55)
Share based payments - equity settled	154	166
Amortisation of intangibles arising on acquisition	502	516
Compensation to contract manufacturer and Autographer inventory write off	540	-
Redundancy costs	160	9
Reapportion Group overheads	(343)	(629)
Adjusted profit before tax - continuing operations	2,392	7
Profit/(loss) before tax - discontinued operations	9,095	(529)
Share based payments - equity settled	16	24
Amortisation of intangibles arising on acquisition	124	220
Impairment of goodwill	-	616
Profit on disposal of House of Moves and 2d3 Group	(10,797)	-
Reapportion Group overheads	343	629
Adjusted (loss)/profit before tax - discontinued operations	(1,219)	960
Total adjusted profit before tax - all operations	1,173	967

The redundancy costs in the year ended 30 September 2015 are associated with the restructuring of the Yotta UK, Vicon and OMG Life business segments.  Those in the year ended 30 September 2014 are associated with the restructuring of the Yotta UK business only.

The compensation to contract manufacturer and Autographer inventory write off relates to the cost of terminating the contract with our manufacturer in OMG Life Limited.

6.     Taxation

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

	2015	2014
	£'000	£'000
United Kingdom corporation tax at 20.5% (2014: 22.0%)	212	-
Overseas taxation	2,041	66
Adjustments in respect of prior year	(155)	(16)
Current taxation	2,098	50
Deferred taxation	334	(64)
Total taxation expense / (income)	2,432	(14)

Continuing and discontinued operations:

	2015	2014
	£'000	£'000
Income tax (credit)/expense from continuing operations	144	49
Income tax expense / (credit) from discontinued operations excluding gain on sale	(372)	(63)
	(228)	(14)

Total tax expense:

	2015	2014
	£'000	£'000
Income tax credit excluding tax on sale of discontinued operations	(228)	(14)
Income tax expense on gain on sale of discontinued operations	2,660	-
	2,432	(14)

At 30 September 2015, the Group had an undiscounted deferred tax asset of £632,000 (2014: £614,000).  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 (2014: 20% and 38%, respectively).

The inclusion of legislation to reduce the main rate of corporation tax from 20% to 19% from 1 April 2017 and then a further reduction to 18% from 1 April 2020 was substantively enacted on 26 October 2015.

For the purposes of deferred tax, the rate change from 20% to 19% was substantively enacted after the balance sheet date.

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 20.5% (2014: lower than the standard rate of 22.0%).

The differences are explained as follows:

	2015	2014
	£'000	£'000
Profit /(loss) on ordinary activities before tax	10,474	(584)
Expected tax income based on the standard rate of corporation tax in the UK of 20.5% (2014: 22.0%)	2,147	(128)
Effect of:
Expenses not deductible for tax purposes	61	(47)
Tax gain on sale of discontinued operation in excess of book gain	346	-
Book gain on sale of discontinued operation in excess of tax gain	(1,732)	-
Unrelieved current year losses	475	241
Utilisation of losses brought forward	-	142
Adjustments to tax charge in respect of prior year current tax	(155)	(16)
Adjustments to tax charge in respect of prior year deferred tax	(203)	-
Higher rates on overseas taxation	1,754	47
Research and development tax credit	(320)	(245)
Tax deduction in excess of income statement charge	6	-
Effect of rate change	53	(8)
Total tax expense / (income)	2,432	(14)

7.     Finance income and expense

	2015	2014
	£'000	£'000
Finance expense - Hire purchase liabilities	(6)	(10)
-  Bank interest paid	(4)	(5)
	(10)	(15)
Finance income - Interest income on short term bank deposits	30	6
- Unwinding of discount on contingent consideration	10	-
	40	6

8.     Earnings/(loss) per share

	2015			2014
	Earnings/(loss)	Weighted average number of shares	Per share amount	Earnings/ (loss)	Weighted average number of shares	Per share amount
	£'000	'000	(pence)	£'000	'000	(pence)
Continuing operations
Basic earnings per share
Earnings attributable to ordinary shareholders	1,235	114,626	1.08	(104)	111,334	(0.09)
Dilutive effect of employee share options	-	2,789	(0.03)	-	-	-
Diluted earnings per share	1,235	117,415	1.05	(104)	111,334	(0.09)
Discontinued operations
Basic earnings/(loss) per share
Earnings attributable to ordinary shareholders	6,807	114,626	5.94	(466)	111,334	(0.42)
Dilutive effect of employee share options	-	2,789	(0.14)	-	-	-
Diluted earnings/(loss) per share	6,807	117,415	5.80	(466)	111,334	(0.42)
Total operations
Basic earnings/(loss) per share
Loss attributable to ordinary shareholders	8,042	114,626	7.02	(570)	111,334	(0.51)
Dilutive effect of employee share options	-	2,789	(0.17)	-	-	-
Diluted earnings/(loss) per share	8,042	117,415	6.85	(570)	111,334	(0.51)

Basic earnings per share is calculated by dividing the profit/(loss) 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.     Dividends

	2015	2014
Equity - ordinary	£'000	£'000
Final 2014 paid in 2015 (0.50 pence per share)	567	-
Special paid in 2015 (4.5 pence per share)	5,102	-
Special paid in 2015 (5.0 pence per share)	5,872	-
Final 2013 paid in 2014 (0.40 pence per share)	-	429
	11,541	429

The directors have announced a further special dividend of 3.75 pence per share which will absorb an estimated £4,404,000 of shareholders' funds.  This dividend will be paid on 12 January 2016 to shareholders on the register of members at close of business on 18 December 2015.

The directors are proposing a final dividend in respect of the financial year ended 30 September 2015 of 0.65 pence per share (2014: 0.50 pence per share) which will absorb an estimated £763,000 of shareholders' funds.  This dividend will be paid on 9 March 2016 to shareholders who are on the register of members at close of business on 18 December 2015 subject to approval at the AGM. These dividends have 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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