Earnings Release • Dec 5, 2013
Earnings Release
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OMG PLC
05 December 2013
Thursday, 5 December 2013
OMG plc
("OMG" or the "Group")
Preliminary Results for the financial year ended 30 September 2013
OMG plc (LSE: OMG), the technology group providing image understanding products for the entertainment, defence, life science, engineering and consumer markets, announces preliminary results for the financial year ended 30 September 2013.
Financial Key Points
· Group Revenue of £29.5m (FY12: £29.5m)
· Loss before Tax from continuing operations of £0.4m (FY12 Profit: £1.8m)
· Adjusted* Profit Before Tax from operations of £1.2m (FY12: £3.0m)
· Adjusted* Profit before Tax profit excluding OMG Life of £3.6m
· Healthy Net Cash balance at 30 September of £7.8m (FY12: £4.3m)
· Proposed dividend increased by 14% to 0.40p (FY12: 0.35p)
· Successfully completed a Placing and fully subscribed Open Offer enabling the Group to realise the acquisition of Mayrise and exploit the Autographer opportunity
Operational Key Points
· Vicon
o Systems used in a broad variety of applications from NASA to video games to sports performance
o Over 1500 Bonita cameras shipped, up 33% from last year
o Launched and shipped two new products: Cara and Apex
o Vicon technology featured on top video games, including FIFA 2014, Dead Island Riptide, and Beyond: Two Souls, and recent film releases including World War Z starring Brad Pitt, and 3D science fiction thriller and space blockbuster, Gravity, starring Sandra Bullock and George Clooney
· Yotta
o Maiden full year adjusted* profit before tax and improved recurring revenue base
o Completed the acquisition of Mayrise to broaden our expertise and product set
o Combination delivering results witnessed by cross-selling and wins at Sefton and Bracknell Forest
o Surveyed over 128,000km of road, up 57% from last year
o Secured a number of new customers including Cardiff, Carillion M40, East Sussex, Area 3 (Enterprise Mouchel) and Island Roads (Isle of Wight)
· 2d3
o Closed 2d3's largest ever software deal with an order worth $3.5m
o Signed a number of strategically important contracts across all three of the US services: US Army, US Navy and US Air Force
o Software development upgrades made to all three of product lines: TacitView, Catalina, and Tungsten
· OMG Life
o Autographer shipped and progress made to expand sales and distribution channels
o Increased investment in Autographer to exploit opportunities
Commenting on the results Nick Bolton, Chief Executive Officer said:
"As the global economic outlook shows signs of improvement, we enter the year ahead with cautious optimism. Our four businesses, three of which are operating profitably have every opportunity to develop further in 2014. The task for us now is to execute on the promising possibilities ahead. The strength of those possibilities owes much to the work our team has done this year to enhance our offer, strengthen market share and win significant banner contracts that prove our ability to win across OMG."
* Profit Before Tax from continuing operations before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, fair value adjustment to contingent consideration, unwinding of discount on contingent consideration, acquisition costs and redundancy costs. The statutory equivalents of the adjusted numbers shown in this statement are disclosed in notes 3 and 5.
For further information please contact:
| OMG plc | +44 (0) 1865 261800 |
| Nick Bolton, CEO | |
| David Deacon, CFO | |
| FTI Consulting | +44 (0) 20 7831 3113 |
| Matt Dixon / Emma Appleton / Charles Palmer / Jessica Liebmann | |
| N+1 Singer (NOMAD to OMG) | +44 (0) 20 7496 3000 |
| Shaun Dobson / Jenny Wyllie |
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, defence, life science and engineering industries.
The Group's technology is used to capture the movements of actors (for the movie industry), sportsmen (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 infrastructure assets or even for providing image intelligence and situational awareness from drone aircraft. Through this diverse offering the Group has earned its strong international reputation for precision from pixels.
Founded in 1984, the Group is headquartered in Oxford, UK, and has four offices in the US and four in the UK. It has customers in over 50 countries and is a quoted company listed on AIM, a market operated by the London Stock Exchange. The Group trades through four subsidiaries: Vicon, the world's largest motion capture and movement analysis company, 2d3, a manufacturer of specialised image understanding software for defence applications, Yotta, a provider of software and services for infrastructure asset management and OMG Life, a new consumer subsidiary.
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 and Loughborough University, engineering industry leaders including: Ford Motor Company, BMW, Airbus and Toyota, and in the entertainment sector; Sony, Industrial Light and Magic, Sega, Nintendo, UbiSoft, EA and Square Enix. In infrastructure asset management, clients include Highways Agency, East Sussex, Kent, Lancashire, Transport for London, UK Power Network, Cheshire East and West as well as many others. In Defence our customers include ultimately the Department of Defense in the USA and the Ministry of Defence in the UK. And of course a growing number of private individuals enjoying the benefits of our innovative camera the Autographer.
For more information about OMG, visit www.omgplc.com.
Chairman's Statement - broadening the offer and enhancing recurring revenue
Whilst at a headline level, the Group has seen revenues unchanged and profit before tax decline, a great deal has been achieved and in fact positive real signs have emerged that the Group's strategy is beginning to deliver.
Overall, Vicon, Yotta and 2d3 all performed profitably on an adjusted* basis. Vicon remains the cornerstone of the Group but the other operations are now beginning to catch up. This year saw Yotta take a huge step forward in profitability and conclude a great acquisition. 2d3 demonstrated it is now a force in the defence market winning the Group's largest ever contract and OMG Life shipped its first products to consumers in July 2013 and, whilst it is early days in terms of revenue, this product and the team behind it have made a confident start to what will be an exciting journey. Since year-end we have been encouraged by progress made and, as is the case with all our businesses, OMG Life has built a valuable intellectual property asset and brand, which gives the Group an expanding set of options on how to leverage this in the future.
Looking further into the results, our House of Moves division had a poor year and has been the single biggest impact on Group results reporting an adjusted* loss of £0.7m (2011/12: Profit £0.9m). This part of our business has had a mixed track record and trading conditions have been challenging in the Entertainment market for some time. In recognition of this and that House of Moves is increasingly becoming a content-orientated business rather than the Group's strong technology orientation, the Group will be undertaking a strategic review of House of Moves in the first half. In the interim, the business is being managed outside Vicon.
We also faced external challenges in the US defence market late in the year, as a result of US government shutdown and sequestration. This undoubtedly delayed the timing and changed the shape of certain deals but still 2d3 recorded a good result.
In July 2013, we completed the acquisition of Mayrise Systems, thanks to the support from a significant number of both new and long-term OMG investors. This was made possible via a Placing and fully subscribed Open Offer and has immediately added value to Yotta and the Group as a whole.
In terms of headline results for continuing operations, overall revenue was unchanged at £29.5m and an adjusted* profit before tax result of £1.2m (FY12: £3.0m) is reported. On an unadjusted basis the Group reported a loss before tax for £0.4m (FY12: Profit of £1.8m). As at 30 September 2013, cash stood at £7.8m (FY12: £4.3m).
Later in this report Nick Bolton, our Chief Executive, will go into more depth on the individual businesses and their trading performance, but noteworthy achievements in 2012/13 include:
- A significant US$3.5m defence deal for 2d3 Inc. which saw the business achieve individual market expectations;
- Yotta achieved revenue growth of 34% helped by further take-up of the Horizons platform which as of today has 31 customers (30 September 2012: 16 customers) and achieved a maiden full year adjusted* profit before taking into account the acquisition of Mayrise which exceeded individual market expectations;
- Vicon (excluding House of Moves) also reported revenue growth of 2.5%, shipped a record number of systems and improved adjusted* profit results; and
- For OMG Life, the year under review only included 9 weeks of trading and therefore did not have a material revenue impact on the results. However, since year-end marketing efforts have been focused on the important Christmas period and shipping to the US and elsewhere outside the EU has begun. As a result, shipments have increased post year-end to users around the world, who are now enjoying the benefits of this unique camera.
We are proud to be a British technology business competing on the international stage, developing innovative products and pushing boundaries. All this would not be possible without the dedicated and brilliant team of people within OMG whom I would like to thank very warmly, and for the continued support of all the Group's customers and shareholders.
Our strategy to deliver growth by combining a strong core of unique expertise in imaging technology with the other resources necessary (people, money, marketing) to grow a portfolio of profitable diversified businesses remains unchanged. We achieve this by applying the most appropriate business model for the specific market in which we've identified a clear opportunity. In one market, this may mean delivering exceptional service enabled by our technology; in another, we may integrate our technology into a powerful and transformative hardware or software product.
Because our businesses operate in different markets, each is subject to a different set of market forces, which we believe provides the Group with a wider spread of opportunity and better long term balance than would be the case for a single business, competing in a single market, using just one business model.
Turning now to our financial performance in more detail. Key performance indicators (KPIs) for the Group are as follows:
| KPI | FY13 | FY12 | Change |
| Group revenue | £29.5m | £29.5m | +£0.0m |
| Group cash position | £7.8m | £4.3m | +£3.5m |
| Group adjusted* profit before tax | £1.2m | £3.0m | -£1.8m |
The Group reported revenues from continuing operations of £29.5m (FY12: £29.5m) so overall unchanged compared to last year. On an adjusted* basis the Group reports a profit before tax of £1.2m (FY12: £3.0m). For the figures and key performance indicators achieved by our four businesses, please turn to the relevant sections in the Chief Executive's statement.
The Income Statement includes a significant finance expense of £0.4m (FY12: £0.5m), this is the final unwinding of the discount relating to the contingent consideration of the Sensing Systems acquisition. This is a non-cash moving item which is included in the reconciliation of the underlying profit before tax.
Foreign exchange rates, in particular the US Dollar-Sterling rate, have been relatively stable during 2012/13, and have not made any real impact on year-on-year Group performance.
The Group continues to invest in Research and Development (R&D) and spent £5.9m (FY12: £5.0m) during the year. A number of key projects were completed and launched during the year including OMG Life's Autographer, Vicon Cara, a head-mounted motion capture device aimed at the Entertainment segment, Vicon Apex, an interaction device designed for use in Virtual Reality caves in the engineering segment together with software releases of Vicon Blade, 2d3's suite of software and Yotta's Horizons Software-as-a-Service (SaaS) platform. From this total spend, we expensed £3.8m (FY12: £2.7m) and capitalised £2.1m (FY12: £2.3m) in this year's results.
The Statement of Financial Position shows an increase in Non-Current Assets due to the acquisition of Mayrise Systems Limited and R&D Capitalisation during the year. The increase in Current Assets is due to particularly strong revenues in September which contributed to an increase in Trade Receivables to £9.2m (FY12: £8.2m). The Group finished the year with a cash balance of £7.8m (30 September 2012: £4.3m, 31 March 2013: £4.0m) which reflects positive cash generation during the year from trading operations and residual funds raised from the placing in July 2013. Current Liabilities increased due to the inclusion of deferred income in Mayrise Systems acquired during the year and accrual for contingent consideration relating to Sensing Systems which increased given we now expect earn-outs to be paid in full in the near future due to the revenue performance in FY13. As a whole, the Statement of Financial Position remains robust. The share premium account increased substantially following the successful fund raise.
There is no current tax charge for this year, as the Group as a whole has made a taxable loss for the year. The effective rate of 66% is higher than the previous year, due to deferred taxation movements. The Group deferred tax asset has increased by £0.5m due to the recognition of losses and the movement of temporary timing differences on expenses. The Group deferred tax liability has increased by £0.8m, primarily due to the deferred tax liability on intangible assets arising from the Mayrise acquisition and increase in deferred tax liability on the R&D costs, which are wholly deductible for tax purposes, but capitalised and amortised for accounting purposes. This increase has been offset in part by a decrease in the deferred tax liability relating to intangible assets arising on past acquisitions, as they are amortised through the income statement.
In view of the Group's underlying progress, I'm pleased to confirm the Board's proposal to increase the dividend for the year to 0.40p (FY12: 0.35p) in line with our stated progressive dividend policy.
Looking ahead
In general terms, the global economic outlook appears to be improving. Whilst we continue to be mindful of the macro-economic conditions and of external forces, we expect our established businesses, Vicon, Yotta and 2d3 to move forward in the coming year underpinned by the new product releases described above. Vicon continues to dominate its marketplace and invest in innovative developments which will benefit the company's future performance. Yotta is now a considerably more robust business, with improved visibility and £2.2m in the combined recurring revenue base following the acquisition of Mayrise. 2d3, which is now well established within the Intelligence, Surveillance and Reconnaissance (ISR) marketplace in the USA, is expected to sign more software deals and importantly build recurring support revenues.
It is fair to say that OMG is one of only a few UK-based technology companies offering a new innovative technology product, in Autographer, to the consumer market on a growing global scale and the Board does not underestimate this challenge. It is still early days but the Board remain confident that our re-focussed marketing effort and improved pricing will reach out to an even wider consumer market in FY14.
So we enter 2013/14 in the knowledge that the foundation of OMG is in good shape and our four businesses have every opportunity to develop and move forward. Our strategy is clear and unchanged and so the Group enters 2013/14 with cautious optimism. The year ahead is now about executing on the promise of this momentum and this is where our attention as a team squarely rests.
Anthony Simonds-Gooding
Chairman
5th December 2013
* Profit Before Tax from continuing operations before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, fair value adjustment to contingent consideration, unwinding of discount on contingent consideration, acquisition costs 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: Forward on a strong foundation
In 2012/13, I can report our business made progress. I know that's a rather predictable opening line from a Chief Executive but when I review the year and collate the bullet points of achievements and challenges across our subsidiaries, it is clear there has been forward movement which dealt with the market, technology and execution challenges presented.
So, as we step into the new financial year, each business starts it stronger than it did 12 months ago, aided by our focus during the year to broaden the offer in each of our businesses, and expand the recurring revenue base to increase platform visibility and security - now let's take a look at each business in turn.
OMG Vicon: Leading around the World
| KPI | Revenue | PBT | Adjusted* PBT | |||
| FY13 | FY12 | FY13 | FY12 | FY13 | FY12 | |
| Vicon UK/ROW | £9.3m | £9.1m | £3.0m | £2.9m | £2.2m | £2.0m |
| Vicon US | £8.1m | £7.9m | £0.7m | £0.4m | £2.9m | £2.7m |
| Total Vicon Systems | £17.4m | £17.0m | £3.7m | £3.3m | £5.1m | £4.7m |
| House of Moves | £2.0m | £4.0m | (£0.7m) | £0.9m | (£0.7m) | £0.9m |
| Vicon Group | £19.4m | £21.0m | £3.0m | £4.2m | £4.4m | £5.6m |
Vicon Systems continues to be the market leader around the World. With growing revenues and profits drawn from over 40 countries during 2012/13, motion capture is becoming an increasingly accepted measurement technique in a broader variety of applications. We have seen systems used for measuring everything from Mars rover vehicles at NASA to innovative automatically controlled soil excavators; as well as the more well-known applications including capturing actors for video games and athletes for sports performance improvement. This broadened use resulted in the company shipping more systems to more customers in 2012/13 than in any one of the previous 28 years of trading.
With total system sales of £17.4m, Vicon Systems improved revenues by 2.5% compared to last year. Vicon Systems'overall gross margin improved slightly to 71.8% (FY12: 71.1%) per the Management Accounts. Overall adjusted* profit was up £0.4m reflecting higher revenues and cost restraint.
The trends of widened application use and broadened geographic reach meant the take up of Vicon's entry-level camera, the Bonita, continued to grow. The camera was introduced in October 2009 and since then has grown to become our best-selling camera range and the Bonita name has become synonymous with reliability, capability and affordability. Currently in its second generation, there are now five cameras in the range, including both motion capture and high-speed reference video cameras. Across all of these variants, over 1500 Bonitas were shipped in 2012/13, up 33% from last year and up 80% from two years ago. The increased proportion of the lower priced Bonita cameras has had no significant detrimental impact on gross margins and has enabled the business to compete in all market sectors more effectively.
Vicon continued to lead the market with product innovation, shipping two new products: Cara and Apex. Cara is our new 3D facial motion capture system which works in conjunction with the standard Vicon system to enable the simultaneous capture of face and body motion data. The system is part hardware and part software. The hardware consists of a lightweight helmet, four tiny synchronised video cameras and a recording box about the size of two packs of cards - a very compact system all round. The Cara software takes the video of the moving face from the Cara hardware and tracks the movement in 3D. There is nothing quite like it on the market and despite shipments only beginning in August 2013, Cara systems are already in use in 3 different continents - testimony again to Vicons's global reach.
Apex is a hand-held tracking tool which enables its user to interact intuitively with virtual objects in a 3D environment - in effect it is a very accurate 3D mouse which is tracked using a Vicon system. It has been designed for the engineering market and helped drive 22.6% growth in the Engineering market in 2012/13.
In the Entertainment market, our Blade 2 product, which allows motion capture and live action shooting to become indistinguishable, is driving upgrade revenues alongside new system sales with its world-leading real-time performance. Blade 2 users gain the benefit of being able to focus on the performance of their actors alongside fast turnaround times, high fidelity data and instant feedback. Blade 2 is so robust directors can interact with performers on the stage as they shoot scenes allowing creative decisions to be made on-the-fly saving time and money.
Vicon systems continue to be widely used globally as well as featuring in top video game and film releases. Most recently, Framestore used Vicon's T-Series motion capture cameras on the acclaimed 3D science fiction thriller and space blockbuster, Gravity, starring Sandra Bullock and George Clooney.
South and Central America sales continue to grow with revenues up 149% on last year, including our largest deal in South America to date at University Federal de Goias in Brazil. Furthermore, we installed the first ever Vicon systems in Chile and in Panama.
House of Moves (HoM), our service-based motion capture business, reported an adjusted loss of £0.7m, compared with an adjusted* profit of £0.9m last year. As the Chairman has already mentioned, this swing of £1.6m into loss, attributable to revenues half those of last year, has impacted overall Group performance.
In summary, Vicon goes into its 30th year of trading with much to mark this important anniversary - an overall good financial performance, an improved product line and a broadened market application reach. Motion capture really is coming of age.
OMG Yotta: Building a stronger platform
| KPI | Revenue | PBT | Adjusted* PBT | |||
| FY13 | FY12 | FY13 | FY12 | FY13 | FY12 | |
| Yotta DCL | £5.2m | £4.3m | (£0.4m) | (£0.8m) | £0.5m | (£0.3m) |
| Mayrise | £0.5m | - | £0.2m | - | £0.2m | - |
| Yotta | £5.7m | £4.3m | (£0.2m) | (£0.8m) | £0.7m | (£0.3m) |
Yotta, our infrastructure software and services business, reported a revenue increase excluding acquisition of 22.6% compared to last year which enabled the business to report a maiden full year adjusted* profit before factoring in contributions from the recently acquired Mayrise business. This improvement in Yotta's core business was achieved through a full year contribution from the TRACS contract and further traction with its Horizons SaaS platform, which secured 13 new customers during the year.
As a reminder, Yotta provides value to its customers by offering a virtuous circle of surveying, software and services. In other words, when customers start to realise how valuable the right data can be by using the right software, they want more of the high quality data that Yotta surveys supply. Over the past 12 months, I am pleased to report this circle of benefit has delivered a very positive outcome for both our customers and for Yotta.
The company surveyed more lane kilometres of road than ever before (2012/13: 128,736km, 2011/12: 81,749km, 2010/11: 79,476km) with 14 active surveying vehicles during 2012/13 up from 8 two years ago. We provided skid resistance surveys directly for the first time and built and commissioned our third Tempest surveying vehicle to further improve the efficiencies of our survey operations in the years ahead.
In addition to doing a good job undertaking the surveys, the company also recorded surveying contract wins, some of them multi-year contracts, at a number of customers. These included survey contracts at Hounslow, Cardiff, Carillion M40, East Sussex, Area 3 (Enterprise Mouchel) and Island Roads (Isle of Wight).
The company also grew the footprint of its innovative Horizons visualised asset management software from just one customer at the end of 2010/11 to 16 customers at the end of 2011/12 to over 30 today. This Horizons contribution to the software performance of the business meant Yotta reported greater software revenues than ever before (2012/13: £562K, 2011/12: £365K, 2010/11: £318K) even before adding in Mayrise. With Mayrise the business now has a contracted software revenue base of £2.2m up from £0.4m at the end of 2011/12. This is a great foundation upon which to continue to build the software strength of the combined businesses in 2013/14. This acquisition enables Yotta to provide an extended product offering to an enlarged client base, underpinned by a significant recurring revenue stream. With both Mayrise and Yotta operating within the same market, we expect to benefit from the opportunities presented to us as we seek to secure Yotta's profitable future.
Yotta also offers a variety of Professional Services to highways customers, including installing and configuring software to interpreting the data and analysis the software provides. Through focussed expansion, the company recorded the highest level of Professional Services revenue ever achieved by the business up by 60% from last year (2012/13: £520K, 2011/12: £327K, 2010/11: £324K).
Over the course of this year, Yotta has built upon its longstanding surveying partnership with East Sussex County Council. East Sussex commissioned an inventory survey of its highways assets and Yotta were successful in winning the contract and in doing so were able to deliver the survey using its Horizons SaaS software. This meant the inventory information could then be shared and disseminated over a wide range of users within the Council. In addition, Yotta has gone on to provide consultancy services to help the Council with its asset management policies and overall strategy. So a relationship which until recently was based purely on surveying has grown to encompass many of Yotta's products and services - this is the virtuous circle in action.
In July 2013, the Group acquired Mayrise Limited, a clear strategic fit with Yotta. Mayrise is a well-regarded software business with a suite of products designed for Local Authorities and companies involved in the management of highways, street lighting assets, street works, waste and grounds maintenance. The software helps these customers manage information about the quantity, age, and condition of their various assets and works. The decision to bring the two businesses together was to improve the visibility of Group revenues and provide a platform for future growth. The combination represents an exciting opportunity for Yotta to build on its position as a trusted, proven supplier of software and services for the highways industry.
Mayrise made a very positive contribution to the combined Yotta business, reporting revenues of £0.5m and an adjusted* profit of £0.2m for the two months included in the fiscal year post acquisition. We are already seeing the benefits of combining the two businesses. There has been cross-selling between the two customer bases with wins at Sefton and Bracknell Forest, with more in the pipeline for 2013/14. Technical integration of Mayrise held data in Horizons has also already been achieved with only a small amount of development. Lastly, there have been improvements to commercial execution at Mayrise., including creating a unified sales team across Yotta and Mayrise selling the combined software suite, promoting key individuals to technical sales roles and adding structure to Mayrise's implementation services. It has only been two months but clear progress has been made and we look forward to a full year of increased co-operation and benefit.
Overall an encouraging Yotta result in 2012/13 with the prospect of another good performance in 2013/14.
OMG Life: Seizing the moment
| KPI | Revenue | PBT | Adjusted* PBT | |||
| FY13 | FY12 | FY13 | FY12 | FY13 | FY12 | |
| UK | £0.1m | £0.1m | (£2.6m) | (£1.2m) | (£2.4m) | (£1.0m) |
It has been a fast-paced first year in the public life of Autographer: the world's first intelligent, wearable camera. Our pioneer consumers have been using Autographer to document both their special event and everyday life activities. The camera has been climbing - capturing atmospheric images of an ascent of Everest. It has captured day-in-the-life records of the British Lions on tour down-under and has been backstage at Formula 1 races. It has captured unique photographic memories of family holidays across the globe, and supported a range of charity missions and research studies in India and Africa.
With Autographer, users are free to enjoy the things they like doing without having to be always stuck behind a lens. They can capture rich and candid memories without having to interrupt or miss the moment. They have been doing this at music festivals, weddings and sporting events - capturing natural and personal images of those unique moments with children and friends. The launch of Autographer marks a watershed moment for a new category of photography that puts people back into the centre of their lives - more natural, more atmospheric, more candid and more real.
The product was initially available only in the UK and Europe. Since year-end as production volumes increased, we opened up the US online shop on 30th October and then shipments to the rest of the world on 26th November.
We have been busy expanding the channels for the product. The product continues to be available at £299 from our own online shop (www.autographer.com) but to boost our channel reach, we have recently been in discussion with a range of online retailers and high street retailers across Europe, USA and Japan. Consequently, Autographers can now also be found at a range of retailers, including Firebox.com, Touch of Modern, Fancy.com, Photojojo, Argos and Interdiscount in Switzerland; along with many more just coming online. We have selected our initial distribution partner for UK and Europe and are in discussions with a specialist partner in Japan for exclusive distribution.
The product has generated a great deal of interest in the technology community and has been well received in the media; notably receiving a 4 out of 5 stars review in a Sunday Times double page feature.
The company is now expanding the vertical marketing of the camera with a series of initiatives driving sales in the all-important holiday trading season and beyond. The website has recently been refreshed to showcase the way the camera can be and has been used - for adventure, for family gatherings, for special events and so forth. There is a media campaign currently in progress to support this contextual activity marketing and we have recently broadened the product appeal with an expanded range of accessories.
OMG Life invested in R&D during 2012/13 through the high quality consumer electronics team that has been assembled to bring Autographer to market. This investment has created some important Intellectual Property (IP) in the fields of wearable computing, imaging and the use of sensors - some of which is suitable for patenting and in these instances we have filed a number of patent applications.
In addition to the R&D costs expensed, OMG Life also capitalised further R&D costs of £1.02m (FY12: £1.14m) increasing the total amount capitalised to £2.16m. Amortisation of capitalised R&D commenced in the financial year, which reduced the carrying value to £1.98m, no impairment has been deemed necessary.
For completeness it is worth noting that as a result of the limited trading window in the remaining 9 weeks of the financial year and the limited supply volumes, reported sales in 2012/13 had little impact on the full year adjusted* loss of £2.4m (FY12: Loss £1.0m). Marketing campaigns, channel development and sales volumes are now progressing. We look forward to expanding the world of Autographer and to bringing more news on the product's traction over the year ahead.
OMG 2d3: Securing significant wins
| KPI | Revenue | PBT | Adjusted* PBT | |||
| FY13 | FY12 | FY13 | FY12 | FY13 | FY12 | |
| UK | £0.3m | £0.5m | (£0.4m) | (£0.3m) | (£0.3m) | (£0.3m) |
| US | £3.9m | £3.6m | (£0.2m) | (£0.1m) | £0.8m | £1.1m |
| Total 2d3 | £4.2m | £4.1m | (£0.6m) | (£0.4m) | £0.5m | £0.8m |
2012/13 was another year of measurable progress for 2d3. In sales, the company closed the largest software deal in OMG's history with an order worth $3.5m. In development, we were awarded Certificates to Field (CTF) from the US Department of Defense (DoD) which allows our software to be used on secure US networks. In operations, the company won and delivered projects with numerous, diverse customer sets within the DoD, paving the way for future year contract wins. And in product, we further improved our commercial-off-the-shelf products with three version releases during the fiscal year.
In summary, a year of purposeful achievement for 2d3, but also a year of significant challenge due primarily to US Congressional machinations resulting in Sequestration and the 17 day US Government shutdown. These market changes, which we could not influence, have not changed the importance of the Intelligence, Surveillance and Reconnaissance (ISR) space within which we operate nor the desire from the market for our products and services. However they did change the size and timing on a number of important deals.
Despite these challenges, 2d3's overall revenues, were up compared to last year by 2.1%. When combined with planned investment in business development, adjusted* profit fell to £0.5m (FY12: £0.8m).
As reported at the time of the Interim Results, the US Government introduced sequestration measures in March 2013, which for 2d3 meant a number of deals being subject to delay and in some cases deals, which had been previously a co-operative acquisition by several defence agencies, were subsequently split into separate opportunities.
The US Government shutdown occurred at the end of September 2013 and introduced widespread uncertainty in the US Defence market. As a result of this uncertainty, 2d3 saw a number of contract signature delays, which impacted the overall 2d3 headline result. While this certainly had a negative impact on FY13 numbers, the pending awards, in excess of $1m, are still expected to close in 2013/14.
Despite this market headwind, the company did sign a number of strategically important contracts to become the motion imagery baseline in a number of programmes across all three of the US services: US Army, US Navy and US Air Force. This growing traction across programmes is a key goal for the business, and is the foundation for future year performance.
One of these contracts was a $3.5m software contract signed in August 2013 with the US Air Force. This was a multi-year contract with $0.8m yet to be recognised. This deal builds on a contract win in 2011/12 and places our Catalina and TacitView product lines in the foundation for full motion video surveillance and reconnaissance processing and distribution.
As introduced in last year's report, our OEM relationship with Insitu, a subsidiary of Boeing, continues to progress well with aggregate revenues from the relationship now totalling over a $1m. Potentially the most exciting advancement in our relationship this year is Insitu's decision to include our Tungsten product in their new multi-platform ground control station software, ICOMC2. 2d3 makes up the entire video processing pipeline for Insitu's ICOMC2, and we are proud of and excited to further our relationship with Boeing and Insitu throughout 2013/14 and beyond.
2d3 continues to gain reputational traction in the marketplace. For reasons of security, we often cannot talk about the details of the programmes in which we are involved, nor the high levels of satisfaction our customers report. However, we have recently received approvals to cover our work with the US Naval Surface Warfare Center, Crane Division, working closely with the Marine Corps to deliver the Ground-Based Operational Surveillance System (G-BOSS) capability. This capability relies on key motion imagery components from 2d3's Tungsten product. As a result of the success of our involvement in the project, our contract which now amounts to over $2m in licences, was awarded an "exceptional technical competence" contract performance assessment - a real honour in the market.
With all of these customer and contract wins, the product range continues to evolve and has been improved in number of ways over the past year. As mentioned above, we have continued to invest in and improve all three of our product lines: TacitView, Catalina, and Tungsten. Not only are we reaping the benefits of new license sales with our continued investment, but we are also now in a position to sell long-term, pre-committed maintenance contracts for the software as we have proven to the market that we will be constantly improving the value of the product.
2d3 again enters the new financial year with a solid order book and a larger sales pipeline than ever before, and perhaps most importantly, this pipeline is spread across a greater number of opportunities. Are there market challenges? Of course, but 2d3 is positioned well to achieve and continue to grow in 2013/14 and beyond.
Stepping up in 2014
The Group moves into 2014 with increasing momentum across the Group as three of our four businesses are now profitable on an adjusted* basis. We anticipate that momentum in the year ahead will be driven by the growing market traction for Autographer, 2d3's broadened customer base and strengthened pipeline, Yotta's improved recurring revenue base and cross-selling opportunities, and Vicon's extending global reach and growing market applicability. The year ahead is now about executing on this all these promising possibilities.
Nick Bolton
Chief Executive
5th December 2013
* Profit Before Tax from continuing operations before group recharges adjusted for share based payments, amortisation of intangibles arising on acquisition, fair value adjustment to contingent consideration, unwinding of discount on contingent consideration, acquisition costs 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 2013
| 2013 | 2012 | ||
| Note | £'000 | £'000 | |
| Revenue | 3 | 29,456 | 29,504 |
| Cost of sales | (12,272) | (11,797) | |
| Gross profit | 17,184 | 17,707 | |
| Sales, support and marketing costs | (5,423) | (4,681) | |
| Research and development costs | (3,781) | (2,697) | |
| Administrative expenses | (8,065) | (8,189) | |
| Other income | 46 | 168 | |
| Operating (loss)/profit | (39) | 2,308 | |
| Finance income | 6 | 11 | 8 |
| Finance expense | 6 | (416) | (540) |
| (Loss)/profit before taxation | 3,4 | (444) | 1,776 |
| Taxation | 7 | 292 | (685) |
| (Loss)/profit from continuing operations | (152) | 1,091 | |
| Loss on discontinued operation net of tax | - | (34) | |
| (Loss)/profit for the financial year attributable to owners of the parent during the year |
(152) | 1,057 | |
| Earnings per share for profit attributable to owners of the parent during the year | |||
| Basic (loss)/earnings per ordinary share (pence) | 8 | (0.19)p | 1.48p |
| Diluted (loss)/earnings per ordinary share (pence) | 8 | (0.19)p | 1.43p |
| Continuing operations | |||
| Basic (loss)/earnings per ordinary share (pence) | 8 | (0.19)p | 1.53p |
| Diluted (loss)/earnings per ordinary share (pence) | 8 | (0.19)p | 1.47p |
COnsolidated statement of
comprehensive income FOR THE YEAR
ENDED 30 sEPTEMBER 2013
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Net (loss)/profit for the year | (152) | 1,057 | |
| Other comprehensive income | |||
| Exchange differences on retranslation of overseas subsidiaries | (54) | (52) | |
| Tax recognised directly in equity | 53 | (2) | |
| Total other comprehensive (expense)/income | (1) | (54) | |
| Total comprehensive (expense)/income for the year attributable to owners of the parent | (153) | 1,003 |
Consolidated statement of financial position AS AT 30 september 2013
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Non-current assets | |||
| Goodwill and intangible assets | 17,913 | 11,967 | |
| Property, plant and equipment | 2,198 | 2,162 | |
| Financial asset - investments | 69 | 69 | |
| Deferred tax asset | 897 | 362 | |
| 21,077 | 14,560 | ||
| Current assets | |||
| Inventories | 1,836 | 1,874 | |
| Trade and other receivables | 10,972 | 9,415 | |
| Cash and cash equivalents | 7,803 | 4,341 | |
| 20,611 | 15,630 | ||
| Current liabilities | |||
| Trade and other payables | (9,749) | (6,115) | |
| Current tax liabilities | (348) | (36) | |
| (10,097) | (6,151) | ||
| Net current assets | 10,514 | 9,479 | |
| Total assets less current liabilities | 31,591 | 24,039 | |
| Non-current liabilities | |||
| Financial liabilities | (51) | (2,255) | |
| Deferred tax liability | (2,559) | (1,742) | |
| (2,610) | (3,997) | ||
| Net assets | 28,981 | 20,042 | |
| Capital and reserves attributable to owners of the parent |
|||
| Share capital | 260 | 179 | |
| Shares to be issued | 65 | 65 | |
| Share premium account | 15,443 | 7,028 | |
| Merger reserve | 4,008 | 3,546 | |
| Retained earnings | 9,280 | 9,245 | |
| Foreign currency translation reserve | (75) | (21) | |
| Total equity shareholders' funds | 28,981 | 20,042 | |
consolidated STATEMENT of CASHFLOWS For the ended 30 september 2013
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Cash flows from operating activities - continuing operations | |||
| Operating profit | (39) | 2,308 | |
| Depreciation and amortisation | 1,796 | 1,387 | |
| Impairment of intangibles | - | 456 | |
| Share-based payments | 389 | 80 | |
| Exchange adjustments | (23) | 288 | |
| Increase in inventories | 34 | (135) | |
| (Increase) / decrease in receivables | (1,358) | (1,162) | |
| Increase / (decrease) in payables | 310 | 1,245 | |
| Cash generated from continuing operations | 1,109 | 4,467 | |
| Discontinued operations | - | (19) | |
| Cash generated from operating activities | 1,109 | 4,448 | |
| Tax paid | (41) | 50 | |
| Net cash from operating activities | 1,068 | 4,498 | |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (655) | (535) | |
| Purchase of intangible assets | (2,102) | (2,315) | |
| Proceeds on disposal of property, plant and equipment | 60 | 174 | |
| Interest received | 11 | 8 | |
| Acquisition of subsidiary undertaking net of cash acquired | (3,003) | - | |
| Net cash used in investing activities | (5,689) | (2,668) | |
| Cash flows from financing activities | |||
| Payment of finance lease liabilities | (137) | (53) | |
| Interest element of finance lease repayments | (11) | (3) | |
| Issue of ordinary shares | 9,006 | 6 | |
| Share issue costs | (514) | - | |
| Equity dividends paid | (255) | (214) | |
| Net cash used in financing activities | 8,089 | (264) | |
| Net increase in cash and cash equivalents | 3,468 | 1,566 | |
| Cash and cash equivalents at beginning of the period | 4,341 | 2,817 | |
| Effect of exchange rate changes | (6) | (42) | |
| Cash and cash equivalents at end of the period | 7,803 | 4,341 | |
Major non-cash transactions
During the year the Group entered into new finance leases to the value of £nil (2012: £343,000).
During the year shares relating to the deferred consideration for the purchase of Sensing Systems Inc. were issued.
During the year ended 30 September 2012 the Group issued ordinary shares in exchange for services received from Sacker Gooding Limited.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2013
| 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 2011 | 178 | 65 | 6,998 | 3,546 | 8,349 | 31 | 19,167 |
| Net profit for the year | - | - | - | - | 1,057 | - | 1,057 |
| Exchange differences on retranslation of overseas subsidiaries | - | - | - | - | - | (52) | (52) |
| Tax recognised directly in equity | - | - | - | - | (2) | - | (2) |
| Transactions with owners: | |||||||
| Dividends | - | - | - | - | (214) | - | (214) |
| Issue of share capital | 1 | - | 30 | - | - | - | 31 |
| Movement in relation to share options | - | - | - | - | 55 | - | 55 |
| Balance as at 30 September 2012 | 179 | 65 | 7,028 | 3,546 | 9,245 | (21) | 20,042 |
| Net loss for the year | - | - | - | - | (152) | - | (152) |
| Exchange differences on retranslation of overseas subsidiaries | - | - | - | - | - | (54) | (54) |
| Tax recognised directly in equity | - | - | - | - | 53 | - | 53 |
| Transactions with owners: | |||||||
| Dividends | - | - | - | - | (255) | - | (255) |
| Issue of share capital | 81 | - | 8,929 | 462 | - | - | 9,472 |
| Costs of share issue deducted from equity | - | - | (514) | - | - | - | (514) |
| Movement in relation to share options | - | - | - | - | 389 | - | 389 |
| Balance as at 30 September 2013 | 260 | 65 | 15,443 | 4,008 | 9,280 | (75) | 28,981 |
(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 5th December 2013.
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 2013 and 30 September 2012, but is derived from those accounts. The statutory accounts for the year ended 30 September 2012 have been delivered to the Registrar of Companies and those for the year ended 30 September 2013 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 2013 or 30 September 2012.
(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 2013.
(3) Segmental analysis
Segment information is presented in the financial information 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 and taxation, highway surveying and associated software development;
· 2d3 Group: This is the development and sale of computer software for the defence market; and
· OMG Life: This is the consumer electronics segment.
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 2013 are £3,213,000 (2012: £3,468,000).
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 | (Loss)/profit before tax | Underlying profit before tax * | Non-current assets | |||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Vicon UK | 9,267 | 9,055 | 2,999 | 2,854 | 3,034 | 2,842 | 2,464 | 2,377 |
| Vicon USA | 8,132 | 7,915 | 744 | 378 | 744 | 564 | 1,234 | 1,155 |
| Vicon Group excluding House of Moves | 17,399 | 16,970 | 3,743 | 3,232 | 3,778 | 3,406 | 3,698 | 3,532 |
| House of Moves USA | 1,986 | 4,024 | (748) | 917 | (748) | 920 | 744 | 682 |
| Vicon Group | **19,385 | **20,994 | 2,995 | 4,149 | 3,030 | 4,326 | 4,442 | 4,214 |
| Yotta UK: continuing | 5,247 | 4,278 | (453) | (803) | 71 | (677) | 4,839 | 4,365 |
| Yotta Mayrise: acquisition | 488 | - | 226 | - | 226 | - | 5,033 | - |
| Yotta Group | 5,735 | 4,278 | (227) | (803) | 297 | (677) | 9,872 | 4,365 |
| 2d3 UK | 278 | 467 | (442) | (255) | (392) | (255) | 15 | 24 |
| 2d3 USA | 3,939 | 3,662 | (210) | (99) | 579 | 738 | 4,410 | 4,641 |
| 2d3 Group | 4,217 | 4,129 | (652) | (354) | 187 | 483 | 4,425 | 4,665 |
| OMG Life | 119 | 103 | (2,569) | (1,151) | (2,532) | (1,142) | 2,081 | 1,150 |
| Unallocated | - | - | 9 | (65) | 225 | (27) | 257 | 166 |
| Continuing operations | 29,456 | 29,504 | (444) | 1,776 | 1,207 | 2,963 | 21,077 | 14,560 |
| Yotta USA - discontinued operation | - | - | - | (33) | - | (33) | - | - |
| OMG Group | 29,456 | 29,504 | (444) | 1,743 | 1,207 | 2,930 | 21,077 | 14,560 |
*Underlying profit before tax is detailed in note 5.
| 2013 | 2012 | |
| £'000 | £'000 | |
| Revenue by origin | ||
| UK | 15,399 | 13,904 |
| USA - continuing operations | 14,057 | 15,600 |
| OMG Group | 29,456 | 29,504 |
| 2013 | 2012 | |
| £'000 | £'000 | |
| Revenue by destination | ||
| UK | 7,101 | 6,298 |
| Europe | 2,729 | 2,679 |
| North America | 11,996 | 15,466 |
| Asia Pacific | 6,833 | 4,482 |
| Other | 797 | 579 |
| OMG Group | 29,456 | 29,504 |
| 2013 | 2012 | |
| £'000 | £'000 | |
| Vicon revenue by market | ||
| Engineering | 3,659 | 2,983 |
| Entertainment | 5,446 | 9,239 |
| Life sciences | 10,280 | 8,772 |
| Vicon Group | **19,385 | **20,994 |
**This additional information is provided to the Chief Operating Decision Maker. Further analysis by market is not available.
An analysis of adjusted profit before tax net of Group recharges is provided below:
| 2013 | 2012 | |||||
| Underlying profit before tax * | Group recharges | Adjusted profit before tax (net of Group recharges) | Underlying profit before tax | Group recharges | Adjusted profit before tax (net of Group recharges) | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Vicon UK | 3,034 | (872) | 2,162 | 2,842 | (859) | 1,983 |
| Vicon USA | 744 | 2,163 | 2,907 | 564 | 2,091 | 2,655 |
| Vicon Group excluding House of Moves | 3,778 | 1,291 | 5,069 | 3,406 | 1,232 | 4,638 |
| House of Moves USA | (748) | - | (748) | 920 | - | 920 |
| Vicon Group | 3,030 | 1,291 | 4,321 | 4,326 | 1,232 | 5,558 |
| Yotta UK: continuing | 71 | 440 | 511 | (677) | 400 | (277) |
| Yotta Mayrise: acquisition | 226 | - | 226 | - | - | - |
| Yotta Group | 297 | 440 | 737 | (677) | 400 | (277) |
| 2d3 UK | (392) | 133 | (259) | (255) | 5 | (250) |
| 2d3 USA | 579 | 213 | 792 | 738 | 315 | 1,053 |
| 2d3 Group | 187 | 346 | 533 | 483 | 320 | 803 |
| OMG Life | (2,532) | 175 | (2,357) | (1,142) | 132 | (1,010) |
| Unallocated | 225 | (2,252) | (2,027) | (27) | (2,084) | (2,111) |
| Continuing operations | 1,207 | - | 1,207 | 2,963 | - | 2,963 |
*Underlying profit before tax is detailed in note 5.
| Additions to non-current assets | Carrying amount of segment assets |
Carrying amount of segment liabilities |
Segment depreciation and amortisation | |||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Vicon UK | 676 | 926 | 6,700 | 8,684 | (2,204) | (2,309) | 563 | 483 |
| Vicon USA | 49 | 57 | 3,964 | 4,069 | (1,377) | (1,204) | 51 | 45 |
| Vicon Group excluding House of Moves | 725 | 983 | 10,664 | 12,753 | (3,581) | (3,513) | 614 | 528 |
| House of Moves USA | 22 | 11 | 1,368 | 1,802 | (249) | (264) | 42 | 123 |
| Vicon Group | 747 | 994 | 12,032 | 14,555 | (3,830) | (3,777) | 656 | 651 |
| Yotta UK: continuing | 651 | 908 | 8,482 | 8,122 | (1,504) | (1,358) | 77 | 390 |
| Yotta Mayrise: acquisition | 5,108 | - | 9,490 | - | (1,942) | - | 477 | - |
| Yotta Group | 5,759 | 908 | 17,972 | 8,122 | (3,446) | (1,358) | 554 | 390 |
| 2d3 UK | 3 | 7 | 1,684 | 1,447 | (60) | (63) | 9 | 24 |
| 2d3 USA | 229 | 401 | 8,094 | 7,183 | (4,109) | (3,594) | 363 | 296 |
| 2d3 Group | 232 | 408 | 9,778 | 8,630 | (4,169) | (3,657) | 372 | 320 |
| OMG Life | 1,123 | 878 | 733 | (487) | (784) | (710) | 200 | 8 |
| Other unallocated | 4 | 5 | 1,147 | (677) | (473) | (641) | 14 | 18 |
| Continuing operations | 1,127 | 3,193 | 41,662 | 30,143 | (12,702) | (10,143) | 1,796 | 1,387 |
| Yotta USA - discontinued operation | - | - | 26 | 47 | (5) | (5) | - | - |
| OMG Group | 7,865 | 3,193 | 41,688 | 30,190 | (12,707) | (10,148) | 1,796 | 1,387 |
(4) Loss before taxation
The loss before taxation is stated after charging / (crediting):
| 2013 | 2012 | |
| £'000 | £'000 | |
| Loss on disposal of property, plant and equipment | 1 | 9 |
| Depreciation of property, plant and equipment - owned | 520 | 559 |
| - under hire purchase/finance lease | 111 | 77 |
| Amortisation of customer relationships | 182 | 134 |
| Amortisation of intellectual property | 217 | 192 |
| Amortisation of development costs | 766 | 425 |
| Impairment of intangible fixed assets | - | 456 |
| Share based payments - equity settled | 389 | 55 |
| Operating lease charges - other than plant and machinery | 843 | 734 |
| Fair value adjustment to contingent consideration | 150 | 69 |
| Foreign exchange | (52) | 280 |
| Research and development costs | 3,781 | 2,697 |
(5) Reconciliation of underlying profit before tax
| 2013 | 2012 | |
| £'000 | £'000 | |
| (Loss)/profit before tax - continuing operations | (444) | 1,776 |
| Share based payments - equity settled | 389 | 55 |
| Amortisation of intangibles arising on acquisition | 397 | 323 |
| Fair value adjustment to contingent consideration | 150 | 69 |
| Unwinding of discount on contingent consideration | 405 | 537 |
| Acquisition costs | 293 | - |
| Redundancy costs | 17 | 203 |
| Underlying profit before tax - continuing operations | 1,207 | 2,963 |
| Profit before tax - discontinued operations | - | (33) |
| Underlying profit before tax - discontinued operations | - | (33) |
Acquisition costs in the year ended 30 September 2013 comprise costs relating to the acquisition of Mayrise Limited.
The redundancy costs in the year ended 30 September 2013 are associated with the restructuring of the 2d3 UK business and those in the year ended 30 September 2012 with the restructuring of the Vicon USA business.
(6) Finance income and expense
| 2013 | 2012 | |
| £'000 | £'000 | |
| Finance expense - Hire purchase liabilities | (11) | (3) |
| - Unwinding of discount on contingent consideration | (405) | (537) |
| (416) | (540) | |
| Finance income - Interest income on short term bank deposits | 11 | 8 |
(7) Taxation
The tax is based on the (loss)/profit for the year and represents:
| 2013 | 2012 | |
| £'000 | £'000 | |
| United Kingdom corporation tax at 23.5% (2012: 25%) | - | 4 |
| Overseas taxation | - | 93 |
| Adjustments in respect of prior year | - | (99) |
| Current taxation | - | (2) |
| Deferred taxation | (292) | 687 |
| Total taxation (income)/expense | (292) | 685 |
At 30 September 2013, the Group had an undiscounted deferred tax asset of £897,000 (2012: £362,000). 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 (2012: 23% and 38%, respectively).
The inclusion of legislation to reduce the main rate of corporation tax from 23% to 21% from 1 April 2014 and then a further reduction to 20% from 1 April 2015 was substantively enacted on 3 July 2013.
For the purposes of deferred tax, the rate change from 23% to 20% had been substantively enacted before the balance sheet date.
The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 23.5% (2012: higher than the standard rate of 25%). The differences are explained as follows:
| 2013 | 2012 | |
| £'000 | £'000 | |
| (Loss)/profit on ordinary activities before tax | (444) | 1,776 |
| Expected tax (income)/expense based on the standard rate of corporation tax in the UK of 23.5% (2012: 25%) |
(104) | 444 |
| Effect of: | ||
| Expenses not deductible for tax purposes | (309) | 325 |
| Unrelieved current year losses | 327 | 534 |
| Utilisation of losses brought forward | (357) | (396) |
| Adjustments to tax charge in respect of prior year current tax | - | (99) |
| Adjustments to tax charge in respect of prior year deferred tax | (134) | - |
| Higher rates on overseas taxation | 532 | 268 |
| Research and development tax credit | (194) | (411) |
| Effect of rate change | (53) | 20 |
| Total tax (income)/expense | (292) | 685 |
(8) Loss per share
| 2013 | 2012 | |||||
| Loss | Weighted average number of shares | Per share amount | Earnings | Weighted average number of shares | Per share amount | |
| £'000 | (pence) | £'000 | (pence) | |||
| Continuing operations | ||||||
| Basic (loss)/earnings per share | ||||||
| (Loss)/earnings attributable to ordinary shareholders | (152) | 78,609,466 | (0.19) | 1,091 | 71,452,933 | 1.53 |
| Dilutive effect of employee share options | - | - | - | - | 998,124 | (0.03) |
| Dilutive effect of contingent shares | - | - | - | - | 1,562,500 | (0.03) |
| Diluted (loss)/earnings per share | (152) | 78,609,466 | (0.19) | 1,091 | 74,013,557 | 1.47 |
| Total operations | ||||||
| Basic (loss)/earnings per share | ||||||
| (Loss)/earnings attributable to ordinary shareholders | (152) | 78,609,466 | (0.19) | 1,057 | 71,452,933 | 1.48 |
| Dilutive effect of employee share options | - | - | - | - | 998,124 | (0.02) |
| Dilutive effect of contingent shares | - | - | - | - | 1,562,500 | (0.03) |
| Diluted (loss)/earnings per share | (152) | 78,609,466 | (0.19) | 1,057 | 74,013,557 | 1.43 |
Basic earnings per share is calculated by dividing the profit 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.
The loss used in the calculation of loss per share for discontinued operations is £nil (2012: £34,000).
(9) Dividend
| 2013 | 2012 | |
| Equity - ordinary | £'000 | £'000 |
| Final 2012 paid in 2013 (0.35 pence per share) | 255 | - |
| Final 2011 paid in 2012 (0.30 pence per share) | - | 214 |
The directors are proposing a final dividend in respect of the financial year ended 30 September 2013 of 0.40 pence per share (2012: 0.35 pence per share) which will absorb an estimated £416,000 of shareholders' funds. This dividend will be paid on 11 March 2014 to shareholders who are on the register of members at close of business on 20 December 2013 subject to approval at the AGM. This dividend has not been accrued in this financial information.
(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.
This information is provided by RNS
The company news service from the London Stock Exchange
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