Contents Half Year in Brief 1 Group Balance Sheet 7

Transcription

1 INTERIM REPORT 2004

2 OMG is a world leader for generating 3D information from moving images. Built on a young and specialised family of technologies, OMG s customer base already spans life sciences, entertainment and engineering an ever-widening range of applications. We are passionate about business and with the energy, ability and dedication of our staff we look forward to the future with enthusiasm Contents Half Year in Brief 1 Chairman and Chief Executive s Joint Statement 2 Group Profit and Loss Account 6 Statement of Group Total Recognised Gains and Losses 6 Group Balance Sheet 7 Group Cash Flow Statement 8 Notes to the Interim Financial Information 9 Independent Review Report to OMG Plc 11 Company Information 12

3 HALF YEAR IN BRIEF Some significant milestones have been achieved so far this year with the Group s first acquisition and a major new product launch, which will contribute to the growth of the business. We will continue to work on opportunities for growth both by acquisition and organically. Highlights Acquisition of House of Moves, Hollywood-based motion capture studio (announced 27 May 2004), Launch of Vicon MX new product range with the worlds first 4 million pixel optical motion capture system (announced 3 June 2004) Turnover was in-line with management expectations and slightly ahead of the previous six months at 4.3m (2003 restated*: 5.3m), although lower than the same period of last year Profitable trading period with operating profit of 0.1m (2003 restated*: 0.5m) Change of Japanese distributor caused disruption to order flow, now making progress with good prospect list. Strong growth in Europe and UK with revenues already equalling the level for the whole of the previous financial year Strong market positioning in the Entertainment sector continues, with products being used in all of the top four earning film releases over the past month: Harry Potter and the Prisoner of Azkaban, The Day After Tomorrow, Troy, and Van Helsing. 1 OMG Plc Interim Report 2004

4 CHAIRMAN AND CHIEF EXECUTIVE S JOINT STATEMENT This announcement follows some significant milestones in the development of the Company, including the Group s first acquisition and a major new product launch. At the time of the Company s AGM in February, it was reported that we anticipated sales during the current year to be weighted towards the second half. One of the key factors behind this comment, which we were then not in a position to reveal, was the forthcoming release of the new Vicon MX product, announced in early June. Trading was nevertheless steady during the first six months of the year, marginally ahead of the previous six months. Overall, the results for the first half are in line with management expectations, with the Company well positioned for the future. OMG s Markets OMG s Vicon business is a world leader in the supply of biomechanical motion analysis systems to Life Science markets, motion capture for animation in films, video and computer games in the Entertainment industry, and optical tracking and ergonomics analysis systems for manufacturing Engineering. OMG s 2d3 business sells specialist image processing software to the 3D visual effects market. OMG s recently acquired House of Moves, provides motion capture services to the leading film and games producers in the United States from its Hollywood based studio. Financial Results Turnover was slightly ahead of the previous six months at 4.3m (2003 restated*: 5.3m) although lower than the same period of last year. Allowing for the effect of the weaker US dollar, this represents underlying growth of 5% compared to the previous six month period. Operating profit for the period was 0.1m (2003 restated*: 0.5m). Cash reserves at the period end were 5.0m, up 0.2m over the six month period. Market & Business Review In our last statement we identified the potential for strong recovery in European markets. These have delivered very good growth during the first half-year, already equalling the level of sales for the whole of the previous year. The UK contributed its largest ever share (17%) of OMG s total revenues. There are several factors behind this growth. 2 OMG Plc Interim Report 2004

5 CHAIRMAN AND CHIEF EXECUTIVE S JOINT STATEMENT continued London and Los Angeles are the two leading centres of the world s visual effects and postproduction businesses. The top four earning films of the past month Harry Potter and the Prisoner of Azkaban, Troy, The Day After Tomorrow, and Van Helsing, the first two of which were UK productions, all made extensive use of both Vicon and 2d3 products. Across Europe, higher-education research funding is strong and growing in those areas seen by governments as important for economic growth and physical well-being. These include the many facets of human factors engineering and sports development. OMG s US entertainment market is buoyant, with a general increase in the value of individual orders for motion capture systems. The timing of a small number of very large orders can have a significant effect on results in a given reporting period. Last year, this phenomenon biased revenues towards the first half of the year. This year, our expectation is for the reverse, with second half revenues being stronger. House of Moves, our Hollywood-based motion capture studio, is expected to provide a steady base of revenues which will provide some smoothing effects to OMG s US earnings. Market reaction to the acquisition has been very positive. House of Moves will also provide a showcase for the new Vicon MX system (see New Products section below), a key source of information and ideas for product development projects and a test bed for new technology in the entertainment sector. The recent change of Vicon s Japanese distributor for the life science, government and academic markets has caused larger disruption to revenues than was anticipated, accounting for a significant shortfall in the usual first-half contribution from Japan. However, we are confident of a recovery and the Company continues to support the investment being made by its new Japanese distributors by locating a direct full-time sales specialist in Tokyo. The Vicon MX system will be launched in Japan in July. OMG has also been investing in the Chinese market for several years. The 2008 Olympics will have a major impact on the Chinese sports and broadcast markets. OMG is well placed to exploit this market with a strong presence over many years in Hong Kong and Taiwan, and with key sports and broadcast accounts already in place in China where the Company has placed its first dedicated salesman. 3 OMG Plc Interim Report 2004

6 CHAIRMAN AND CHIEF EXECUTIVE S JOINT STATEMENT continued New Products The first half of 2004/5 has been a period of intense development activity with several key projects coming to fruition. The following new products were launched during or shortly after the period. Vicon MX Target: All motion capture markets Announced: June 2004 Will Ship: July 2004 The MX system is the most significant enhancement of OMG s motion capture product range in 10 years. The result of over 2 years of development, the system includes high-resolution (4 Million pixels) high-speed cameras, expandable digital networking, and applications software for life, science, entertainment and engineering markets. Vicon Tracker Target: Engineering applications Announced: April 2004 Shipped: April 2004 Vicon Polygon Muscle Modeller Target: Clinical & research biomechanics Announced: June 2004 Shipped: June 2004 Polygon, Vicon s biomechanics visualisation software, now models muscles and ligaments as well as bones. 2d3 boujou bullet Target: 3D visual effects Announced: April 2004 Shipped: April d3 s boujou is now used by the vast majority of leading visual effects companies in the world. boujou bullet offers the same performance but with a much simpler user interface and significantly lower price. It should extend the use of boujou within these companies and attract new elements of the total visual effects market. Like 2d3 s video stabiliser, SteadyMove, bullet is sold directly from 2d3 s web site. Virtual prototyping and human factors engineering use Vicon optical tracking for precision and ease-to-use. Vicon Tracker reduces the complexity of motion capture to a black box which starts tracking at the flick of a switch. Summary & Outlook Sales for the first half-year were marginally ahead of the previous six months and in-line with management expectations. A number of factors lead us to expect a significantly stronger second half. 4 OMG Plc Interim Report 2004

7 CHAIRMAN AND CHIEF EXECUTIVE S JOINT STATEMENT continued Markets are generally buoyant with the life science market continuing to see growth in applications outside the traditional gait analysis, with opportunities in sports analysis, neurological research and motor control and other general biomechanical research applications. The Company is continuing to work on a number of projects for the introduction of new technologies to existing markets and the use of the Company s products and IP to penetrate new markets. There are opportunities for growth both organically and by acquisition. In the entertainment market demand for detailed facial and body motion capture remains strong. There is a good prospect of some unusually large orders in the second half of the year, although their exact timing is hard to predict. The recent acquisition of House of Moves will also contribute to revenues from the entertainment sector in the second half. The very positive market reaction to the launch of the Vicon MX system in June is expected to deliver additional revenues in the 4th quarter, particularly from the entertainment sector. The performance of this system also provides growth opportunities from a new range of more demanding applications across all the Company s markets. The combination of the recent acquisition, product launches and financial resources place the Company in a good position for a successful 2004 and beyond. Further Information Further information on OMG plc, its markets and products is available from the company s Web sites at and Anthony Simonds-Gooding Chairman Julian Morris Chief Executive 22 June 2004 * Comparative figures have been restated. See note 1 of the notes to the interim financial information. 5 OMG Plc Interim Report 2004

8 GROUP PROFIT AND LOSS ACCOUNT for the six months ended 31 March 2004 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September (As restated (As restated See Note 1) See Note 1) Turnover 4,350 5,314 9,649 Cost of sales (1,576) (1,845) (3,283) Gross profit 2,774 3,469 6,366 Net operating expenses (2,757) (2,989) (5,763) Grants receivable Operating profit Interest receivable and similar income Profit on ordinary activities before taxation Tax on profit on ordinary activities (21) (34) (34) Retained profit for the period Basic earnings per share (Note 3) 0.26p 1.10p 1.52p Diluted earnings per share (Note 3) 0.23p 0.93p 1.37p STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the six months ended 31 March 2004 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September (As restated) (As restated) Profit for the financial period Exchange adjustments offset in reserves (6) (4) Total recognised gains and losses for the period Prior year adjustment (note 1) (227) Total recognised gains and losses since the last annual report (100) 6 OMG Plc Interim Report 2004

9 GROUP BALANCE SHEET at 31 March 2004 Fixed assets Unaudited at Unaudited at Audited at 31 March 31 March 30 September (As restated) (As restated) Tangible assets Current assets Stocks 1,521 1,177 1,365 Debtors 2,374 2,655 2,336 Corporation tax Cash and short term deposits 4,991 4,717 4,826 8,886 8,713 8,697 Creditors: amounts falling due within one year Trade and other creditors 1,750 1,981 1,578 Net current assets 7,136 6,732 7,119 Total assets less current liabilities 7,593 7,194 7,443 Capital and reserves Share capital Share premium account 5,321 5,269 5,301 Merger reserve Profit and loss account 2,139 1,799 2,012 Shareholders Funds 7,593 7,194 7,443 7 OMG Plc Interim Report 2004

10 GROUP CASH FLOW STATEMENT for the six months ended 31 March 2004 Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September Net cash inflow from operating activities Returns on investments and servicing of finance Interest received Taxation 164 (37) (38) Capital expenditure Purchase of tangible fixed assets (245) (152) (256) Sale of tangible fixed assets Financing Issue of share capital Increase in cash ,003 8 OMG Plc Interim Report 2004

11 NOTES TO THE INTERIM FINANCIAL INFORMATION for the six months ended 31 March Preparation of the interim financial information The financial information for each of the six month periods ended 31 March 2004 and 31 March 2003 is unaudited and does not constitute statutory accounts within the meaning of the Companies Act It has been prepared on the basis of accounting policies set out in the Group s statutory accounts for the year ended 30 September 2003 except for the adoption of Financial Reporting Standard ( FRS ) 5, Application Note G Reporting the Substance of Transactions : Revenue Recognition. The comparative figures have been restated to reflect this change of accounting policy. Application Note G, which became effective for accounting periods ending after 23 December 2003 provides specific guidance to certain types of transactions, which have previously been subject to a range of differing but acceptable interpretations. In implementing the new guidance the Directors have conducted a re-evaluation of the separable components included within a sales transaction, and reassessed the fair value attributed to each component. The effect of adopting this new policy has been to increase the fair value of components, which are recognised as revenue after the delivery of the system. The effect can be summarised as follows: For the 6 months to 31 March 2004, revenues have been increased by 60,000, profit before tax has been increased by 36,000, and net assets have been decreased by 196,000. For the 12 months to 30 September 2003, revenues have been decreased by 109,000, profit before tax has been decreased by 88,000, and net assets have been decreased by 227,000. For the 6 months to 31 March 2003, revenues have been decreased by 116,000, profit before tax has been decreased by 89,000, and net assets have been decreased by 226,000. The interim financial information has been reviewed by the group s auditors. A copy of the auditors review report is attached to this interim report. The financial statements for the year ended 30 September 2003 (prior to restatement) have been delivered to the Registrar and included an unqualified auditors report which did not contain a statement either under section 237 (2) of the Companies Act 1985 (accounting records or returns inadequate or accounts not agreeing with records and returns), or section 237 (3) (failure to obtain necessary information and explanations). 2 Tax on profit on ordinary activities The tax charge for the six month period ended 31 March 2004 is lower than the standard rate of corporation tax in the UK due to the anticipated use of unrelieved tax losses and research and development tax credits. 3 Earnings per share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options. At 31 March 2004 there were 52,969,208 allotted, called up and fully paid ordinary shares of 0.25p each, the weighted average number of shares was 52,148,618, and the dilutive effect of options was 6,432,120 ordinary shares. 9 OMG Plc Interim Report 2004

12 NOTES TO THE INTERIM FINANCIAL INFORMATION continued 4 Reconciliation of operating profit to net cash outflow from operating activities Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September (As restated) (As restated) Operating profit Depreciation Profit on sale of tangible fixed assets (1) (12) (31) Reduction/(increase) in stock (156) Increase in debtors (29) (1,057) (738) Increase in creditors Net cash inflow from operating activities Reconciliation of net cash flow to movement in net funds Unaudited Unaudited Audited six months to six months to twelve months to 31 March 31 March 30 September Increase in cash for the period ,038 Currency movements 4 (35) Change in net funds for the period ,003 Opening net funds 4,826 3,823 3,823 Closing net funds 4,991 4,717 4,826 6 Copies of the interim statement Copies of the interim statement will be sent to shareholders. Further copies will be available from the company s registered office at 14 Minns Business Park, West Way, Oxford OX2 0JB. 10 OMG Plc Interim Report 2004

13 INDEPENDENT REVIEW REPORT TO OMG Plc Introduction We have been instructed by the company to review the financial information which comprises the group profit and loss account, the statement of group total recognised gains and losses, the group balance sheet, the group cash flow statement and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of OMG Plc management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 March PricewaterhouseCoopers LLP Chartered Accountants West London 22 June OMG Plc Interim Report 2004

14 COMPANY INFORMATION Company registration number: Registered office: Directors: Secretary: Bankers: Solicitors: Broker: Registrars: Auditors: Nominated adviser: 14 Minns Business Park West Way Oxford OX2 0JB Anthony Simonds-Gooding (Non-executive Chairman) Julian Morris (Chief Executive) Peter Wharton (Finance Director) Peter Meddings (Executive Director) Catherine Robertson (Executive Director) Christopher Steele (Executive Director) Catherine Robertson National Westminster Bank plc 121 High Street Oxford OX1 4DD Taylor Wessing Carmelite 50 Victoria Embankment London EC4Y 0DX Evolution Beeson Gregory 100 Wood Street London EC2V 7AN Capita IRG Plc Balfour House 390/398 High Road Ilford Essex IG1 1NQ PricewaterhouseCoopers LLP West London Office Harman House 1 George Street Uxbridge UB8 1QQ Smith & Williamson Corporate Finance Limited No.1 Riding House Street London W1A 3AS 12 OMG Plc Interim Report 2004

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16 Images courtesy of NASA Anthropometry and Biomechanics Facility