If you want a ‘smart’ investment for 2025 then look no further than Oxford Metrics (LON:OMG).
This week the £76m-capitalised group announced its final results for the year to end-September, they were not impressive in performance but digging deeper into what the group has and does, together with its balance sheet, gives the shares some strong appeal for ‘tech’ investors.
The Business
Set up over 40 years ago, this group has achieved a track record of creating value by incubating, growing and augmenting through acquisition, unique technology revenue streams.
Today it has over 10,000 active customers in 70+ countries using its smart sensors and software, including some of the biggest names in aerospace, automotive, education, electronics, entertainment, healthcare, pharmaceutical, research and sports.
Lifesciences - Guys & St Thomas Hospital, Imperial College London, Harvard University, Shriner’s Hospital for Children and Australian Institute of Sport, are amongst the host of customers using Vicon systems to provide deep insights into movement for sports, healthcare and research.
Engineering - Boeing, Airbus, Ford, BMW, UPENN and NASA are just some of the customers driving Vicon systems at the forefront of ground-breaking applications in ergonomics, engineering, UAVs and research.
Entertainment - Industrial Light & Magic, Epic Games, EA Sports, Framestore, DNEG and Dimension are customers using Vicon to help create mind-blowing visual effects, In-Camera Visual Effects for virtual production and realistic characters in triple-A video games.
Virtual Reality - Dreamscape Immersive, Immersive Gamebox, Sandbox VR and Europa Park are just some of the customers using Vicon to help create immersive Virtual Reality experiences for Location-based Entertainment.
Smart manufacturing - BD, DePuy, Jaguar Land Rover, Johnson & Johnson, and Alkegen are just some of the customers who use the group’s smart manufacturing products for high precision, automated quality control to ensure “right first time” products. Through its partnerships with blue-chip manufacturers, the group is able to offer customers an extensive range of metrology solutions to help solve manufacturing challenges.
Latest Results
The year to end-September showed group revenues down from £44.2m to £41.5m, while adjusted pre-tax profits were halved at £3.7m (£7.5m), and earnings fell to 2.9p (4.5p) per share.
Management confidence and the strong balance sheet underpin a progressive dividend approach, with a final dividend proposed of 3.25p per share, up from 2.75p in FY23, an increase of 18% and a yield of 5.6%.
At the end of September there was a net cash balance of £50.7m (£64.8m), reflecting acquisition and investment costs.
Management Comment
CEO Imogen O’Connor stated that:
Against an exceptionally strong prior year comparator where our teams delivered more camera systems than ever before, the trend of extended buying really developed in September – historically our busiest month - impacting the overall result today.
While conversion rates in the final month of the year were below historical levels, our Entertainment segment was affected most, reflecting the slowdown in the global games industry and subsequent content creation contraction.
Geographically, UK and Europe tracked ahead with North America and APAC behind FY23.
Our teams have been working hard as we look to commercialise markerless – the future of our industry with Vicon setting the gold standard.
Commercial delivery is in final stages and set to contribute modest revenue including annual recurring revenue in FY25.
Positioning the business for future success we have also extended our capabilities into a new growth area this year, establishing a presence in smart manufacturing.
Having secured Industrial Vision Systems our first acquisition, we were delighted to welcome measurement specialists, Sempre into Oxford Metrics, post period end.
With a strong balance sheet, we’re well placed to capture more of this growth market as inspection automation becomes mainstream and smart manufacturing becomes the standard.
FY25 trading has started in line with management expectations with a continuation of the normalised buying behaviour and trading patterns seen in the latter part of FY24.
With a continued focus on cost, efficiency and reallocating resources to high-impact areas, we are positioning the business for success in 2025 and beyond.”
The Equity
There are 129.72m shares in issue.
The larger holders include Aviva Investors Global Services (10.08%), Charles Stanley Investment Management (9.99%), Schroder Investment Management (8.64%), Canaccord Genuity Wealth (7.98%), Herald Investment Management (6.19%), Chelverton Asset Management (3.45%), Investec Wealth & Investment (3.17%), JO Hambro Capital Management (3.06%), Harwood Capital (2.59%) and Jarvis Investment Management (2.43%).
Analyst Views
Upon these figures and accompanying statement analysts at Deutsche Bank cut their Oxford Metrics price target to 95p (110p) but still rate the group’s shares as a 'Buy'.
Over at Progressive Equity Research analyst Ian Robertson considered that the last trading year show a period of strategic and operational progress, but also one of unsettled trading, while the underlying market story for motion capture remains intact.
The analyst expects to see the launch of OM’s exciting markerless product in FY25.
“Furthermore, supported by its strong balance sheet, OM is positioned to build upon its IVS and Sempre acquisitions with further deals in smart manufacturing.
We question whether this potential and underlying growth is reflected in the market valuation.”
For the year now underway he estimates £47.0m revenues, with £3.8m profits, and 2.6p of earnings per share.
For the year to end-September 2026 he estimates £49.7m revenues, £4.5m profits and 3.2p of earnings.
In My View
The smart sensing and software company, servicing life sciences, entertainment, engineering and smart manufacturing markets, is a quite fascinating little group, with over 60% of its current value represented by cash at bank.
Did you notice how quickly the group has prepared and reported its annual results – an example to other tardy quoted brethren.
Its shares, which were up to 118p during this summer, are now trading at around the 60p, at which level they could well prove to be too cheap to ignore.
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