Oxford Metrics has ambitious growth targets

The release of Apple’s (US:APPL) new headset shows that the most valuable company in history believes augmented and virtual realty is here to stay. The fact 3D imaging is far from dead is good news for smart sensing software company Oxford Metrics (OMG), which makes its revenue by capturing 3D images for entertainment, engineering and life science purposes.

After some pandemic disruption, demand for the software is back. In the 12 months to March, the company has racked up a near-record order book of £22mn, up 68 per cent from the year before. This puts it in a good position to keep growing after revenue rose 70 per cent to £21.3mn.

A deal with a content studio in Tokyo helped push entertainment revenue up 178 per cent to £11mn. Meanwhile, life sciences was up 25.5 per cent to £5.8mn after deals were signed with Victoria University in Australia, and engineering sales rose 15.8 per cent to £3.1mn.  

To drive future growth, the company doubled R&D spend from £1.7mn to £3.4mn, but managed to keep its administrative and marketing costs fairly flat. This means that despite investing more in its technology, it was able to increase operating profit by 540 per cent to £3.9mn.

Management says its five-year growth plan is to increase revenue by 2.5 times while achieving a 15 per cent adjusted pre-tax margin of 15 per cent. Numis is confident in this forecast and expects revenue to rise 50 per cent by 2024, leaving Oxford Metrics trading on an EV/Ebitda of 11.6. Expensive, but not prohibitive. We stick to buy.

Last IC View: Buy, 106p, 23 Jun 2022