Interim Results

26^th May 2021

Oxford Metrics plc

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

Interim Results for the six months ended 31 March 2021

- Resilient business with continued strong cash generation -

- Improving demand in important North American marketplace -

- Strong financial platform to innovate and drive inorganic growth -

Oxford Metrics plc (LSE: OMG), the international software company servicing infrastructure, life sciences, entertainment and engineering markets, announces interim results for the six months ended 31 March 2021.

* Profit/(loss) Before Tax from continuing operations before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition, change in fair value of deferred consideration payable and unwinding of associated discount factor, Pimloc and exceptional costs

Commenting on the results Nick Bolton, Chief Executive said:

"Oxford Metrics has traded well in the first half delivering both revenue and profit improvements, with key metrics tracking ahead. Strong cash generation has continued providing the Group with a resilient platform to operate through the challenging environment.

The pandemic has accelerated positive market drivers in both of our businesses which we are well placed to capitalise on.  With a broader range of motion measurement applications continuing to emerge, including taking virtual production to new heights, Vicon has continued to innovatively push boundaries and the need for Yotta's software solutions continues as customers look to digitally transform and seamlessly manage their public assets remotely.

While restrictions continue to vary in many of the countries we serve, we have been encouraged by the return to more normal levels for Vicon's markets, particularly in the USA, and, for Yotta, we expect a return to more normal trading conditions in the second half.

The Group enters the second half with strong fundamentals and a robust balance sheet to drive both organic and inorganic growth. We do expect to be second-half weighted in terms of revenue as has historically been the case, and given the promising sales pipeline for both of our businesses and this solid first half performance, the Board remains confident the business is in-line with achieving its full year expectations."

Financial Highlights

Operational Highlights

Strategy for Vicon: strengthen and grow profitable market leader

Strategy for Yotta: enhance cloud-based software and grow recurring revenue

Outlook and Guidance

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About Oxford Metrics

Oxford Metrics develops and markets analytics software for motion measurement and infrastructure asset management to customers 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 subsidiaries: Vicon and 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, enabling central and local government agencies and other infrastructure owners to seamlessly manage their assets remotely. Yotta has a large number of high-profile clients including Highways England, over 160 local authorities across the UK, VicRoads in Australia and Auckland Motorway System in New Zealand.

Founded in 1984 our Group is headquartered in Oxford with offices in Leamington Spa, Gloucester, Los Angeles, Denver 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 and Chief Executive's Statement

Despite the on-going restrictions associated with the pandemic continuing during the half, the Group has traded well, reporting total revenues of £15.3m (H1 FY20: £15.0m), up 2.1% at a headline level on last year's first half and up 3.8% on a constant currency basis.

The Group also reports an improvement in Adjusted PBT* to £1.3m (H1 FY20: £0.3m) reflecting the additional gross margin from higher revenues and a number of pandemic-related cost savings.

In line with our "amplify the core" strategic plan to increase the visibility of revenues and profits, the Group increased Annual Recurring Revenues ('ARR') by 4.7% year-on-year to £7.1m (H1 FY20: £6.8m).

The cash position, having paid a final dividend of £2.3m in the first half, finished at £15.9m as at 31 March 2021 (H1 FY20: £10.8m). Cash generated from operations during the first half was £4.2m (H1 FY20: £1.0m).  

Asset management division - Yotta

Yotta reported software revenues up 11.1% to £4.1m (H1 FY20: £3.7m). Annualised Recurring Revenues ('ARR') as at 31 March 2021 grew 4.7% year-on-year to £7.1m (H1 FY20: £6.8m). The retention rate also improved to 97.5% (H1 FY20: 95.8%).

We can also report that additions in the first half of £0.5m are contracted, on average, for two years with a Total Contract Value over this period of £0.9m. The first half included new wins across UK local and central government, although in the second quarter we started to see additions to ARR impacted by the UK national lockdown with procurement processes taking longer, which has resulted in sales pipeline opportunity moving into the second half. Assuming a return to more normal trading conditions in H2 we expect Yotta to report improved additions in the second half.

An Adjusted PBT of £0.4m (H1 FY20 Loss: £0.5m) is reported, the improvement reflects our strategy of ARR growth leveraging the existing cost base. Notwithstanding challenges that may arise from the pandemic, Yotta is well placed to deliver a full year of profitability.

Through the first half, we continued to experience growing customer interest in using Yotta software to drive digital transformation projects in the management of public assets. The pandemic has accelerated remote working and management for asset maintenance and service teams across the UK - whether that is for assigning jobs, reporting inspections or managing waste collection.

This on-going trend has accelerated the need for tools like Yotta's to help seamlessly manage remote working and has helped us secure contract wins at both large and smaller Local Authorities. For example, Devon County Council and SSE adopted our solution to manage their street lighting and Halton Borough Council added our arboreal management capability within Alloy following a highly competitive open tender. We also experienced further migrations from Mayrise to Alloy including at Kier for Highways England Areas 3 and 4, at the London Borough of Newham, at Isle of Anglesey County Council and at Walsall Council. Furthermore, through this migration process a number of these customers expanded their use of our software within their organisations. Finally, we also saw a number of good wins for Horizons in the UK at Northumberland County Council and Calderdale MBC.

Partnerships continue to be an important organic growth channel for us to both broaden our solution in our existing markets as we build out our network of carefully selected partners. This partner-centric approach also provides a channel to take us into geographies and vertical markets we do not currently serve directly to expand our customer footprint. One such existing channel partner, PMS in Australia, saw growing momentum for Horizons with wins at four cities across Australia.

We also strengthened our combined solution capabilities with a number of new partnerships in the period with Society Works, which runs the popular street issue reporting site, FixMyStreet Pro, and with smart city technology solution providers CIMCON Lighting, New Zealand-based PiP IoT and Australia-based Blue IoT.

Our professional services team continued to provide valuable implementation and consultancy services. As a result, the first half also saw a record number of "go-lives" for Alloy, including implementations at Ubico, Bristol Waste and Hackney. The professional services team also delivered a series of successful consulting engagements. These included an impact analysis relating to HS2 for Warwickshire, where we created a bespoke historical analysis model that assessed the accelerated deterioration caused by HS2 construction sites. We also enabled Northumberland to make use of their automated road survey data by linking it with Alloy operational data for improved scheme selection.

Motion measurement division - Vicon

Vicon reported revenues of £11.2m (H1 FY20: £11.3m), representing a slight year-on-year reduction of 0.9% at a headline level. On a constant currency basis underlying growth of 1.4% was achieved. The trading trends in Vicon seen in the second half of last fiscal year continued into the first quarter of FY21, with weaker market conditions in the USA but with a stronger performance in the Asia Pacific region.

We are pleased to report that demand in the USA returned in the second quarter and, coupled with continued strong performance in other geographical markets, means Vicon achieved its internal revenue targets and reported an Adjusted PBT* of £2.2m (H1 FY20: £2.0m) and an unadjusted profit before tax of £1.1m (H1 FY20: £0.9m).

While Vicon reported a slight decline in gross margin at 73.3% (H1 FY20: 73.8%) in the first half driven by revenue mix, together with pandemic-related cost savings led to an improvement in profitability year-on-year.

The move of motion measurement into mainstream, everyday life is the overarching structural trend supporting Vicon's growth prospects. New applications for our technologies are regularly emerging due to the continued innovation within our business, from our customers and across the broader market. Our engineering customers have delivered some impressive results through the first half. Firstly, Bell Innovation used their Vicon system to act as an indoor GPS system as they develop their mobility-as-a-service strategy, which includes the Bell APT delivery drone and their air taxi, the Bell Nexus 4EX. Bell have created some exciting results and demonstrated their capabilities with the Vicon system live at CES in 2020, flying six drones for 33 consecutive hours during the show in over 4,000 flights and 400 battery changes. Secondly, Vicon customer NASA's Jet Propulsion Lab have achieved astounding success with the Ingenuity Mars Helicopter. Developed and tested in a Vicon-equipped chamber which mimicked the lower atmospheric density it would find on Mars, this amazing piece of engineering successfully performed its first flight on Mars on April 19th and as it continues to explore it will undoubtedly make further headlines.

In the entertainment market, we experienced increased demand for our tracking systems to enable in-camera visual effects (ICVFX) in virtual production environments. In its simplest form virtual production is the merger of physical and digital worlds, enabling creators to view near-final-quality shots live on set - rather than having to wait until post-production. These production techniques offer logistical, cost and creative benefits. In the first half, we announced our continuing partnership with industry leader ILM, who have taken virtual production to a new level in the most recent season of The Mandalorian, the highly successful new Star Wars production. We also announced in the first half the partnership with the University of Portsmouth to support ground-breaking innovation in virtual, augmented and extended realties at their all-new Centre for Creative and Immersive Extended Reality (CCIXR). Moreover, their capabilities were put to almost immediate use to support the Royal Shakespeare Company's production, Dream. Using A Midsummer Night's Dream as its inspiration, this highly creative production brought together live theatre and cutting-edge digital technology, and then live streamed the production to a global audience.

The first half also saw Vicon expand the range of measurement methods available, and thus expand our market opportunity by broadening the range of applications where Vicon can be used. Adding to the existing optical and inertial methods of measurement, Vicon launched an integrated markerless capability powered by partner, Theia. In this video-based free sensing method, the subject is measured from video camera images, without the need to place any sensor or other element on the subject. Regardless of the method of measurement, the data can still be analysed and further processed in Vicon's broad range of existing software.

Following a slower period in our adjacent markets of Location-based Virtual Reality (LBVR) and Elite Sports due to pandemic-related lockdowns in 2020, we saw a return to more normal levels of market activity in 2021. In our Elite Sports business, we saw a series of customers renew across the world including teams from the MLB, NBA and NRL. We also won a number of new deals including university sports programme customers and a key European football club following an in-depth trial.

Outlook

The Group continues to operate successfully and has fully adapted to the pandemic-affected environment. The pandemic remains ongoing so there may be unforeseen challenges ahead, but we are cautiously optimistic that the Group will now resume the growth trajectory we have previously enjoyed. Sales pipelines in both Vicon and Yotta are promising, giving the Board confidence for the second half, which is typically the Group's more active trading period.

At Vicon, the impact of the pandemic has been felt more acutely, particularly in the USA, where purchasing decisions were deferred. Based on our FY21 second quarter performance and an encouraging sales pipeline for H2 we expect to see a stronger H2 compared to H1 which has historically always been the case pre-pandemic.

At Yotta, the business is well placed as revenues are largely pre-contracted with government customers delivering fully hosted cloud software, so forecast variability relates only to whether the business can sign new software contracts. While additions to ARR were slower in H1 due to UK national lockdowns, sales pipeline opportunity has simply moved into H2. Assuming a return to more normal trading conditions in H2, we expect Yotta to report improved additions in the second half.

While Vicon is experiencing some extended lead-times on certain components due to global semiconductor conditions, actions are being taken to avoid any disruption to shipments in the second half.

Our strong balance sheet puts the Group in a robust position to adapt, innovate and navigate any further challenges that arise whilst driving organic growth and providing scope to execute acquisitions to accelerate our strategy. From a cost perspective, across the Group we will continue to take prudent actions as needed and expect to realise further pandemic related cost savings in H2 though assuming a return to normal trading conditions these will be considerably lower as marketing and other activities resume.

Both businesses continue to see an acceleration in favourable market dynamics and we enter the second half with promising sales pipelines in both Vicon and Yotta. Given this first half performance and the outlook described the Board remain confident that the business is in-line with achieving its full year expectations.

* Profit/(loss) Before Tax from continuing operations before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition, change in fair value of deferred consideration payable and unwinding of associated discount factor, Pimloc and exceptional costs.

CONDENSED CONSOLIDATED INCOME STATEMENT