Oxford Metrics plc (OMG) Earnings Call Transcript & Summary

Good morning, and thank you for joining us for Oxford Metrics FY '26 Interim Results. Before Zoe takes you through the financials, a reminder that as announced on the 16th of December 2025, we have moved our year-end from September to December. FY '26 is, therefore, an extended 15-month period running to the 31st of December 2026. Today covers the first 6 months of that year, reported against the equivalent 6 months last year, and we will publish further unaudited interims for the 12 months to the 30th of September 2026 in December 2026. So with that, let me hand over to Zoe for the financial results, and I'll pick up the strategic highlights and outlook later on.

What you're looking at today is the first 6 months of our extended 15 months period to the end of March '26, and we're comparing it against the equivalent 6 months last year. So, the headlines, the first 6 months have been a period of progress, execution and optimisation. Revenue and profitability improving year-on-year, strong shareholder returns maintained and meaningful steps taken to sharpen the operational base of the business with annualized savings executed of approximately GBP 800,000 from rightsizing office space, and there's more to come on costs down. Order intake was GBP 18 million, down 21% on prior period, reflecting the timing of certain Vision Metrology customer projects, which we now expect late in financial year '26. Revenue improved to GBP 20.7 million, a 3% increase on prior-year period, a solid step forward, particularly given those timing headwinds in Vision Metrology. Gross margin was 66%, up 0.5% on prior year, reflecting the continued margin quality of the businesses. Adjusted EBIT improved by 50% to negative GBP 0.2 million, benefiting from that overhead optimization, offsetting inflationary increases, improved revenue and a small tickup in margins. Adjusted earnings per share also improved, turning positive at 0.38p, reflecting the improvement in profit after tax and the impact of the share buyback. On the balance sheet, we remain in a strong position with cash and fixed-term deposits of GBP 31.7 million, and that is after returning GBP 5 million to shareholders in the period through buybacks and dividends. So that is how the year has started. Revenue growing, margins holding, profitability improving and the balance sheet we're putting to work. So a good balance for the rest of the year or a good basis for the rest of the year and the continued execution of our strategic plans. Looking at the revenue trends in more detail. Starting on the left, order intake, you can see the step down this period. In Motion Capture, intake was broadly in line with the prior period. That business is performing well. The softness sits in Vision Metrology, and it reflects the timing of certain customer projects delayed until later in the year due to macroeconomic events. These are deferrals, not losses. It's just moved later in the year. The opening order book in the next graph shows the order book we had at the start of the period slightly improved year-on-year. On revenue, the third chart, you can see the 3% increase. Motion Capture up 10% and the quality of that revenue is factored in that gross margin holding at that 66% for the group, about 0.5% ahead of last year. Revenues are up despite the headwinds of the delayed projects from Vision Metrology. And on the right, adjusted earnings before interest and tax, the improvement comes from that higher revenue cost base that is increasingly aligned to it. That alignment is something we're working hard at, and it's beginning to show in our numbers. This is a slide that explains the cash movement. I'll take you from left to right. We started the period with GBP 37.3 million in cash and fixed term deposits. EBITDA contributed a positive GBP 1.2 million. From there, we've invested GBP 1.5 million in capital additions. A large proportion of that is on our product developments of GBP 1.4 million, continuing our investment in our technology road map. Lease payments were GBP 700,000. Working capital was a modest outflow of GBP 200,000. The operational cash generation was lighter than prior period. And that's largely because last year benefited from a large working capital unwind following our inventory management improvements. We continue to push out best practices across the group and look to improve working capital towards the end of this financial year. Net interest added GBP 600,000 from cash deposits and then GBP 5 million of shareholder returns. That's the dividend and the buyback combined, which brings us to a closing cash of GBP 31.7 million. So whilst the cash movement looks high, it's not the function of an underlying business consuming cash. It is reflecting the deliberate shareholder returns of GBP 5 million during the period whilst continuing to invest in our products. So looking at the 2 divisions in more detail. Motion Capture is a growth story for the period. Revenue grew 10% to GBP 16.3 million, up from GBP 14.8 million. We saw good growth in both Entertainment and Engineering, and we secured some significant international contract wins. Adjusted EBIT in the division improved to GBP 600,000 from breakeven, and we've continued to take out costs, growing top line and tightening cost base at the same time. Vision Metrology is a story of timing. Revenue was GBP 4.4 million, down from GBP 5.3 million, reflecting those customer projects I mentioned earlier that are now expected to be delivered, confirmed later in FY '26. Strategically, though, this is where we've done important work. We've unified Sempre and IVS into a single, Industrial Vision and Metrology Systems, IVMS, creating a more integrated platform for growth and letting the division draw on group shared service and expertise. You can see the mix on the right, Motion Capture now represents 79% of the group revenue with Vision Metrology at 21% and the revenues by geography chart shows the international spread underneath that. So if I leave you with four things from the finance section for our first 6 months of trading in this 15-month year. First, revenue and profit growth, 3% revenue growth across the group and a 50% improvement in adjusted EBIT. The direction of travel is the right one. Second, continued shareholder returns, GBP 1.3 million of shares repurchases and GBP 3.7 million of dividends paid in the period. We continued in returning capital. Third, efficiency and cost control. The integration of IVS and Sempre into IVMS gives us a stronger, leaner platform and actions like the earlier lease exit keeps us on the path back towards our historic margins, which further annualized cost savings of between GBP 1 million and GBP 1.6 million has been identified for delivery 2027 and beyond. And fourth, we are well positioned looking ahead, a robust balance sheet underpinned by GBP 31.7 million of cash gives us the agility to support both organic growth and selective bolt-on M&A. With that, I'll hand back to Imogen to take you through the strategic highlights and our outlook. Thank you.

Thank you, Zoe. So let's review the strategic progress made in the first 6 months of FY '26, starting with Motion Capture. We've seen pleasing commercial traction with significant global contract wins secured across all main verticals. We have a program of new product releases and updates underway designed to broaden our use cases and improve conversion throughout the rest of the year. Turning to Vision Metrology. Here, the focus has been integration for growth. We've combined Sempre and IVS to create IVMS with a strengthened management team behind it. We've also sharpened our positioning with the division name changing to Vision Metrology, which better reflects the core of what this business does. And at the group level, 2 things. First, restructuring, our 2026 cost optimization program is continuing, including office footprint reduction. And secondly, our strategic refinement, where we're finalizing our medium-term ambitions, including capital allocation. Together, these priorities reflect our focus on growth, efficiency and value, and they set the stage for the outlook and our ambitions. So on to our FY '26 outlook. Our trading expectations for the full year to December 2026 are unchanged. Both businesses are well positioned. Motion Capture has a supportive opportunity pipeline and new product releases planned for the rest of the year. And Vision Metrology has good visibility from its forward opportunity pipeline. We are also running a structural optimization program set to deliver GBP 1 million to GBP 1.6 million of benefit in 2027 with further targeted savings planned for the medium term. And we have a strong balance sheet behind it, supporting product and commercial investment alongside our selective M&A. Finally, at our investor event today, we'll set out our refined strategy in more detail. Our financial medium-term ambitions are: to double group revenue based on both organic and inorganic activities, to increase recurring revenue to around 25% of the total, to grow adjusted EBIT margin into the mid-teens, and to introduce a dividend policy linked to free cash flow. So please do join us this afternoon for the live webcast. The link and details can be found in the RNS. Thank you.