Interim Results
OMG PLC
23 June 2005
OMG plc ('OMG' or 'the Company')
Interim Statement for the six months ended 31 March 2005
OMG, the global leader in the three-dimensional capture and analysis of
movement, providing tools and services for life sciences, entertainment and
engineering applications, announced today its interim results for the six months
ended 31 March 2005.
Highlights:
* Revenues increased by 10% to £4.8m (2004: £4.4m) including the effect of
acquisitions.
* Operating loss of £0.6m (2004: operating profit of £0.1m) resulting
principally from US revenues being below expectations.
* Business outside of the US in line with expectations with strong growth in
important Japanese market.
* Integration of Peak Performance Technologies business, acquired in February
2005, progressing well with combined businesses now trading globally as Vicon
Peak.
* Appointment of Nick Bolton as Chief Executive and Julian Morris as Deputy
Chairman in May 2005.
* Order received from Electronic Arts, the world's leading independent
developer and publisher of interactive software, for a number of large MX
systems for delivery in the second half.
* Vicon's optical motion capture technology honoured with Academy Award(R).
Nick Bolton, Chief Executive commented:
'The Company has made some significant steps forward during the first half of
the year which are not immediately apparent from the financial performance.
While the first half got off to a slow start, recent large system orders will
help improve performance during the second half. I look forward to guiding OMG
towards reaching its full potential.'
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 / Nicola Cronk
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 science,
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 & CHIEF EXECUTIVE'S JOINT STATEMENT
The six months to 31 March 2005 follows a record finish to last year. However,
as indicated at the AGM in February, in the US, our largest market, trading
experienced a slow start and performance for the first half and full year
depended critically on the timing of a number of major contracts. Business
prospects are good with potential for a significant recovery in the US market
and therefore the results for the first half of the year may not be a good
indication of the underlying activity within the Company.
Financial Results
Turnover was 10% ahead of the same period last year at £4.8m (2004: £4.4m),
helped by the acquisition of House of Moves in May 2004 and Peak Performance
Technologies Inc. ('Peak') business in February of this year. Revenues were
below expectation in the US and as a result of continuing investments and
planned expenditure, the Company incurred an operating loss of £0.6m (2004:
operating profit of £0.1m).
Cash balances remain healthy at £2.5m, although this represents a decrease of
£1.5m during the six month period. Cash decreased by £0.9m from operating
activities and £0.7m from investment in fixed assets and the effect of
acquisitions. Lower than expected sales in the first half resulted in higher
stocks of finished goods and work in progress, contributing to the net cash
outflow from operating activities.
Board Changes
As announced on 27 May 2005, Nick Bolton was appointed as Chief Executive.
Dr Julian Morris, founder and former Chief Executive, continues as an Executive
Director in the role of Deputy Chairman. Chris Steele, Director of UK Operations,
left the Company with effect from 25 May.
Business Developments
The MX product range, launched last year, has continued to be enhanced with the
release of lower priced MX3 which started shipping in January 2005. This market
leading product range has continued to generate strong interest from our
customer base and potential new customers. The recent order from Electronic
Arts, the world's leading independent developer and publisher of interactive
entertainment software, for a number of large MX systems to replace competitive
products and the commitment to a long term relationship underlines the advances
made in our technology and product offering.
In February, the Company was honoured with a Scientific and Technical Academy
Award(R) from The Academy of Motion Picture Arts & Sciences. Moreover, four of
the seven films which competed for the Best Visual Effects Oscar(R) award ('The
Day After Tomorrow', 'Harry Potter and the Prisoner of Azkaban', 'Lemony
Snicket's A Series of Unfortunate Events' and 'Spider-Man 2') used products or
services from OMG group companies.
In the US, the year started with a strong prospect list with a noticeable shift
toward the opportunity for large systems and multiple system orders. Typically,
the timing of large orders or multiple system orders is more difficult to
predict and there is a longer gestation period. During the first half, none of
these larger prospects were concluded and buying decisions have continued to be
deferred, although none of these larger prospects were lost to competitors. As a
result, US revenues were significantly lower than the same period of last year
and well below management expectations.
In the rest of the world, overall revenues increased by 15% compared to the same
period last year. Of particular note, strong revenue growth was experienced in
Japan as this important market continued its recovery.
House of Moves (acquired in May 2004), which provides motion capture services to
the film and games sector, has achieved its first gross revenue target and,
under the terms of the purchase agreement, the Company is due to issue 965,927
ordinary shares to the vendors. In addition, further contingent cash and share
consideration is payable following each of two subsequent twelve month periods
following acquisition. Preliminary estimates indicate that a small amount of
additional consideration will be payable following the end of the first twelve
month period.
The integration of Peak, acquired in February 2005, is continuing to be
successful and it has made a profitable contribution in the two months since
acquisition. The proposition of the leading optical motion capture capability
combined with the leading video based motion capability under the new brand of
Vicon Peak has been well received. Work has already been completed to enable the
MX system to be operated using Peak's Motus software system with the first
customer delivery in June.
Dividend Policy
The current policy is not to pay a dividend and none will be paid in relation to
the interim period. However, this policy will be kept under review.
Outlook
Following a disappointing first half result, the immediate priority for the
Company is to deliver a significant improvement in the second half. To this end,
Nick Bolton, our new Chief Executive, has started and is leading a review
focused on sales execution and delivery against a strong prospect list. This
increased focus on sales together with a programme of improving internal process
and cost control is expected to continue into the next financial year and
represents an increase in emphasis on delivery of profits from our core
business.
The Company continues to invest in product development and has identified
opportunities for improving the release of new products and product features
which will help to increase differentiation of our product offering.
Whilst we are confident that business will be stronger during the second half of
our financial year, given the first half performance, the Company has moderated
its expectations for the full year result as a whole.
Anthony Simonds-Gooding, Chairman Nick Bolton, Chief Executive
23 June 2005
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 31 March 2005
Unaudited Unaudited Unaudited Unaudited Audited
Six months Six months Six months Six months Twelve
to to to to months to
31 March 31 March 31 March 31 March 30
2005 2005 2005 2004 September
Continuing Continuing Continuing (As 2004
Operations Operations- Operations- restated
Acquisitions Total See Note 1)
£'000 £'000 £'000 £'000 £'000
Turnover 4,551 246 4,797 4,350 10,895
Cost of (1,965) (82) (2,047) (1,827) (4,818)
sales
---------- --------- ---------- ---------- -----------
Gross profit 2,586 164 2,750 2,523 6,077
Sales, support
and marketing
costs (1,209) (41) (1,250) (927) (2,360)
Research and
development (724) (15) (739) (597) (1,399)
Administrative
expenses (1,284) (84) (1,368) (982) (2,146)
Grant income - - - 44 114
---------- --------- ---------- ---------- -----------
Operating
(loss) /
profit (631) 24 (607) 61 286
Interest
receivable and
similar income 58 93 171
----------- ---------- -----------
(Loss) /
profit on
ordinary
activities
before
taxation (549) 154 457
Tax on (loss)
/ profit on
ordinary
activities - (21) (51)
----------- ---------- ------------
Retained
(loss) /
profit for the
period (549) 133 406
=========== ========== ============
Basic (loss) /
earnings per
share (Note 4) (0.96p) 0.26p 0.77p
Diluted (loss)
/ earnings per
share (Note 4) (0.96p) 0.23p 0.71p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 31 March 2005
Unaudited Unaudited Audited Twelve
Six months to Six months to months to
31 March 31 March 30 September
2005 2004 2004
£'000 £'000 £'000
(Loss) / profit for the financial
period (549) 133 406
Exchange adjustments offset in
reserves (40) (6) (7)
---------- --------- ---------
Total recognised gains and losses
for the period (589) 127 399
========== ========= =========
GROUP BALANCE SHEET
At 31 March 2005
Unaudited at Unaudited at Audited at
31 March 31 March 30 September
2005 2004 2004
£'000 £'000 £'000
Fixed assets
Intangible assets 1,334 - 891
Tangible assets 1,142 457 863
--------- ---------- --------
2,476 457 1,754
Current assets
Stocks 2,409 1,521 1,712
Debtors 2,967 2,374 3,239
Cash and short term deposits 2,518 4,991 4,096
--------- ---------- ---------
7,894 8,886 9,047
Creditors: amounts falling due
within (2,406) (1,750) (2,558)
one year
---------- ----------- ---------
Net current assets 5,488 7,136 6,489
----------- ----------- ---------
Total assets less current 7,964 7,593 8,243
liabilities
Creditors: amounts falling due in
more (82) - (82)
than one year
----------- ------------ ---------
Net assets 7,882 7,593 8,161
=========== ============ =========
Capital and reserves
Share capital 146 132 138
Share premium account 5,672 5,321 5,370
Shares to be issued 241 - 241
Profit and loss account 1,823 2,140 2,412
---------- ---------- ----------
7,882 7,593 8,161
========== ========== ==========
GROUP CASH FLOW STATEMENT
For the six months ended 31 March 2005
Unaudited Unaudited Audited
six months six months Twelve months
to to to
31 March 31 March 30 September
2005 2004 2004
£'000 £'000 £'000
Net cash (outflow) / inflow
from operating activities
(note 5) (929) 134 236
Returns on investments and
servicing of finance
Interest received 57 84 169
Taxation (10) 164 164
Capital expenditure
Purchase of tangible fixed
assets (517) (245) (780)
Proceeds on disposal of
tangible fixed assets 30 1 43
Acquisitions
Purchase of subsidiary
undertaking (307) - (629)
Net cash acquired with
subsidiary 111 - -
---------- ---------- ----------
Net cash (outflow)/inflow
before financing and
management of liquid
resources (1,565) 138 (797)
Financing
Issue of share capital 40 23 78
---------- ---------- -----------
(Decrease) / increase in
cash (note 6) (1,525) 161 (719)
========== ========== ===========
NOTES TO THE INTERIM FINANCIAL INFORMATION
For the six months ended 31 March 2005
1. Preparation of the interim financial information
The financial information for each of the six month periods ended 31 March 2005
and 31 March 2004 is unaudited and does not constitute statutory accounts within
the meaning of the Companies Act 1985. It has been prepared on the basis of
accounting policies set out in the Group's statutory accounts for the year ended
30 September 2004.
As explained in the 2004 Group accounts, the directors have taken the view that
clearer categorisation on the face of the profit and loss account would enhance
the presentation to the user. Therefore costs relating to sales, support, and
marketing have been separately analysed, where previously they were classified
with administration expenses. Additionally, the Group's definition of costs of
sales has been broadened to include all other production overheads, resulting in
the cost of sales for the six months to 31 March 2005 increasing by £616,000 (31
March 2004: increasing by £251,000) with gross profit and administration
expenses reducing by the same amount.
In the previous interim financial statements a merger reserve of £1,000 was
included in the Group reserves. At the year ended 30 September 2004, the
directors disclosed this in the profit and loss account as it is de minimus.
2. Acquisition of Peak Performance Technologies, Inc
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
includes a deferred cash consideration element of up to £53,000 subject to
certain performance conditions.
The total provisional goodwill arising upon acquisition was £424,000, which is
being written off over 10 years.
The provisional fair value of the business assets acquired is set out below
Book value Adjustment Fair Value
£'000 £'000 £000
Tangible Fixed Assets 40 - 40
Intangible Fixed 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) - (197)
-------- -------- ---------
Net business assets acquired at book
and fair value 84 108 192
-------- -------- ---------
Provisional consideration:
Cash 270
Share consideration 270
Contingent cash consideration 53
--------
Total provisional consideration 593
Costs of acquisition 23
---------
Provisional purchase consideration and
costs of acquisition 616
---------
Provisional goodwill arising 424
=========
The contingent cash consideration, is dependent upon a 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. The directors have made
use of all the available information at the period end in order to estimate the
likely value of the contingent cash consideration. This value will be subject to
re-assessment at the year end.
The provisional fair value of the intellectual property acquired amounted to
£108,000.
In its last 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 a loss after taxation of £34,000.
3. Tax on profit on ordinary activities
There is no tax charge for the six month period ended 31 March 2005 due to the
loss for the half year and brought forward UK tax losses.
4. Earnings per share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the period. Due to the loss per share, the outstanding
share options are non-dilutive at 31 March 2005.
At 31 March 2005 there were 58,390,358 allotted, called up and fully paid
ordinary shares of 0.25p each, and the weighted average number of shares was
57,250,126.
5. Reconciliation of operating profit to net cash outflow from operating
activities
Unaudited Unaudited Audited
six months six months Twelve months
to to to
31 March 31 March 30 September
2005 2004 2004
£'000 £'000 £'000
Operating (loss) / profit (607) 61 286
Depreciation and
amortisation 301 102 268
Profit on sale of tangible
fixed assets (1) (1) (4)
Increase in stock (609) (156) (347)
Decrease / (Increase) in
debtors 327 (29) (837)
(Decrease) / Increase in
creditors (340) 157 870
-------- -------- -------
Net cash (outflow)/inflow from
operating activities (929) 134 236
======== ======== =======
6. Reconciliation of net cash flow to movement in net funds
Unaudited Unaudited Audited
six months six months Twelve months
to to to
31 March 31 March 30 September
2005 2004 2004
£'000 £'000 £'000
(Decrease) / increase in
cash for the period (1,525) 161 (719)
Currency movements (53) 4 (11)
--------- --------- ---------
Change in net funds for the
period (1,578) 165 (730)
Opening net funds 4,096 4,826 4,826
---------- --------- ---------
Closing net funds 2,518 4,991 4,096
========== ========= =========
7. Copies of the interim statement
Copies of the interim statement will be sent to shareholders. Further copies
will be available from the Company's registered office at 14 Minns Business
Park, West Way, Oxford OX2 0JB, and from the Company's website: www.omg3d.com.
Independent review report to OMG plc
Introduction
We have been instructed by the company to review the financial information which
comprises the profit and loss account, the statement of total recognised gains
and losses, the balance sheet, the cash flow statement and the related notes. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Rules
which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where any changes, and the reasons for them,
are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of OMG plc management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the AIM Rules and for no other purpose. We do not, in producing this report,
accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2005.
PricewaterhouseCoopers LLP
Chartered Accountants
West London
23 June 2005
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