It’s not that half-year results from Oxford Metrics (OMG) were bad. But because management previously promised to double profits and triple recurring revenues between 2016 and 2021, flat adjusted pre-tax profits and only a 23 per cent increase in recurring revenues did not seem quite good enough.
And although infectiously enthusiastic chief executive Nick Bolton has maintained his confidence in the group’s ability to deliver its long-term goal, there is no denying that the performance from infrastructure software business Yotta (23 per cent of revenue) was disappointing. Sales were flat year on year as the growth in annualised recurring revenue didn’t materialise until later than expected, while continued investment in the new software services business, Alloy, widened the division’s losses.
Therefore, these numbers have called into question the logic in OMG’s business model. On the one hand, it is running Vicon, a high-margin, fast-growing motion sensor provider for the film and gaming industry. But the group’s overall growth is being held back by the lossmaking infrastructure services arm, which makes most of its money from local councils. Broker N+1 Singer has trimmed its forecasts for Yotta, although strength in Vicon means it has maintained its annual pre-tax profits and EPS forecasts of £5.2m and 3.2p, respectively, in the year to September 2018 (up from £3.9m and 2.7p in 2017).
| OXFORD METRICS (OMG) | ||||
| ORD PRICE: | 70p | MARKET VALUE: | £87m | |
| TOUCH: | 68-71p | 12-MONTH HIGH / LOW: | 83p | 50p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 36 | |
| NET ASSET VALUE: | 21p* | NET CASH: | £9.2m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 12.9 | 1.47 | 1.26 | nil |
| 2018 | 14.3 | 1.18 | 0.60 | nil |
| % change | +11 | -20 | -52 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £11.9m, or 10p a share | ||||
