Well-off OMG returns another slug of cash

OMG's share price is up by 50% since we said "cash-rich OMG looks cheap" at the full-year results in December. Since then, management has sold its defence software division for $25 million (£17 million) and handed back a slug of the proceeds to shareholders. A delayed contract marred half-year results, but the order has now been shipped and profits are tipped to surge both this year and next.

Revenue fell by 4% to £11.3 million in the six months to March as a $1.1 million (£700,000) order from Argentina for motion capture cameras slipped from the first to the second half. That also meant OMG made an adjusted loss of £0.7 million, similar to last year. Cash grew by a third to £8.6 million, then to £21.7 million after period-end following the sale of 2d3 to Boeing.

Shareholders have already received £5.1 million of the 2d3 proceeds worth 4.5p a share dividend, and they'll get another £5.7 million, or 5p per share, on 10 July (ex-dividend date is 18 June). But broker N+1 Singer still forecasts year-end net cash of £8.7 million, enough to bankroll further acquisitions, perhaps at the Yotta business, which fits cameras on vans that the Highways Agency uses to search for cracks and potholes to repair.

Yotta grew revenue by 9% in the period to £3.6 million and made an adjusted profit before tax of £0.5 million, up two-thirds. It's since won a first overseas order for its Horizons software with Dutch infrastructure services firm De Jong Zuurmond. A local distributor has been appointed in Australia, too, so international expansion is very much on the cards.

(click to enlarge)

Core division Vicon was obviously impacted by the delayed order from Argentina. It's why revenue fell 6% to £7.7 million and profit dip in profit from £2.3 million to £1.8 million. But as well as work on Hollywood films like American Sniper, the unit won orders from Boeing, carmakers Suzuki and Maserati, and computer games giant EA. Its metrology system even helped Champion design a range of sports bras.

The Argentina money has now been received, and if Vicon has a straightforward second half, the company should hit full-year targets.

OMG's Life division lost money again - £1.7 million versus £2.1 million in 2014 - but the high-tech camera business has at least attracted interest from potential clients. Chief executive Nick Bolton told Interactive Investor the company is in "formal negotiations" with two specific licensees. "Growth is about getting IP in as many devices as possible. There's a large pipeline of opportunities in Japan, Korea, the US, Europe and elsewhere for tablet devices, smartphones and wearable cameras."

Singer currently pencils in adjusted pre-tax profit of £2.2 million for the year to September, giving earnings per share (EPS) of 1.4p. That rises to £4.3 million and 2.7p next year, which lowers the forward PE ratio from 31 times to a more modest 16 times. Strip out forecast year-end net cash of 8p and 10p respectively and that drops to 26 times for 2015 and 13 times.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser