Interim Results

23^rd June 2022

Oxford Metrics plc

 

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

Interim Results for the six months ended 31 March 2022

 

-     Oxford Metrics trades successfully in important development period for the Group

-     Vicon revenue grows despite supply chain constraints

-     Unprecedented level of orders-in-hand going into the second half

-     Strong financial platform, further strengthened by sale of Yotta, to accelerate M&A and planned organic investments

 

Oxford Metrics plc (LSE: OMG), the smart sensing software company, servicing life sciences, entertainment and engineering markets, announces unaudited interim results for the six months ended 31 March 2022.

 

	H1 FY22	H1 FY21
Revenue	£12.5m	£11.2m
Adjusted Profit before Tax*	£0.3m	£1.0m
Adjusted* Basic Earnings per Share	0.41p	0.69p
Statutory Profit/(Loss) before Tax	£0.6m	£1.3m
Statutory Basic Earnings per Share	0.65p	0.92p
Net Cash	£19.6m	£15.9m
Operating Cashflow	£3.2m	£4.5m
Cash as at 22 June 2022	£67.7m	-
Order book	£12.9m	£0.7m

* 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 and exceptional costs

Commenting on the results Nick Bolton, Chief Executive said:

"Oxford Metrics has traded successfully in an important development period for the Group. Firstly, in October last year we announced our new five-year plan to both grow revenues by 2.5x and to deliver Adjusted PBT margins of 15% by the end of the plan.

Secondly, the Group's trading during the first half of FY22 saw Vicon reporting strong revenue growth of 11.8% despite supply chain constraints, but this does not fully reflect the underlying strength of the business.

More recently, the Group announced the disposal of Yotta to Causeway Technologies for a cash consideration of £52.0m. The sale means we have increased financial firepower to make strategic organic and inorganic investments through the lens of Vicon and its core technology. 

The Group enters the second half with Vicon having more than recovered from the pandemic-impacted years with an unprecedented level of orders-in-hand driven by buoyant demand continuing. Although our ability to deliver has been impacted by supply chain constraints, the situation is gradually improving and the Board remains confident that Oxford Metrics is in-line with achieving its full year expectations. The Group also has significant cash resources and is actively seeking out M&A opportunities to enhance our capabilities and scale towards our five-year goals."

Financial Highlights

·	Headline Group revenue of £12.5m, up 11.8% (H1 FY21: £11.2m), on a constant currency basis underlying growth was 11.1%
·	The Group reported an adjusted profit before tax £0.3m (H1 FY21: £1.0m) reflecting a planned increase in R&D investment, together with operating costs returning to more normal levels
·	Adjusted earnings per share 0.41p (H1 FY21: 0.69p)
·	Order book of £12.9m (H1 FY21: £0.7m)
·	Continued cash generation with operating cashflow of £3.2m (H1 FY21: £4.5m)
·	Strong balance sheet with no debt and cash of £19.6m as at 31 March 2022 (H1 FY21: £15.9m)
·	Cash position as at 22nd June 2022 £67.7m, reflecting Yotta sale proceeds

 

Operational Highlights

 

Vicon delivers strong revenue growth, despite supply chain constraints

 

·	Vicon's revenue grew 11.8%, at a headline level, to £12.5m (H1 FY21: £11.2m) despite some supply chain constraints.
·	Strong demand across all vertical markets despite being subject to supply chain constraints, with an unprecedented level of orders-in-hand of £12.9m.
	o  Location-based Entertainment (LBE) market recovery continues with growth of 131.3%, as all market partners restart their experiences.
	o  Life Sciences revenue grew by 11.0%, and accounts for a quarter of the orders  in-hand.
	o  Engineering grew 8.3%  with good wins at Cranfield University and ICAI Madrid.
	o Entertainment revenue was flat although buoyant Virtual Production and Animation growth continues, with Entertainment accounting for half of the orders-in-hand.
·	Before Group costs, Vicon reported an Adjusted PBT* of £1.8m (H1 FY21: £2.2m) reflecting a change in product mix and some increases to operating costs.

 

Yotta sale is an enabler of growth

 

·	Yotta was sold to Causeway Technologies on 30th May 2022 for a cash consideration of £52.0 million, in a sale that makes sense on multiple fronts:
	o  The transaction represents attractive revenue and profit multiples.
	o  While Yotta has been growing steadily in scale, growing recurring revenue and achieving full year adjusted profitability, it shared no overlap with Vicon - the much larger and higher growth part of the Group.
	o  In joining with Causeway, a well-established leader of software solutions to the construction industry, we believe this newly combined business is much better positioned to continue both Yotta's growth and innovation.
·	The proceeds from the sale have provided the Group with significant near-term financial firepower to accelerate M&A and planned organic investments.

 

Outlook and Guidance

 

·	Vicon has more than recovered from the pandemic-affected years which is evidenced by the unprecedented level of orders-in-hand arising from ongoing buoyant demand.
·	The overall cost base in the second half is expected to rise compared to the first half as costs continue to normalise following the pandemic and we continue with our investment plans to augment our ability to sense, analyse and apply.
·	Having considered the current order book, the expected rise in the cost base and given that supply chain constraints are gradually improving, the Board remains confident that Oxford Metrics is in-line with achieving its full year expectations.
·	Following the sale of Yotta, the Group has significant cash resources and is actively seeking out M&A opportunities to enhance capabilities.
·	The Company is now a more focussed business, well placed to deliver on the targets set out in our five-year plan.

 

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 / Tejas Padalkar
FTI Consulting	+44 (0)20 3727 1000
Matt Dixon / Jamille Smith / Jemima Gurney

About Oxford Metrics

 

Oxford Metrics develops software that enables the interface between the real world and its virtual twin. Our smart sensing software helps over 10,000 customers in more than 70 countries, including all of the world's top 10 games companies and all of the top 20 universities worldwide. Founded in 1984, we started our journey in healthcare, expanded into entertainment, winning an OSCAR® and an Emmy®, then moved into defence and engineering. We have a track record of creating value by incubating, growing and then augmenting through acquisition, unique technology businesses.

 

The Group trades through its market-leading division: Vicon. Vicon is a world leader in motion measurement analysis to thousands of customers worldwide, including Guy's Hospital, Industrial Light & Magic, MIT and NASA.

 

The Group is headquartered in Oxford with offices in California, Colorado, 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

The first half was a period of important development for the Group. Firstly, in October 2021, we announced our new five-year plan, through which we aim, by the end of plan, to both grow revenues by 2.5x and deliver adjusted PBT margins of 15%. Secondly, we traded successfully in the first half with headline revenues growing 11.8% whilst still holding an unprecedented level of orders-in-hand of £12.9m (H1FY21: £0.7m) into the second half driven by buoyant demand. In May 2022, we announced the disposal of our Yotta business at a highly attractive valuation. The disposal has resulted in a company which is now more focussed and with greater financial firepower to deliver on its growing set of organic and inorganic opportunities.

 

Yotta sale

 

Given the significance of the sale of Yotta to both these reported figures and to the go-forward growth opportunities for the Group, let us start here. On 30th May 2022, we announced the sale of Yotta, our infrastructure asset management software division, to Causeway Technologies for a cash consideration of £52.0 million. First and foremost, the transaction makes clear financial sense. The consideration was paid fully in cash and represents attractive revenue and profit multiples.

 

The second point to note is that, whilst Yotta had been growing steadily in scale, particularly in growing recurring revenue and achieving full year adjusted profitability, it shared no overlap with Vicon - the much larger part of our Group and higher-growth division. This meant driving synergy benefits to scale Yotta would be difficult to achieve under our ownership. Whereas, in joining with Causeway, a well-established leader of software solutions to the construction industry, we believe this newly combined business is much better positioned to continue both Yotta's growth and innovation.

 

Although the sale closed after period end, these Interim Results have been restated accordingly to reflect the sale. This means Yotta is disclosed as a discontinued operation in the Income Statement and as an Asset Held for Sale on the Statement of Financial Position. The disposal is expected to generate a profit on disposal net of costs of £44.3m which will not be subject to tax given the transaction qualifies under the Finance Act 2002 Substantial Shareholder Exemption as amended. From a net cash perspective the transaction is expected to add £47.4m.

 

First half trading (from continuing operations)

 

KPI	Revenue		PBT		Adjusted PBT*
	H1 FY22	H1 FY21	H1 FY22	H1 FY21	H1 FY22	H1 FY21
Group	£12.5m	£11.2m	£0.6m	£1.3m	£0.3m	£1.0m

 

Removing Yotta from the trading figures, the reported revenues of the remaining Group have improved to £12.5m (H1 FY21: £11.2m), up 11.8% at a headline level and up 11.1% on a constant currency basis. However, this does not fully reflect the underlying strength of the business when orders-in-hand are taken into account. We have continued to see strong demand across all Vicon's vertical markets, although delivering on this demand has been subject to well publicised supply chain constraints. We have had success in navigating these challenges in the first half and continue to actively manage the situation. As we enter the second half of the financial year, we carry an unprecedented level of orders-in-hand of £12.9m (H1 FY21: £0.7m) driven by buoyant demand. Whilst some supply chain constraints continue, the overall picture continues to improve gradually.

 

The Group also reports an Adjusted PBT* of £0.3m (H1 FY21: £1.0m), largely reflecting an increase in R&D investment announced at the Preliminary Results for FY21, together with operating costs returning to more normal levels following the depressed spend during the pandemic when marketing and travel costs were lower.

 

All vertical market segments have performed well and reported growth through the first half.

 

Engineering

 

Engineering reported revenue growth of 8.3%. During the period the Centre for Autonomous and Cyberphysical Systems, at Cranfield University, purchased a system to be used in the research and study of Aeronautical Systems, Autonomous Systems, Flight Physics and Off-Road Vehicle Engineering. While ICAI Madrid, in Spain, is using Vicon to understand the potential risks of reclined seating postures intended for autonomous cars as the current design of seat belts and airbags has never considered installation in autonomous vehicles.

 

Entertainment

 

Entertainment reported revenues were broadly flat year-on-year, following a strong performance in the first of last year. However, over half of the order backlog is accounted for by Entertainment which continues to see buoyant growth in Virtual Production and Animation. In the half the Institute of American Indian Arts purchased a system to help to preserve the heritage of the Native American. Illfonic Games and Monkey Chow also added Vicon to their Games and VFX business, and our long-term customer Industrial Light and Magic launched the "ABBA: Voyage" show which used Vicon technology to help animate the band members to widespread critical acclaim.

 

Life Sciences

 

Life Sciences reported revenues were up 11.0% and accounts for over a quarter of the order backlog. During the period Manchester Metropolitan University Institute of Sport invested in a new system, which is an integral part of the brand new £26m Institute of Sport Building (Centre of Sporting Excellence) at the University, opening in 2022. While a system purchased by the JOiiNT LAB in Bergamo, Italy is being used for robot control (navigation and manipulation), ergonomic studies, and biomechanical studies to technically evaluate a novel prosthetic foot for lower-limb amputees, a by no means unique combination of Life Sciences and Engineering studies being conducted on the same system. As part of the same research consortium another system installed at IIT Genoa will be used for robot teleoperation, as well as for technically evaluating upper-limb and lower-limb prostheses. Tonal, a home gym and personal training company purchased system to help assess their sports science product range.

 

LBE

Our Location-based Entertainment (LBE) market continues to recover reporting year-on-year growth of 131.3% and also has an encouraging order backlog. This performance was driven by all of our market partners restarting their experiences as the pandemic rules were relaxed. Significant expansions, previously planned prior to COVID-19 are now in progress, and we were able to sign a new market partner up in the latter part of the first half.

Overall, Vicon reported a gross margin at 70.7% (H1 FY21: 73.3%) in the first half. The decline is attributed to the mix of revenues arising from both the specific geographic spread of revenues and the various margin contributions of each product line.

Given the above revenue and gross margin performance coupled with a rise in the underlying cost base, before Group costs, Vicon reported an Adjusted PBT* of £1.8m (H1 FY21: £2.2m) and an unadjusted profit before tax of £0.6m (H1 FY21: £1.1m).

The cash position, having paid a final dividend of £2.5m in the first half, finished at £19.6m as at 31 March 2021 (H1 FY21: £15.9m). Cash generated from operations during the first half was £3.2m (H1 FY21: £4.5m). The Group cash position on the eve of these Interims Results stood at £67.7m.

Five-year plan - a reminder

 

The successful sale of Yotta changes nothing about our ambition for our five-year plan but it does provide an increased opportunity as to how fast and how hard we drive it. Our plan recognised something fundamental was changing in our markets and in our opportunity. This change was driven by the arrival of the Augmented Age - an era where humans partner with machines to achieve what neither can alone. For this augmented partnership to thrive, we need technologies which have the ability to perceive us and our surroundings. They must be able to capture and understand every dimension of our world in real-time - humans, objects, movements, environments.

 

This requires smart sensing systems, where cameras and other sensors are deeply coupled with powerful software to enable machines to transparently enhance our lives. Such smart sensing capability has always been our core technology - from imagery to insight; from pixel to purpose; and from sensing to sense-making. Indeed, it provided the seed for Yotta's creation, growth and eventual sale. Today, we are seeing it can be applied to a growing set of domains and applications.

 

Our plan looks to capitalise on exactly this expanded opportunity by focussing on driving each of the three elements of smart sensing - sense, analyse and apply.

 

1.	Extend the sensing capabilities our integrated smart sensing systems through R&D, M&A and fostering key supplier partnerships. Currently, our solutions utilise a wide range of sensors - including optical, video, inertial, force plates among others - some we own and some we integrate with. These existing sensing mechanisms can be improved, and we can also add other sensing mechanisms to broaden the applicability of our integrated solutions.
2.	Enhance the analysis we can undertake to broaden the range of applications to which our systems can be applied. Our most recent acquisition, Contemplas, completed in August 2021 is a great example of this.
3.	Embed our Intellectual Property (IP) in other firms' solutions by opening up our technology through R&D, M&A and investing in dedicated embedding sales and support resources. Here we will expand the ability to integrate our sensing and analysis IP to specific application domains, such as our existing partners in the Location-based Entertainment (LBE) market.

 

 

Greater focus. Greater resources.

 

Following the sale of Yotta, the entirety of the five-year plan still holds. The contexts of market and technology developments still hold. The validity of our three-initiative approach through the constituent elements of sense, analyse and apply still hold. Now we will pursue this plan through the focussed lens of our market-leading global Vicon business and technology, and with the increased resources the sale of Yotta has provided to our balance sheet. Our aim is to build a larger, more connected enterprise. This means adding the following adaptations to our sense, analyse, apply initiatives:

 

·	Focus on a single integrated core technology stack. We already lead in a variety of markets through a range of sensing and analysis technologies. We now have to the opportunity to add to this core through both organic development and M&A. In all cases the additional technologies must augment and/or amplify our existing capabilities. Although the end market application may be new, there will always be a tie back to this central capability of integrated smart sensing systems.
·	Extract greater operational leverage across markets and the organisation. Closer markets, technologies and customers enable us to extract greater operational leverage across initiatives. For example, a single technology innovation which can be applied to all our markets or driving out economies of scale in our marketing or our production. We are seeking coherence across the organisation and the end markets we target.
·	Pursue larger scale transactions. With a stronger balance sheet, we have the opportunity to accelerate our pace of growth through lifting our ambition to complete a number of larger transactions. We already have an exciting pipeline of M&A opportunities which fit well within this new, more cohesive plan. We will remain disciplined on price and we continue to look for IP-rich, hard-to-replicate technology companies with attractive actual or potential cashflow metrics, good-to-high revenue visibility or a dominant position in a niche market, proven market acceptance of their technology, and able management teams who share our cultural values.

 

Outlook

The Vicon business has more than recovered from the pandemic-affected years, which is evidenced by the unprecedented level of orders-in-hand driven by ongoing buoyant demand.

The overall cost base in the second half is expected to rise as costs continue to normalise following the pandemic and we continue with our investment plans to augment our ability to sense, analyse and apply.

Our ability to deliver on the buoyant demand has hitherto been impacted by supply chain constraints but looking forward, the situation is gradually improving and the Board believe Oxford Metrics will deliver a performance for the full year in line with achieving market expectations.

With growing market demand, a newly focussed, more connected enterprise and now with more financial firepower, we believe Oxford Metrics is well positioned to realise its ever-visible, longstanding growth potential.

* 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 and exceptional costs.

CONDENSED CONSOLIDATED INCOME STATEMENT

 

		Six months ended 31 March 2022	Six months ended  31 March 2021	Year ended  30 September 2021
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Revenue	2	12,547	11,225	27,571
Cost of sales		(4,099)	(3,525)	(8,589)
Gross profit		8,448	7,700	18,982
Sales, support and marketing costs		(3,099)	(2,569)	(5,336)
Research and development		(1,676)	(1,374)	(3,511)
Administrative expenses		(3,038)	(2,473)	(6,438)
Operating profit		635	1,284	3,697
Finance income		1	3	4
Finance expense		(32)	(34)	(67)
Profit before taxation		604	1,253	3,634
Taxation		228	(88)	(574)
Profit from continuing operations		832	1,165	3,060
Loss from discontinued operations, net of tax		(206)	(145)	(125)
Profit for the period attributable to owners of the parent during the period		626	1,020	2,935
Earnings per share for profit on continuing operations attributable to owners of the parent during the year
Basic earnings per share (pence)	6	0.65p	0.92p	2.42p
Diluted earnings per share (pence)	6	0.65p	0.91p	2.40p

 

Earnings per share for profit on total operations attributable to owners of the parent during the year
Basic earnings per share (pence)	6	0.49p	0.81p	2.32p
Diluted earnings per share (pence)	6	0.49p	0.80p	2.30p

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

		Six months ended 31 March 2022	Six months ended  31 March 2021	Year ended  30 September 2021
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Net profit for the period		626	1,020	2,935
Other comprehensive income
Items that will or may be reclassified to profit or loss
Exchange differences on retranslation of overseas subsidiaries		85	(351)	(129)
Total other comprehensive income/(expense)		85	(351)	(129)
Total comprehensive income for the period attributable to the owners of the parent		711	669	2,806

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

		31 March 2022	31 March 2021	30 September 2021
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Non-current assets
Goodwill and intangible assets		8,984	12,524	13,543
Property, plant and equipment		1,548	1,728	1,756
Right of use assets		1,022	2,061	1,978
Financial asset - investments		236	305	236
Deferred tax asset		898	1,155	1,877
		12,688	17,773	19,390
Current assets
Inventories		2,769	3,220	2,494
Trade and other receivables		3,406	8,627	6,099
Current tax debtor		32	102	118
Cash and cash equivalents		19,614	15,867	22,957
		25,821	27,816	31,668
Assets classified as held for sale		12,001	-	-
Current liabilities
Trade and other payables		(8,358)	(10,978)	(12,504)
Current tax liability		(154)	-	-
Lease liabilities		(356)	(496)	(582)
		(8,868)	(11,474)	(13,086)
Liabilities directly associated with assets classified as held for sale		(6,968)	-	-
Net current assets		21,986	16,342	18,582
Total assets less current liabilities		34,674	34,115	37,972
Non-current liabilities
Other liabilities		(762)	(687)	(883)
Lease liabilities		(839)	(1,719)	(1,563)
Provisions		(36)	(28)	(32)
Deferred tax liability		(2,186)	(1,972)	(3,058)
		(3,823)	(4,406)	(5,536)
Net assets		30,851	29,709	32,436
Capital and reserves attributable to the owners of the parent
Share capital	7	318	316	317
Shares to be issued		65	65	65
Share premium account		18,742	18,184	18,483
Retained earnings		11,608	11,333	13,538
Foreign currency translation reserve		118	(189)	33
Total equity shareholders' funds		30,851	29,709	32,436

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS

 

		Six months ended 31 March 2022	Six months ended 31 March 2021	Year ended 30 September 2021
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Cash flows from operating activities
Operating profit from continuing operations		635	1,284	3,697
Operating loss from discontinued operations		(102)	(243)	(374)
Group operating profit		533	1,041	3,323
Depreciation and amortisation		1,432	1,711	3,339
Impairment of intangible assets		-	-	1,341
Increase in fair value of investment		-	-	(68)
Share based payments		122	72	98
Exchange adjustments		96	(254)	(69)
(Increase)/decrease in inventories		(266)	176	1,144
Decrease in receivables		47	440	3,126
Increase in payables		1,200	1,265	2,223
Cash generated from operating activities		3,164	4,451	14,457
Tax received/(paid)		16	(87)	(102)
Net cash from operating activities		3,180	4,364	14,355
Cash flows from investing activities
Purchase of property, plant and equipment		(340)	(78)	(239)
Purchase of intangible assets		(1,688)	(1,191)	(2,778)
Proceeds on disposal of property, plant and equipment		30	4	11
Acquisition of subsidiary undertaking net of cash acquired		-	-	(1,149)
Interest received		1	3	4
Net cash used in investing activities		(1,997)	(1,262)	(4,151)
Cash flows from financing activities
Principal paid on lease liabilities		(230)	(248)	(504)
Interest paid on lease liabilities		(45)	(50)	(105)
Interest paid		(4)	-	(1)
Issue of ordinary shares		225	387	687
Equity dividends paid		(2,542)	(2,264)	(2,264)
Net cash used in financing activities		(2,596)	(2,175)	(2,187)
Net (decrease)/increase in cash and cash equivalents		(1,413)	927	8,017
Cash and cash equivalents at beginning of the period		22,957	14,940	14,940
Cash and cash equivalents at end of the period		21,544	15,867	22,957
Amount included in cash and cash equivalents		19,614	15,867	22,957
Amount included in assets classified as held for sale		1,930	-	-
Total cash and cash equivalents at end of the period		21,544	15,867	22,957