Half Year Results to 31 December 2014

RNS Number : 1806G

Seeing Machines Limited

02 March 2015

 

Seeing Machines Limited

Half Year Results to 31 December 2014

2 March 2015

Seeing Machines (AIM: SEE) the AIM listed technology company with a focus on operator monitoring and intervention sensing technologies and services, is pleased to release its unaudited financial results for the six months to 31 December 2014. 

Key Points:

Financial

·    Total revenue for the half year increased by 41% to A$9,437,346 (December 2013: A$6,689,766);

·    Increase in sales, licensing and service income (A$5,867,061 compared to A$5,640,100 for 2013);

·    Sales to the mining industry increased by 26%, despite challenging market conditions;

·    Mining revenue beginning to transition from hardware sales to recurring revenue streams, with services revenue increasing by 62% to A$1,351,944;

·    Net loss increased to A$4,310,464 (December half 2013: loss of A$844,903), reflecting planned increase in R&D activities and investments in sales and marketing resources;

·    Cash at 31 December 2014 decreased to A$21,185,430 (30 June 2014: A$22,764,774) mainly as a result of the increase in these activities but offset by capital raising of A$10,627,929.

Operational

·    Executing our strategy to commercialise our technology in six global industries: mining; commercial fleets; road vehicles; rail; consumer electronics; and aviation and simulators;

·    Strategic alliance agreement signed with TK Holdings Inc., the Americas subsidiary of Takata Corporation, an automotive industry leader in the supply of advanced driver safety systems (ADAS);

·    First contract secured with Takata, and product development underway, to deliver a driver monitoring system to a global passenger car OEM, with more than 10 other OEMs at various stages in assessing our technology; 

·    Strategic agreement signed with Electro-Motive Diesel, Inc. (EMD), a Caterpillar Company, related to in-cab operator fatigue and distraction monitoring systems for use in locomotives and other railway vehicles;

·    Memorandum of Understanding (MOU) with Samsung Electro-Mechanics Corporation to facilitate joint development of face and eye tracking technology for the consumer electronics industry;

·    A strategic alliance with Insurance Underwriting Managers in South Africa to trial DSS^TM with a major South African logistics fleet to assess the technology's ability to reduce fatigue and distraction related road accidents;

·    On track to launch DSSFleet^TM product for the commercial road transport market in April 2015; and

·     Strategic joint venture with Chilean company GTD Ingenieria de Sistemas to form Seeing Machines Latin America to enable the highest levels of service to both mining and road transport customers and our local Caterpillar dealers.

Commenting on the Results, Seeing Machines CEO, Ken Kroeger said:

"With our revenue still dominated by sales to the mining industry, we're pleased to have increased our first half revenue over the same period last financial year despite very challenging conditions in the global mining sector.  Our sales revenue is a solid result in these market conditions.  It's also notable that we are starting to see a change in our revenue mix, with a sizable shift from one-off product sales towards ongoing services revenue.  We expect this transition to continue. 

We also expect our revenue sources to gradually reflect the transition of mining product sales to the Caterpillar dealer network and our strategic investment in non-mining sectors, in particular the commercial fleet and passenger car markets. 

Consistent with the strategy we outlined almost 12 months ago, during this half year we invested significantly in our capability and resources to commercialise our technology in six global industries.  We have successfully delivered several important milestones in that strategic plan, by partnering with industry leaders in automotive safety (Takata), rail (EMD) and consumer electronics (Samsung), to build on our existing partnership in mining (Caterpillar).  During this half year we also developed a new product for trucks and buses which we will launch in late April. 

In the road vehicle market, we're working with Takata to develop driver monitoring systems for a global car maker.  We are seeing huge interest in our technology from other car makers, as part of their development plans for ADAS - Advanced Driver Assistance Systems.  This will be a strong focus over the coming year. 

Our investment in these opportunities is reflected in increased expenses for R&D, sales and marketing and corporate activities, resulting in a higher loss for the half year than for the prior financial year.  As is usual we are conducting an annual review of our strategy and fine-tuning our business plans for our six targeted industries to ensure we're focusing our resources on the opportunities that can deliver most value for our shareholders.

Consistent with previous years, we expect sales revenue for the full financial year to be weighted towards the second half, ending 30 June 2015, with full year sales revenue higher than last year.  To achieve this we will need to see a continued increase in mining sales and a significant contribution towards the end of the half year from sales of our new DSSFleet^TM product.  We expect to convert a significant number of fleet opportunities into product trials before the end of the financial year, giving us a strong fleet-based sales pipeline for conversion the following financial year.

In parallel, we are continuing to work closely with Caterpillar dealers to preserve and grow sales in the mining industry, as well as broadening our activities with Caterpillar into their other industry sectors.

Our Board and management thank shareholders for their support and we look forward to updating the market on our continued progress over the coming months."

The half year financial report is available at http://www.seeingmachines.com/investors/financial-reports/ 

Enquiries:

Seeing Machines Limited	www.seeingmachines.com
Ken Kroeger, Managing Director and CEO	[phone] [e-mail]
James Walker, Finance Director	[phone] [e-mail]
finnCap Ltd, Broker for Seeing Machines
Ed Frisby / Christopher Raggett Corporate Finance	[phone]
Victoria Bates, Corporate Broking
Newgate Threadneedle, Investment Communications for Seeing Machines
Robyn McConnachie Tim Thompson	Tel: [phone] Mob: [phone] [e-mail] Tel: [phone] Mob: [phone] [e-mail]

About Seeing Machines

Seeing Machines, (AIM: SEE), is an AIM-listed technology company that specialises in operator monitoring and intervention technologies and services. Its software and engineering services are used in products and applications that range from devices that improve driver safety and save lives to assessing trainees in simulators and simplifying the relationships between people and technology. Seeing Machines technology is used worldwide across the automotive, mining, transport and aviation industries; as well as many of the leading academic research groups and transportation authorities. Seeing Machines is headquartered in Australia, and has offices in Tucson, Mountain View, and Santiago. The Company counts Caterpillar, Takata, Eye Tracking Inc and Samsung Electro-Mechanics (SEMCo) as its partners and BHP Billiton, Freeport McMoran, Teck and Toll Holdings amongst its customers.

Directors' Report

Review and results of operations

The Company's total revenue for the half year to 31 December 2014 was A$9,437,346 (2013: A$6,689,766), including A$5,867,061 (2014: A$5,640,100) from the sale of goods and services.

The first six months of trading in the 2015 financial year was an improvement over the corresponding period in the previous financial year.  This was primarily driven by significant growth in recurring revenue from the services component of our DSS^TM offering.

The Company made a net loss of A$4,310,464 for the six months to 31 December 2014 compared to a net loss of A$844,903 for the period to 31 December 2013. The loss was a result of planned investments to implement the Company's business strategy outlined in mid-2014.  During this half year we invested significantly in our capability and resources to commercialise our technology in six global industries: mining; commercial fleets; road vehicles; rail; consumer electronics; and aviation and simulators.  This investment is reflected in increased expenses for R&D, sales and marketing and corporate activities, resulting in a higher loss for the half year than for the prior financial year.

Operational highlights for the half-year include:

·      Executing our strategy to commercialise our technology in six global industries:

Mining	·      Increased sales from DSSTM products and services to the mining industry, through our global partnership with Caterpillar ·      Signed DSSTM distribution agreements with additional Caterpillar dealers, including the world's largest Caterpillar mining dealership (Finning International)
Road Vehicles	·      Strategic alliance agreement signed with TK Holdings Inc., the Americas subsidiary of Takata Corporation, an automotive industry leader in the supply of advanced driver safety systems (ADAS) ·      First contract secured with Takata, and product development underway, to deliver a driver monitoring system to a global passenger car OEM
Commercial Fleets	·      Developed a new product for trucks and buses, to be launched in April 2015 ·      A strategic alliance with Insurance Underwriting Managers in South Africa to trial DSSTM with a major South African logistics fleet to assess the technology's ability to reduce fatigue and distraction related road accidents
Rail	·      Strategic agreement signed with Electro-Motive Diesel, Inc. (EMD), a Caterpillar Company, related to in-cab operator fatigue and distraction monitoring systems for use in locomotives and other railway vehicles
Consumer Electronics	·      Memorandum of Understanding (MOU) with Samsung Electro-Mechanics Corporation to facilitate joint development of face and eye tracking technology for the consumer electronics industry
Aviation and Simulators	·      Significant interest from global leaders in the aviation and simulator markets.  Developing business and investment plans for this market.

·      An increase in sales, licensing and service income (A$5,867,061 compared to A$5,640,100 for 2013);

·      Continued growth in the DSS^TM customer base and corresponding recurring revenue stream;

·      Significant capital raising of A$10,627,929 completed in December 2014;

·      Capital raise of A$1,025,009 from existing shareholders completed in January 2015;

·      Strategic joint venture with Chilean company GTD Ingenieria de Sistemas to form Seeing Machines Latin America to enable the highest levels of service to both mining and road transport customers and our local Caterpillar dealers; and

·      Formation of a new joint venture, NuCoria Pty. Ltd., with The Australian National University to commercialise TrueField Analyzer (TFA) Intellectual Property.

Financial Results

The Company achieved revenues of A$5,867,061 (2014: A$5,640,100) from sale of goods and services and other income resulting in total revenue for the half year to 31 December 2014 of A$9,437,346 (2013: A$6,689,766).  Of the revenue from sale of goods and services, A$4,120,417 was from the sale of goods and A$1,746,644 was from providing services.  Revenue for the half year for each of the three products; DSS^TM, Fovio^TM and Other Income compared to the same period last year is shown in the following table.

Product	31 December 2014 A$	31 December 2013 A$	Variance %
DSSTM	5,438,697	4,311,755	+26
FovioTM	166,952	939,994	-82
Core technology integration services	261,412	388,351	-33
Other income	2,335,908	1,049,666	+123
Foreign exchange gains	1,234,377	0
Total Revenue	9,437,346	6,689,766	+41

Cost of sales at A$3,195,156 (2013: A$2,317,165) was higher due to upfront tooling, setup and freight costs incurred in preparation of the commercial fleet product setup at our contract manufacturer In-tech, as well as the expansion of the Company's logistics facilities in Australia and the USA.

Indirect expenditure for the half-year was A$10,552,654, up from A$5,217,504 for the period to 31 December 2013, reflecting the planned increased investment in research and development, and increased activity in DSS^TM sales, distribution and marketing, to underpin commercialisation and future sales of DSS^TM and other products in our chosen markets.   

Cash reserves at 31 December 2014 were A$21,185,430 compared to A$22,764,774 at 30 June 2014 and A$26,449,133 at 31 December 2013. The decrease was due to the deposits paid for the large stock orders placed with In-Tech for the commercial fleet product, due to be launched in late April 2015.

Operational Highlights

DSS^TM

DSS^TM revenues were A$5,438,697 for the six months to 31 December 2014, reflecting a significant increase over A$4,311,755 achieved for the six months to 31 December 2013.  This was the result of the increase in the DSS^TM installed unit numbers across our customers leading to an increase in the recurring services and reporting portion. 

Revenue was generated from:

·      sales of DSS^TM units;

·      software licensing;

·      installation services;

·      maintenance and support fees;

·      field support services; and

·      DSSi^TM information reporting services including event classification.

During the half year the Company signed distribution agreements with four additional Caterpillar dealers (bringing the total to 16), further increasing the reach of DSS^TM sales to customers in the mining industry.   In addition to this, the Group's results included revenue of A$1,645,030 from Seeing Machines Latin America, the Company's subsidiary in Chile established during this half year.

The Board expects the Company's revenue sources to gradually reflect the transition of mining product sales to the Caterpillar dealer network and our strategic investment in non-mining sectors, in particular the commercial fleet and passenger car markets. 

Consistent with previous years, the Board expects sales revenue for the full financial year to be weighted towards the second half, ending 30 June 2015, with full year revenue higher than last year.  In order to achieve this we will need to continue to increase sales in the mining industry - in challenging market conditions - and drive a significant contribution from sales of our new DSSFleet^TM product, to be launched in late April 2015.  Management expects to convert a significant number of fleet opportunities into product trials before the end of the financial year, giving us a strong fleet-based sales pipeline for conversion the following financial year.

In parallel, we are continuing to work closely with Caterpillar dealers to preserve and grow sales in the mining industry, as well as broadening our activities with Caterpillar into their other industry sectors.

Automotive opportunities - 'ADAS'

One of the Company's six target markets is road vehicles.  The opportunity in this market is to integrate the Company's technology into passenger cars as part of Advanced Driver Assistance Systems, or "ADAS".  ADAS is an industry term for systems developed to automate, adapt and enhance vehicle systems for safety and better driving.  ADAS systems include safety features designed to avoid collisions and accidents by offering technologies that alert the driver to potential problems, or to avoid collisions by implementing safeguards and taking over control of the vehicle.  ADAS technology can be based upon vision/camera systems and sensor technologies that monitor the driver and the external environment.   

During this half year the Company signed a strategic alliance with TK Holdings Inc., the Americas subsidiary of Takata Corporation and, through Takata, secured a contract to develop driver monitoring systems for a global car maker.  Following the announcement of our agreement with Takata, the Company experienced strong initial indications of interest from multiple further OEMs.  This strong interest has continued after the Company demonstrated its technology at the Consumer Electronics Show in early January 2015.  While no guarantee can be made that any of these OEMs will ultimately decide to purchase the Company's technology, the Board believes there is a significant opportunity to capitalise upon the Company's early work in this market.

FOVIO^TM

Following the discontinuation of the FaceLAB & FaceAPI product line, FOVIO^TM has now been established as the technology platform with all research based interest and opportunities directed to Eye Tracking, Inc, the Company's distributor for this field.

Core technology team integration services

With the recent marketing and demonstration initiatives, the Group has received an overwhelming response resulting in a broader focus on the automotive sector through the Company's product development agreement with Takata, signed during the half year. The Company generated revenue of A$261,412 from the core technology services provided to Takata in the development of a product for our first automotive OEM customer.

Summary

The Directors remain committed to delivering significant growth in shareholder value.

The additional capital raised over the past three months allows the Company to accelerate investment, both capitalised and uncapitalised, in our targeted six industries: mining; commercial fleets; road vehicles; rail; consumer electronics; and aviation and simulators.  The Company will seek to leverage its current competitive advantage in order to more rapidly scale revenues in future years. The acceleration of investment in the second half is expected to result in a reported loss before tax for this financial year.

In line with usual corporate practice the Board and Management are conducting an annual review of the Company's strategy and fine-tuning its business plans for our six targeted industries to ensure we are focusing the Company's resources on the opportunities that can deliver most value for our shareholders.

Terry Winters Chairman 27 February 2015

Ken Kroeger Managing Director & CEO 27 February 2015

Interim Consolidated Statement of Financial Position

			31 DEC 2014	30 JUN 2014
AS AT 31 DECEMBER 2014			A$	A$
ASSETS
CURRENT ASSETS
Cash and cash equivalents			21,185,430	22,764,774
Trade and other receivables			3,710,570	5,502,755
Inventories			11,222,903	2,821,783
Other current assets			224,130	132,551
TOTAL CURRENT ASSETS			36,343,033	31,221,863
NON-CURRENT ASSETS
Property, plant and equipment			800,521	456,309
Intangible assets			3,110,776	1,288,656
TOTAL NON-CURRENT ASSETS			3,911,297	1,744,965
TOTAL ASSETS			40,254,330	32,966,828
LIABILITIES
CURRENT LIABILITIES
Trade and other payables			2,861,846	1,982,819
Provisions			1,079,563	919,469
Deferred revenue			447,255	601,847
Interest bearing loans and borrowings			-	7,430
TOTAL CURRENT LIABILITIES			4,388,664	3,511,565
NON-CURRENT LIABILITIES
Provisions			5,965	5,178
Interest bearing loans and borrowings			-	43,421
TOTAL NON-CURRENT LIABILITIES			5,965	48,599
TOTAL LIABILITIES			4,394,629	3,560,164
NET ASSETS			35,859,701	29,406,664
EQUITY
Contributed equity			56,404,103	45,776,174
Treasury shares			(1,250,982)	(707,110)
Accumulated losses			(21,143,676)	(16,716,289)
Other reserves			1,164,735	1,053,889
Equity attributable to the owners of the parent			35,174,180	29,406,664
Non-controlling interest			685,521	-
TOTAL EQUITY			35,859,701	29,406,664

The above interim condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.

Interim Consolidated Statement of Comprehensive Income

			2014	2013
FOR THE HALF-YEAR ENDED 31 DECEMBER 2014			A$	A$
Continuing operations
Sale of goods and license fees			4,120,417	4,934,042
Rendering of services			1,746,644	706,058
Revenue			5,867,061	5,640,100
Cost of Sales			(3,195,156)	(2,317,165)
Gross Profit			2,671,905	3,322,935
Other income			3,570,285	1,049,666
Research and development expenses			(1,819,954)	(1,411,854)
Customer support and marketing expenses			(5,265,728)	(1,456,115)
Occupancy and facilities expenses			(770,312)	(442,649)
Corporate services expenses			(2,696,660)	(1,906,886)
Loss before income tax			(4,310,464)	(844,903)
Income tax expense			-	-
Loss from continuing operations after income tax			(4,310,464)	(844,903)
Loss for the period			(4,310,464)	(844,903)
Attributable to:
Equity holders of parent			(4,427,387)	(844,903)
Non-controlling interests			116,923	-
			(4,310,464)	(844,903)
Other comprehensive income to be reclassified subsequently to profit and loss
Exchange differences on translation of foreign operations			(41,602 )	(1,913)
Other comprehensive income net of tax
Total comprehensive income			(4,352,066)	(846,816)
Total comprehensive income attributable to equity holders of parent			(4,352,066)	(846,816)
Earnings per share for profit attributable to the ordinary
equity holders of the company:
·        Basic earnings per share			(0.518)	(0.168)
·        Diluted earnings per share			(0.518)	(0.167)

The above interimcondensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Interim Statement of Changes in Equity

			Contributed Equity	Treasury Shares	Accumulated Losses	Foreign Currency Translation Reserve	Employee Equity Benefits & Other Reserve	Total	Non-Controlling Interest	Total Equity
FOR THE HALF-YEAR ENDED 31 DECEMBER 2014			A$	A$	A$	A$	A$	A$	A$	A$
At 1 July 2013			17,049,175	-	(14,013,117)	49,846	648,259	3,734,163	-	3,734,163
Loss for the half-year			-	-	(844,903)	-	-	(844,903)	-	(844,903)
Other comprehensive income			-	-	-	(1,913)	-	(1,913)	-	(1,913)
Total comprehensive income			-	-	(844,903)	(1,913)	-	(846,816)	-	(846,816)
Transaction with owner in their capacity as owner
Shares Issued			28,388,159	(644,160)	-	-	-	27,743,999	-	27,743,999
Capital Raising Costs			(1,574,575)	-	-	-	-	(1,574,575)	-	(1,574,575)
Employee Share Loan Plan			-	-	-	-	122,804	122,804	-	122,804
Share Options Issued			-	-	-	-	125,605	125,605	-	125,605
At 31 December 2013			43,862,759	(644,160)	(14,858,020)	47,933	896,668	29,305,180	-	29,305,180
									-
At 1 July 2014			45,776,174	(707,110)	(16,716,289)	46,638	1,007,251	29,406,664	-	29,406,664
Profit/(Loss) for the half-year			-	-	(4,427,387)	-	-	(4,427,387)	116,923	(4,310,464)
Other comprehensive income			-	-	-	(41,602)	-	(41,602)	-	(41,602)
Total comprehensive income			-	-	(4,427,387)	(41,602)	-	(4,468,989)	116,923	(4,352,066)
Transaction with owner in their capacity as owner
Shares issued			11,182,672	(543,872)	-	-	-	10,638,800	-	10,638,800
Capital raising costs			(554,743)	-	-	-	-	(554,743)	-	(554,743)
Employee Share Loan Plan			-	-	-	-	152,448	152,448	-	152,448
Acquisition of Non-controlling interest			-	-	-	-	-	-	568,598	568,598
At 31 December 2014			56,404,103	(1,250,982)	(21,143,676)	5,037	1,159,699	3,5174,180	685,521	35,859,701

The above interimcondensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Interim Consolidated Statement of Cash Flows

					Consolidated
					2014		2013
	FOR THE HALF-YEAR ENDED 31 DECEMBER 2014				A$		A$
	Operating activities
	Receipts from customers				7,544,573		7,496,080
	Receipt of tax concession for research and development costs				2,202,534		1,045,089
	Payments to suppliers and employees				(19,574,365)		(9,883,815)
	Interest received				113,370		3,114
	Interest Paid				(340)		(1,197)
	Net cash flows used in operating activities				(9,714,228)		(1,340,729)
	Investing activities
	Purchase of plant and equipment				(523,267)		(195,099)
	Payments for intangible assets				(1,500,458)		(37,717)
	Net cash flows used in investing activities				(2,023,725)		(232,816)
	Financing activities
	Proceeds from issue of shares				10,525,758		27,576,080
	Cost of capital raising				(544,539)		(383,318)
	Repayment of borrowings				(50,852)		(3,171)
	Net cash flows from financing activities				9,930,367		27,189,591
	Net increase/(decrease) in cash and cash equivalents				(1,807,586)		25,616,045
	Net foreign exchange differences				228,242		(1,913)
	Cash and cash equivalents at 1 July				22,764,774		835,001
	Cash and cash equivalents at 31 December				21,185,430		26,449,133

The above interimcondensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.

 

END

 

 

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