Final Results

OMG PLC 4 December 2001 4 December 2001 OMG PLC MAIDEN PRELIMINARY RESULTS OMG plc, the group that delivers, through its two operating divisions Vicon and 2d3, electronics and software products based upon 3-dimensional information contained in 'the moving image' to the entertainment, medical, scientific and engineering industries, is pleased to announce its maiden preliminary results since flotation on AIM for the year ended 30 September 2001. HIGHLIGHTS * Turnover up 45% to £9.9 million (2000: £6.8 million) largely attributable to the Vicon Motion Systems division. 2d3's new product, boujou, launched in April 2001 made a significant contribution to revenues in the second half of the year. * Operating profit of £0.80 million (£2000: £1.0 million), reflecting post-fundraising investment in increased marketing and R&D in the second half, was higher than expected. * Vicon's entertainment sales have grown by 68% with demand from all areas; computer games, film and video post production, and motion capture services. New generation of computer games consoles demands substantial increases in realism provided by Vicon. Movie credits include Gladiator, Enemy at the Gates, Pearl Harbour. * Vicon's product is being increasingly used for virtual engineering resulting in reduction of prototyping costs and acceleration of project time- clients include Pratt & Whitney for use in the Joint Strike Fighter project. * 2d3's Visual Geometry division's first product, boujou, is fast becoming the quality standard for camera tracking. Boujou film & TV credits include Harry Potter, Tomb Raider and BskyB Premiership Football commercial. * Earning per share 1.21p. * AIM flotation in April 2001 raised £5.3 million after expenses, net cash position stands at £4.7 million. Commenting on the results, Chief Executive, Julian Morris said; 'Many of the markets for our products are buoyant. Others such as the film, TV commercials, and aerospace industries are responding to economic conditions with caution and seeking increased production efficiencies. OMG's products provide these efficiencies by automating slow, manual tasks. We therefore expect continued growth in sales for the coming year with profitability restrained by further increases in R&D and marketing.' For further information, please contact: OMG plc 01865 261860 Julian Morris, Chief Executive OMG: www.omg3d.com Buchanan Communications 020 7466 5000 Tim Thompson/Bobbie Swanson Chairman And Chief Executive's Joint Statement This is the first full year financial statement published by OMG Plc since being admitted to AIM on 10 April 2001. Private to Public This has been a formative year during which OMG PLC made the transition from successful private to successful public company. At the start of the year, with the momentum of several years of self-funded, profitable growth, plans were laid to raise new investment to press the company's business forward. In April 2001, a successful placing raised £5.3 million after expenses to be invested over a planned 2-year cycle. The focus of the plan was, and remains, organic growth, driven by a substantial increase in overhead resources for new product development, worldwide sales, marketing, and customer support. The plan was implemented immediately the new finance was secured and most of the new projects are now up and running. This major corporate transition has been achieved with minimal disruption to the company's on-going business which has delivered even more than the predicted levels of growth. Financial Results We are pleased to report extremely strong growth in sales during the current financial year to 30 September 2001. Turnover rose to £9,850,000 (2000: £6,780,000), an increase of 45% over the previous year. A healthy profit before tax of £805,000 (2000: £1,043,000) was achieved despite investment in substantially increased marketing, development, and research in the second half. The growth in turnover was largely attributable to the group's motion capture business, Vicon Motion Systems. The new visual geometry business, 2d3, began shipments of its first product boujou on 1 April 2001, making a significant contribution to OMG revenues during the second half of the year. Gross Margin increased to 67% of sales (2000: 63%), while Overheads increased to 62% of sales (2000: 51%). Together these ratios demonstrate that the planned reduction in net profit was entirely due to the additional investment being made on the above mentioned items. Share Price On April 10th OMG's placing share price was 75p. Following minor fluctuations, the share price ended the year at its placing price, despite significant falls in all indices during the same period. Vicon Motion Capture Entertainment Entertainment sales have grown by 68% with increased contributions in all primary areas: computer games, film and video post-production, and motion capture services. Growth has been particularly strong in the Far East and Europe. The computer games industry is currently poised to enjoy its fourth cycle of growth with the introduction of the new generation of platforms: Microsoft's X-box, Sony's Playstation II, and Nintendo's GameCube. Developers across the world are hard at work on new games with the substantial increases in realism made possible by these consoles. Realistic human movements require motion capture. Success is not limited to the giants of the industry. Tiny Vicon customer Bohemia Interactive in Prague had a worldwide 'number 3 hit' with Operation Flashpoint. Vicon's landmark movie credits like Titanic and Gladiator continue to grow with the release of Return of the Mummy, Enemy at the Gates, and Pearl Harbour. Motion capture characters are now routinely used to save the cost of extras and to generate photo-realistic foreground fantasy characters. The realism of computer-generated human characters and their movements continues to improve as illustrated by Paris-based Vicon customer Attitude Studios' character Eve Solal, which takes realism well beyond other current digital characters ('avatars'). Medical and Biomechanics Vicon's large global installed base of gait analysis laboratories continues to grow and to generate a steady flow of replacement and upgrade business. In particular, the high-resolution MCam, originally developed to meet the demands of the animation industry, is driving a round of major system upgrades among Vicon's gait analysis user base. The new investment is also helping Vicon to apply resources to investigating new medical and biomechanical applications of motion capture, including club-based consumer sports assessment, image-guided and robotic surgery, and radiotherapy control. Virtual Engineering A significant part of the newly-funded investment plan is being directed at 'virtual engineering' and other simulation applications. Graphical human simulations ('avatars') are driven interactively using motion capture to allow ergonomic testing of CG prototypes long before they are built. Motion capture-driven simulation also allows the testing and training of human reaction to a wide range of visual environments, from proposed or inaccessible moving and working spaces, to vehicle and aircraft control. Virtual engineering has the potential to eliminate huge prototyping costs and to accelerate large-scale projects by many months. Vicon has sold and installed a system at Pratt & Whitney (Hartford CT) to be used for virtual engineering on the Joint Strike Fighter project due for delivery in 2008. 2001 Queen's Awards Vicon Motion Systems Limited won 2 Queen's Awards, for 'Innovation' (for applying the technology of a medical product to animation), and for 'International Trade'. 2d3 Visual Geometry Entertainment 2d3's first product, boujou, began shipping in April 2001. Thanks to earlier investment in pre-launch marketing and on-going investment in a global sales network, boujou has fast become the quality standard for camera tracking. Boujou is already in use in many of the premier film and video post-production 'houses' in London and Hollywood, several of which have multiple licenses. Because of boujou's fully automatic mode of operation, a new practice is being introduced by which every 'shot' which might be modified by a visual effect is tracked, whether or not it is finally used in the production. Boujou tracking credits have come thick and fast and include; Harry Potter, Tomb Raider, Enemy at the Gates, When Dinosaurs Ruled America, Mike Bassett England Manager, and BSkyB Premiership Football commercial. The sales and marketing task now is to disseminate the routine use of boujou camera tracking from the major studios to the smaller but much more numerous post-production companies which generate the majority of visual effects for TV, video commercials, music videos, and Webcasts. Boujou has won a clutch of industry awards, including Computer Graphics World Innovation Award, IABM Peter Wayne Award, and CATS Award for Innovation. Design Boujou has taken its first steps into the design visualisation market through sales to Hayes Davidson, one of London's leading architectural visualisation companies. There is also evidence of diversified demand from the design and marketing divisions of a range of industries, including car and aerospace. All share the need to visualise actual or potential new products, while still at the design stage, in live footage and with maximum realism. Well targeted marketing will be essential to address these global markets. Technologies for new 2d3 Products Two of the most formative events of the year were 2d3's 'technology demonstrations' at SIGGRAPH (August in Los Angeles) and IBC (October in Amsterdam). These two enormous trade exhibitions allowed 2d3 to expose several of its new technologies, currently in their research phase, to potential customers. The demonstrations covered photo-rendered model building, image mosaicing and super-resolution, and removal of moving foreground objects from still and sequenced images - all by fully automatic processes. The response to the demonstrations was extremely positive and, in some cases, bordered on incredulity. The exercise has provided strong confirmation of potential markets for 2d3's next products. Investment The injection of cash resulting from the placement has been applied principally to four specific areas: additional staff, subcontracted and out-sourced costs, marketing, and working capital. In accounting terms, the first three of these are classified as 'overhead' and are investments fully written off against current trading. All staff costs are treated as overheads. The planned period of return varies from relatively short (6-12 months) for additional sales staff, to medium (6-18 months) for marketing and sales infrastructure, and long (12-36 months) for research and development. Increased working capital has been applied mainly against the inevitable increases in debtors (£3.157million; up 49%) and stock (£1.337million; increased by more than 3 times) associated with high rates of growth. Vicon personnel Vicon development expenditure has more than doubled over the previous year, with staffing increasing from 9 to 19. The majority of new appointments have been made in software engineering but they also cover electronics, project management, and documentation. Sales, marketing, and customer support staffing has also increased in both UK and US offices by a combined 64% from 14 to 23. The benefits are already evident in improved competitive performance in existing markets, and a solid focus on new markets such as virtual engineering. Vicon customer support is now establishing an enviable reputation around the world, which will pay the dividend of repeat business in future years. Vicon Motion Systems has achieved an increase in output of over 40% with only 2 additional full-time production staff, bringing the total to 6. 2d3 personnel At the start of the year, boujou was being developed by 3 full-time staff plus 2 contractors, one academic and one commercial. By the year end, 2 further full-time development staff have been appointed. Initial boujou sales were made in the course of product testing, without dedicated sales staff. Four new sales and support appointments have now been made, including one in Los Angeles. A full-time UK-based CG artist assists in demonstrations and provides customer support. Marketing To sustain the rapid increase in sales, it is vital that OMG's operating companies achieve a strong global presence. Their two primary marketing tools are solid appearances at international trade shows and good Web sites. Fortunately, OMG's customers are very largely English speaking and attend a small number of major international conferences and trade shows. One major trade show can generate over a thousand serious new leads to be followed up by the sales teams. There is strong evidence to show that the primary source of information on OMG's companies and products are its Web sites. All company Web sites are constantly reviewed and kept up-to-date. Premises By the end of the year, OMG staff had increased by 71% to 70 (2000: 41) in all areas of operation. Of these, 23 new appointments were made in UK putting existing premises under great pressure. In the short term, available space has become a significant constraint to further recruitment. OMG's (Vicon's) space requirements are significantly complicated by the need to accommodate a majority of straightforward office space with electronics production and shipping area, and a large, high-ceilinged motion capture studio, ideally all under one roof. The target costs for each of these types of space varies by a factor of more than 3:1. After months of searching, a suitable building has been found and a move should be possible after alterations are completed by mid 2002. Outlook Many of the markets for our products are buoyant. Others, like the film, TV commercial, and aerospace industries, are responding to economic conditions with caution and by seeking increased production efficiencies. By comparison with the older methods they frequently replace, OMG's products reduce users' costs. For a company of its size, OMG also has unusual strengths of geographic and market diversity. We therefore expect continued growth in sales in the year 2001/02, which has started well. Profitability will be affected during a year characterised by further increases in research, development and marketing costs. This investment will enable us to exploit the potential of our innovative products in their expanding markets to the full in the years ahead. Dividends As indicated in the flotation Prospectus, the directors are not declaring a dividend in relation to these results, but the issue of dividend policy will be kept under review. Shareholder, Employee, and Director Support We should like to thank all shareholders, employees, and directors for their continuing support and hope that they will enjoy a long association with the company. Further Information Further information on OMG plc is available from the company's Web site at www.omg3d.com. Sir Peter Thompson, Chairman Julian Morris, Chief Executive 4 December 2001 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 September 2001 Note 2001 2000 £'000 £'000 Turnover 9,850 6,780 Cost of sales (3,274) (2,527) Gross profit 6,576 4,253 Administrative expenses (6,176) (3,442) Grant income 260 178 Operating profit 660 989 Interest receivable 145 54 Profit on ordinary activities before taxation 805 1,043 Tax on profit on ordinary activities 3 (263) (356) Profit retained and transferred to reserves 542 687 Basic earnings per share 4 1.21p 1.69p Diluted earnings per share 4 1.04p 1.60p There were no recognised gains or losses other than the profit for the financial year. BALANCE SHEET AT 30 SEPTEMBER 2001 Group Group Company Company Note 2001 2000 2001 2000 £'000 £'000 £'000 £'000 Fixed assets Tangible assets 544 152 - - Investments - - 101 - 544 152 101 - Current assets Stocks 1,337 414 - - Debtors 3,157 2,116 3,449 - Cash at bank and short term deposits 4,686 900 2,864 - 9,180 3,430 6,313 - Creditors: amounts falling due within one year 1,357 1,028 23 - Net current assets 7,823 2,402 6,290 - Total assets less current liabilities 8,367 2,554 6,391 - Capital and reserves Share capital 5 123 101 123 - Share premium account 5,249 - 5,249 - Merger reserve 1 1 - - Profit and loss account 2,994 2,452 1,019 - Shareholders' funds 6 8,367 2,554 6,391 - CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 2001 Note 2001 2000 £'000 £'000 Net cash outflow from operating activities 7 (541) (318) Returns on investments and servicing of finance Interest received 145 54 Taxation (476) (74) Capital expenditure and financial investment Purchase of tangible fixed assets (615) (164) Sale of tangible fixed assets 2 13 Financing Issue of share capital 5,271 - Increase/(decrease) in cash 3,786 (489) NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2001 1. BASIS OF PREPARATION The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. The principal accounting policies of the group have remained unchanged from the previous year. 2. BASIS OF CONSOLIDATION The consolidated financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 30 September 2001. Acquisitions of subsidiaries are dealt with by the acquisition method of accounting, except those qualifying as Group reconstructions where merger accounting is permitted. The acquisition of Vicon Motion Systems Limited (formerly Oxford Metrics Limited) took place on 1 November 2000 by way of a share for share exchange. This acquisition qualified as a Group reconstruction and the principles of the merger method of accounting set out in Financial Reporting Standard 6, 'Acquisitions and mergers' have been applied. In order to provide meaningful information in respect of the previous year, the accounts have been prepared as though the merger had been in effect from 1 October 1999. The financial information for the year ended 30 September 2000 was based on the audited financial statements of Vicon Motion Systems Limited for the year ended 30 September 2000 and the unaudited financial information of Vicon Motion Systems Inc. for the same period. 3. TAX ON PROFIT ON ORDINARY ACTIVITIES The tax charge is based on the profit for the year and represents: 2001 2000 £'000 £'000 UK Corporation tax at 30% (2000: 30%) 220 324 Overseas taxation 18 11 238 335 Adjustments in respect of prior year 25 21 263 356 4. EARNINGS PER SHARE 2001 2000 weighted weighted average number average of shares number of Per Per shares share share amount amount pence Earnings pence Earnings £'000 £'000 Basic earnings per share Earnings 542 44,745,367 1.21 687 40,502,000 1.69 attributable to ordinary shareholders Dilutive effect of securities Options - 7,567,646 - - 2,256,800 - Diluted earnings per share 542 52,313,013 1.04 687 42,758,000 1.60 5. SHARE CAPITAL Group and Company Group Company 2001 2000 2000 £'000 £'000 £'000 Authorised 100,000,000 ordinary shares of 0.25p 250 250 250 (2000: 250,000 shares of £1 each) Allotted, called up and fully paid 49,202,947 ordinary shares of 0.25p 123 101 - (2000: 1 ordinary share of £1) The comparative figure for the Group's share capital reflects the application of merger accounting principles and represents the 101,255 ordinary shares of £1 each issued to acquire Vicon Motion Systems Limited. By an agreement dated 1 November 2000 the company acquired the entire share capital of Vicon Motion Systems Limited through the issue of 101,255 ordinary shares of £1 each by way of a share for share exchange. The company's authorised share capital was subsequently subdivided from 250,000 ordinary shares of £1 each into 100,000,000 ordinary shares of 0.25p each. On 10 January 2001, 1,000 ordinary shares of £1 each were issued for cash at a price of £10.39. On 26 March 2001, 500 ordinary shares of £1 each were issued for cash at a price of £10.39. On 4 and 10 April 2001 a total of 7,828,947 ordinary shares of 0.25p each were issued for cash in a placing on the Alternative Investment Market at a price of 75p. On 23 April 2001, 272,000 ordinary shares of 0.25p each were issued for cash in respect of share options exercised at an exercise price of 0.4425p. Other than the issue of shares on acquisition of Vicon Motion Systems Limited, in each of the above cases the difference between the proceeds and the nominal value of shares issued has been credited to share premium. 6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2001 2000 £'000 £'000 Retained profit for the financial year 542 687 Issue of shares 5,889 - Expenses of share issues (618) - Currency movements - 1 Net additions to shareholders' funds 5,813 688 Shareholders' funds at 1 October 2000 2,554 1,866 Shareholders' funds at 30 September 2001 8,367 2,554 7. RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2001 2000 £ £ Operating profit 660 989 Depreciation 221 133 Profit on sale of tangible fixed assets - (2) Increase in stock (923) (49) Increase in debtors (1,041) (1,496) Increase in creditors 542 107 Net cash outflow from operating activities (541) (318) 8. PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The Balance Sheet at 30 September 2001 and the Group Profit and Loss Account, Consolidated Cashflow Statement and associated notes for the year then ended have been extracted from the Group's 2001 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. 9. COPIES OF ANNOUNCEMENT Copies of this statement will be available from the company's registered office at 14 Minns Business Park, West Way, Oxford OX2 0JB for one month from this date. 4 December 2001

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