Half-year Results

Vicon secures seven markerless cornerstone customers to redefine future of motion capture

Industrial Vision Systems, performing well, opening up smart manufacturing opportunities

>90% full year revenue visibility, a growing pipeline and resources for targeted M&A

Oxford Metrics plc (LSE: OMG), the smart sensing and software company, servicing life sciences, entertainment and engineering markets, announces unaudited interim results for the six months ended 31 March 2024.

Commenting on the results Imogen Moorhouse, Chief Executive, said: "Now over halfway into delivering our five-year plan, our teams are in full execution mode. I'm pleased to announce that we are making clear progress both operationally and financially towards our goals, as we report on track first half revenues, demonstrating strong Vicon execution.

Our recent acquisition of Industrial Vision Systems has been a successful move, it's performing well and we are excited about the opportunity to drive yet more applications into the smart manufacturing space. We have the financial resources to do so and are working on a number of interesting M&A opportunities to build out our presence in this growing vertical.

As Vicon works towards commercialising markerless, which enables 3D motion capture without the need to wear motion capture suits or markers, we are working with seven cornerstone customers to make the product the gold standard.

Looking ahead, Oxford Metrics enters the second half with >90% visibility of full year revenues and with a growing pipeline, the Board believes the Group is well placed to deliver results in line with current market expectations."

* Profit/(loss) Before Tax from continuing operations before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition and exceptional costs

** FY23 comparative restated at $1.25/£ exchange rate

Financial Highlights

Chief Executive's Statement

Now in year three and just over halfway into delivering our five-year plan, the team is in full execution mode, and we are making clear progress towards our goals. Today, we report an on track first half revenue performance, driven by strong Vicon execution.

During the half, we welcomed Industrial Vision Systems into the Group. An earnings enhancing acquisition taking us into a new market - smart manufacturing. We are excited about the opportunities this move brings to extend into yet more applications.

Our team at Vicon has been making good progress commercialising markerless. Markerless will be a key part of the future of our industry, enabling 3D motion capture without the need to wear motion capture suits or markers, using the latest machine learning and AI techniques to process video imagery to create 3D visualisations. As part of our Pioneer Programme to further develop and test the markerless technology, Vicon has now partnered with seven cornerstone customers to get the delivery and commercialisation right and set the gold standard.

In March, after 15 years as our CFO, David Deacon announced his desire to move away from a full-time executive role with these Interims being his last. I would like to take the opportunity to thank David for his years of service. David will remain with the business for a period of time to ensure a smooth handover to our CFO designate, Zoe Fox, who will be appointed as the Group's CFO from 1 July 2024.

As expected, the Vicon business has returned to pre-pandemic trading patterns. Our order book has returned to more normal levels as customer demand and buying behaviours have normalised post the pandemic disruption and the well-documented global supply chain challenges throughout that time. This continues the trend we saw in the second half of FY23 which saw us close the year with orders-in-hand of £11.3m.

As our teams focus their attention and innovation efforts on commercialising markerless - where we see clear growth opportunities - we have taken a strategic decision to discontinue IMeasureU (IMU), our New Zealand operation and are actively engaged in discussions to sell the IP.

On target first half trading

The Group reports revenues of £23.5m (H1 FY23: £21.3m), up 10.5% at a headline level. The Group also reports an Adjusted PBT* of £4.0m (H1 FY23: £4.5m), which largely reflects the net effect of increased revenues less planned investment in the five-year plan to develop markerless technology, additional Vicon Sales & Marketing investment, increased property related costs and some inflationary related increases.

Vicon successfully stepped-up volume again, delivering most of the opening order book whilst at the same time booking new orders in the first half of £14.0m. The current Vicon orderbook stands at £2.0m and we expect this to be delivered in the second half.

Our acquisition of IVS was completed and is performing well, reporting revenues of £1.8m and an Adjusted profit of £0.5m in the first half; further, the business has an orderbook of £1.0m and a healthy sales pipeline.

Vertical market segments performance was as follows:

Engineering

Engineering reported revenues of £4.9m (H1 FY23: £3.1m) representing growth of 56.6%.

Common applications for Vicon solutions in the Engineering market include Unmanned Aerial Vehicle (UAV) and robot tracking, robotics development and evaluating product designs in manufacturing, ergonomics and research. Contracts were secured from automotive, aerospace and metrology sectors. Of note is the work being carried out at Satellite Applications Catapult. Catapult added cameras to their existing Vicon system which they use to help them track robots and simulate orbital environments to prepare for servicing, refuelling and assembly operations in space.

Life Sciences

Life Sciences reported revenues of £8.1m (H1 FY23: £5.8m) representing growth of 38.3%. Valkyrie successfully achieved the UK Conformity Assessment (UKCA) medical device mark accreditation, a new and more stringent classification on patient safety and device performance, part of the UK Medical Device Regulations (MDR). This accreditation enabled Valkyrie systems to be delivered to hospitals around the world including:

Our new customer, University of Sydney, invested in a Valkyrie solution for research into head injuries with Rugby League and Rugby Union players with the aim of studying safer tackling techniques that could reduce the risk of concussions in sport.

Entertainment

Entertainment reported revenues of £8.5m (H1 FY23 £11.0m) representing a decline of 22.8%. This follows a very strong FY23 performance in APAC that is now seeing delayed effects from the global games industry contraction.

Through our customer and partner, Lux Machina, Valkyrie solutions were delivered to London College of Fashion and MyWorld, a new global centre of creative technology. Most recently, Paper Games in China added an additional large Valkyrie system to their existing Valkyrie solution to add realism to their female-focused games and their VTuber, Nikki, who live streams weekly.

Location-based Entertainment (LBE)

LBE reported revenues of £0.4m (H1 FY23: £1.4m) representing a decline of 73.7% due to delayed partner rollouts that we expect to deliver throughout the rest of FY24.

Our partner, Sandbox VR, is now operating in 46 locations in multiple countries and continues to expand. Sandbox VR recently announced it is partnering with Apparel Group and plans on opening 25 new locations across the UAE, Kingdom of Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman by 2028. Elsewhere, our partner Immersive Gamebox is trialling experiences across Merlin Entertainment sites, following its multi-million pound and multi-territory agreement.

Smart manufacturing

Encouragingly, multiple new contracts have been secured in the first half as demand continues for automated inspection and quality control. The medical sector saw the largest growth in the first half, including:

Overall, Vicon reported a gross margin at 68.7% (H1 FY23: 69.1%) in the first half as anticipated and 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. As the residual supply chain costs begin to normalise, together with other initiatives, we expect gross margin to show improvement in the second half.

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 £4.3m (H1 FY23: £5.3m) and an unadjusted profit before tax of £1.9m (H1 FY23: £3.4m) and IVS reported an Adjusted Profit of £0.5m.

Returning to the Balance Sheet, the cash position, having paid a final dividend of £3.6m and deployed £6.2m on the acquisition of IVS in the first half, finished at £54.8m as at 31 March 2024 (H1 FY23: £63.6m). Cash generated by operations during the first half was £2.2m compared with £0.4m in the first half of last year.

Vicon inventory at £9.0m (H1 FY23: £6.4m) is higher than typical due to a planned increase which is largely for operational reasons and is expected to be reduced to around £7.0m by the end of the financial year.

Sense. Analyse. Apply - Five-year plan progress

During the half, we continued to make good progress against our five-year plan, which aims to increase FY21 revenues 2.5x and deliver an adjusted profit before tax margin of 15% by the end of FY26. The plan is all about extending our sensing capabilities, enhancing analysis modes and embedding our IP in other areas. This is being achieved through a measured approach with both organic and inorganic investment.

At our recent Capital Markets Day in April 2024 the progress made through our investment efforts were on display. Now past the halfway point of the five-year plan, we have made clear progress, including:

Having started the five-year plan in 2021 with continuing revenues of £27.5m, all from our motion capture business Vicon, we are aiming for £70m revenues by the end of FY26.

Five-year plan investment

Markerless - now a reality

Since unveiling our markerless technology at Siggraph 2023, Vicon has partnered with seven cornerstone customers as part of their Pioneer Program to further develop and test the markerless technology. These cornerstone partners include some of the leading brands in game and film industries and have been carefully selected for their groundbreaking innovations in animation and virtual production. Feedback so far has been encouraging as our teams and partners work hard to commercialise the offering, optimising the future of motion capture and setting the gold standard.

M&A

We continue to actively pursue M&A that aligns with our strict criteria. We are primarily targeting between £3-9m in revenues in smart manufacturing, as we aim to build out from the IVS acquisition. We are actively working on a number of opportunities within the smart manufacturing space that deliver this goal and have discovered a broad and diverse range of opportunities.

Quadrants of growth

Outlook

We enter the second half with a growing sales pipeline well ahead of this time last year and >90% visibility of full year revenues.

We continue to deploy internal and external resources into M&A to deliver on the inorganic component of the five-year strategic plan. Whilst we recognise the Group has considerable cash resources, the Board remain resolute that every acquisition we make will be the right one, for the right reasons and at the right price.

Given the first half performance and visibility of the second half, the Board believe Oxford Metrics are well placed to deliver a performance for the full year in line with current market expectations.

* Profit/(loss) Before Tax from continuing operations before Group recharges adjusted for share-based payments, amortisation of intangibles arising on acquisition and exceptional costs.

CONDENSED CONSOLIDATED INCOME STATEMENT

Other comprehensive income

Items that will or may be reclassified to profit or loss

Capital and reserves attributable to the owners of the parent

The accompanying notes are an integral part of this interim financial information.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM STATEMENTS

Basis of preparation

Oxford Metrics Plc, (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 31 March 2024 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed consolidated interim financial statements have been prepared using accounting policies consistent with those of the annual financial statements for the year ended 30 September 2023. They are in accordance with IAS 34. Other new and amended standards and interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.

The interim financial statements have not been audited or reviewed and the financial information contained in this report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the year ended 30 September 2023 are not the statutory accounts but have been extracted from the Group's 2023 financial statements which have been delivered to the Registrar of Companies. The auditors' report on those financial statements was unqualified did not contain references to any matters to which the auditors drew attention without qualifying the report and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

• Revenue from contracts with customers All revenue shown within note 2 relates to continuing operations.

Segmental Analysis

Segment information is presented in the condensed consolidated interim financial statements in respect of the Group's business segments, which are reported to the Chief Operating Decision Maker (CODM). The Group has identified the Board of Directors of Oxford Metrics plc, ("the Board") as the CODM. The business segment reporting reflects the Group's management and internal reporting structure.

The Group comprises the following business segments:

Vicon Group: This is the development, production and sale of computer software and equipment for the entertainment, engineering and life science markets; and

Industrial Vision Systems: This is the development, production and sale of smart manufacturing systems.

Other unallocated costs represent head office expenses not recharged to subsidiary companies.

Business segments are analysed below:

Segment depreciation and amortisation

The adjusted profit before tax for the Vicon business segments is shown in detail below;

Vicon Group

Taxation

The Group's consolidated effective tax rate for the six months ended 31 March 2024 was 29.5% (for the six months ended 31 March 2023: 16.3%; for the year ended 30 September 2023: 9.5%.

In accordance with IAS 34 the tax charge for the half year is calculated on the basis of the estimated full year tax rate.

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.

During the six months ended 31 March 2024 there were 12,000 shares issued relating to share options that were exercised. There were 444,000 shares issued in respect of share options exercised during the six months ended 31 March 2023 (year ended 30 September 2023: 625,000).

In addition, during the six months ended 31 March 2024 there were 1,007,000 shares issued as consideration for the acquisition of Industrial Vision Systems Limited.

There were no shares (six months ended 31 March 2023: 27,624 shares) issued to the non-executive Chairman, Roger Parry, in satisfaction of salary.

Dividends

The following dividends were recognised as distributions to equity holders in the period:

The final dividend for 2023 was paid to shareholders on 14 February 2024 at 2.75 pence per share, a total of £3,615,000.

Business combinations

The Group acquired 100% of the share capital of Industrial Vision Systems Limited on 31 October 2023 for a total provisional consideration of £8.1m, 10% of which has been funded though the issue of share capital with the balance coming from existing cash resources.

A provisional valuation of the assets acquired and resulting goodwill has been performed and included within these results. Further detail will be provided in the full Annual Report for the year ending 30 September 2024.

Copies of the interim statement

Copies of the interim statement will be available from the Company's registered office at 6 Oxford Pioneer Park, Yarnton, Oxfordshire OX5 1QU, and from the Company's website: www.oxfordmetrics.com.