Preliminary Results
OMG PLC
06 December 2005
OMG plc ('OMG' or 'the Company')
Preliminary results for the year ended 30 September 2005
OMG, the leading supplier of motion capture and visual geometry systems for life
sciences, entertainment and engineering applications, announced today its
preliminary results for the year ended 30 September 2005.
Highlights:
* Turnover increased 30% to £14.2m (2004: £10.9m)
* Operating profit before goodwill amortisation and exceptional items increased
by 193% to £923,000 (2004: £315,000)
* Earnings per share increased by 65% to 1.27p (2004: 0.77p)
* Cash balances increased during the year by £0.3m to £4.4m
* Strong recovery in the second half in the important North American market
with annual revenue growth of 37% excluding the acquisition of Peak
Performance Technologies Inc's business ('Peak')
* Strong performance in the Far East led by the Japanese market with 83%
revenue growth
* Positive contribution from Peak, acquired in February, with revenues of £1.3m
and operating profit before goodwill amortisation and exceptional items of
£185,000
* Major order for premium MX camera system in excess of $3m
* New development agreement signed by subsidiary 2d3 with QinetiQ to provide
key technology for recovering 3D information from airborne video imagery
* Investment commences in radical diversification project
Nick Bolton, Chief Executive, commented: 'For the Group to be reporting these
very satisfactory results after such a slow start to the year is a tribute to
the inspiration and hard work of the entire OMG team, and provides a strong
foundation on which to build the coming year of growth and diversification.'
For further information please contact:
Nick Bolton, Chief Executive, nick.bolton@omg3d.com
Peter Wharton, Finance Director, peter.wharton@omg3d.com
Tel: 01865 261800
Tim Thompson / Frances Adigwe
Buchanan Communications
Tel: 020 7466 5000
About OMG
OMG plc (LSE: OMG) is the global leader in the three-dimensional capture and
analysis of movement, providing tools and services for life sciences,
entertainment and engineering applications. Based in Oxford UK, California USA
and Colorado USA, OMG has customers in over 35 countries and is listed on AIM, a
market operated by the London Stock Exchange. The group trades through a number
of operating subsidiaries in the name of Vicon Peak, 2d3 and House of Moves in
the UK and USA, and through a network of distributors in other major countries.
Vicon Peak provides professionals with the latest tools to capture accurately
three-dimensional human motion for research, medicine, sport, engineering, game
development, broadcast and film. 2d3 produces innovative visual geometry
software deriving 3D data from moving images. House of Moves is the world's most
experienced motion capture service studio, producing high quality motion capture
data for entertainment production companies.
For more information about OMG, or its subsidiaries, visit www.omg3d.com,
www.viconpeak.com, www.2d3.com or www.moves.com.
CHAIRMAN AND CHIEF EXECUTIVE STATEMENT
The year ended 30 September 2005 has been one of change. Change in terms of
revenue performance between the two halves of the year - £9.4m second half
versus £4.8m first half. Change in terms of product - a dozen new product
releases and upgrades across the Group. Change in terms of management - Julian
Morris passing on the role of Chief Executive to Nick Bolton.
We believe OMG is a business with an exciting present and enticing future. The
present is a group of companies in strong or dominant global market positions,
with distributed geographical and sector risk. The future is one of realisable
opportunities in both core and diversified business based on a deep pool of
technology.
Financial Summary
Group turnover, including acquisitions, rose 30% to £14.2m (2004: £10.9m).
Turnover excluding the acquisition of Peak Performance Technologies Inc.'s
business ('Peak'), grew 19% to £12.9m.
Gross profits improved from 56% of turnover to 60% due to higher volume and
lower manufacturing costs of the new MX motion capture system. However, the
improvement in gross margin was partially offset by the sale of earlier product
lines at lower margins.
Operating profit before amortisation of goodwill and exceptional items increased
by 193% to £923,000 (2004: £315,000) and after goodwill amortisation and
exceptional items, increased by 107% to £593,000 (2004: £286,000).
The exceptional items amounting to £216,000 comprise one-off costs relating to
the cost of rationalising distribution channels following the acquisition of
Peak and the cost of changes within senior management.
Profit before tax improved by 51% to £690,000 (2004: £457,000). Earnings per
share increased by 65% to 1.27p (2004: 0.77p)
The Group's strong cash position further improved during the year to £4.4m
(2004: £4.1m).
Business Review
Second Half Turnaround
Group full-year profit before tax of £690,000 contrasts dramatically with the
reported first half loss of £549,000. Stand-alone second half profit before tax
was a healthy 13% of equivalent revenues. The turnaround was achieved by a major
improvement in revenues and tight control and selective reduction of costs.
Sales management has been completely reorganised with more direct and regular
reporting of UK and US sales teams. Product lines, services, procedures and
infrastructure are being consolidated across all operations within the Group.
Manufacturing costs are being further reduced by higher volume production of
standard products.
Global Revenue Growth
Revenue growth for the year was strong across all markets, with the exception of
UK which, as previously reported, enjoyed exceptional revenues in the previous
year.
For the first time in the Group's history, North America delivered over half
(58%) of global revenues. Including eight months of sales from Peak, the Group's
second US acquisition, revenues from North America increased by 62%. Excluding
Peak, revenues from North America rose 37%. In the second half year, several
large individual orders - one for over $3m for a very large installation of the
new MX40 motion capture system - were won in the highly competitive US
entertainment market.
Far Eastern and Continental European markets also grew well with revenues up by
83% and 16% respectively. In particular, Japanese revenues were up 109%, with
strong growth across all market sectors.
Acquisition of Peak & other Corporate Investment
The Group's core business was significantly strengthened by the acquisition of
the business of Peak based in Denver, Colorado in February 2005. Peak is a
specialist in motion capture for sports science and human and animal motion
research using video image recording.
Within 45 days of completion, the two existing companies' product ranges were
combined and re-branded under the name Vicon Peak. Within 60 days, the Peak
Motus motion capture software was re-engineered to use Vicon's MX cameras.
Within 90 days, the first Vicon orders were taken through a former Peak sales
channel and global distribution channels were rationalised, allowing access to
all markets.
Peak's product range for its well-established sports and animal science markets
in North America is now considerably extended. In Europe, the response of the
academic sports science market to the merger of two well-respected companies and
the availability of a combined optical and video motion capture system has been
particularly strong. As a result, since joining OMG, Peak's sales have increased
while its costs are reduced, giving the business new focus as a profitable
operation.
During the year, the Group has taken a 12% stake in Munich-based start-up
Contemplas Gmbh. Contemplas produces software for simple 2D and 3D motion
capture and analysis based on video (DV) recording. Their aim is to bring the
technology into consumer-driven markets such as running-shoe selection and
fitness assessment.
Marketing Led, Engineering Driven
Global sales channels for the Group's core products, built around motion capture
and camera tracking, are well established. Applications cover an extraordinary
range from the production of feature films and computer games to military
training; from medical research and treatment to engineering ergonomics; and
from sports performance to the study of the neural control of the gait of
millipedes.
During the year the Group has increased its marketing resource, bringing
systematic analysis and planning to the process of prioritising and specifying
the Group's product development.
Industry Awards
In February 2005, Vicon Motion Systems was awarded a Scientific & Technical
Academy Award, a 'Technical Oscar', by the Academy of Motion Picture Arts &
Sciences for contributions made through optical motion capture to the film
industry.
The Company's other leading product for the entertainment industry, 2d3's boujou
automatic camera tracker, was used in 4 out the 7 films nominated for the Oscar
for Best Visual Effects, including the winning film Lord of the Rings.
New Product Introductions
The Vicon Peak MX product range has been enhanced by the introduction of MX
Bridge and Reference Video. MX Bridge allows many older models of Vicon camera
to be used alongside the new MX cameras. Customers wishing to upgrade their
systems can now do so gradually, without having to discard existing cameras.
As well as the integration of MX cameras into the Peak Motus system, Vicon
software has also been enhanced to allow simultaneous video capture from a range
of DV and digital machine vision cameras with a range of resolutions and frame
rates.
Vicon Peak motion capture systems are frequently used in applications where
accurate 3-dimensional tracking of targets, ranging from surgical and medical
devices to performing actors and animals, is required in 'real time'. During the
year, the development of a combination of new tracking algorithms and software
engineering for parallel processing on multi-processor computers has
dramatically increased real-time performance. The possibility of a director
viewing a live multi-character animation as it is performed removes one of the
remaining separators between motion capture and traditional film making.
2d3's original automatic camera tracker, boujou, used mainly in the movie
industry has been considerably enhanced and upgraded with the release during the
year of versions 3.0 and 3.1. A simpler version of boujou, aimed at video and
educational markets, is now sold under the name bullet.
Radical Diversifications
During the year, the Group tasked a team, comprising the past and present Chief
Executives and a full-time Business Development manager, to evaluate
opportunities for radical diversification of the Group's business. The main
criteria were:
* Market potential well above the combined markets of the Group's current
products
* Expectation of taking and holding market leadership and dominance
* Gain leverage from existing in-house or accessible new technologies
From several dozen potential business areas, a short list of opportunities has
emerged, winning the unanimous support of the Board.
One opportunity in a defence application of 2d3's 'structure-from-motion' IP has
moved forward with the recently-announced development agreement with QinetiQ.
Another, based on IP from both Vicon and 2d3, concerns management and
maintenance of key national infrastructure. For reasons of commercial
sensitivity it is not possible to give more details of these developments at
present.
Dividend Policy
As in previous years, the Directors are not declaring a dividend, although the
dividend policy will be kept under review.
Comment & Outlook
Despite the marked contrast between the first and second halves, the Group's
overall financial performance in 2004/5 was very satisfactory, with excellent
revenue growth, market diversification, good control of costs and cash, and
increasingly healthy profits.
The Group's plan is to continue this pattern of profitable growth in two ways.
Firstly, through business execution in our core markets, where market activity
appears well able to support this plan. Secondly, through a structured business
diversification programme. Although at a very early stage, the new opportunities
for diversification look exciting.
Currently the Company has adequate internal resources to progress these
diversifications and has already committed an initial investment of £0.2m so far
this year. Details of progress with diversifications will be made available in
due course.
Trading in the current year is making a strong start and we will review progress
at the Annual General Meeting.
Anthony Simonds-Gooding, Chairman Nick Bolton, Chief Executive
6 December 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 SEPTEMBER 2005
Notes 2005 2005 2005 2004
Continuing Continuing Total Continuing
Operations Operations - operations
Acquisitions
£'000 £'000 £'000 £'000
Turnover 3 12,930 1,283 14,213 10,895
Cost of sales (5,173) (447) (5,620) (4,818)
--------- ------ ------- -------
Gross profit 7,757 836 8,593 6,077
Sales, support and marketing
costs (2,977) (327) (3,304) (2,360)
Research and development (1,542) (65) (1,607) (1,399)
Administrative expenses (2,756) (333) (3,089) (2,146)
Grant income - - - 114
-------- -------- -------- --------
Operating profit before
goodwill amortisation and
exceptional items 738 185 923 315
Goodwill amortisation (86) (28) (114) (29)
Exceptional items 4 (170) (46) (216) -
-------- -------- -------- --------
Operating profit 482 111 593 286
Interest receivable and
similar income 97 171
-------- --------
Profit on ordinary activities
before taxation 690 457
Tax credit / (charge) on
profit on ordinary
activities 5 46 (51)
-------- -------
Retained profit for the
financial year 736 406
======== ========
Basic earningsper ordinary
share 6 1.27p 0.77p
Diluted earnings per
ordinary share 6 1.22p 0.71p
There is no material difference between the retained profit on ordinary
activities before taxation and the retained profit for the financial year stated
above and their historical cost equivalents.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 SEPTEMBER 2005
2005 2004
£'000 £'000
Retained profit for the financial year 736 406
Exchange differences on retranslation of opening
net assets of overseas subsidiaries 9 (7)
-------- --------
Total recognised gains and losses for the year 745 399
======== ========
CONSOLIDATED AND COMPANY BALANCE SHEETS AT 30 SEPTEMBER 2005
Group Group Company Company
2005 2004 2005 2004
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 1,353 891 132 56
Tangible assets 970 863 169 195
Investments 69 - 978 645
----- ----- ----- ------
2,392 1,754 1,279 896
Current assets
Stocks 1,739 1,712 - -
Debtors 3,637 3,239 2,366 2,794
Cash at bank and short term deposits 4,371 4,096 3,525 3,152
----- ----- ----- -----
9,747 9,047 5,891 5,946
Creditors: amounts falling due within one
year (2,902) (2,558) (279) (240)
------- ------- ------ ------
Net current assets 6,845 6,489 5,612 5,706
------ ------ ------ ------
Total assets less current liabilities 9,237 8,243 6,891 6,602
====== ====== ====== ======
Creditors : amounts falling due after more
than one year - (82) - -
------ ------ ------ ------
Net Assets 9,237 8,161 6,891 6,602
====== ====== ====== ======
Capital and reserves
Share capital 147 138 147 138
Shares to be issued 241 241 - -
Share premium account 5,692 5,370 5,692 5,370
Profit and loss account 3,157 2,412 1,052 1,094
----- ----- ----- -----
Total equity shareholders' funds 9,237 8,161 6,891 6,602
===== ===== ===== =====
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2005
2005 2004
£'000 £'000
Net cash inflow from operating activities 1,015 236
Returns on investments and servicing of finance
Interest received 97 169
Taxation 8 164
Capital expenditure and financial investment
-------------------
Purchase of tangible fixed assets (897) (780)
Disposal of tangible fixed assets 282 43
-------------------
(615) (737)
Acquisitions
-------------------
Purchase of subsidiary undertaking (342) (629)
Net cash acquired with new subsidiary 111 -
Other investment acquired (69) -
-------------------
(300) (629)
------- -------
Net cash inflow / (outflow) before financing 205 (797)
Financing
Issue of ordinary share capital 61 78
------- -------
Increase / (decrease) in cash 266 (719)
======= =======
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 30 September 2005
1. Basis of Preparation
The financial information in this preliminary announcement is unaudited and has
been prepared on the going concern basis, under the historical cost convention
and applicable accounting standards in the United Kingdom and is consistent with
the policies set out in the Group's statutory accounts for the year ended
30 September 2004.
2. Basis of Consolidation
The consolidated financial statements consolidate those of the Company and all
of its subsidiary undertakings drawn up to 30 September 2005. Acquisitions of
subsidiaries are dealt with by the acquisition method of accounting from the
date of acquisition.
3. Turnover and segmental analysis
The directors consider there to be only one class of business, that of motion
capture.
An analysis of turnover destination by geographical market is given below:
2005 2004
£'000 £'000
United Kingdom 673 2,217
Continental Europe 2,021 1,746
North America 8,245 5,082
Far East 3,089 1,691
Other 185 159
------ ------
14,213 10,895
====== ======
An analysis of turnover by origin is given below:
2005 2004
£'000 £'000
United Kingdom 6,166 5,965
North America 8,047 4,930
-------- -------
14,213 10,895
======== =======
An analysis of operating profit and net assets by geographical origin is given
below:
Operating profit Net Assets
2005 2004 2005 2004
£'000 £'000 £'000 £'000
United Kingdom 494 177 8,767 8,147
North America 99 109 470 14
--------- --------- --------- ---------
593 286 9,237 8,161
========= ========= ========= =========
All turnover, operating profit and net assets attributable to acquisitions is
from North America.
4. Exceptional items
Exceptional costs of £216,000 (2004: nil) comprise the cost of reorganising
distribution channels and management changes relating to the acquisition of Peak
Performance Technologies Inc.'s business, and other senior management changes
within the group.
5. Tax on profit on ordinary activities
The tax (credit) / charge is based on the profit for the year and represents:
2005 2004
£'000 £'000
United Kingdom corporation tax at 30% (2004: 30%) 8 -
Overseas taxation - 51
Adjustments in respect of prior year (54) -
-------- --------
(46) 51
======== ========
At 30 September 2005, the group had an undiscounted deferred tax asset of
£283,000 (2004: £255,000), which has not been recognised. The asset comprises
accelerated capital allowances of £41,000 (2004: £124,000), and the accumulated
unrelieved tax losses of £904,000 (2004: £725,000) available to subsidiary
undertakings of the Group, to offset against future taxable trading profits of
the same trade. Unrelieved tax losses in respect of prior years were increased
by £775,000, principally due to the submission of claims for R&D tax credits.
Tax losses amounting to £596,000 have been utilised during the year. Due to the
risks and uncertainty over the subsidiaries' timing and extent of future trading
profits, the deferred tax asset has not been recognised.
The tax assessed for the year is lower than the standard rate of corporation tax
in the UK of 30% (2004: 30%). The differences are explained as follows:
2005 2004
£'000 £'000
Profit on ordinary activities before tax 690 457
===== =====
Profit on ordinary activities multiplied by the standard rate
of corporation tax in the UK of 30% (2004: 30%) 207 137
Effect of:
Expenses not deductible for tax purposes 62 10
Depreciation in excess of capital allowances (5) (53)
Utilisation of losses (179) -
Tax effect of prior year adjustment - (68)
Adjustments to tax charge in respect of prior year (54) -
Higher rates on overseas taxation - 15
Unrecognised deferred tax on losses - 50
Research and development tax credit (77) (40)
-------- --------
Current (credit) /charge for the year (46) 51
======== ========
6. Earnings per Share
2005 2004
weighted weighted
average average
number of Per share number of Per share
Earnings shares amount Earnings shares amount
£'000 pence £'000 pence
Basic
earnings per
share
Earnings
attributable
to ordinary
shareholders 736 58,065,827 1.27 406 52,887,870 0.77
Dilutive
effect of
securities
Options - 2,265,211 (0.05) - 4,222,384 (0.06)
Diluted
earnings -------- ---------- -------- -------- ---------- --------
per
Share 736 60,331,038 1.22 406 57,110,254 0.71
======== ========== ======== ======== ========== ========
7. Reconciliation of Movements in Shareholders' Funds
2005 2004
£'000 £'000
Retained profit for the financial year 736 406
Issue of shares 331 78
Contingent shares to be issued - 241
Currency movements 9 (7)
----- ------
Net movements in shareholders' funds 1,076 718
Shareholders' funds at 1 October 2004 8,161 7,443
----- ------
Shareholders' funds at 30 September 2005 9,237 8,161
===== ======
8. Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
2005 2004
£'000 £'000
Operating profit 593 286
Depreciation & amortisation 692 268
Loss / (profit) on disposal of fixed assets 14 (4)
Decrease / (increase) in stock 68 (347)
Increase in debtors (296) (837)
(Decrease) / increase in creditors (56) 870
-------- --------
Net cash inflow from operating activities 1,015 236
======== ========
9. Acquisition
On 9 February 2005 the Group completed the acquisition of the trade and assets
of Peak Performance Technologies Inc for a total consideration of £593,000. This
included a contingent cash consideration element of up to £53,000 subject to
certain performance conditions.
The total goodwill arising upon acquisition was £461,000, which is being written
off over 10 years.
The fair value of the business net assets acquired was as follows:
Provional
Book value Adjustment fair value
£'000 £'000 £'000
Fixed Assets 40 - 40
Intangible Assets - 108 108
Stock 89 - 89
Trade debtors 46 - 46
Prepayments and accrued income 9 - 9
Cash 111 - 111
Trade creditors (14) - (14)
Accruals and deferred income (197) (15) (212)
-------- -------- --------
Net Business Assets Acquired 84 93 177
-------- -------- --------
Consideration:
Cash 270
Share consideration 270
Contingent cash consideration 53
--------
Total provisional consideration 593
Costs of acquisition 45
--------
Provisional purchase
consideration and costs of
acquisition 638
--------
Provisional goodwill arising 461
========
The contingent cash consideration is dependent upon a final review of the fair
value of the net assets acquired to be performed after 30 September 2005. The
maximum amount payable under this arrangement will be £53,000 although £27,000
has already been paid following a fair value review of certain of the assets.
This review has not yet been completed. The directors have made use of all the
information available at the year end in order to estimate the likely value of
the contingent cash consideration.
The fair value of the intellectual property acquired has been assessed by the
Company and valued at £108,000.
In the financial year to 30 September 2004, Peak Performance Technologies Inc.
had revenues of £1.8 million and made a profit before tax of £25,000. In the
period from 1 October 2004 to 8 February 2005, Peak Performance Technologies Inc
had revenues of £425,000 and made a loss before taxation of £34,000.
10. Publication and non-statutory accounts
The preliminary results for the year ended 30 September 2005 are unaudited. The
financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985 for the years ended 30 September 2005 or 30 September 2004. The financial
information for the year ended 30 September 2004 is derived from the Annual
Report for that year which was delivered to the Registrar of Companies. The
auditors, Pricewaterhouse Coopers LLP., reported on those accounts: their report
was unqualified and did not contain a statement under either section 237 (2) or
237 (3) of the Companies Act 1985.
11. 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.
6 December 2005
This information is provided by RNS
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