Seeing Machines Limited

Earnings Release • Aug 21, 2013

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RNS Number : 1203M

Seeing Machines Limited

21 August 2013

Seeing Machines Limited

("Seeing Machines" or the "Company")

PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2013

Seeing Machines (AIM:SEE) is pleased to announce its preliminary results for the year ended 30 June 2013.

Highlights

·    A$2,293,784 improvement in Net Profit to A$558,951 (2012: loss of A$1,734,833).

·    Total Revenue increase of 63% to A$12,735,741 (2012: A$7,824,226);

·    Gross profit increased 74% to A$7,492,697 (2012: A$4,315,567) due primarily to:

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

o  the sale of services, including consulting; while maintaining

o  consistent faceLAB® and faceAPI™ sales.

·    Cash at 30 June 2013 increased to A$835,001 (30 June 2012: A$578,022) mainly due to:

o  proceeds from issue of shares during the year (A$1,923,188); offset by

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.

·    Significant current sales pipeline of over A$20,000,000 comprising:

o  new customers secured;

o  significant backlog of firm orders at 30 June 2013

o  existing customers planning programmed increases in their deployment.

·    Entered into a global alliance agreement with Caterpillar that will see DSS systems deployed through Caterpillar Dealers around the world;

·    Secured a major road transport customer, increasing the number of trucks now running DSS to over 80;

·    Additional DSS business secured in the North and Latin America, Australia and Indonesia.

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

"This continuing improvement in Seeing Machines' performance is the result of a clear strategy and a capable and maturing management team and board that remains focused on maintaining this positive trend as the Company evolves into a successful technology provider to its target markets around the world.

During the year the Company continued to invest heavily in on-going R&D for its face, eye and gaze tracking technology which is at the core of the DSS system. This investment is expected to deliver substantial revenue growth opportunities for "Seeing Machines - Everywhere" in the future as new applications open up in the next generation of automobiles and in health, and for improving the way people interact with machines, Smartphones, Tablets and PC's.

A number of world-leading branded consumer and communications technology companies have recognised the state of the art position of Seeing Machines' core technology and algorithms. This has led to a number of collaborative development programs being formed during the last year.

Investment has continued in Truefield as the Company prepares this technology for peer review during the new financial year, following which a range of commercialisation alternatives is expected to become available for the first time.

The Company has seen a significant increase in revenue this year as a result of our ongoing investment in the mining and resource sectors.

The increase in demand for DSS reflects our customer's focus on the safety of their people employed at the front line of mining.  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 and released a new highly ruggedised product that was developed as a result of our field experience and customer feedback. In addition, we continue to develop and refine our service and support offerings.

The financial performance of the Company the year just ended is before any incremental revenue was realized through the recently announced strategic alliance with Caterpillar Global Mining.  We are seeing an increasing number of opportunities from our existing customer sales pipeline and through the implementation of the Caterpillar alliance, giving us the confidence of continuing strong revenue growth and profit performance in 2014."

For further information, please contact:

Seeing Machines Limited
Ken Kroeger, Managing Director and CEO	+61 2 6103 4700 [email protected]
James Walker, CFO	+61 2 6103 4700 [email protected]
Terry Winters, Chairman	+61 2 6103 4700 [email protected]
FinnCap Limited
Ed Frisby / Ben Thompson, Corporate Finance	+44 20 7220 0500
Simon Starr, Corporate Broking
AxiCom Limited
James Kennedy	+44 20 8392 4091 [email protected]

The annual financial report will be available to view on the Company's website and will be sent to those shareholders who have elected to receive physical copies in September 2013.

Chief Executive's Statement

Overview

Seeing Machines Limited (AIM:SEE) is an acknowledged world leader in face and eye gaze tracking technology and is revolutionising the way people work with machines.  The Company specialises in visual computing systems that track faces, eye and facial features and what people are looking at in real time.  Its software and engineering services are used in products and applications that range from devices that detect eye disease to prevent loss of sight, to those that improve driver safety and save lives.  Seeing Machines technology is used worldwide across the automotive, mining, games, transport and aviation industries, as well as many leading academic research groups, transportation authorities and Defence Departments.

Financial Results

Total revenue for the year increased by A$4,911,515 (63% over the prior year) to A$12,735,741 (2012: A$7,824,226):

·    Revenue from sale of DSS, license fees, services and faceLAB® and faceAPI™  was A$11,692,298 (2012: A$7,031,353); and

·    Other income was A$1,043,443 (2012: A$792,873) primarily due to the recovery of R&D tax offsets refund from the Australian Government and favourable foreign exchange variations.

Cost of Goods Sold (COGS) increased to A$4,199,601 (2012: A$2,715,786) due primarily to:

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

·    the increased sale of services including consulting; and

·    a overall increase in faceLAB® and faceAPI™ sales.

Operational expenses increased by 27% to A$7,981,797 (2012: A$6,843,517) due primarily to supporting the significant growth in revenue through additional customer fulfilment and support infrastructure and personnel.

The Company achieved a net profit of A$558,951 for the year ended 30 June 2013, an improvement by A$2,293,784 on the prior year's net loss (2012: loss of A$1,734,833).

The Company had A$835,001 in cash at 30 June 2013 compared to A$578,022 at 30 June 2012 and debtors of $3,700,648 compared to A$1,627,314 in the previous year and completed a capital raising during the year realising $1,923,188.

The increase in profit 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.

Operational Highlights

Driver Safety Solutions (DSS)

The DSS business unit achieved an 84% increase in revenues over the previous year to A$9,203,301 (2012: A$4,989,483).  The installed base of DSS units grew rapidly following the successful release in 2012 of the Company's 3rd generation ruggedised product.  A number of blue chip mining customers continued their adoption of DSS as their preferred fatigue and distraction detection monitoring system.  The increase in revenue this year is as a result on our activities in growing the market and does not include any revenue from the alliance with Caterpillar Global Mining announced in May 2013. 

North America continues to have the largest number of deployed systems but significant deployments in Australia and South America have expanded our profile around the world.

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. We are very pleased with the business progress made by our Latin American channel partner who delivered our largest single order in 2013.

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 and distraction data management, analysis and reporting services.

Successfully executing phase one of the Caterpillar Global Mining strategic alliance is 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.

We remain committed to 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); and

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

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 2,500 of the Haul Trucks in operation have any Fatigue and Distraction Detection and Management systems installed, creating a substantial opportunity for the Company.

At 30 June 2013, Seeing Machines had over 1,372 systems installed in Haul Trucks and other mining related vehicles. The Company had an order backlog of over 132 units as at 30 June 2013.

faceAPI™

faceAPI™ revenue remained constant during the year at A$437,635 (2012: A$440,789). 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 remain steady during 2014 through both current and new licensing agreements.

faceLAB®

faceLAB® sales for the year of A$1,609,667 were consistent with the 2012 year of A$1,601,081. The revenue remained flat 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 continued the prior year's development of a new set of revolutionary eye gaze tracking algorithms that will be introduced across all of the Company's commercial offerings during 2014.

TrueField Analyzer® (TFA)

The Company continues to actively support the work of the ANU College of Medicine, Biology and Environment to prepare for the commercialisation of the TFA. In June 2013 the Company was successful in obtaining Victorian Government funding to assist with market validation studies.  Following on from these studies, we expect to review our commercial licensing strategy and in 2014 will announce the results from that review.

Core Technology Team Integration Services

The wider adoption of the faceAPI™ developer and production licenses has created a market demand for our core technology team to provider integration services to third parties.

The Company has generated revenues of $441,695 from these services during the 2013 year and expects for this to continue in future years.

Strategy

The Company continues to organise itself around business units that each bring together a particular technology and market focus aligned with the Company's commercial offerings. The Seeing Machines business comprises three divisions:

·    the Driver Safety Solutions group is responsible for the aftermarket specific technical and business related aspects of vehicle occupant safety and driver awareness;

·    the Consumer face and eye-tracking group which manages development and sales of all non-vehicle operator related technology; and

·    the Core Technology group, which manages R&D and IP protection functions for both groups, the development of future OEM/in-vehicle driver safety and communication systems as well as generating revenues from our technology integration services.

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

·    To successfully implement phase one of the Caterpillar Global Mining strategic alliance, by supplying and supporting our Fatigue Monitoring Systems within the Caterpillar dealer network

·    To progress the other phases of the alliance, including the joint product development and technology licensing opportunities.

·    To continue to grow the mining opportunities outside the Caterpillar alliance to:

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

o  further improve product ruggedness and reliability;

o  scale equipment production volumes through an outsourced manufacturing partnership and improve our global logistics to streamline production and improve efficiency of global delivery and support for our customers;

o  to continue development and enhancement of the DSSi product and service to support existing customers and to underpin the Company's services offering.

·    To commence market diversification into the road transport sector to take advantage of increasing interest from major operators around the world and reduce the risk of the current exposure to one major market.

The Company continues its plans to migrate to a fully outsourced DSS manufacturing and logistics model. A select group of manufacturers are being evaluated based on their ability to provide world-class ruggedised DSS products and scale production to meet our expected rapid growth in unit sales in the current and future financial years.

R&D and Product Development

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.

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.

Current trading and future strategy

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

·    Since 1 July 2013 the Company has received orders for a further 138 DSS units; and

·    At the end of July we had initiated negotiations with four Caterpillar dealers.

Outlook

2013 has been a significant year in the Company's history with its highest profit, driven by significant revenue growth.  This growth reflects the Company's investment in commercializing its products and expanding its technology applications.

During the period 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 form a strategic alliance with the world's leading manufacturer of mining equipment, Caterpillar Global Mining, which represents a significant step forward in the Company's evolution.

The opportunity presented by the Fatigue Monitoring Systems supply and support phase of this alliance, together with our existing sales pipeline, gives the Board confidence of continued strong revenue growth in 2014 along with improved overall financial performance.

Terry Winters Chairman	Ken Kroeger 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 2013 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
			2013	2012
AS AT 30 JUNE 2013			A$	A$
ASSETS
CURRENT ASSETS
Cash and cash equivalents			835,001	578,022
Trade and other receivables			3,700,648	1,627,314
Inventories			859,343	86,151
Other current assets			91,637	222,139
TOTAL CURRENT ASSETS			5,486,629	2,513,626
NON-CURRENT ASSETS
Property, plant and equipment			382,052	256,254
Intangible assets			1,016,043	479,573
TOTAL NON-CURRENT ASSETS			1,398,095	735,827
TOTAL ASSETS			6,884,724	3,249,453
LIABILITIES
CURRENT LIABILITIES
Trade and other payables			2,499,882	1,486,621
Provisions			640,247	533,245
TOTAL CURRENT LIABILITIES			3,140,129	2,019,866
NON-CURRENT LIABILITIES
Provisions Non-Current			10,432	79,438
TOTAL NON-CURRENT LIABILITIES			10,432	79,438
TOTAL LIABILITIES			3,150,561	2,099,304
NET ASSETS			3,734,163	1,150,149
EQUITY
Contributed equity			17,049,175	15,024,112
Accumulated losses			(14,013,117)	(14,567,460)
Other reserves			698,105	693,497
TOTAL EQUITY			3,734,163	1,150,149

Statement of Comprehensive Income

			Consolidated
			2013	2012
FOR THE YEAR ENDED 30 JUNE 2013			A$	A$
Continuing operations
Sale of goods and licence fees			10,880,145	6,079,526
Rendering of services			812,153	951,827
Revenue			11,692,298	7,031,353
Cost of Sales			(4,199,601)	(2,715,786)
Gross Profit			7,492,697	4,315,567
Other income			1,034,398	759,620
Finance income			9,045	33,253
Research and Development Expenses			(1,400,225)	(1,604,493)
Distribution Expenses			(854,360)	(625,739)
Marketing expenses			(1,631,107)	(1,256,879)
Occupancy and facilities expenses			(812,207)	(745,730)
Administration expenses			(3,236,352)	(2,609,021)
Finance costs			(16,410)	(1,655)
Other expenses			(31,136)	-
Profit / (Loss) from continuing operations before income tax			554,343	(1,735,077)
Income tax expense			-	-
Profit / (Loss) from continuing operations after income tax			554,343	(1,735,077)
Net Profit / (Loss) for the year			554,343	(1,735,077)
Profit / (Loss) attributable to equity holders of parent			554,343	(1,735,077
Other comprehensive income - amounts recycled to profit and loss
Foreign currency translation			4,608	244
Other comprehensive income net of tax			4,608	244
Total comprehensive income			558,951	(1,734,833)
Total comprehensive income attributable to equity holders of the parent			558,951	(1,734,833)
Earnings per share for profit attributable to the ordinary
equity holders of the company:
·        Basic earnings per share			0.0012	(0.0042)
·        Diluted earnings per share			0.0012	(0.0042)

Statement of Changes in Equity

			Contributed Equity	Accumulated Losses	Foreign Currency Translation	Employee Equity Benefits Reserve	Total Equity
FOR THE YEAR ENDED 30 JUNE 2013		Note	A$	A$	A$	A$	A$
At 1 July 2011			14,813,612	(12,832,383)	44,994	648,259	2,674,482
Profit / (Loss) for the year			-	(1,735,077)	-	-	(1,735,077)
Other comprehensive income net of tax			-	-	244	-	244
Total comprehensive income			-	(1,735,077)	244	-	(1,734,833)
Transaction with owner in their capacity as owner
Share issue			210,500	-	-	-	210,500
At 30 June 2012			15,024,112	(14,567,460)	45,238	648,259	1,150,149
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

Statement of Cash Flows

			Consolidated
			2013	2012
FOR THE YEAR ENDED 30 JUNE 2013			A$	A$
Cash flows from operating activities
Receipts from customers			9,781,434	6,971,333
Payment to suppliers and employees			(11,559,896)	(8,719,478)
Interest received			9,045	33,253
Interest paid			(16,410)	(1,655)
Payments received for Research and Development Costs			1,000,211	724,803
Net cash flows used in operating activities			(785,616)	(991,744)
Cash flows from investing activities
Purchase of plant and equipment			(256,146)	(22,872)
Payments for intangible assets			(629,057)	(56,392)
Net cash flows used in investing activities			(885,203)	(79,264)
Cash flows from financing activities
Proceeds from issue of shares			1,947,249	-
Costs of capital raising			(24,061)	-
Net cash flows from financing activities			1,923,188	-
Net increase / (decrease) in cash and cash equivalents			252,371	(1,071,008)
Net foreign exchange differences			4,608	244
Cash and cash equivalents at beginning of period			578,022	1,648,786
Cash and cash equivalents at end of period			835,001	578,022

BASIS OF PREPARATION

·      This general purpose financial report for the year ended 30 June 2013 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 2013 was authorised for issue in accordance with a resolution of the Directors on 20 August 2013.

·      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 2012.

This information is provided by RNS

The company news service from the London Stock Exchange

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