Preliminary Results

RNS Number : 2928Q

Seeing Machines Limited

29 August 2014

 



Seeing Machines Limited: Preliminary unaudited results for year ended 30 June 2014

Seeing Machines (AIM: SEE) is pleased to announce its preliminary results for the year ended 30 June 2014.

Highlights

·    Total revenue increase of 39% to A$17,762,246 (2013: A$12,735,741);

·    Gross profit increased by 34% to A$10,012,894 (2013: A$7,492,697) due primarily to:

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

o  the sale of services, including engineering consulting services;

o  decline in faceLAB^® and faceAPI™ sales.

·    The existing DSS mining business remained profitable.

·    With significant investment in additional R&D and resourcing the business for its growth into new markets, the consolidated results for the year delivered a net loss of A$2,706,380, representing a decline of A$3,261,331 from last year's profit of A$558,951.

·    Cash at 30 June 2014 increased to A$22,764,774 (30 June 2013: A$835,001) due to:

§ proceeds from capital raised in December 2013 and January 2014 (A$27,977,575);

§ increased investment in inventory to fulfil the customer orders;

§ initial investment in expanding  entry into an extended set of industry sectors;

§ developing scalable infrastructure to enable increased scaling of field support capabilities within the Company's main Driver Safety Solution ("DSS") markets;

§ increased investment in R&D.

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

Overview

Seeing Machines achieved record sales in the year ended 30 June 2014, with particularly strong performance delivered from the Company's continued roll-out of its DSS products and services to the global mining sector. This growth has been aided by our strong relationship with Caterpillar and growing relationships with the Caterpillar Global Dealer Network and the increased reach these dealers bring to our distribution capabilities.

In parallel with the successes being derived from our DSS product range, we are experiencing significant interest from other much larger markets, including the long distance road freight transport industry and rail networks.

This has reinforced the Company's research and development focus:

·    The development of OEM products for the world's leading automobile and truck manufacturers that in the foreseeable future are expected to lead to DSS type capabilities being incorporated into Advanced Driver Assistance Systems (ADAS) for new vehicles;

·    The development of OEM products that will deliver DSS type capabilities into today's fleets of long distance road freight transport and rail network operators;

·    The development of after-market products that will deliver DSS type capabilities into today's fleets of long distance road freight transport and rail network operators.

The Company ended the financial year with a strong balance sheet following its successful capital raising in late 2013. This capital provides the credibility to work in partnership with some of the world's largest companies, and the financial resources to accelerate our investment in core technologies that take advantage of the very substantial growth opportunities ahead of us. 

Underpinning Seeing Machines financial results and future growth are the following factors:

·    Seeing Machines is a leading supplier of Driver/Operator Safety Monitoring technology and services;

·    Strong partnerships with most of the largest global companies in the mining and mining services markets;

·    Seeing Machines has strong relationships with one of the world's largest automobile safety components suppliers to automobile producers and with some of the world's largest smart phone and tablet producers;

·    Seeing Machines is actively engaged in developing technology that will play a valued role in the future of Advanced Driver Assistance Systems (ADAS);

·    Seeing Machines' technology is widely recognised as current best in class for operating in outside light environments vs. competitors whose technology works well in more controlled light environments;

·    Seeing Machines continues to attract and retain some of the best researchers in its space;

The focus of Seeing Machines' Management team is to continue developing and evolving products and services that maintain the Company's leadership position in these chosen markets.

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 / Ben Thompson, Corporate Finance	[phone]
Victoria Bates, Corporate Broking
Newgate Threadneedle, Investment Communications for Seeing Machines
Robyn McConnachie Josh Royston	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, Arizona and Mountain View, California. The Company counts Caterpillar and Eye Tracking Inc as its partners and BHP Billiton, Freeport McMoran, Teck, Toll Holdings amongst its customers.

Chief Executive's Statement

Introduction

Seeing Machines saves lives - the organisation is committed to the prevention of driver fatigue and distraction related accidents and is actively engaged in developing technology that is expected to play an increasingly important role in the future of Advanced Driver Assistance Systems (ADAS). To date, our technology has helped deliver over fifty million miles of accident free, on and off-highway, commercial and industrial driving. In the coming years it is expected to deliver the same levels of protection to fleet and rail and public transport system operators, the airline industry and private passenger vehicle occupants and road users.

Seeing Machines is home to over 100 employees and while remaining committed to our home base in Australia as the main centre for R&D, Seeing Machines is expanding internationally to better serve our customers and collaborate with our partners.

The Year in Review

In the year under review, Seeing Machines posted a strong all-round performance against operational and financial targets while also recapitalising the organisation and refocusing our strategy to fully exploit core technical capability, the growing success of our DSS technology and our alliance with Caterpillar Global Mining.

Our significant engineering efforts and the resulting development of a new driver monitoring capabilities, bring us ever closer to the release of technologies that are expected to satisfy our chosen mass-market transport applications. In parallel, we have been successfully building very strategic relationships to take these technologies to market.  We aspire to see our technology in a wide number of commercial fields and in millions of cars over time.

The organisation has expanded its employee numbers, with additional highly capable and credentialed people and leaders and geographically in an effort to ensure the highest levels of support for our growing internationally distributed customer base.

We have prioritised our internal management efforts and begun to implement the significant organisational change required to deliver on our ambitious strategy. As we go forward, Seeing Machines is focused on leading our fields of operation and maturing into a more effective, efficient and capable organisation - preparing Seeing Machines for a key role in the enhancement of operator performance and safety through real time monitoring and intervention  - enabled by intelligent sensing capability.

Review of Operations

Financial Results

The existing DSS mining focussed business was profitable this year but with the significant investment already started in the activities identified above to accelerate growth in future years the Company has generated a consolidated loss for this year.

Total revenue for the year increased by A$5,026,505 (39% over the prior year) to A$17,762,246 (2013: A$12,735,741):

·    Revenue from sale of DSS, license fees, services and  faceLAB^® and faceAPI™  was A$16,756,392 (2013: A$11,692,298); and

·    Other income was A$887,335 (2013: A$1,034,398) primarily due to the recovery of R&D tax offsets refunded from the Australian Government.

·    Finance income was A$118,519 (2013: A$9,045) attributable to the interest earnings due to increased cash holdings resulting from the capital raise.

Cost of Goods Sold (COGS) increased to A$6,743,498 (2013: A$4,199,601) due primarily to:

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

·    the increased sale of services including consulting; and

·    decline in faceLAB^® and faceAPI™ sales.

Operational expenses, including R&D, increased by 72% to A$13,721,919 (2013: A$7,981,797). This increase is a result of Seeing Machines expanding its plans for entry into an extended set of industry sectors as well as supporting the significant growth in revenue through additional customer fulfilment and support infrastructure and personnel.

The Company achieved a net loss for the year ended 30 June 2014 of A$2,706,380, representing a decline of A$3,265,331 from the prior year's net profit (2013: profit of A$558,951).  Included in this result is an unrealised foreign exchange loss of $558,650 in relation to the Company holding its cash balances in AUD, USD and GBP.

The consolidated loss for the year was as also impacted by the Company's increased investment in R&D to A$2,552,542 (2013: A$1,400,225) and first phase of investment in the infrastructure required to enter new industry sectors to drive future years' revenue growth. The Company has already started to invest in personnel, technology and infrastructure for the commercial fleet, automotive, rail and aviation / simulator markets. Without these additional investments the Company would have generated a profit this year.

	30 June 2013	30 June 2014
	Consolidated Result	Existing Business	New Business Activities	Consolidated Result
Revenue	11,692,298	16,756,392	-	16,756,392
Cost of goods sold	(4,199,601)	(6,743,498)	-	(6,743,498)
Gross profit	7,492,697	10,012,894	-	10,012,894
Other income	1,034,398	887,835	-	887,835
Finance income	9,045	118,519	-	118,519
	8,536,140	11,018,748	-	11,018,748
Expenses
Research and development	(1,400,225)	(1,975,478)	(577,064)	(2,552,542)
Marketing & Distribution	(2,485,467)	(3,397,481)	(984,555)	(4,382,036)
Occupancy and facilities	(812,207)	(867,162)	-	(867,162)
Administration and corporate	(3,236,352)	(4,384,086)	(950,618)	(5,334,704)
Finance & other	(42,938)	(30,033)	(558,650)	(588,683)
Total expenses	(7,977,189)	(10,654,241)	(3,070,887)	(13,725,128)
Net profit for the year	558,951	364,507	(3,070,887)	(2,706,380)

The profit from the existing business was due largely to the significant growth in demand for DSS by the world's largest mining and resource companies. The growth in revenue allowed the Company to maintain its strategy of investing in R&D, increasing global business development activities, expanded field support capabilities and improving our data reporting capabilities.

The Company had A$22,764,774 in cash at 30 June 2014 (2013: A$835,001) and debtors of A$5,502,755 (2013: A$3,700,648) and completed a capital raising during the year realising a net A$28,019,889.

Operational Highlights

Sales to both mining and transport customers have seen the organisation ship a record number of 1,059 units this year. In addition to revenues from DSS, the Company sold engineering services to the automotive sector.

Driver Safety System (DSS)

The DSS business unit achieved a 57% increase in revenues over the previous year to A$14,471,178 (2013: A$9,203,301).  The installed base of DSS units grew rapidly as the successful uptake of the Company's 3^rd generation ruggedised product continued.  The Company has started to derive revenue from the multiple Caterpillar Mining Dealers signed throughout the year as well as a number of new and existing blue chip mining customers adopting DSS as their preferred fatigue and distraction detection monitoring system. The increase in revenue this year is as a result of expanding our sales team and their activities in growing the market as well as working closely with the Caterpillar Dealers.

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. The Company was very successful in expanding the product's adoption with our existing customers at the same time as growing the overall number of customer sites.

During the year the Company also installed DSS units for the first time into the commercial fleet market in Australia. For the following year Seeing Machines intends to expand into the much larger American commercial fleet market.

We continue to expand and improve our DSSi database analytics and reporting suite. This is translating into higher ongoing recurring revenues. A key component in the expansion of our services is the creation of a full time (24-7) monitoring and intervention centre to act as our customer's immediate response team for all fatigue and distraction events. This service was established as a result of our customers' belief that operator fatigue and distraction are serious issues that can only be addressed with a complete solution approach.

Successfully executing phase one of the Caterpillar Global Mining strategic alliance remains a strong focus this year as the number of customers we can reach through the Caterpillar dealer network will be a key driver of revenue over the coming years.

The Company finalised its plans to migrate to a fully outsourced DSS manufacturing and logistics model and appointed In-Tech Electronics Ltd (a Lean Six Sigma Company), headquartered in Hong Kong, to scale-up production of the Driver Safety System (DSS). Working with In-Tech will allow the Company to reduce its manufacturing and logistics costs and to reduce production and logistics cycle times.

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);

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

·    Teck (Canada); and

·    Pacific National (Queensland).

There are currently over 38,000 mining Haul Trucks in operation around the world.  However, less than 2,500 of the Haul Trucks in operation have any Fatigue and Distraction Detection or Management systems installed, creating a substantial opportunity for the Company.

During the year Seeing Machines sold 1,059 systems, bringing the total systems installed in Haul Trucks, other mining related and commercial road going vehicles to over 3,500 units. With the additional working capital available this year the Company was able to ship all unit orders by 30 June 2014 compared to an order backlog of over 132 units as at 30 June 2013.

faceAPI™ and  faceLAB^®

Revenue declined during the year to A$1,162,730 (2013: A$2,047,302).

During the year the Company rebranded these research market products under the FOVIO™ core technology banner. With Seeing Machines planning its entry into new and significant industrial markets the Company has appointed Eye Tracking Inc. to be the Company's global distributor for the eye tracking research marketplace.

TrueField Analyzer^® (TFA)

The Company has continued to support the work of the Australian National University (ANU) College of Medicine, Biology and Environment to prepare for the commercialisation of the TFA. With the Company's strategic focus on operator performance and safety and ANU's intention to be more active in the commercialisation process both parties have agreed to spin out the TFA technology and IP into a new jointly owned company.

Seeing Machines will become a minority shareholder and receive royalties from any future licensing deals the new company enters into.

Core Technology Team Integration Services

The continued interest in Seeing Machines platform technology, now known as FOVIO, has created a market demand for the provision of platform integration and non-recurring engineering services to third parties.

Through these services, the Company generated revenues of A$968,275 (2013: A$441,695). We expect this to continue in future years.

R&D Program

Until recently, Seeing Machines has focused on facial data capture through a camera sensor and the interpretation of the captured data. Our traditional interpretation capability includes head position/angles of rotation, eyelid aperture and precision eye tracking.

With an emerging strategy aimed at broadening our sensing capabilities to include other forms of measurement in support of real-time operator monitoring, the organisation is investing heavily in sensing related capabilities and the interpretation of the captured data streams.

Other research projects include investigation of new tracking technologies, optimisation for automotive hardware applications, data analytics and industry sector relevant human factors.

The Company is also working with collaborative commercial and institutional partners to accelerate the developments of supporting product and service components that are outside of Seeing Machines' sphere of engineering expertise including software embedding, industrial design, camera design etc.

The advancements made across these technological elements are expected to enhance all products and services being developed and offered by the Company.

Outlook for Financial Year 2014-2015

2014 has been significant year in the Company's history with another record revenue result. This significant revenue growth is based on our leadership in the mining industry though our own efforts and in partnership with Caterpillar Global Mining.

This growth, together with the capital raise completed during the year is expected to lead to the accelerated commercialisation of our technology across a focused range of industry sectors. In preparation, Seeing Machines has expanded its business development teams, improved its technology, reviewed new market opportunities and further developed its service and reporting offerings.

This focus and approach has seen Seeing Machines execute on its strategic alliance with the world's leading manufacturer of mining equipment, Caterpillar Global Mining and gives the Board confidence in another year of revenue growth from the mining sector.

While the existing mining focussed business (DSS) was profitable this year the significant investment being made in the activities identified above to accelerate growth in future years are expected to generate a consolidated loss for the following financial year.

The annual financial report will be available to view on the Company's website (www.seeingmachines.com) and will be sent to those shareholders who have elected to receive physical copies in September 2014.

Terry Winters                                                                          Ken Kroeger

Chairman                                                                                Managing Director & CEO

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 2014 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.

 

Statement of Financial Position

		Consolidated
		2014	2013
AS AT 30 JUNE 2014		A$	A$
ASSETS
CURRENT ASSETS
Cash and cash equivalents		22,764,774	835,001
Trade and other receivables		5,502,755	3,700,648
Inventories		2,821,783	859,343
Other current assets		132,551	91,637
TOTAL CURRENT ASSETS		31,221,863	5,486,629
NON-CURRENT ASSETS
Property, plant and equipment		456,309	382,052
Intangible assets		1,288,656	1,016,043
TOTAL NON-CURRENT ASSETS		1,744,965	1,398,095
TOTAL ASSETS		32,966,828	6,884,724
LIABILITIES
CURRENT LIABILITIES
Interest bearing loans and borrowings		7,430	-
Trade and other payables		2,584,666	2,499,882
Provisions		919,469	640,247
TOTAL CURRENT LIABILITIES		3,511,565	3,140,129
NON-CURRENT LIABILITIES
Provisions		5,178	10,432
Interest bearing loans and borrowings		43,421	-
TOTAL NON-CURRENT LIABILITIES		48,599	10,432
TOTAL LIABILITIES		3,560,164	3,150,561
NET ASSETS		29,406,664	3,734,163
EQUITY
Contributed equity		45,069,064	17,049,175
Accumulated losses		(16,716,289)	(14,013,117)
Other reserves		1,053,889	698,105
TOTAL EQUITY		29,406,664	3,734,163

 

 

Statement of Comprehensive Income

		Consolidated
		2014	2013
FOR THE YEAR ENDED 30 JUNE 2014		A$	A$
Continuing operations
Sale of goods and licence fees		13,638,322	10,880,145
Rendering of services		3,118,070	812,153
Revenue		16,756,392	11,692,298
Cost of Sales		(6,743,498)	(4,199,601)
Gross Profit		10,012,894	7,492,697
Other income		887,335	1,034,398
Finance income		118,519	9,045
Research and development expenses		(2,552,542)	(1,400,225)
Marketing and distribution expenses		(4,382,036)	(2,485,467)
Occupancy and facilities expenses		(867,163)	(812,207)
Corporate and administration expenses		(5,334,704)	(3,236,352)
Finance costs		(4,332)	(16,410)
Other expenses		(581,143)	(31,136)
(Loss) / Profit from continuing operations before income tax		(2,703,172)	554,343
Income tax expense		-	-
Profit / (Loss) from continuing operations after income tax		(2,703,172)	554,343
Net (Loss) / Profit for the year		(2,703,172)	554,343
(Loss) / Profit attributable to equity holders of parent		(2,703,172)	554,343
Other comprehensive income - to be reclassified to profit and loss in subsequent periods
Foreign currency translation		(3,208)	4,608
Other comprehensive income net of tax		(3,208)	4,608
Total comprehensive income		(2,706,380)	558,951
Total comprehensive income attributable to equity holders of the parent		(2,706,380)	558,951
Earnings per share for profit attributable to the ordinary
equity holders of the company:
·        Basic earnings per share		(0.0041)	0.0012
·        Diluted earnings per share		(0.0041)	0.0012

Statement of Changes in Equity

		Contributed Equity	Treasury Shares	Accumulated Losses	Foreign Currency Translation	Employee Equity Benefits & Share Options Reserve	Total Equity
FOR THE YEAR ENDED 30 JUNE 2014		A$	A$	A$	A$	A$	A$
At 1 July 2012		15,024,112		(14,567,460)	45,238	648,259	1,150,149
Profit / (Loss) for the year		-		554,343	-	-	554,343
Other comprehensive income		-		-	4,608	-	4,608
Total comprehensive income		-		554,343	4,608	-	558,951
Transaction with owner in their capacity as owner
Share issue		2,049,124		-	-	-	2,049,124
Transaction costs		(24,061)		-	-	-	(24,061)
At 30 June 2013		17,049,175		(14,013,117)	49,846	648,259	3,734,163
At 1 July 2013		17,049,175		(14,013,117)	49,846	648,259	3,734,163
Profit / (Loss) for the year		-		(2,703,172)	-	-	(2,703,172)
Other comprehensive income		-		-	(3,208)	-	(3,208)
Total comprehensive income		-		(2,703,172)	(3,208)	-	(2,706,380)
Transaction with owner in their capacity as owner
Shares issued		30,310,556	(707,110)	-	-	-	29,603,446
Capital raising costs		(1,583,557)	-	-	-	-	(1,583,557)
Employee share loan plan		-	-	-	-	233,387	233,385
Share options issued		-	-	-	-	125,605	125,605
At 30 June 2014		45,776,174	(707,110)	(16,716,289)	46,638	1,007,251	29,406,664

Statement of Cash Flows

		Consolidated
		2014	2013
FOR THE YEAR ENDED 30 JUNE 2014		A$	A$
Cash flows from operating activities
Receipts from customers		14,640,070	9,781,434
Payment to suppliers and employees		(21,019,143)	(11,559,896)
Interest received		118,519	9,045
Interest paid		(8,435)	(16,410)
Payments received for Research and Development Costs		1,045,089	1,000,211
Net cash flows used in operating activities		(5,223,900)	(785,616)
Cash flows from investing activities Proceeds from sale of plant and equipment		9,082	-
Purchase of plant and equipment		(172,435)	(256,146)
Payments for intangible assets		(447,556)	(629,057)
Net cash flows used in investing activities		(610,909)	(885,203)
Cash flows from financing activities
Proceeds from issue of shares		29,435,527	1,947,249
Costs of capital raising		(1,457,952)	(24,061)
Proceeds from borrowings		57,563	-
Repayment of borrowings		(6,712)	-
Net cash flows from financing activities		28,028,426	1,923,188
Net increase / (decrease) in cash and cash equivalents		22,193,617	252,371
Net foreign exchange differences		(263,844)	4,608
Cash and cash equivalents at beginning of period		835,001	578,022
Cash and cash equivalents at end of period		22,764,774	835,001

BASIS OF PREPARATION

·      This general purpose financial report for the year ended 30 June 2014 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 2014 was authorised for issue in accordance with a resolution of the Directors on 28 August 2014.

·      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 to be adopted in the annual financial report for the year ended 30 June 2014.

 

END

 

 

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