Preliminary Results

3^rd December 2020

Oxford Metrics plc

 ("Oxford Metrics", the "Company" or the "Group")

Preliminary Results for the financial year ended 30 September 2020

- Resilient business well placed to adapt to the post-pandemic economy -

- Short-term sales delay but macro growth drivers accelerating -

- Strong financial platform affords us the opportunity to bring forward growth plans -

Oxford Metrics plc (LSE: OMG), the international software company servicing government, life sciences, entertainment and engineering markets, announces preliminary results for the financial year ended 30 September 2020.

* Profit Before Tax before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition, fair value adjustments to IMeasureU purchase consideration, impairment of Pimloc investment and exceptional costs.

Commenting on the results Nick Bolton, Chief Executive said:

"We're extremely proud of how the business has navigated a challenging year, to deliver continued strategic progress, showing itself to be a resilient and agile organisation. Our performance owes much to our employees who have adapted brilliantly, and I would like to thank every one of them for their continued innovation and dedication to servicing our global customer base.

Although the pandemic has caused short-term sales delays, particularly in the USA, it has also accelerated positive market drivers, which will underpin our future growth. Yotta has been a beneficiary of the acceleration in the Digital Transformation of public asset management, reporting growth in Annual Recurring Revenue ('ARR'), driven by an increased need for Yotta software to manage new ways of remote working. Vicon has continued to see the move of motion measurement into the mainstream, as companies plan to enhance their solutions with motion tracking capabilities, such as the emerging opportunities in virtual film production.

As we enter a new financial year uncertainty remains as the pandemic continues. That said, both of our divisions have started the year well, and the combination of our robust financial position and a tailwind from structural growth drivers puts us in a strong position both to navigate any further challenges that may arise and bring forward our growth plans."

For further information please contact:

Oxford Metrics                                                                                      +44 (0) 1865 261860

Nick Bolton, CEO

David Deacon, CFO

Numis Securities Limited                                                                    +44 (0)20 7260 1000

Simon Willis / Hugo Rubinstein / Matthew O'Dowd

FTI Consulting                                                                                      +44 (0) 20 3727 1000

Matt Dixon / Emma Hall / Jamille Smith / Greg Hynes

About Oxford Metrics

Oxford Metrics develops and markets analytics software for motion measurement and infrastructure asset management to clients in over 70 countries worldwide. Our list of clients across the globe is as diverse as the markets we operate in: we help highways authorities manage and maintain their road networks, hospitals and clinicians decide therapeutic strategies and Hollywood studios create stunning visual effects. And the diversity of applications is growing all the time.

The Group trades through two market-leading divisions: our motion measurement division, Vicon, and our infrastructure asset management division, Yotta. Vicon is the world's leader in high-precision motion measurement analysis to thousands of customers worldwide, including Guy's Hospital, EA Sports, MIT and NASA, and our software is used in an ever-expanding range of applications. Yotta provides cloud-based infrastructure asset management software to central and local government agencies and other infrastructure owners. Yotta has a large number of high-profile clients including Highways England, Amey in the UK and VicRoads in Australia.

Founded in 1984, the Group is headquartered in Oxford with offices in Leamington Spa, Gloucester, California, Colorado, Singapore and Auckland. Since 2001, Oxford Metrics (LSE: OMG), has been a quoted company listed on AIM, a market operated by the London Stock Exchange.

For more information about Oxford Metrics, visit www.oxfordmetrics.com

Chairman's Statement

As we review what has been a most unexpected 2020, we find three key themes emerging, which demonstrate both the strengths of the business today and, perhaps more importantly, where the opportunities lie for the future.

These themes are reflected in our headline financial performance for the 12 months to 30th September 2020 with the Group reporting revenue of £30.3m (FY19: £35.3m) and an Adjusted PBT* of £2.6m (FY19: £5.5m) despite the unprecedented market conditions. Furthermore, we are pleased to report that these results include a profitable second half for our Yotta subsidiary following several years of investment in its transition to a Software-as-a-Service offering ('SaaS'), enhancing the Group's recurring revenue base and forward visibility.

We continued to improve the quality of our earnings by increasing our Annual Recurring Revenue ('ARR') to £6.8m (FY19: £6.2m). This growth was achieved by our Yotta subsidiary, which signed £1.0m in new ARR during the financial year (FY19: £1.0m) whilst retention rates fell slightly to 91.7% (FY19: 94.8%).

The Group reports another year of cash generation with operating cash flow of £6.4m (FY19: £7.7m). The Group had £14.9m in cash as of 30 September 2020 (30 September 2019: £13.8m) having paid a final 2019 dividend of £2.3m (2018: £1.9m) during the year. In the light of this cash performance and confidence in our resilience as a business but tempered by the continued economic uncertainty, the Board proposes maintaining our final dividend at 1.80p per share (FY19 Final Dividend: 1.80p) this year. Our dividend policy remains to make the pay-out progressive with the aim of maintaining an average dividend cover of approximately 2 times Adjusted* Earnings per Share.

Finally, I would like to thank all stakeholders in our business for their exceptional contributions over the past year - our outstanding global team and their families who adapted so well to the new operational environment, and our shareholders, partners and customers who continued to support us in these most challenging of times.

Roger Parry

Chair

* Profit Before Tax before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition, fair value adjustments to IMeasureU purchase consideration, impairment of Pimloc investment and exceptional costs.

CEO STATEMENT

2019/20 was a challenging year, but despite the COVID-19 pandemic both divisions made progress that will benefit both towards our short-term goals and broader strategic aims.

STRATEGIC REVIEW

As the Chairman has already introduced in his review, we saw three key strategically relevant themes develop over the past 12 months. These are worth explaining in detail in order to understand both the historical performance and where the business can go from here.

1. Resilient business well placed to adapt to the post-pandemic economy

From March 2020, we moved quickly to remain fully functional whilst ensuring the safety of our people and customers. None of our employees were furloughed and we serviced our global customer base remotely. For those who could not work from home, we put in place safe working environments and practices and saw no significant hiatus in our ability to fulfil customer orders at Vicon or deliver implementation projects at Yotta. The team adapted brilliantly to this new remote working model.

Looking forward, evidence from our sales and client service teams suggests that customers have changed the way they want to engage with us as a result of the pandemic. We have stayed close to customers throughout the pandemic and are fortunate to have strong, established and well-respected brands which provide the environment of trust to enable the whole sales process to be conducted without the same number of face-to-face meetings. Whilst we still expect to make some sales in traditional ways, we believe we can increase sales efficiency by making full use of remote working.

2. Short-term sales delay but macro growth drivers accelerating

The second observation is that although the pandemic caused a short-term delay to sales across both divisions, we saw stronger macro winds of positive market change which, we believe, will assist in driving our growth in the future.

During the lockdowns and throughout the second half, the sales delay arose from some of our customers having to shut down their operations and activities which meant our planned sales to them were deferred. In some cases, this was customers needing to address immediate operational needs, temporarily de-prioritising adoption or upgrade of our technology. For example, where Local Authorities needed to focus on the reconfiguration of their services, such as waste collection or home care, given the new lockdown environments. This switch of focus delayed procurement processes, rather than causing their cancellation, and as we move into 2021 we see a broad picture of a return to more normal Local Authority procurement cycles. Indeed, we are encouraged by the interest shown by new customers. In the case of Yotta we believe the strong word-of-mouth approval from users of our software is creating interest from a wider range of UK Local Authorities, and Vicon's motion measurement technology is finding a wider range of potential end-users as new use cases continue to emerge.

Despite the pandemic causing a short-term sales delay, it also accelerated broader changes prevalent in our markets - all of which are positive for the long-term success of the Group.

In Yotta, we have witnessed an acceleration in the Digital Transformation of public asset management. With asset maintenance and service teams across the UK now having to work and be managed remotely - be that assigning work, reporting inspections or collecting waste - local government customers need digital tools to help them run their services in this new way. This "shift to digital" was already underway but the pandemic has accelerated the need for tools like Yotta's to seamlessly manage this new remote way of working.

At Vicon, the macro driver is the move of motion measurement into the mainstream and into everyday life - watches which measure our steps, robotics which assist our lives, and smartphones which can now track skeletal movement. The pandemic has made companies look to bring forward remote sensing or operations projects, which requires a capability to measure motion within their products and services. For example, non-contact passenger security systems which will remotely track our movements and behaviours to ensure public safety; or virtual film production which requires fewer people simultaneously on set; or in monitoring patients post-orthopaedic surgery at home avoiding the need to bring patients into traditional healthcare environments. This acceleration in the move to remote sensing in more markets is further validation of Vicon's broader application and bodes well for this division's continuing long-term success.

3. Strong financial platform affords us the opportunity to bring forward growth plans

The Group's finances are in robust shape. We generated cash despite the exceptional trading environment. We have no debt, exercise tight financial controls and we are maintaining our dividend this year, without impacting our ability to invest in the future of the business. Given the strength of this financial position and the accelerated macro picture in both our divisions, we are now in a position to bring forward our growth plans through both organic and inorganic development.

Organic growth

Both divisions have organic growth opportunities. At Yotta, we estimate we hold around 12% of the UK market for applications we serve. Over the past 12 months with growing ARR levels, we have demonstrated we have a compelling proposition with our innovative product, Alloy. Several flagship partnerships have been secured including: with Panasonic to run Alloy on their in-cab devices in waste collection vehicles; with Telensa, the UK's largest provider of smart IoT streetlights, to provide a seamless lighting solution; and control groups of streetlights and with bbits as part of their "Love Clean Streets" initiative. Over the coming year we will continue to invest in both market and product development with a key focus on the UK market.

At Vicon, our organic plans fall into two specific growth vectors: Established Markets and Adjacent Verticals. In our Established Markets business, where we hold a market-leading position, we will continue to invest in R&D to provide the most capable platform for our customers to undertake their work and maintain that leadership role. Our Adjacent Verticals opportunity continues to grow as more markets recognise the value motion measurement can bring to their specific vertical implementation. We can see this in the interest in our elite sports solutions from the new markets of orthopaedic rehabilitation and military performance management, and also in the emerging opportunity to exploit our Location-based Virtual Reality ('LBVR') solution further in the enterprise and defence markets.

As we look to exploit these adjacent market opportunities, we are developing and working with a network of carefully selected partners, who provide complementary technology and/or channels to market. We now have 14 such partners in total. This partner-centric approach means the business can focus on its core competency of measurement capability and avoid the expensive market start-up costs of channel development and whole product investment.

Inorganic growth

Given our strong financial position we are actively investigating acquisition opportunities to strengthen both of our existing divisions. Using a strict criteria lens, we are exploring opportunities in software related to measurement and data analysis with niche commercial applications.

In our asset management division, this means expanding our geographical and/or vertical market customer footprint. We know Alloy can manage almost any type of asset and thus has applications outside its current markets, therefore we can accelerate its adoption by adding organisations with existing successful customer relationships in those markets.

In our motion measurement division, we have two broad target areas. Firstly, companies which hold complementary sensing and measuring technologies which can be incorporated into the Vicon proposition, and secondly companies which hold material end-user market positions which would benefit from motion-enabling or bringing our existing 3D capabilities to their marketplaces.

Our strategy and strong financial position enable us to drive our software into more applications, amplifying the core of what we do. 

OPERATIONAL REVIEW

2019/20 was a challenging year operationally but despite the COVID-19 pandemic both Vicon and Yotta made progress and growth trends have accelerated that will benefit the longer-term for both divisions.

Asset Management Division - Yotta

Our Asset Management division, Yotta, reported its highest level of ARR of £6.8m on 30th September 2020 (30th September 2019: £6.2m) and customer retention of 91.7% (FY19: 94.8%). Having reported additions to ARR in the first half of £0.8m, progress was muted in the third quarter due to the pandemic, but the market has since adapted and momentum driven by ongoing Digital Transformation saw additions rise in the fourth quarter to record total additions for the year of £1.0m.

Reported headline revenue increased by 7.3% to £7.5m (FY19: £7.0m) and the division reported an Adjusted PBT* loss of £0.1m (FY19 Loss: £0.2m). Our shareholders will be aware that we have been investing in Yotta for several years and consequently the business has been loss-making. Having completed its transition to SaaS, we are delighted to report that the business produced a £0.4m profit in the second half and is now profitable on a run-rate basis at the current level of ARR and normal levels of consulting revenue, so a major milestone has been achieved by the business.

This growth in ARR was driven by some excellent competitive wins across UK local government, including at South Gloucestershire, Warwickshire, Somerset, Worcestershire and City of York. Furthermore, because of lockdowns, contract wins secured in the first part of the year were successfully implemented remotely. This worked well and, indeed, we have been able to get many customers live and continue to implement with others, some of which without ever meeting them in person.

During Q3 Yotta saw sales wins pause, but the processes around pipeline generation and activity did not. Yotta's sales team worked on modifying their customer and prospect engagement models to reflect the new situation and activity levels in the earlier part of sales campaigns remained high. Q4 saw many of the stalled latter-stage campaigns restart and close due to reduced pressure on Local Authority authorisation processes.

We are now seeing activity levels grow throughout Yotta's sales processes, with many new and existing prospects and customers citing a higher priority for capable and robust systems to help them operate in a world where remote services are needed. This is accelerating the need for systems to aid implementation of Digital Transformation processes, where customers want or need to engage online and not in person. Alloy's connectivity and flexible data model means that it is ideally placed to help customers react to situations for which they have not planned. New services or asset classes can easily be created by them using standard tools. Similarly, connections to new audiences or other systems are equally available.

With the expectation that at least another £1.0m will be added to ARR in FY21, our Asset Management division is well placed to deliver a full year of profitability ahead.

Motion Measurement Division - Vicon

Vicon reported a decline in revenue of 19.6% to £22.8m (FY19: £28.3m) which has interrupted continuous growth since 2015. The COVID-19 pandemic affected all market segments but to varying degrees. Hardest hit was the Engineering segment, down 31.2% and the Life Sciences segment down 25.8%. In contrast the Entertainment segment was down by only 1.0% and Adjacent Verticals (including primarily LBVR) was down 5.1%.

Gross margin on reported revenue was 73.6% (FY19: 74.0%) so largely comparable with last year, but the impact in real terms was a loss of gross margin of around £4.0m compared to last year. The impact on Adjusted PBT* was mitigated to some extent by lower commissions and primarily from Lockdown-related savings. For example, travel-related costs, marketing events and other areas of discretionary spend were substantially lower than last year. Consequently, Vicon reported a lower Adjusted PBT* of £4.8m (FY19: £8.1m).

Established Markets - strength in leadership

In order to maintain our leadership position in our most developed markets we continued to invest in R&D and product innovation throughout the year, which saw us deliver over 20 new software releases over the year. This included the addition of a Machine Learning-based hand and finger tracking solution in Shogun, our Entertainment market solution, and new versions of Nexus, our flagship Life Sciences software.

We also updated our iPhone/iPad app, Capture.U, several times during the year. This innovative app uses both Apple's iOS skeletal tracking, now enhanced with the LIDAR sensors on-board the Pro versions of the iPad and iPhone, and our own Blue Trident Inertial Measurement Units. The app enables researchers to see human skeletal movement and inertial measurements overlaid on live video in real-time. This enables a low-cost entry point for physiotherapists and sports scientists to use Vicon technology to analyse motion in a highly portable, intuitive manner.

These new capabilities combined with Vicon's clear market differentiation helped win deals around the world. This included an especially strong performance in the Asia Pacific region with wins at Tencent, Konami and ASICS.

Adjacent Markets - developing new growth vectors

In addition to growing our Established Market business, we also seek further growth by applying our technology to newer markets which offer higher levels of potential growth. We are focussed on two specific opportunities: LBVR and Elite Sports.

LBVR revenue of £1.7m (FY19: £1.8m) was recorded with the planned rollouts by our partners slowing as a result of COVID-19. That said, we signed four new partners over the full course of the year, and existing partner Europa-Park, one of the world's leading theme parks, introduced their very large free-roaming LBVR experience aimed at the theme park market. Furthermore, partners also found there is interest in the enterprise market for their collective VR experiences, where we fulfilled a number of orders for this broader enterprise market.

Our elite sports offering, IMU Step, made progress during the year. Prior to lockdown and the suspension of virtually all elite sports, we won new teams in the NBA, NFL, MLB, NRL and AFL as well as with a number of collegiate athletic and health science programmes including at the University of Kentucky and the University of Montana. We also engaged in a number of exploratory partnership programmes which would see our technology embedded in others' sports solutions. Since the gradual return of elite sports, we have seen some degree of life returning to the market, and we have also identified new markets for our solution in orthopaedic rehabilitation and military performance management, which we are now pursuing.

CURRENT TRADING AND OUTLOOK

Both businesses have started the new financial year well, however the COVID-19 pandemic is on-going, so uncertainty remains which continues to affect certain end-markets.

Vicon's current sales pipeline includes a rollover of opportunity from FY20 into FY21 that is expected to benefit future quarters. The timing and recognition of these potential orders is taking longer than normal as customers adapt purchasing plans to suit their own financial and operational circumstances. In the immediate short-term our sales pipeline for Q1 is comparable overall with this time last year (pre-COVID). This combined with longer term sales pipeline data suggests recovery is underway in our Rest-of-World markets but for the time being the USA remains subdued.

Yotta has a strong ARR sales pipeline for the full year, consistent with adding at least another £1.0m gross additions to ARR during the financial year. With this anticipated growth in ARR and a stable cost base, Yotta can look forward to a full year of profitability.

We operate two market-leading divisions in expanding global markets with highly differentiated software products and clear strategies to continue to drive progress - amplifying our core. We will continue to both invest in our organic growth and explore acquisition opportunities, which together can accelerate our strategies within our chosen markets.

Returning to the three themes of 2020, we enter FY21 a resilient Group with two fundamentally strong and profitable businesses, both of which are seeing an acceleration in favourable market dynamics. This platform together with our robust Balance Sheet mean we feel confident in our ability to adapt, innovate and navigate any further challenges that may arise whilst driving organic and inorganic growth.

Nick Bolton

CEO

FINANCIAL REVIEW

Income Statement

The Group reported revenue of £30.3m (FY19: £35.3m) representing a headline decline of 14.3%, and on a constant FX basis the decline was 13.9%. The segmental revenue analysis illustrates that all market segments were affected and from a geographic standpoint, the USA market suffered more than most, down £5.0m compared with last year.

Gross Profit margin reduced slightly to 69.0% (FY19: 71.2%), reflecting a slight change in the mix of revenue. Gross Profit declined year on year by £4.3m to £20.9m.

Reviewing the cost base within the Income Statement:

Adjusted PBT* of £2.6m (FY19: £5.5m) has been determined after adding back to the Statutory PBT £1.6m (FY19: £4.7m) non-cash moving items such as amortisation of acquired intangibles, share option charge, impairment of investment in Pimloc, adjustment to fair value of deferred consideration payable for IMeasureU Limited and non-recurring exceptional items which this year included aborted M&A costs of £0.2m. A full reconciliation is available in note 6.

Statement of Financial Position

Goodwill and intangibles

The modest increase in goodwill and intangibles represents the net effect of capitalised R&D of £2.5m (FY19: £2.2m), amortisation and impairment of development costs £1.8m (FY19: £1.6m) and the amortisation of acquired intangibles of £0.6m (FY19: £0.6m).

Property, plant and equipment

The decline arose due to the net effect of capital expenditure of £0.3m (FY19: £0.5m) and a depreciation charge of £0.6m (FY19: £0.6m).

Right of use assets

The Group has now adopted IFRS16. The balance reported of £2.2m (FY19: £0.0m) represents the value of property and assets utilised by the Group.

Investments

The year-on-year movement relates to an investment of £0.2m for a minority interest in Trensl Inc. which provides training VR solutions for the military and healthcare (rehabilitation). The investment comes back-to-back with an exclusive Supply Agreement to provide all systems. The year on year movement also includes the impairment of our investment in Pimloc Limited being our share of post-acquisition losses from Pimloc's trading.

Inventories

The inventory position at the end of the financial year was £3.4m (FY19: £3.2m).

Trade and other receivables

At the year-end trade and other receivables decreased to £9.2m (FY19: £11.7m). The overall decrease is largely due to accounts receivable that was lower compared to a particularly strong September 2019 revenue in the USA.

Current liabilities

The year-on-year decline in trade and other payables is accounted for by a decrease in trade payables at the year-end to £2.0m (FY19: £2.9m) which relates to the shipment of goods in September 2019 being greater than September 2020.

The lease liabilities balance reported of £0.4m (FY19: £0.0m) represents the value of lease payments due within one year relating to right of use assets given the adoption of IFRS16.

Non-current liabilities

The lease liabilities balance reported of £1.9m (FY19: £0.0m) represents the value of lease payments due greater than one year relating to right of use assets given the adoption of IFRS16.

Statement of cashflows

The Group finished the year with cash of £14.9m (FY19: £13.8m).

Cash generated from operating activities was £6.4m (FY19: £7.7m) which included a working capital inflow arising from a reduction in accounts receivables of £2.2m. The deployment of this cash included continued investment in development giving rise to a purchase of intangibles of £2.5m (FY19: 2.2m) and payment of dividends of £2.3m (FY19: £3.1m)

Tax

The Group tax charge this year was £0.0m (FY19: £0.5m). This decrease for the most part is due to the recognition of tax losses that can be Group relieved in the future. The level of Group R&D activities in the UK where the marginal rate of tax is 19% (FY19: 19%) continues to have a beneficial effect on the level of corporation tax payable in the UK given the reliefs available.

The deferred tax asset increased to £1.0m (FY19: £0.4m) due to the aforementioned recognition of losses whilst the deferred tax liability increased slightly to £2.0m (FY19: £1.8m) due to a change of deferred taxation rates.

David Deacon

CFO

* Profit Before Tax before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition, fair value adjustments to IMeasureU purchase consideration, impairment of Pimloc investment and exceptional costs.

consolidated INCOME statement

for the year ended 30 september 2020

COnsolidated statement of

comprehensive income FOR THE YEAR

ENDED 30 sEPTEMBER 2020

* The Group has applied IFRS 16 using the modified retrospective approach.  Under this method the comparative information is not restated. 

consolidated statement of financial position AS AT 30 september 2020

* The Group has applied IFRS 16 using the modified retrospective approach.  Under this method the comparative information is not restated.

consolidated STATEMENT of CASHFLOWS

For the YEAR ended 30 september 2020

* The Group has applied IFRS 16 using the modified retrospective approach.  Under this method the comparative information is not restated. 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2020

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 IFRS.  This announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS on 3^rd December 2020.

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 statement of financial position 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.

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 2020 and 30 September 2019 but is derived from those accounts. The statutory accounts for the year ended 30 September 2019 have been delivered to the Registrar of Companies and those for the year ended 30 September 2020 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 2020 or 30 September 2019.

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 2020.

3.     Revenue from contracts with customers

All revenue is from continuing operations.