6th Dec 2005 07:02
OMG PLC06 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 lifesciences, entertainment and engineering applications, announced today itspreliminary 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 thesevery satisfactory results after such a slow start to the year is a tribute tothe inspiration and hard work of the entire OMG team, and provides a strongfoundation on which to build the coming year of growth and diversification." For further information please contact: Nick Bolton, Chief Executive, [email protected] Wharton, Finance Director, [email protected]: 01865 261800 Tim Thompson / Frances AdigweBuchanan CommunicationsTel: 020 7466 5000 About OMGOMG plc (LSE: OMG) is the global leader in the three-dimensional capture andanalysis of movement, providing tools and services for life sciences,entertainment and engineering applications. Based in Oxford UK, California USAand Colorado USA, OMG has customers in over 35 countries and is listed on AIM, amarket operated by the London Stock Exchange. The group trades through a numberof operating subsidiaries in the name of Vicon Peak, 2d3 and House of Moves inthe UK and USA, and through a network of distributors in other major countries.Vicon Peak provides professionals with the latest tools to capture accuratelythree-dimensional human motion for research, medicine, sport, engineering, gamedevelopment, broadcast and film. 2d3 produces innovative visual geometrysoftware deriving 3D data from moving images. House of Moves is the world's mostexperienced motion capture service studio, producing high quality motion capturedata 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 ofrevenue performance between the two halves of the year - £9.4m second halfversus £4.8m first half. Change in terms of product - a dozen new productreleases and upgrades across the Group. Change in terms of management - JulianMorris passing on the role of Chief Executive to Nick Bolton. We believe OMG is a business with an exciting present and enticing future. Thepresent is a group of companies in strong or dominant global market positions,with distributed geographical and sector risk. The future is one of realisableopportunities in both core and diversified business based on a deep pool oftechnology. Financial SummaryGroup turnover, including acquisitions, rose 30% to £14.2m (2004: £10.9m).Turnover excluding the acquisition of Peak Performance Technologies Inc.'sbusiness ("Peak"), grew 19% to £12.9m. Gross profits improved from 56% of turnover to 60% due to higher volume andlower manufacturing costs of the new MX motion capture system. However, theimprovement in gross margin was partially offset by the sale of earlier productlines at lower margins. Operating profit before amortisation of goodwill and exceptional items increasedby 193% to £923,000 (2004: £315,000) and after goodwill amortisation andexceptional items, increased by 107% to £593,000 (2004: £286,000). The exceptional items amounting to £216,000 comprise one-off costs relating tothe cost of rationalising distribution channels following the acquisition ofPeak and the cost of changes within senior management. Profit before tax improved by 51% to £690,000 (2004: £457,000). Earnings pershare 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 ReviewSecond Half TurnaroundGroup full-year profit before tax of £690,000 contrasts dramatically with thereported first half loss of £549,000. Stand-alone second half profit before taxwas a healthy 13% of equivalent revenues. The turnaround was achieved by a majorimprovement in revenues and tight control and selective reduction of costs. Sales management has been completely reorganised with more direct and regularreporting of UK and US sales teams. Product lines, services, procedures andinfrastructure are being consolidated across all operations within the Group.Manufacturing costs are being further reduced by higher volume production ofstandard products. Global Revenue GrowthRevenue growth for the year was strong across all markets, with the exception ofUK which, as previously reported, enjoyed exceptional revenues in the previousyear. 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'ssecond US acquisition, revenues from North America increased by 62%. ExcludingPeak, revenues from North America rose 37%. In the second half year, severallarge individual orders - one for over $3m for a very large installation of thenew MX40 motion capture system - were won in the highly competitive USentertainment market. Far Eastern and Continental European markets also grew well with revenues up by83% and 16% respectively. In particular, Japanese revenues were up 109%, withstrong growth across all market sectors. Acquisition of Peak & other Corporate InvestmentThe Group's core business was significantly strengthened by the acquisition ofthe business of Peak based in Denver, Colorado in February 2005. Peak is aspecialist in motion capture for sports science and human and animal motionresearch using video image recording. Within 45 days of completion, the two existing companies' product ranges werecombined and re-branded under the name Vicon Peak. Within 60 days, the PeakMotus 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 saleschannel and global distribution channels were rationalised, allowing access toall markets. Peak's product range for its well-established sports and animal science marketsin North America is now considerably extended. In Europe, the response of theacademic sports science market to the merger of two well-respected companies andthe availability of a combined optical and video motion capture system has beenparticularly strong. As a result, since joining OMG, Peak's sales have increasedwhile its costs are reduced, giving the business new focus as a profitableoperation. During the year, the Group has taken a 12% stake in Munich-based start-upContemplas Gmbh. Contemplas produces software for simple 2D and 3D motioncapture and analysis based on video (DV) recording. Their aim is to bring thetechnology into consumer-driven markets such as running-shoe selection andfitness assessment. Marketing Led, Engineering DrivenGlobal sales channels for the Group's core products, built around motion captureand camera tracking, are well established. Applications cover an extraordinaryrange from the production of feature films and computer games to militarytraining; from medical research and treatment to engineering ergonomics; andfrom sports performance to the study of the neural control of the gait ofmillipedes. During the year the Group has increased its marketing resource, bringingsystematic analysis and planning to the process of prioritising and specifyingthe Group's product development. Industry AwardsIn February 2005, Vicon Motion Systems was awarded a Scientific & TechnicalAcademy Award, a "Technical Oscar", by the Academy of Motion Picture Arts &Sciences for contributions made through optical motion capture to the filmindustry. The Company's other leading product for the entertainment industry, 2d3's boujouautomatic camera tracker, was used in 4 out the 7 films nominated for the Oscarfor Best Visual Effects, including the winning film Lord of the Rings. New Product IntroductionsThe Vicon Peak MX product range has been enhanced by the introduction of MXBridge and Reference Video. MX Bridge allows many older models of Vicon camerato be used alongside the new MX cameras. Customers wishing to upgrade theirsystems can now do so gradually, without having to discard existing cameras.As well as the integration of MX cameras into the Peak Motus system, Viconsoftware has also been enhanced to allow simultaneous video capture from a rangeof DV and digital machine vision cameras with a range of resolutions and framerates. Vicon Peak motion capture systems are frequently used in applications whereaccurate 3-dimensional tracking of targets, ranging from surgical and medicaldevices to performing actors and animals, is required in "real time". During theyear, the development of a combination of new tracking algorithms and softwareengineering for parallel processing on multi-processor computers hasdramatically increased real-time performance. The possibility of a directorviewing a live multi-character animation as it is performed removes one of theremaining separators between motion capture and traditional film making.2d3's original automatic camera tracker, boujou, used mainly in the movieindustry has been considerably enhanced and upgraded with the release during theyear of versions 3.0 and 3.1. A simpler version of boujou, aimed at video andeducational markets, is now sold under the name bullet. Radical DiversificationsDuring the year, the Group tasked a team, comprising the past and present ChiefExecutives and a full-time Business Development manager, to evaluateopportunities for radical diversification of the Group's business. The maincriteria 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 hasemerged, winning the unanimous support of the Board. One opportunity in a defence application of 2d3's "structure-from-motion" IP hasmoved forward with the recently-announced development agreement with QinetiQ.Another, based on IP from both Vicon and 2d3, concerns management andmaintenance of key national infrastructure. For reasons of commercialsensitivity it is not possible to give more details of these developments atpresent. Dividend PolicyAs in previous years, the Directors are not declaring a dividend, although thedividend policy will be kept under review. Comment & OutlookDespite the marked contrast between the first and second halves, the Group'soverall financial performance in 2004/5 was very satisfactory, with excellentrevenue growth, market diversification, good control of costs and cash, andincreasingly 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 activityappears well able to support this plan. Secondly, through a structured businessdiversification programme. Although at a very early stage, the new opportunitiesfor diversification look exciting. Currently the Company has adequate internal resources to progress thesediversifications and has already committed an initial investment of £0.2m so farthis year. Details of progress with diversifications will be made available indue course. Trading in the current year is making a strong start and we will review progressat the Annual General Meeting. Anthony Simonds-Gooding, Chairman Nick Bolton, Chief Executive6 December 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTfor 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 marketingcosts (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 beforegoodwill 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 andsimilar income 97 171 -------- --------Profit on ordinary activitiesbefore taxation 690 457 Tax credit / (charge) onprofit on ordinary activities 5 46 (51) -------- -------Retained profit for the financial year 736 406 ======== ========Basic earningsper ordinaryshare 6 1.27p 0.77p Diluted earnings perordinary share 6 1.22p 0.71p There is no material difference between the retained profit on ordinaryactivities before taxation and the retained profit for the financial year statedabove and their historical cost equivalents. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 30 SEPTEMBER 2005 2005 2004 £'000 £'000 Retained profit for the financial year 736 406 Exchange differences on retranslation of openingnet 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 £'000Fixed assetsIntangible assets 1,353 891 132 56Tangible assets 970 863 169 195Investments 69 - 978 645 ----- ----- ----- ------ 2,392 1,754 1,279 896 Current assetsStocks 1,739 1,712 - -Debtors 3,637 3,239 2,366 2,794Cash 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 oneyear (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 morethan one year - (82) - - ------ ------ ------ ------Net Assets 9,237 8,161 6,891 6,602 ====== ====== ====== ======Capital and reservesShare capital 147 138 147 138Shares to be issued 241 241 - -Share premium account 5,692 5,370 5,692 5,370Profit 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 STATEMENTFor 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 financeInterest 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) FinancingIssue 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 allof its subsidiary undertakings drawn up to 30 September 2005. Acquisitions ofsubsidiaries are dealt with by the acquisition method of accounting from thedate of acquisition. 3. Turnover and segmental analysis The directors consider there to be only one class of business, that of motioncapture. An analysis of turnover destination by geographical market is given below: 2005 2004 £'000 £'000 United Kingdom 673 2,217Continental Europe 2,021 1,746North America 8,245 5,082Far East 3,089 1,691Other 185 159 ------ ------ 14,213 10,895 ====== ======An analysis of turnover by origin is given below: 2005 2004 £'000 £'000 United Kingdom 6,166 5,965North America 8,047 4,930 -------- ------- 14,213 10,895 ======== ======= An analysis of operating profit and net assets by geographical origin is givenbelow: Operating profit Net Assets 2005 2004 2005 2004 £'000 £'000 £'000 £'000 United Kingdom 494 177 8,767 8,147North America 99 109 470 14 --------- --------- --------- --------- 593 286 9,237 8,161 ========= ========= ========= ========= All turnover, operating profit and net assets attributable to acquisitions isfrom North America. 4. Exceptional items Exceptional costs of £216,000 (2004: nil) comprise the cost of reorganisingdistribution channels and management changes relating to the acquisition of PeakPerformance Technologies Inc.'s business, and other senior management changeswithin 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 - 51Adjustments 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 comprisesaccelerated capital allowances of £41,000 (2004: £124,000), and the accumulatedunrelieved tax losses of £904,000 (2004: £725,000) available to subsidiaryundertakings of the Group, to offset against future taxable trading profits ofthe 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 tradingprofits, the deferred tax asset has not been recognised. The tax assessed for the year is lower than the standard rate of corporation taxin 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 rateof corporation tax in the UK of 30% (2004: 30%) 207 137 Effect of:Expenses not deductible for tax purposes 62 10Depreciation 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 - 15Unrecognised deferred tax on losses - 50Research 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 penceBasicearnings pershareEarningsattributableto ordinary shareholders 736 58,065,827 1.27 406 52,887,870 0.77 Dilutiveeffect ofsecuritiesOptions - 2,265,211 (0.05) - 4,222,384 (0.06) Dilutedearnings -------- ---------- -------- -------- ---------- --------perShare 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 406Issue of shares 331 78Contingent shares to be issued - 241Currency movements 9 (7) ----- ------Net movements in shareholders' funds 1,076 718Shareholders' 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 OperatingActivities 2005 2004 £'000 £'000 Operating profit 593 286Depreciation & amortisation 692 268Loss / (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 assetsof Peak Performance Technologies Inc for a total consideration of £593,000. Thisincluded a contingent cash consideration element of up to £53,000 subject tocertain performance conditions. The total goodwill arising upon acquisition was £461,000, which is being writtenoff 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 - 40Intangible Assets - 108 108Stock 89 - 89Trade debtors 46 - 46Prepayments and accrued income 9 - 9Cash 111 - 111Trade creditors (14) - (14)Accruals and deferred income (197) (15) (212) -------- -------- --------Net Business Assets Acquired 84 93 177 -------- -------- -------- Consideration:Cash 270Share consideration 270Contingent cash consideration 53 --------Total provisional consideration 593 Costs of acquisition 45 --------Provisional purchaseconsideration and costs ofacquisition 638 -------- Provisional goodwill arising 461 ======== The contingent cash consideration is dependent upon a final review of the fairvalue of the net assets acquired to be performed after 30 September 2005. Themaximum amount payable under this arrangement will be £53,000 although £27,000has 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 theinformation available at the year end in order to estimate the likely value ofthe contingent cash consideration. The fair value of the intellectual property acquired has been assessed by theCompany 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 theperiod from 1 October 2004 to 8 February 2005, Peak Performance Technologies Inchad 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 notconstitute statutory accounts as defined in Section 240 of the Companies Act1985 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) or237 (3) of the Companies Act 1985. 11. Copies of Announcement Copies of this announcement will be available from the Company's registeredoffice at 14 Minns Business Park, West Way, Oxford OX2 0JB. 6 December 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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