Preliminary results for year ended 30 June 2012

RNS Number : 1714N

Seeing Machines Limited

26 September 2012

 



26 September 2012

Seeing Machines Limited

("Seeing Machines" or the "Company")

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2012

Seeing Machines Limited (AIM:SEE)is pleased to announce its preliminary results for the year ended 30 June 2012.

Highlights

·    Total Revenue increased 9.2% to A$7,824,226 (2011: A$7,161,938);

·    Decrease in gross profit to A$4,315,567 (2011: A$4,875,031) due primarily to:

o  a change in product mix resulting from higher DSS sales;

o  the sale of services, including consulting; and

o  lower faceLAB® and faceAPI™ sales.

·    Net loss decreased A$439,874 to A$1,735,077 (2011: loss of A$2,174,951);

·    Cash at 30 June 2012 decreased to A$578,022 (30 June 2011: A$1,648,786) mainly due to:

o  continuing investment in expansion of business development; and

o  increased scaling of field support capabilities within the Company's main Driver Safety Solution ("DSS") markets.

·     Sales pipeline expanded significantly to over A$24,000,000 in value during the period as a result of:

o  new customers secured;

o  existing customers planning programmed increases in their deployment.

·     Secured major road transport customer, increasing company trucks now running DSS to over 65;

·     Additional DSS business secured in the Americas, Australia and South Africa;

·     Appointment of technology entrepreneur Ken Kroeger as CEO and appointment of experienced chairman Terry Winters.

Commenting on the Preliminary Results, Seeing Machines Chairman, Terry Winters said:

"Seeing Machines has continued to make a substantial investment in extending its presence in the mining and resource sector, taking advantage of increasing demand for DSS as the safety of the people employed at the front line of mining assumes new levels of priority for boards and leadership teams. The industry's leaders are responsibly seeking to minimise risk to their people, plant and equipment. During the period we have expanded our geographic coverage, improved our technology, releasing a 3^rd generation highly ruggedised product that was developed as a result of our field experience and customer feedback. In addition, we have further developed and refined our service and support offerings."

"As a result, we are seeing an increasing number of opportunities. This in turn is leading to an expanding pipeline, giving us the confidence of accelerating revenue growth in 2013 along with an improved financial performance."

For further information, please contact:

Seeing Machines Limited Ken Kroeger, CEO	[phone]
Terry Winters, Chairman	[e-mail] [phone] [e-mail]
Daniel Stewart & Company plc.
David Hart	[phone]
Walbrook IR Ltd
Helen Westaway Paul Cornelius	[phone] [phone] [e-mail] [phone] [e-mail]

Chief Executive's Statement

Overview

Seeing Machines Limited (AIM:SEE) is an acknowledged world leader in face and eye gaze tracking technology and has developed groundbreaking technology for human-machine interaction that is revolutionising the way people work with machines. The Company's technology has the ability to detect, track and understand a person's face, eyes and gaze direction. It can also interpret head and eye behaviour to identify drowsiness, inattention and distraction. Also tailored for health applications, this technology will soon be able to measure eye conditions and diseases such as Glaucoma, Age-Related Macular Degeneration and Diabetic Retinopathy in the one device.

Financial Results

Total revenue for the year increased by 9.25% to A$7,824,226 (2011: A$7,161,938) an increase of A$662,288 over the prior year:

·    Revenue from sale of DSS, license fees, services and  faceLAB® and faceAPI™  was A$7,031,353 (2011: A$7,024,749); and

·    Other income was A$792,873 (2011: A$137,189) primarily due to the recovery of R&D refund offsets from the Australian Taxation Office and favourable foreign exchange variations.

Cost of Goods Sold (COGS) increased to A$2,715,786 (2011: A$2,149,718) due primarily to:

·    a change in product mix resulting from higher DSS sales;

·    the increased sale of services including consulting; and

·    reduced faceLAB® and faceAPI™ sales.

Operational expenses were A$6,843,517 (2011: A$6,745,093).

The Company reduced its net loss by A$439,874 to A$1,735,077 for the year ended 30 June 2012 (2011: loss of A$2,174,951).

The Company had A$578,022 in cash at 30 June 2012 compared to A$1,648,786 at 30 June 2011 and debtors of $1,627,314 compared to A$1,555,275 in the previous year.

The loss and the consequential decrease in cash were due largely to the continuing investment in R&D, increased global business development activities and expanded field support capabilities to take advantage of the rapidly growing demand for DSS by the world's largest mining and resource companies.

Operational Highlights

Driver Safety Solutions (DSS)

The DSS business unit achieved revenues of A$4,989,483 (2011: A$4,300,715), a 16% increase over the previous year. Sales in Australia during the year generated revenue of more than A$1,600,000, making Australia the largest territory by revenue, overtaking the United States as the largest revenue contributor for DSS. In the second half of the 2012 financial year, the installed base of DSS units grew rapidly following the release of the company's 3^rd generation ruggedised product. A number of blue chip mining customers confirmed their adoption of DSS as their preferred fatigue detection and management system. Furthermore, whilst North America currently has the largest number of deployed systems, significant deployments are already underway in Australia, South America and Africa.

The strategy for commercialisation of the DSS technology remains strongly focused on the global mining and resource sectors through both direct sales and channel partners. Channel partners have already been appointed for Africa and Latin America, with other global channel agreements currently being negotiated.

The DSS pipeline continues to grow, offering further opportunity for profitable growth in the current and future years. The Company's strategy is to derive revenue from:

·    product (equipment) sales and recurring maintenance;

·    specialist services to support the operation of the DSS; and

·    specialist fatigue management consulting, data management, analysis and reporting services.

A strong focus will be on growing the services side of the business particularly through our data management, analysis and reporting services made possible through the DSSi database analysis and reporting suite.

Seeing Machines blue chip customers currently include:

·    Freeport-McMoRan (installations in United States, Peru, Chile and Indonesia);

·    BHP Billiton (installations in Australia, United States, South Africa, Chile);

·    Teck Energy (installations in Canada);

·    Cloud Peak Energy (installations in Wyoming USA);

·    Newmont Mining Corporation (installations in United States, Indonesia and Australia);

·    Toll Mining Services (installations in Australia in Queensland, Western Australia and South Australia); and

·    Xstrata (installation in Chile).

There are currently over 22,000 mining Haul Trucks in operation around the world. This number is growing at an estimated 7-8% per year. However, less than 1,200 of the Haul Trucks in operation have any Fatigue Detection and Management systems installed, creating a substantial opportunity for the Company.

At 30 June 2012, Seeing Machines had 680 systems installed in Haul Trucks and other mining related vehicles. Between January and June 2012, the Company shipped over 180 3^rd generation ruggedised units and had an order backlog of over 200 units as at 30 June 2012.

faceAPI™

faceAPI™ revenue reduced 9% in the year to A$440,789 (2011: A$484,446). The majority of the revenue generated to date has been achieved though developers license sales and a small number of production licenses.

This and other faceAPI™ revenue is expected to grow during 2013 through both current and new licensing agreements.

faceLAB®

faceLAB® achieved sales for the year of A$1,601,081 (2011:A$2,239,588) down by A$638,507 (29%). This contraction in revenue was expected in the lead-up to the release of exciting new product capabilities resulting from the Company's increased R&D investment. R&D efforts over the last year have resulted in the development of a new set of revolutionary eye gaze tracking algorithms that will be gradually introduced across all of the Company's commercial offerings.

During 2012, the following customers purchased faceLAB® systems:

·    Daimler Group;

·    West Point Military Academy;

·    Philips;

·    Medstar Research Institute;

·    GE Aviation; and

·    Johnson Controls.

TrueField Analyzer® (TFA)

The Company has actively supported the work of the ANU College of Medicine, Biology and Environment to resolve issues with the TFA's stimulus delivery mechanism, which has to date prevented commercialisation of the TFA. This has now been completed and the final TrueField medical trials are underway. The first trials delivered high quality repeatable performance and we expect the second and final trials to yield the same outcome. Following on from these trials, we expect to initiate a luminary review and validations phase in the first half of 2013 which will lead to a commercial licensing arrangement in late 2013 / early 2014.

It has already been confirmed that the TFA will also be applied to testing of Aged Macular Degeneration (AMD) and Diabetic Retinopathy (DR) in addition to Glaucoma, the initial focus of this R&D project, all in the one device.

Future Strategy

Since 30 June 2012, Seeing Machines has taken steps to organise itself around business units that each bring together a particular technology and market focus aligned with the company's commercial offerings. Going forward, the Seeing Machines business will comprise three divisions: the Driver Safety Solutions group will be responsible for all technical and business related aspects of vehicle occupant safety and driver awareness; the Consumer face and eye-tracking group which will manage development and sales of all non-vehicle operator related technology; and the Core Technology group, which will manage R&D and IP protection functions for both groups.

Seeing Machines immediate priorities in this financial year are as follows:

·    To develop a fully outsourced DSS manufacturing and logistics partnership to:

o  enable the Company to meet demand from its current and expected customers;

o  further improve product ruggedness and reliability (tailored specifically to the resources sector) to reduce field support costs;

o  reduce cost of goods (COGS) to streamline production and increase product margins;

o  increase competitive barriers to entry; and

o  To continue development and enhancement of the DSSi to support existing customers and to underpin the Company's services offering which is expected to generate significant revenue in future years.

As a result of increased demand for the DSS product, Seeing Machines has brought forward its plans to migrate to a fully outsourced manufacturing and logistics model. A select group of manufacturers are currently being evaluated based on their ability to provide world-class ruggedised DSS products and scale to meet our rapid growth in unit sales in the current and future financial years. The selected supplier will be expected to manufacture and assemble all of the system components and ship direct to distributors and customers.

The Company's focus for DSS during 2013 will be to:

·    Significantly expand the DSS customer and installed base in the Americas, Sub Saharan Africa, Central Asia and APAC (including Australia and South East Asia);

·    Continue to support the existing DSS customer base in these countries with new 3^rd and 4^th generation products;

·    Develop further global channel partners to increase the DSS presence in high-demand, mining driven economies;

·    Continue to grow the Company's service and support capability;

·    Develop further commercialisation opportunities for the DSS technology in other sectors both directly and with strategic partners; and

·    Progress DSS hardware and software development projects to facilitate entry into other major non-mining related transport sectors.

 

R&D and Product Development

Seeing Machines' commercially licensed face tracking software, faceAPI™, has recently been released for the Linux operating system. This new version is capable of tracking multiple faces simultaneously with a similar CPU demand profile to that of single face tracking - a feature developed due to significant demand from the home theatre industry

R&D activities relating to the consumer face tracking group of products include a variety of initiatives aimed at increasing the software's ability to capture and interpret all aspects of human facial characteristics, including the synthesis of sound.

Additional R&D outcomes from these initiatives will include the porting of the algorithms to "lighter footprint" processors typically used in today's smart phones and tablets.

Beyond the resources sector, Seeing Machines is working collaboratively with a number of tier-one automotive manufacturers in the development of in-vehicle driver monitoring systems.

Some of these developments are being driven by the pending arrival of semi-autonomous passenger cars and the advancement of the next generation of active passenger safety systems intended to respond to the risk posed by in-car communications, internet and entertainment systems. The company sees these as long term high value opportunities.

Changes to the Board of Directors:

The board of Seeing Machines has decided to create an "Automotive Industry Advisory Council" to play a pro-active role in providing advice and support for the company's Automotive Products R&D and business development initiatives globally.  Non-executive Director, Dr Trent Victor has given notice of his intention to resign from the board of Seeing Machines with effect from 30 September 2012 and will become a foundation member of this Council. Trent is currently Product Area Manager, Advanced Technology & Research, Volvo Group Trucks Technology (GTT) Vehicle and Transport Solutions and is an Internationally-renowned expert in driver awareness products, driver drowsiness, driver distraction, impairment detection and assistance systems.

The board is grateful for Trent's faithful service to Seeing Machines for over 9 years as one of the company's longest serving directors.

Current trading and future strategy

Since the end of the 2012 financial year, additional business has been secured with both existing and new customers that will further expand the DSS installed base over 2013 and 2014:

·    In July and August 2012, the Company shipped a further 104 DSS units; and

·    At the end of August, the Company had a backlog of a further 190 units to ship in September and October 2012, with a current "high-probability" pipeline of more than 800 units to ship before 30 June 2013.

Trading in the first two months of the new financial year has been strong with the Company generating revenues of over A$1,700,000 and EBIT of over A$200,000 with debtors increasing to over $2,100,000. This level of performance is very encouraging.  However, it should not be assumed that this level of monthly

revenue will occur consistently at this level for the remaining 10 months of the year.

Outlook

2012 has been a period of considerable investment for Seeing Machines as the Company moves forward with its strategy of commercialising its products and technology.

During the period Seeing Machines has expanded its business development teams, improved its technology and further developed its service offerings.

As a result, the Company is seeing an increasing number of opportunities which in turn is leading to an expanding order pipeline, giving the Board confidence of strong revenue growth in 2013 along with improved overall financial performance.

Compliance Statement

The preliminary financial reports attached, being the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cashflows have been prepared based on the 30 June 2012 accounts which are in the process of being audited by an independent audit firm.  It is not expected that remaining audit activity will lead to any changes in the values contained in these accounts or the final full annual financial report.

Terry Winters                                                                               Ken Kroeger

Chairman                                                                                       Managing Director & CEO

Statement of Financial Position

			Consolidated
			2012	2011
AS AT 30 JUNE 2012			A$	A$
ASSETS
CURRENT ASSETS
Cash and cash equivalents			578,022	1,648,786
Trade and other receivables			1,627,314	1,555,275
Inventories			86,151	332,152
Other current assets			222,139	199,341
TOTAL CURRENT ASSETS			2,513,626	3,735,554
NON-CURRENT ASSETS
Property, plant and equipment			256,254	358,900
Intangible assets			479,573	467,582
TOTAL NON-CURRENT ASSETS			735,827	826,482
TOTAL ASSETS			3,249,453	4,562,036
LIABILITIES
CURRENT LIABILITIES
Trade and other payables			1,486,621	1,325,671
Provisions			408,717	402,129
TOTAL CURRENT LIABILITIES			1,895,338	1,727,800
NON-CURRENT LIABILITIES
Provisions Non-Current			203,966	159,754
TOTAL NON-CURRENT LIABILITIES			203,966	159,754
TOTAL LIABILITIES			2,099,304	1,887,554
NET ASSETS			1,150,149	2,674,482
EQUITY
Contributed equity			15,024,112	14,813,612
Accumulated losses			(14,567,460)	(12,832,383)
Other reserves			693,497	693,353
TOTAL EQUITY			1,150,149	2,674,482

Statement of Comprehensive Income

			Consolidated
			2012	2011
FOR THE YEAR ENDED 30 JUNE 2012			A$	A$
Continuing operations
Sale of goods and licence fees			6,079,526	6,504,936
Rendering of services			951,827	519,813
Revenue			7,031,353	7,024,749
Cost of Sales			(2,715,786)	(2,149,718)
Gross Profit			4,315,567	4,875,031
Other income			792,873	137,189
Operational expenses			(6,843,517)	(7,187,171)
Other expenses			-	(442,078)
Loss from continuing operations before income tax			(1,735,077)	(2,174,951)
Income tax expense			-	-
Loss from continuing operations after income tax			(1,735,077)	(2,174,951)
Net Loss for the year			(1,735,077)	(2,174,951)
Other comprehensive income
Foreign currency translation			244	(1,911)
Other comprehensive income net of tax			244	(1,911)
Total comprehensive income			(1,734,833)	(2,176,862)
Earnings per share for profit attributable to the ordinary
equity holders of the company:
·        Basic earnings per share			(0.420)	(0.532)
·        Diluted earnings per share			(0.420)	(0.532)

Statement of Changes in Equity

			Contributed Equity	Accumulated Losses	Foreign Currency Translation	Employee Equity Benefits Reserve	Total Equity
FOR THE YEAR ENDED 30 JUNE 2012			A$	A$	A$	A$	A$
At 1 July 2010			14,664,487	(10,657,432)	46,905	780,229	4,834,189
Loss for the year			-	(2,174,951)	-	-	(2,174,951)
Other comprehensive income net of tax			-	-	(1,911)	-	(1,911)
Total comprehensive income			-	(2,174,951)	(1,911)	-	(2,176,862)
Transaction with owner in their capacity as owner
Share based payment			-	-	-	(131,970)	(131,970)
Share issue			149,125	-	-	-	149,125
At 30 June 2011			14,813,612	(12,832,383)	44,994	648,259	2,674,482
At 1 July 2011			14,813,612	(12,832,383)	44,994	648,259	2,674,482
Loss for the year				(1,735,077)			(1,736,613)
Other comprehensive income			-	-	244	-	1,780
Total comprehensive income			-	(1,735,077)	244	-	(1,734,833)
Transaction with owner in their capacity as owner
Share based payment			-	-	-	-	-
Share issue			210,500	-	-	-	210,500
At 30 June 2012			15,024,112	(14,567,460)	45,238	648,259	1,150,149

Statement of Cash Flows

					Consolidated
					2012		2011
	FOR THE YEAR ENDED 30 JUNE 2012				A$		A$
	Cash flows from operating activities
	Receipts from customers				6,971,333		6,737,913
	Grants received				-		49,125
	Payment to suppliers and employees				(8,721,133)		(8,864,926)
	Interest received				33,253		88,064
	Payments received for Research and Development Costs				724,803		-
	Net cash flows used in operating activities				(991,744)		(1,989,824)
	Cash flows from investing activities
	Proceeds from sale of plant and equipment						-
	Purchase of plant and equipment				(22,872)		(235,428)
	Payments for intangible assets				(56,392)		(30,916)
	Net cash flows used in investing activities				(79,264)		(266,344)
	Cash flows from financing activities
	Proceeds from issue of shares				-		-
	Costs of capital raising				-		-
	Net cash flows from financing activities				-		-
	Net (decrease)/increase in cash and cash equivalents				(1,071,008)		(2,256,168)
	Net foreign exchange differences				244		-
	Cash and cash equivalents at beginning of period				1,648,786		3,904,954
	Cash and cash equivalents at end of period				578,022		1,648,786

BASIS OF PREPARATION

·      This general purpose financial report for the year ended 30 June 2012 has been prepared in accordance with Australian Accounting Standards and the Corporations Act 2001.

·      The financial information in this report for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the Directors on 25 September 2012.

·      The financial information in this report does not include all notes of the type normally included within a full annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

·      The accounting policies and methods of computation are the same as those adopted in the annual financial report for the year ended 30 June 2011.

 

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