Oxford Metrics – rising order volumes but supply chain woes

Oxford Metrics (OMG) now confines its ‘smart sensing’ software activities to the life sciences, entertainment, and engineering markets, having completed a post period-end deal to offload its infrastructure asset management division to Causeway Technologies for £52mn (£44.3m profit net of costs). The deal bolsters the company’s war chest and management said there were viable merger and acquisitions (M&A) options on the horizon. This strategic in nature as there was limited crossover between the division, which focuses on improving the management of physical assets such as roadways, and the activities of the remaining areas of the business.

Comparatives with the corresponding half-year period in 2021 aren’t altogether meaningful given the impact of the pandemic, but the group carried an “unprecedented level of orders-in-hand” going into the second half of FY 2022. Over half of the orders are linked to the entertainment segment which continues to see “buoyant growth in virtual production and animation”.

The various business strands offering movement tracking and analysis systems trade under the Vicon label. Clients include Industrial Light & Magic, MIT and NASA. Before group costs, it posted an adjusted pre-tax profit of £1.8mn, down from £2.2mn on the 2021 half year, partly due to increased operating costs. Management makes no secret of the fact that trading has been negatively influenced by supply chain issues, and while they have dissipated to an extent it remains an issue in terms of financial performance.

The swollen cash pile provides optionality on the M&A front, but it would be no surprise if Oxford Metrics itself eventually drew the attention of bidders given its unique intellectual property assets. The shares certainly change hands on a ‘tech’ multiple, but Numis estimates that reported profit will rise by 53 per cent between FY 2022-24, reducing the EV/Ebitda ratio to a healthy 12.2 in the process. Buy.

Last IC View: Buy, 128p, 2 Dec 2021