OMG! Oxford Metrics beats expectations

Technology group Oxford Metrics (LSE: OMG), has released a positive trading update this morning saying it expected full-year revenues to be ahead of expectations.

The Group said it had enjoyed a successful close to the financial year and expected revenues to exceed £29m (+12.4% Yoy), ahead of market expectations, and that adj PBT would be in line with expectations.

Its cash balance for the year was £8.2m, down from £11.7m FY15, after the payment of special and final dividends totalling £5.3m during FY16.

The company's Vicon and Yotta divisions performed well, receiving a boost from weak GBP, but the company discontinued its OMG Life division and wrote off £1.5m of capitalised R&D as an exceptional cost:

"Our Vicon business, with its recently refreshed products, has performed very well this year in all geographies. Furthermore, Vicon has also benefitted from the recent increase in the strength of the US dollar vs. GBP, with an average of 50% of Vicon revenues generated by Vicon's US operation.

Yotta has continued to benefit from a strengthened recurring software revenue stream in the UK and in international markets."

The board decided to discontinue OMG Life so it could focus resources on Vicon and Yotta. 

N+1 Singer analyst Oliver Knott said today's trading update showed strong performance from two divisions leading to revenue and cash ahead of expectations:

"The core Vicon and Yotta businesses continue to trade strongly, resulting in revenue and cash ahead of expectations. Including OMG Life, the group is expecting to report adjusted PBT in-line with our forecasts."

Whilst its core divisions performed well, Singers said it was disappointed that the upside potential from OMG Life will not be realised:

"Following extensive analysis during the year, the Board has decided to discontinue OMG Life in order to focus the group’s resources on the core businesses...

Whilst we are disappointed... we believe this is a sensible decision. We had not forecast any contribution from Life in FY’17 or FY’18, so the decision will have minimal impact on our forecasts.

The shares are trading on just 13.6x Sep’17 PER and 6.2x Sep’17 EV/EBITDA. With Vicon and Yotta performing well, Life losses eliminated and significant cash on the balance sheet, we believe the shares remain highly attractive."

At the Group's Interims in May, it stated it would spin out certain Intellectual Property, relating to Machine Learning-based imagery classification, which has now completed, resulting in a 25% stake in the new entity, Pimloc.