Oxford Metrics (LSE:OMG) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the Oxford METRICS PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so. These

0:32 will be available via your investor meet company dashboard, and we will notify you by email when they're ready for your review. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand you over to CEO, Nick Bolton and CFO, David Deacon. Good morning. Good morning. Thanks very much, Jake, for that introduction, and good morning to all of you, and welcome to the presentation of our interim results for the period that ended in March '22. In terms of this presentation,

1:06 following the short introduction, I'm going to hand over to David Deacon, our CFO, to take you through the financials, including the first half trading highlights. Then I'll take the baton back at that point and update you on our five year plan and our outlook for the full year. So let's begin then by characterizing that that period. And if I were to summarize the half, it would be fair to say it was a period both of successful trading and important development. We grew headline revenues well despite some supply chain constraints, and we have ongoing buoyant demand that we go into h two with a very strong level of orders in hand that, again, David will come on in detail. Back in October of last year, we announced our new five year plan with a plan to grow revenues two and a half times and sorry, two and half times their FY '21 level, and at the end of the plan, to return the group to its historic 15% adjusted profitability.

2:04 And in that way, build a larger, more profitable enterprise. And then more recently, we announced the premium disposal of our Yotta business at attractive revenue and profit multiples. So all of this means that we are now more focused with greater financial firepower to deliver on our ongoing sets of organic and inorganic opportunities. So that's really my summary for the period. What I'd like to do now is hand over to David to put some meat on those bones and take you through the financials. So David, over to you. Thank you, Nick. I'd also like to add my welcome. Good morning, everyone. I'll drill down into the first half trading performance in a few moments. But first, I just want to cover off the disposal of Yotter.

2:52 So as many of you will know, the deal was completed at the end of May for headline cash consideration of 52,000,000, which is clearly after the interim balance date. So in the context of the interim accounts, the Joktar business has been presented as a discontinued operation. Just for the record, really, in the first half, Joktar did report revenues of 4,260,000, up from GBP 4,100,000, an adjusted DBT of GBP $05,000,000, up from GBP 380,000. And a statutory level reported a loss of GBP 120,000, slightly improved from 260,000. So on multiple levels, that's really why we've described the disposal as a premium disposal.

3:37 On the balance sheet, we're holding YOCA as the asset held for for sale, including 12,000,000 of assets, including just under 2,000,000 in cash and also 2,000,000 of goodwill and liabilities of around 7,000,000. Subject really to the agreement of the completion accounts, which will be done over the coming weeks, we currently estimate the profit on disposal is going to be around GBP 44,000,000. And the net cash generated by the transaction is expected to be around 47,000,000. So now I'll turn to the financial headlines for continuing operations. So headline revenues, they improved at 11.8%.

4:25 And on a constant currency basis, underlying growth was around 11.1%. A headline profit before tax is reported of GBP 600,000, and that compares with a profit of GBP 1,250,000 a year ago. On an adjusted basis, which excludes noncash related items such as share option charges, amortization of intangibles arising on acquisition, the adjusted profit was 300,000, and that compared with GBP 1,000,000 a year ago. During the course of the presentation, I will explain and bridge those two numbers. So all of this translated into an adjusted EPS of 0.41p compared with 0.69p a year ago. And as of the end of March, the headline cash position was 19,600,000, and that's post the payment of the final dividend of just over 2,500,000.

5:20 The current cash position as of the eve of the interim results, so that's last Wednesday evening, cash stood at 67,700,000, which obviously includes the cash from the yacht disposal. The inventory position at 2,770,000 is slightly up compared to September, but is otherwise fairly normal. But an opportunity just to comment on the supply chain situation, which has been a challenge over the past six months, but the situation is gradually improving. But more on supply chain a bit later on. The balance sheet, well, that remains robust and debt free. In fact, someone pointed out to me recently that I always say robust.

6:06 And in light of the yacht disposal, perhaps I should use another word. So I did act I did actually do some searches on other synonyms, which came up with words like healthy, vigorous, hearty, even full bodied, which brought a smile to my face. But somehow, that did not seem quite right. So I concluded that robust describes the balance sheet just fine. So now I'll take a look at the h one trading performance, but looking at revenue, first of all, in three ways. Firstly, looking at revenue historically, the first observation is 12,600,000. It's actually slightly ahead of where we were pre pandemic, which is 12,500,000. And 12,600,000 is actually the best start to a new financial year in its own right.

6:56 You would also note that prior to the pandemic, we do tend to have stronger h twos, and there's no reason to not expect that in f y twenty two. And the split historically has been around 45, 55%. But it's fair to say this year, we are likely to be more h two weighted due to the order book that we currently have, but more of that later. Secondly, just looking at revenue geographically, well, Yotto's dropped out of the numbers now, which was largely UK centric. So going forward, revenues coming out of The UK are around 8%, which means that 92% of our revenues are exported.

7:43 During the course of the first half, we saw good growth in Europe, up 36.6%, and also good growth in The US, up 33%. Asia Pacific, which is our second strongest market by some margin, actually showed a slight decline, but that's more to do with a particularly strong showing in that region last year. And then finally, looking at revenue from a segmental perspective.

8:09 So engineering is clearly back on track, reporting growth of 8.3% and included some nice deals during the period, including Cranfield University and IC AI METRICS. Entertainment, which continues to be driven by virtual production and content creation, reported a slight decline of 1.7%. But our customers in this category continue to do very interesting things with our technology. In fact, ILM, were using a previously purchased system and helped out helped animate the avatars. Some of you may have noticed on the opening slide for the new ABBA show ABBA Voyage.

8:55 And it's particularly pleasing that they use our system because they could have used Qualysys, which is our Swedish competitor, so it's particularly pleasing. The life sciences sector also returned to normal. Fair to say life sciences was disrupted during the course of the pandemic, but revenues in the first half were up 11% helped by a good recovery in The USA. And location based entertainment, LBE, that that too was hit during the course of the pandemic, but that has now resumed growth, up a 131% year on year as all our market partners in this segment have resumed their growth plans and global rollouts. So the reported revenues by segment shows growth across all market segments with the exception of entertainment. That's at first glance. However, I would just draw your attention to the box on the right hand side of the slide.

9:52 So we have firm orders in hand at the end of March for just under 13,000,000, and these orders are expected to be shipped during the course of the second half. And you will also note that within that, the entertainment accounts for more than half of those sort of orders together with another million in location based entertainment. So taking account of that order book, it is fair to say that we're seeing strong demand, in fact, buoyant demand across all segments, in particular, in entertainment. Also, just for your information, it's worth noting that out of that order book, 2,200,000 was actually held back for genuine supply chain reasons.

10:39 So had we been able to ship that, that would have been recognized in the first half. So obviously, the the order book distorts this table. In fact, it distorts some of the preceding analysis that I've talked about. But the main takeaway here is the demand side of the equation for the business is very, very strong. And of particular significance is the ongoing buoyant entertainment segment and the rise of location based entertainment as well. So so far, the focus has been very much on revenue. I'll now turn to just look at the the profit performance. And to do this, I've just prepared this waterfall. So on the left hand side, a year ago, we made an adjusted profit of 1,000,000.

11:26 To this, we add gross margin that's been generated by the improved revenues that I've spoken around, so that adds 900,000. Since the first half of last year, we acquired Contemplus in the second half of the year, which means that our cost base is around 500,000 larger for that reason. And the next block, the 1,500,000 represents the underlying increase in the cost base of the business. And this is really arising for two factors. One is we are seeing a normalization of costs. It's fair to say that during the pandemic, costs such as marketing, travel, and other costs were muted during that period. And so these costs are beginning to normalize and rise. But secondly, and perhaps more importantly, you know, we are investing more, which we did signal during the preliminary results back in December where we disclosed that we were gonna increase our investment by around 2,300,000 on an annualized basis to augment our capabilities to sense, analyze and apply our technology.

12:37 To complete the bridge, we did capitalize a little bit more during the course of the first half, But this is more to do with the timing and release of current development projects. So I don't anticipate that featuring as a major item when we come to do this for the full year. So taking into account all these various items, the adjusted PBT for the first half was GBP 300,000. And really, just for the sake of clarity, in relation to how we have presented our results in the past, the GBP 300,000 is the net result of adjusted PBT generated by Viacom of around GBP 1,800,000 less PLC and other central costs of GBP 1,500,000. So in summary for me, the reported revenues were up 12,500,000 12,550,000.

13:31 But as discussed, this does not really truly represent the underlying performance given the order book that we have of nearly 13,000,000. It's worth just noting that a year ago, our order book was only 700,000. And at the end of September, it was 5.9. So it's been growing strongly over that period driven by buoyant demand. And the adjusted PBT is lower at 300,000 in part due to the cost base changes I've described. But, you know, it's fair to say this would have been significantly improved had we shipped the 2,200,000 of orders held back because of supply chain constraints. So as discussed previously, the cash position at GBP 67,700,000 means the balance sheet is indeed reversed.

14:20 And so we are, therefore, in the best possible financial shape to make further progress in the second half. So before handing back to Nick, I'd just like to take the opportunity to remind retail investors that further information is available on the website at www.oxfordmetrics.com. This includes some updated research that's been prepared by Progressive Equity Research, which includes forecast numbers for this year and beyond. That's it for me. Back to you, Nick.

14:56 Great. Well, thank you, David, for that update. What I'd now like to do is turn really to our five year growth plan. So something that we launched back in October of last year. And, really, clearly, the successful sale of Yotta, we need to consider in the context of that five year plan. And the the headline really is is that the sale of Yotta changes nothing about our ambition for that five year plan, but it does provide an increased opportunity as to how fast and how hard we can drive it. So let me, first of all, just remind you about that plan. Our plan recognized that something fundamental was changing in our markets and in our opportunity, that the plan was driven by the arrival of the augmented age, you know, term that we didn't coin, but it's coined by a person called Maurice Conti.

15:47 And he defines that age, the augmented age, as nearer where humans and machines partner to achieve what neither can achieve alone. And that nature of that partnership is much more it makes much deeper and much more transparent and much more ubiquitous than perhaps other technology relationships have have happened before. And for that augmented partnership then to thrive, we need technologies which have the ability to perceive us and our surroundings. They must be able to capture and understand every dimension of our world in real time. So humans, objects, movements, environments, and and and so forth. And it it's that that drives the need for integrated smart sensing systems such as the ones we offer. And when we launched the plan, we talked about this idea of looking after the data from sense, through sense, through analyze, and on to apply.

16:36 We want to look after that through that pipeline in order to maximize the actionable intelligence, that's useful in in the in the application of that understanding where where the user will access that, information. And inside the business, we talk about from imagery to insight,

16:55 from pixel to purpose, and from sensor to sense making. And that that smart sensing technology has always been our core. It's always been our core technology ever since the business was founded in 1984. Indeed, it provided the seed for Yotta's creation, growth, and eventual sale. And indeed, if you follow the stock further back, it was exactly the same seed and technology that provided for the value creation, the two d three business, our defense focused organization.

17:27 And what's changed in and we talked about in launching the five year plan is that we're seeing that that technology, that integrated smart sensing systems, that smart sensing capability can now be applied to a growing set of domains and a growing set of applications, and we want to take advantage of that growing opportunity. And to do that, we're gonna use three growth levers to expand the applicability of our solutions, which again focus on the sense aspect, the analyze aspect, and the apply aspect. Firstly, on the sensing side, we want to extend our sensing capabilities by the developing by either acquiring the wholly owned sensing businesses or actually just leveraging other people's sensors. There's a big drive and change going on in sensors towards more capable, cheaper sensors. We can benefit from that. More sensors means that you can apply apply your technology to a broader set of domains.

18:20 Point two, we want to enhance the analysis, that our systems are capable of, its modes, and its its abilities. And the acquisition of Contemplus, back in the summer of last year is a great example of that. Contemplus are experts in video sensing, so being able to measure

18:35 things just from video. And, also, they're experts, in, analyzing and understanding swimming, which was an area that we weren't involved with. So that's a great example of how we've enhanced the analysis, and in doing that, enhance the addressable market that can be solved with our solutions. Point two. Point point three is about then seeing our technology embedded in other companies' solutions. We cannot play direct in all of those markets and all of those opportunities for that growing set of domains and applications. And where we can't, we want to play in those markets in an indirect way. And David's talked about the growth that we've seen in location based entertainment. That's exactly one of those embedding opportunities. We're not running those facilities. We're not running those entertainment centers, but we are a key component in seeing our technology embedded within the solutions as they roll them out. And we want to continue to see that driving.

19:29 So the plan recognized that we'd achieve the growth through both organic activity and inorganic activity, and David's already mentioned that we've continued to invest in the r and d capability within the business. And that with by the end of the five year plan, it has two aims, to increase revenues two and a half times their FY '21 level. And by the end of the plan, after this period of investment over the sort of year one, year two, and a little bit into year three to effectively achieve an end of the plan return to our historic level of 15% adjusted PBT. So that's the plan as it stands. Well, when we then look following the yachtter sale, how has that plan changed? What are the opportunities within that plan? Well, the first thing to say is actually the five year plan still holds. You know, the context of the market developments that that we discussed at the launch of the five year plan still hold the context of those technology developments. You know, the rise of of cheaper, more capable sensors, the rise of machine learning as a technique, the rise of more sophisticated specialized processing units, that all still holds. And indeed, the validity of the three initiative approach that I just outlined, the extend sensing, enhanced analysis, and BED IP, all of that still holds.

20:52 What has changed is really twofold. Firstly, we can now pursue this plan through the focused lens of our market leading global Vicon business and technology. And secondly, with the increased resources the sale of Yotta has provided to our balance sheet. And that then means that our aim there is, yes, to build a larger enterprise, but more importantly, post the transaction with Yotta is build a more connected, more cohesive, more coherent enterprise. And in order to do that, that means making three connected adaptations to our sense, analyze, and apply plan. The first of those is that we will focus on a single integrated core technology stack.

21:37 We already lead in a variety of markets through a range of different sensing analysis technologies, and now we have the opportunity to add to that core through both organic development and m and a. And in all cases, those additional technologies must augment and or otherwise amplify our existing capabilities. And so that's a new opportunity because because when YOTA was part of the group, in effect, if Vicon invented some really interesting technology, because YOTA serves such a different audience and different customer base, it was really of no benefit to their customers in that technology innovation. We want to change that. So in this new world where we can focus on that single integrated core technology stack, we want effectively those inventions, those additional technologies to benefit all of our markets and all of our customers. So although the end market application may be new, there will always be a tieback to that central capability of integrated smart sensing systems. So that's adaptation number one. Adaptation number two is, about extracting greater operational leverage across markets and across the organization.

22:41 Closer markets, closer technologies, closer customers should enable us to realize greater operational leverage across those initiatives. So for example, the single technology innovation I've just mentioned, you know, where we invent that, that should be applicable to all of our markets. So on the operations or on the production side or on the marketing side, we should be able to drive out economies

23:03 of scale across that expanded enterprise. We know that we're strong in managing that production process. We can bring that to both acquired entities as well as to our expanded footprint from our organic work. You know, overall, we're seeking a coherence across the organization and the end markets we target. And it's through that that will deliver operational leverage and the synergies to drive our increasing profitability from the group. So that's point number two. And finally, point number three, the adaptation number three, is that, clearly with a stronger balance sheet, we have the opportunity to accelerate our pace of growth by pursuing larger scale transactions. And that means lifting our ambition to complete a number of larger transactions. And I'm sure you'll know from either your own personal experience or seeing other companies' acquisitions.

23:52 But in in lots of ways, the effort involved in acquiring small companies is very similar to acquiring a medium sized enterprise. But, of course, it doesn't move the needle as much as that larger enterprise. But we are gonna do just do that with one acquisition, one large acquisition. Rather, we see ourselves just increasing the scale of those acquisitions in order to complete a number of them. In other words, we don't want all our eggs in one basket. We want to make sure we back a number of horses in the race and best then increase our chances of succeeding in that race. We know we already have an exciting pipeline of m and a opportunities, which fed well with this new more cohesive plan, But nothing changes about the discipline that we'll bring to the targets that we're looking at there. So we'll always be disciplined on price. We'll continue to look for IP rich, hard to replicate technology businesses.

24:42 We will look for companies with attractive actual or or potential cash flow metrics. You know, the free cash flow metric is very important one for how Dave and I understand and look for value inside businesses. We're looking to good good to high revenue visibility, or a dominant position in niche market. And then lastly, and this is this is an important point, we're looking for able management teams who want to come with us on that journey, who share our cultural values and want to grow their own enterprise but within a larger vessel. And that's really because we don't have, you know, a whole bunch of operatives sitting on our bench waiting for that acquisition to come in. You know, we want to effectively acquire human capital in those acquisitions as well as, you know, gaining commercial and other capital. So, you know, genuinely, this is an exciting time to be involved with Vicon and OXFORD METRICS.

25:33 In fact, you know, this is a business that, you know, I've been involved with between '95 and 2000. I came back in 2005, you know, and David's been on board now for almost fourteen years. This is his fourteenth year. So, you know, Dave and I have got some common history in in this business, but, genuinely, I can say this is the most exciting time that I've been involved with the business. So then turning to the outlook. What does the what does the second half of the year look what can we look forward to in that period? Well, the Vicon business has more than recovered from its pandemic affected years, which is evidenced by the ongoing, buoyant demand and the consequent, unprecedented, levels of orders in hand. It is worth noting, as David's pointed out, that the overall cost base in the second half is expected to rise as costs continue to normalize, follow the pandemic, the travel costs, the marketing costs, and so forth.

26:25 And we also will continue with our investment plans to augment our ability to sense, analyze, and apply. And it's also worth noting that our ability to deliver on the demand clearly has been impacted in the first half by supply chain constraints. But it's fair to say that looking forward, the situation is gradually improving, which really leads the board to believe the group will deliver performance in line with achieving market expectations. So with growing demand, with a newly focused, more connected enterprise and now with greater financial firepower, we believe OXFORD METRICS is well positioned to realize its ever visible long standing growth potential. Thank you very much for your attention. Now that concludes the formal part of the presentation.

27:15 We can now move into the Q and A. I'm going to hand over to Jake, our host today, who will explain some of that process. David, thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the top right hand corner of your screen. But just while Nick and David take a few moments to review those questions submitted already, I would like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. And Nick, David, as you can see, we have received a number of questions throughout today's presentation, and thank you to all the investors for submitting their questions. If I could please just hand back to you to run through that Q and A tab. And where appropriate to do so, if you could please just read out the questions and give your response, and then I'll pick up from you at the end. Thank you.

28:05 Great. Well, thank you. Well, first of all, thank you very much for such a wonderful list of questions. It's clear that we've got a lot there to get through, but it's clear you're very engaged in our business, and I thank you for that. So and just taking these as they're appearing on my screen here. What is OXFORD METRICS market share in the sector? And how does the market share compare to OXTRAK or Qualysys? So to answer this, really, you really need to look on a per vertical market basis. So for example, the and the two competitors don't really they have a slight asymmetry in the way they compete with us. So OXFORD are strong in America and within the entertainment and engineering space. We don't really see them on the life sciences. And Qualysys are more European focused and stronger on the life sciences side. Where where does where does their market share stack up? Well, sort of on average, we have around 60% of the global market share, and the others have sort of about 20% each, maybe just slightly lower than that in one instance depending on their geography. So that gives you some idea. And, clearly, within those markets, there are some markets we're very strong. So the top end of content production, so things like the Abba or the Mandalorian or more recently, W1, Canobie, we're very strong in those markets. The engineering market itself is a broader market, so there are other solutions than just optical tracking. So we tend to have a slightly lower market share. But on average, it's around 60%, and we're by far the largest within the market.

29:34 So that's that question. So if we move on to the next one. David B. Has posted, how comfortable do you feel in raising prices to offset cost increases? How elastic is demand? So I think David's question there is about price elasticity. I think it's fair to say that we know that Vicon is the premium offer within the marketplace, and we're very proud of that. And it genuinely does deliver a capability over and above the competition, which is why customers are prepared to pay a little bit more for that. In fact, we've actually had customers say in the past to us that the general mantra in the markets is if you have the money, you buy a Vicon system.

30:20 In terms of raising prices to offset cost increases, we've been prices clearly have already some price raises have already been reflected in our in our prices, which are going to the market. So there's always some that have gone through there. There are others actually that we're we aren't because of the way that we've been buying and we have long term purchase agreements at fixed price, we haven't actually had seen all of those cost increases come through yet. In terms of how elastic demand is, I think, really, that really comes back to the position we occupy within the marketplace. I mean, clearly, it's a it's a conversation that needs to go on with both distributors and with customers. But right now, I think the the market is very understanding, since, you know, all the media commentary and and our own personal experience of inflation is clearly very visible and and front and central in people's minds. So I I I think right now, we feel comfortable that there's a a good middle ground that can be cut there.

31:21 And equally that we are doing our utmost inside the business to make sure we remain efficient. And where we can drive out some cost advantage that we we will that should mean protect us from necessarily to pass on all of those price increases onto customers. So that's that's that question. David, would you like to pick up a question here from Shagar again, which is could we see a special dividend? David, would you like to pick that one up? Yes, sure. I mean, right now, we do have a developing M and A opportunities. So in the immediate short, medium term, we do expect to deploy the cash in an M and A sense.

32:13 But that said, wouldn't write off the possibility of returning cash to shareholders. But if we did, we would probably be more likely to consider a tender offer since, you know, the cash generated on the balance sheet has really come through capital, you know, appreciation rather than profit and loss performance. So that would be my answer to that one. Great. Thank you, David. There are a couple of other in there, David, that you might want to pick up as well. But let me just pick off one other one while we're here. So while David is just having a look through some of the finance questions, which I'll hand over to you, you can pick out your own question if you like, David, from there to answer David A has posted, is OMG recession proof?

33:01 Well, there's nice broad question. Clearly, there are degrees to answer that. I don't think there's any business the world over that is completely recession proof except perhaps, you know, receivers and administrators, of course. You know, that should be a time where they're they're really making money. I I think more your question here isn't, you know, are we completely immune? It's with the degree of that immunity within within recession. You know, as David has pointed out in in his finance summary, you know, we are seeing very buoyant market demand. And clearly, we are a b to b business. And, course, I think we've all seen for our own investments. It's the b to c businesses. You know, the the data from Target or Walmart, you know, a few months ago was a clear indication it was b to c that was feeling that most immediately.

33:49 And there's always a lag between the b t c b to c realm and the b to b realm. That said, as you can see from our buoyant market demand and I we we've never seen an order book like this. Right? We've never seen this level of demand. And I think there are a couple of reasons in and around that. Some of it is catch up, you know, undoubtedly in our life science and our engineering space. But actually inside the entertainment side of the business, content production, really, the the truth is there is that content producers are making increased investments really to reflect the demand that's out there and within their own markets. You know? People are playing more games now than they've ever played before. People are watching more shows than they're ever watching before. And so that really has been driving, that side of the business. So I I don't think, you know, we are we definitely are not gonna be completely immune, but I think we we stand in a very robust position today, and I feel pretty good going forward. I think the other thing that's worth saying is that we keep a very close track of you know, as we're fulfilling orders from the backlog, clearly, we're keeping a track of how many new deals we're putting in there within the pipeline. And if we see any change in the velocity of the of the pipeline, which we really are not seeing at at the moment, clearly, that would be an indication that we would have to make some changes within the business.

35:07 But right now, it's really about trying to make sure we deal with the fire hose of opportunity that's that's coming at us. So I hope that answers your question, David a. David, is there a question you want to pick up there from a finance perspective? Or you do want to read the question and then answer it? Yeah. There's a couple here, which kind of M and A related, sort of trying to seek out, you know, what range would we be looking at. I think the first thing to say is it's not our intention to do one big one. Okay? So our preference is to do a series of, you know, medium sized deals and to put a number on it. You know, when I say medium, that could be $10.15, perhaps 20,000,000 in terms of enterprise value. So that would be our preference is to seek out those those types of acquisitions.

35:56 We always see small, you know, acquisition acquisition opportunities coming across our our desks so that that could be some small small ones amongst that. But I think it's it's worth saying that, you know, from an m and a perspective, clearly, it has to tick the right boxes in terms of being in line with, you know, the five year year plan to augment our capabilities to sense, analyze and apply. And it's also fair to say, just to reiterate what Nick said during his presentation, from a financial perspective, we are seeking to enhance earnings in the future. So any potential M and A would have to tick those boxes as well in terms of revenue and profit multiples. David B has also asked why it kind of appears to be fairly working capital intensive business with high levels of inventory and debtors historically.

36:48 Is there any scope to make improvements here? Well, I think I think the short answer is yes, but there is a caveat. We all we've obviously been through a period, you know, with supply chain disruption. And really during that period of time, you know, having inventory on hand in order not to disappoint customers and so forth is really important. So assuming the world returns to normal and just in time manufacturing, you know, comes back into, you know, back into the sort of in back in popularity, then clearly, are there are always opportunity to, you know, manage, you know, effectively.

37:33 But what we have seen though, in terms of customer behavior, we have begun to see customers now being prepared to pay deposits in order to, you know, secure their their sort of position on the delivery schedule, which obviously would, you know, helps the working capital cycle. So the answer is yes, but I think, you know, you're not going to see that until really supply chains and, you know, things return to normal. Great. Thanks, David. There's a couple of other questions here. David B. Has asked a question about competitive is your competitive advantage based on proprietary or nonproprietary technology, I. E, are there patents in place, NDAs for employees, etcetera? So our competitive advantage is is mostly proprietary.

38:21 I mean, clearly, there's some non proprietary elements within there. You know, we use off the shelf sensors, some off the shelf sensors that are other that are readily available in the marketplace. But, actually, that isn't the stuff that really differentiates us. It's what you do with that sensor that really makes the difference. It's what you do with the analysis phase that really makes the difference in there. And that is all proprietary. We have a few patents in place, but majority of that proprietary tech is all protected through trade secrets. And because actually, Viacom's system in itself isn't there's not just one individual invention there that makes the difference. In lots of way, it's a it's a very well engineered system. So if you imagine, it's a a a chain of of looking after the data that integrates smart sensing. Effectively, over the years, when we found the weakest weakest link in that chain, we've improved that link. So that might be camera calibration.

39:15 That might be marker ob obscurations, so where you can't see a mark because there's one behind it or an arm goes over the top of it or where two markers come together. In all of those instances, we've just been improving all of that chain, and it's actually the the totality of that chain that actually provides us with the competitive advantage. And, actually, you can see that in you know, it obstructs our youngest competitor, And so they are still playing really catch up in providing that as competent or successful solution. And, like, of course, I'm gonna say that. I'm the I'm the CEO of of of their competitor. But I think if he goes to the market when there have been market comparisons, that that's always been the that's always been the the observation. So that's really how we do protect. In terms of IP and so forth, clearly, employees within their service contract or the IP they invent whilst on our watch is is ours. And, clearly, we're very careful with signing NDAs when we're talking with partners because we do see that there's a great deal of value within that within that site. And, also, even within our customers, you know, our customers are often want us to sign NDAs with and that in part is also to protect.

40:37 Still have direct contact with the end cuts. They're my own competitive advantage. But, absolutely, we have direct contact with the end customer. It's not quite 50% of sales that are via distributors in the sense that, you know, if you we're direct in The UK and The US and Canada that does account for about 50% of the revenues. But there are, of course, there are others there are some other countries where we don't have any distributor representation, and so those are also written directly to us. And that's really because that would be a territory where there isn't a sufficient level of demand to warrant the appointment of a a distributor. But going back to your point about those distributors, one of the things we insist on our distributors is that we we are by far the largest thing that they sell. In other words, we want to make sure the Vicon system is that is very central to the lifeblood of those distributors. And that there are no secrets about who the end customer is. And we have a range of both support engineers, sales engineers, and product managers who all end up visiting those those end customers. So for example, when I was when I was a young man, a 26 year old and the first hire on the entertainment part side of the business in 1995, One of my first trips was to go to Japan, which has always looked been looked after by actually by two distributors, one focused on the engineering entertainment side and one on the life sciences side. And I was going there really to support our distributor in both new sales campaigns, but also making sure that our customers there, after they've had the installations, were getting everything they could out of those systems. So, yes, we still very

42:08 much do have that end customer contact. And, also, the end customers want that contact because, know, they'll attend an academic conference, and they want to make sure they can come to the Viacom booth and talk to people that they know about what, you know, what else they could achieve with those systems. So, yes, very much, we do have access and direct contact with those end customers. I think we're almost through the questions there. There's a there's another question about m and a pipeline, but I think we've covered that, David, in your answer earlier. Supply chain and price elasticity, I think we've covered that. Yeah. How customers respond to price increases? You might have to. I think we've covered that. Yes. So there's really one question left here from David a. Do you have concerns about attracting people with the skills needed to support your organic growth ambitions?

42:58 I think we are all very aware of the constraints in the labor market right now. In fact, there's a guy on the radio who this morning on the Today program talked about that, but within the defense industry. We we are in an advantaged position in the sense that we do interesting stuff, you know, genuinely. If you've got a potential employee who's coming for interview, and you can talk about The Mandalorian or the Star Wars production or Abba Voyage. That's interesting work. So I think that really helps. I think we've also been very successful in having direct relationships with some university courses for different aspects of the business. So for the r and d team, there are a couple of courses in London and in Oxford who've been generating great engineers. And then on the support side, there are some our university customers where the students would have used the Vicon system in their undergraduate days, their undergraduate products projects, and they're very keen to come and join the company that's making those. I also think that the fact that we've got this very global orientation, again, is exciting to those people coming to work for us because, genuinely, they'll get to if if they're ready for it, go and install a system in Japan or go to Australia to try to unpick a a gnarly problem with with biomechanical modeling.

44:19 So I think that means we're an attractive place to go and work, but we are undertaking a couple of initiatives internally, now to make it an even better place to work, including, talent development program that we want to make sure it's more visible, as well as making sure that those sort of taking another step up in internships and on sandwich, undergraduate, courses. So right now, we we feel we're we're a pretty exciting employee to come and work for, but we don't want to just, you know, rest on our laurels. We'll make it an even better place to come and, to come and work. So that's that's all the questions that I think we've now handled. So I think now David. Jake, do you wanna just talk about the Absolutely, sir. Thank you very much indeed, both of you for addressing all of those questions that came in from investors this morning.

45:11 And of course, if there are any further questions submitted today, we'll make these available to you immediately after the presentation has ended for your review. And ladies and gentlemen, we'll publish all those responses where it's appropriate to do so on the Investor company platform, and you'll be notified by email when they're ready for your review. Nick, perhaps for redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the If I could please just ask you for a few closing comments to wrap up with, that'd be great. Sure. Well, first of all, let me thank you. Thanks so much for attending this. This is forty five minutes to an hour out of your time. And David and I and the rest of the OXFORD METRICS team very much do appreciate you giving up your time to listen to us today. And we really do hope that this has been an engaging and interesting and genuinely useful presentation for you.

46:00 I would remind you of, as David pointed out in his presentation, the progressive note that's now available on our website and also the videos and the other news that we share on there. We do try to keep that up to date so that everybody has access to all of the information from retail, private investors all the way through to our institutional holders. So, yes, do do revisit oximetrics.com. And so I really wanted to finish this presentation as we started. And we started by talking about the two really the two key messages. The first one, it was a it was a period of successful trading. And secondly, and perhaps more importantly, it won it was a period of significant and important development for the group. So that means that now we can really get behind our genuinely global market leading business, Vicon, but now with the increased financial firepower that the Yotta transaction has given us. And then from that, drive real real visible growth from that fantastic platform.

47:06 And we look forward to sharing with you in the next one of these presentations in six months' time more about how we're delivering on that growth. So many thanks for your time, I and look forward to speaking with you all soon. Thanks again. That's great. Nick, David, thank you very much indeed for taking the time to update investors today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of OXFORD METRICS PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.