Interim Results for the 6 months ended 31 March 20

21st May 2020

Oxford Metrics plc

 

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

Interim Results for the six months ended 31 March 2020

 

Oxford Metrics plc (LSE: OMG), the international software company servicing government, life sciences, entertainment and engineering markets, announces interim results for the six months ended 31 March 2020.

 

	H1 FY20	H1 FY19
Revenue	£15.0m	£16.1m
Annualised Recurring Revenue	£6.8m	£5.9m
Adjusted Profit before Tax*	£0.3m	£1.7m
Statutory Profit/(Loss) before Tax	(£0.1m)	£1.2m
Net Cash	£10.8m	£10.9m
Cash as at 20 May 2020	£14.2m	-

* 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:

"The Group had a strong start to FY20, recording our second highest ever first half revenue performance. COVID-19 forced lockdowns in March caused a delay in shipment of Vicon orders during the final two weeks of the period which meant we carried orders into the second half. Post period end, these have now been largely shipped to customers.

This first half performance owes much to the hard work of our people whom I would like to thank for adapting brilliantly to this new working environment and for their ongoing efforts to service our global customer base. 

 

The strategic progress we have been seeking to maintain around growing our recurring revenue base and developing our credentials in Yotta as a true SaaS business has continued.

Our business, like any other, is not immune to the effects of COVID-19 and we continue to monitor the evolving situation closely. The Group's fundamentals remain strong and our robust balance sheet will help Oxford Metrics to navigate the current challenges, whilst continuing to drive innovation."

Financial Highlights

●	Strong performance until last two weeks of March as a result of the government imposed restrictions and shutdowns in response to COVID-19
●	Headline Group revenue of £15.0m, down 6.5% (H1 FY19: £16.1m), as unable to fulfil £1.1m of Vicon orders during last two weeks of the first half due to global operational shutdowns. These orders have now been largely shipped to customers and will be recognised in the second half of the year. This delay in shipments had a £0.9m impact on profitability
●	The Group reported an adjusted profit before tax £0.3m (H1 FY19: £1.7m)
●	Adjusted earnings per share 0.17p (H1 FY19: 1.18p)
●	Cash generated from operations (before paying interest and tax) £1.0m (H1 FY19: £3.3m)
●	Strong balance sheet with no debt and cash of £10.8m as at 31 March 2020 (H1 FY19: £10.9m) after the payment of a final dividend. Cash position at 20th May £14.2m
●	Growth initiatives at Yotta yielding results: o  Improved visibility with Annualised Recurring Revenue ('ARR') up 14.6% year-on-year o  95.8% (FY19: 93.2%) retention of growing SaaS customer base

 

Operational Highlights

 

Strategy for Vicon: strengthen and protect profitable market leader

 

●	Notable wins with game companies Konami in Japan together with Tencent and miHoYo in China
●	Continued innovation to enhance Capture.U app for iPhone/iPad, allowing physiotherapists and sports scientists to analyse motion on the go and see human skeletal movement and inertial measurements overlaid onto live video in real-time
●	IMU Step, the SaaS solution for our Elite Sports offering, continues to gain traction with new wins in the NBA, NFL, MLB, NRL and AFL as well as with a number of collegiate athletic and health science programmes including University of Kentucky, University of Montana and Harvard Medical School

 

 

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

 

●	Strong sales performance for our Connected Asset Management Software-as-a-Service (SaaS), Alloy
●	New wins across the UK, including: Warwickshire, South Gloucestershire, City of York, Somerset, Worcestershire and at waste services contractor, Ubico
●	Notable international activity in Australasia with Alloy roll-outs at Auckland System Management and a new win in Australia at City of Parramatta
●	New flagship partnerships secured: o  Panasonic to run Alloy on their in-cab devices in waste collection vehicles o  Telensa, the UK's largest provider of smart IoT streetlights, to provide a seamless lighting solution and control groups of streetlights o  bbits as part of their "Love Clean Streets" initiative

 

Outlook and Guidance

 

●	We are currently not experiencing any supply chain issues but will continue to take prudent actions as needed
●	The Group is mindful of the current unprecedented macro-economic environment therefore has elected for the time being to withdraw market guidance for the full year
●	Clear guidance will be reinstated at such time as when visibility improves
●	Our strong fundamentals provide confidence that the Group can navigate the current challenges

 

 

For further information please contact:

 

Oxford Metrics	+44 (0) 1865 261860
Nick Bolton, CEO
David Deacon, CFO
FTI Consulting	+44 (0) 20 3727 1021
Matt Dixon / Emma Hall / Jamille Smith / Greg Hynes
N+1 Singer (NOMAD and Broker)	+44 (0) 20 7496 3000
Shaun Dobson / George Tzimas (Corporate Finance) Tom Salvesen (Corporate Broking)

 

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 to central and local government agencies and other infrastructure owners. Yotta has a large number of high profile clients including Highways England and Amey in the UK and VicRoads in Australia amongst others.

Founded in 1984 our Group is headquartered in Oxford with offices in Leamington Spa, Gloucester, Los Angeles, Denver, 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

 

 

Chief Executive's Statement

COVID-19 Response

The Group had a strong start to 2019/20, recording our second highest ever first half revenue performance. When COVID-19 struck, we rapidly introduced measures to protect and ensure the safety of our people. As a global business, we have the infrastructure in place for our teams to stay closely connected and operate seamlessly from wherever they are. Almost all staff have been working remotely since lockdown commenced and no one has been furloughed. The team has adapted brilliantly to this new working environment and I thank them for their flexibility and dedication.

March is always a particularly busy month and for the last two weeks of the month we were unable to complete the shipment of customer systems within our Vicon business, because of the lockdowns in place in the UK and US. This led to us carrying over £1.1m orders into the second half, which have now been largely shipped to customers and will be recognised in the second half.

Following a closure of four weeks, a small number of Vicon production staff have now returned to company offices to ensure systems can be manufactured and delivered to customers. This required adapting working practices to protect employees, including moving to a two-shift work pattern, introducing a one-way system around the building and increasing the spacing between workstations. This team deserves a special thanks as their commitment and ingenuity has enabled us to continue to make and ship systems to our customers around the world.

Across the business, our teams have been working hard to ensure customers have what they need to continue to access our solutions and services. This has included, where our customers are running essential public or health services, extending additional software licenses free of charge to support their expanded work teams.

Looking to the future, although none of us can be certain of the challenges the aftermath of this pandemic will bring, the business stands resilient and ready. We have an improved level of revenue visibility and a strong balance sheet with £14.2m in cash as at 20 May 2020 and the Group remains debt-free. We are diversified across multiple vertical markets with long-term positive growth drivers, and hold powerful competitive positions with multiple defensible barriers to entry. We offer products and services which are clearly differentiated from our competitors and most often distinguished by the strength of our technology. We operate in over 70 countries worldwide and have no significant exposure to those sectors most affected by lockdowns, such as the travel and hospitality industries.

The commitment of the whole team places the Group in a strong position to navigate the challenges likely to arise from the impact of COVID-19.

Trading Performance

KPI	Revenue		PBT		Adjusted PBT*
	H1 FY20	H1 FY19	H1 FY20	H1 FY19	H1 FY20	H1 FY19
Group	£15.0m	£16.1m	(£0.1m)	£1.2m	£0.3m	£1.7m

 

The Group reports a strong revenue performance, recording our second highest ever first half revenues. However, COVID-19 government imposed restrictions and lockdowns in March caused a delay in customer shipments at Vicon during the final two weeks of the first half, which led to carrying forward £1.1m of orders (H1 FY19: nil) into the second half of the year. These orders largely account for the decline compared to last year. Consequently, the Group reports total revenues of £15.0m (H1 FY19: £16.1m), down 6.5% on last year's record at a headline level and 7.0% on a constant currency basis.

The enforced delay to revenue recognition largely accounts for the decline in reported Adjusted PBT* to £0.3m (H1 FY19: £1.7m).

In line with our strategic plan to increase the visibility of revenues and profits, the Group increased Annual Recurring Revenues ('ARR') by 14.6% year-on-year to £6.8m (H1 FY19: £5.9m).

The cash position, having paid a final dividend of £2.3m in the first half, finished at £10.8m as at 31 March 2020 (H1 FY19: £10.9m). Cash generated from operations during the first half was £1.0m (H1 FY19: £3.3m); the decline accounted for by the aforementioned trading performance.

Asset Management Division - Yotta

KPI	Revenue		PBT		Adjusted PBT*
	H1 FY20	H1 FY19	H1 FY20	H1 FY19	H1 FY20	H1 FY19
Yotta	£3.7m	£3.5m	(£1.2m)	(£1.0m)	(£0.5m)	(£0.2m)

 

Yotta reported software revenues up 4.6% to £3.7m (H1 FY19: £3.5m). Annualised Recurring Revenues ('ARR') as at 31 March 2020 grew 14.6% year-on-year to £6.8m (H1 FY19: £5.9m). The retention rate also improved to 95.8% (H1 FY19: 93.2%). We can also report that additions in the first half of £0.8m are contracted over the next three to four years with a Total Contract Value over this period of £2.8m.The first half delivered a strong sales performance for our Connected Asset Management Software-as-a-Service (SaaS), Alloy. There were new wins across UK local government, including at Warwickshire, South Gloucestershire, Blackburn with Darwen, City of York, Somerset, Worcestershire and at waste services contractor, Ubico. There was also good customer activity in Australasia with roll-outs at Auckland System Management and a new win in Australia at City of Parramatta.

Yotta also announced new partnerships during the first half with three key providers in the marketplace: with Panasonic to run Alloy on their in-cab devices in waste collection vehicles; with bbits for their 'Love Clean Streets' product to provide an integrated platform for feedback between the council and citizen; and with Telensa, the UK's largest provider of smart IoT streetlights, Alloy enables a completely seamless lighting solution to control groups of streetlights and other wirelessly connected sensors. It was also a strong period for Yotta's professional services group with a five-year agreement with South Tyneside for Horizons and asset management consultancy, eight Alloy "go-lives" during the period and 12 migrations underway from Mayrise to Alloy.

Yotta's product line-up was also enhanced in the first half to ensure the product keeps pace with market demand and opportunity. For example, Street Manager functionality was delivered on time to enable 80+ customers to work with the Department for Transports new Street Manager initiative, and Custom Reports and a Task Assignment Tool were also added to Alloy.

The transition to a 100% SaaS Business model is complete so Yotta reported no perpetual licenses in the first half (H1 FY19: £0.2m). This factor together with increased R&D Amortisation led to an increase in Adjusted PBT loss of £0.5m (H1 FY19 £0.2m). The Group has worked hard to pivot and transition Yotta's business model, which is now providing the Group with higher than ever levels recurring revenue and enhanced visibility. Notwithstanding challenges that may arise from COVID-19, Yotta is well placed to deliver a profitable second half.

Motion measurement division - Vicon

KPI	Revenue		PBT		Adjusted PBT*
	H1 FY20	H1 FY19	H1 FY20	H1 FY19	H1 FY20	H1 FY19
Vicon	£11.3m	£12.5m	£0.9m	£2.2m	£2.0m	£3.3m

 

Vicon reported revenues of £11.3m (H1 FY19: £12.5m), representing a year-on-year reduction of 9.6% at a headline level (10.3% on a constant currency basis). Vicon carried over £1.1m of orders which could not be shipped during the last two weeks of the half due to enforced restrictions in response to COVID-19.

Vicon also reported a slight decline in gross margin at 73.8% (H1 FY19: 75.4%) in the first half which was revenue mix related. This together with an increase in investment of £0.2m in Elite Sports and an additional £0.1m of R&D Amortisation led to a Vicon reported Adjusted PBT* of £2.0m (H1 FY19: £3.3m) and an unadjusted profit before tax of £0.9m (H1 FY19: £2.2m).

The implementation of our "amplify the core" strategy at Vicon aims to strengthen and protect a profitable market leader, driving the business through two key growth vectors, Established Markets and Adjacent Verticals - both saw notable highlights during the first half.

Established Markets - strength in leadership

During the first half we enhanced our product lines in most of our vertical markets, including adding a Machine Learning-based finger-tracking solution in Shogun 1.3 for the entertainment market and hard synchronisation with our Blue Trident Inertial Measurement Units ('IMU') in Nexus 2.10 targeted at our Life Sciences customers. This helped drive strong sales of our Blue Trident devices, especially in North America.

We also updated the ground-breaking Capture.U app for iPhone/iPad which uses Vicon inertial sensors. By leveraging Apple's Augmented Reality Kit 3 in iOS 13, researchers can now 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 innovations combined with Vicon's existing clear market differentiators helped underpin the first half performance which included notable wins in the Asia Pacific region with game companies Konami in Japan and Tencent and miHoYo in China.

Adjacent Markets - developing new growth vectors

In addition to growing our Established Market business, we also seek further growth by applying our motion measurement technology to more nascent markets but with the opportunity for higher levels of growth. We are currently focussed on two specific opportunities: Location-based Virtual Reality ('LBVR') and Elite Sports.

LBVR revenues of £0.7m (H1 FY19: £0.4m) improved compared to the first half last year. As expected, compared to the second half of last year traction was slower as our partner organisations began to roll out their VR experiences worldwide and fine-tune their business models. We remain excited about the opportunity for growth in this segment but we do recognise it is likely that revenues will be adversely affected for a time following the COVID-19 pandemic with ongoing social distancing measures in place.

Our Elite sports offering, IMU Step made further progress in the first half. We added comprehensive Impact Load assessment, enabling coaches to examine the loading outcomes of specific activities, drills and training days, and their respective effects on an athlete's workload.

IMU Step continues to gain recognition and respect within the marketplace and as a result of increased investment in our sales channel of £0.2m compared to the same period last year, 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 University of Kentucky, University of Montana and Harvard Medical School.

Outlook

As we enter our traditionally stronger second half, we are mindful of the current unprecedented macro-economic environment and how this might affect our business. Our primary focus is on ensuring the well-being and safety of our employees and ensuring we can provide an uninterrupted service to all our customers.

At Vicon, the revenue risk relates to whether customers delay or otherwise defer system acquisitions or upgrades, especially in Vicon's European and North American markets. On a positive note, in Vicon's Asia-Pacific region, business activity appears to have restarted so timing here is currently more predictable.

At Yotta the business is relatively 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.

From a cost perspective, across the Group we will continue to take prudent actions as needed and it is worth noting we are not currently experiencing any supply chain issues.

As a consequence, the Group has elected for the time being to withdraw market guidance for the full year. It is the Group's intention that, at such time as visibility improves, clear guidance can be reinstated.

That said, COVID-19 does not change the robust fundamentals of the Group which remains a resilient business with exciting growth prospects. We have a strong balance sheet with £14.2m in net cash and remain debt-free. Our clear strategic "amplify the core" plan, reduces risk by staying close to the customers and technologies we know best and markets where we lead. In addition, in line with our strategy we will continue to seek earnings-accretive acquisitions to extend product range, grow market share and/or increase differentiation to augment this growth.

We have clearly differentiated products from our competitors and we address diversified markets across over 70 countries worldwide, thus limiting our exposure to any one market or geography. We have growing contracted recurring revenues, approaching a fifth of Group revenues. Given these strong fundamentals, the Board is confident the Group can navigate the current challenges and will indeed thrive in the future.

* 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

 

			Six months ended 31 March 2020	Six months ended  31 March 2019*	Year ended  30 September 2019*
			(unaudited)	(unaudited)	(audited)
		Note	£'000	£'000	£'000
	Revenue	2	15,016	16,055	35,350
	Cost of sales		(4,491)	(4,394)	(10,166)
	Gross profit		10,525	11,661	25,184
	Sales, support and marketing costs		(4,186)	(4,262)	(8,663)
	Research and development		(2,196)	(2,112)	(4,184)
	Administrative expenses		(4,258)	(4,161)	(7,875)
	Other operating income		58	104	202
	Operating (loss)/profit		(57)	1,230	4,664
	Finance income		13	12	66
	Finance expense		(49)	(43)	(2)
Share of post-tax loss of equity accounted associate			(18)	(33)	(59)
	(Loss)/profit before taxation		(111)	1,166	4,669
	Taxation		(94)	(257)	(504)
	(Loss)/profit from continuing operations		(205)	909	4,165
	(Loss)/profit from discontinued operations, net of tax		-	(4)	13
	(Loss)/profit for the period attributable to owners of the parent during the period		(205)	905	4,178
	Earnings per share for profit on continuing operations attributable to owners of the parent during the year
	Basic (loss)/earnings per share (pence)	6	(0.17p)	0.73p	3.33p
	Diluted (loss)/earnings per share (pence)	6	(0.17p)	0.71p	3.24p
	Earnings per share for profit on total operations attributable to owners of the parent during the year
	Basic (loss)/earnings per share (pence)	6	(0.17p)	0.73p	3.34p
	Diluted (loss)/earnings per share (pence)	6	(0.17p)	0.71p	3.25p