Seeing Machines Limited

Earnings Release • Mar 25, 2013

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RNS Number : 7231A

Seeing Machines Limited

25 March 2013

Seeing Machines Limited

("Seeing Machines" or the "Company")

RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2012

Seeing Machines Limited (AIM:SEE) is pleased to announce its unaudited results for the six months ended 31 December 2012.

Seeing Machines creates face and eye tracking products that help machines understand people. As a world leader in the development of computer vision related technology, our products improve driver safety, diagnose ophthalmic health issues, and power next-gen products.

Highlights:

·      Total Revenue for the half year increased 50% to A$5,693,634 (December half 2011: A$3,794,960);

o  DSS revenues increased by 87% to $3,699,553 (December half 2011: $1,981,396) with significant new business growth derived from North America, South America and Africa.

o  Order backlog at 31 December 2012 of over $3,000,000 helping to secure future revenues

·      Increase in gross profit of 57% to A$2,887,500 (December half 2011: A$1,839,243) due primarily to growth in DSS sales;

·      Net loss decreased by A$623,010 to A$317,919 (December half 2011: loss of A$936,801);

·      Cash at 31 December 2012 increased to A$927,518 (30 June 2012: A$578,022) mainly as a result of the capital raising of $1,962,664 completed in October 2012.

Commenting on the Results, Seeing Machines CEO, Ken Kroeger said: "Seeing Machines has continued to invest in extending its position in the mining and resource sector. This increased effort has helped us identify many new and exciting opportunities that are now turning into major DSS contracts. During the first half we have designed improved DSS technology that has successfully completed customer acceptance trials and will be brought to market in the first quarter of 2013-14.

"Given the mining sector's emerging focus on output and efficiency and the role that DSS plays in improving driver alertness and safety, we are seeing a growing sales pipeline and new strategic opportunities.  This provides us with increased confidence in the company's performance for the full year and beyond."

For further information, please contact:

Seeing Machines Limited Ken Kroeger, CEO	+61 2 6103 4700 or [email protected]
Terry Winters, Chairman	+61 411 411 111 or [email protected]
finnCap
Ed Frisby	+44 20 7220 0566 or [email protected]
Ben Thompson	+44 20 7220 0572 or [email protected]
Walbrook PR Ltd	+44 20 7933 8780 or [email protected]
Helen Westaway Paul Cornelius	+44 7841 917 679 +44 7827 879 460

Directors' Report

Your directors submit their report for the half-year ended 31 December 2012.

Directors

The names of the Company's directors in office during the half-year and until the date of this report are as below.  Directors were in office for this entire period unless otherwise stated.

Terry Winters	Non-Executive Chairman
Ken Kroeger	Managing Director & CEO
David Gaul	Non-Executive Director
Rob Sale	Non-Executive Director	To 28 November 2012
Alex Zelinsky	Non-Executive Director
Michael Roberts	Non-Executive Director	From 13 January 2013

Review and results of Operations

Review of the first half of the 2013 financial year

The company achieved revenues of A$4,686,796 from the sale of goods and services and A$1,006,838 from other income resulting in total revenue for the half year to 31 December 2012 of A$5,693,634 (2011: A$3,794,960).

The first six months of trading in the 2013 financial year were a significant improvement over the corresponding period in the 2012 financial year.  This was primarily driven by significant growth in demand for its DSS products, evidenced by both the large increase in sales revenue realised in the period from this source, but also the increase in orders on hand at period end, amounting to more than $3 million in value. 

The company made a net loss of A$317,919 for the six months to 31 December 2012 compared to a net loss of A$936,801 for the period to 31 December 2011.  This result represents a significant improvement in operational outcomes.

Operational highlights for the half-year include:

·      Continued growth of the DSS pipeline with new customers and expansion at existing sites across customers and regions;

·      Strong backlog of orders at end of first half to underpin next quarter revenues;

·      Next generation of DSS prototypes built and delivering very good field test results;

·      New partnership opportunities for the DSS which will increase global channels to market;

·      Development of new services offerings for the DSS enhancing our overall DSS offering and diversifying revenue opportunities;

·      >87% increase in DSS revenues (A$3,699,553 compared to A$1,981,396 for the corresponding period in 2011);

·      Development of next generation Eye Tracking technology to enhance all areas of product commercialisation;

·      TrueField progress and potential for JV or licensing in 2013.

Financial Results

The company achieved revenues of A$4,686,796 (2011: A$3,048,410) from sale of goods and services and A$1,006,838 (2011: A$746,550) from other income resulting in total revenue for the half year to 31 December 2012 of A$5,693,634 (2011: A$3,794,960).   

Revenue for the half year for each of the three products; DSS, faceAPI and faceLAB, and Other Income compared to the same period last year is shown in the following table.

Product	31 December 2012 $	31 December 2011 $	Variance %
DSS	3,699,553	1,981,396	+87
faceLAB	693,870	861,697	-19
faceAPI	293,373	205,317	+43
Other income	1,006,838	746,550	+34
Total Revenue	5,693,634	3,794,960	+50

The high value of the Australian dollar against the US, Euro and Great Britain currencies has had a negative impact on revenue earned from those regions over the period.  Cost of sales at A$1,799,296 (2011: A$1,209,167) was up due to higher revenues whilst the proportionate cost was relatively static at 38% of revenue as opposed to 39% of revenue for the corresponding period in 2011.  Net expenditure for the half-year was A$4,212,257, up from A$3,522,594 for the period to 31 December 2011, reflecting  the increased investment in the period targeted toward additional Research and Development, and increased activity in DSS sales, distribution and marketing.   

The Net Loss for the six months to 31 December 2012 was better than budget at A$317,919, and a significant decrease of $618,882 compared to the net loss of A$936,801 for the period to 31 December 2011. Post half-year report balance sheet date, in February 2013, the accrued R&D Tax Offset of $1,000,211 with respect to the 2012 Income Tax Return of the company was received. This was treated as other income and recognised in the first half of the current 2013 financial year.

Cash at 31 December 2012 was A$927,518 compared to A$578,022 at 30 June 2012 and A$1,070,433 at 31 December 2011.

In October 2012, the company completed a capital raising of A$1,962,664.

Operational Highlights

DSS

DSS revenues were A$3,699,553 for the six months to 31 December 2012, reflecting a substantial increase over A$1,981,396 achieved for the six months to 31 December 2011.  This was the result of the strong demand for the product range following an extended period of mine site trials that are now converting into sales, and the company's success in growing its customer base with a broader geographic spread.  Revenue was generated from:

·      sales of DSS units;

·      software licensing;

·      installation services;

·      maintenance and support fees;

·      field support services; and

·      DSSi information reporting services including event classification.

Customer locations now include North and South America, Africa, Australia, Mongolia and Indonesia.  Notably there was a significant expansion in sales to locations outside Australia and the United States. 

To accommodate growth and access to customers, the company has commenced the relocation of the DSS sales and services arms of the business to larger premises in Tucson Arizona. This will allow the organisation to offer a full service, inventory storage and maintenance for the DSS platform across the Americas.

A number of opportunities to extend the DSS to market are also being pursued.  Over 80 DSS units have been installed in large road-legal transport trucks that operate on a combination of private mining roads and public highways in Australia. This represents an entry into a new market for the product from which we expect ongoing uptake. The technology is being modified for original equipment manufacturer (OEM) opportunities in the wider automotive market.

In terms of R&D, the focus remains aimed at improvements in hardware ruggedisation and reliability, new software features and the development of a real-time situational risk awareness reporting system that will further support the mitigation of fatigue related operator risk.

For the remainder of this financial year we will focus our energies on expansion of the DSS business through:

·     closing a number of significant deals in the sales pipeline that will further entrench the DSS as the superior product for the mining industry;

·      addressing the backlog of outstanding orders ;

·      further building the DSS team capability to support our customers in their use of the product;

·      improving our logistics and business systems to streamline quotations, orders and fulfilment

·      furthering R&D aimed at keeping the technology ahead of its competitors,

·      incorporating feedback and features that our existing customers need; and

·      progressing the partnership opportunities that will expand our routes to market. 

faceAPI

faceAPI achieved revenue of A$293,373 (2011: A$205,317) for the six months to 31 December 2012. 

The Company has started offering integration services for our core technology, known as faceAPI. This is expected to lead to ongoing engineering revenue and to additional production license sales and royalties.

faceLAB

faceLAB achieved revenue of A$693,870 (2011: A$861,697) for the six months to 31 December 2012, a reduction of 19% over the six months to 31 December 2011.

The drop in revenue can be attributed to aging of this product, which will be addressed through the planned near-term release of new product versions incorporating next-generation precision eye-tracking technology. This exciting new technology will also support existing and future products across the range of Seeing Machines' product platforms.

TrueField

The Glaucoma-related laboratory trials performed by our technology partners at the Australian National University (ANU) have recently been completed. In response to the positive results, we will initiate an independent to validate performance in lead up to the next commercialisation steps.

The domain experts continue to believe that the product will have applicability beyond glaucoma in eye diseases such as Age Related Macular Degenerations and Diabetic Retinopathy.

Summary

The Directors remain committed to delivering significant growth in shareholder value and expect results for the full year to 30 June 2013 to be in line with existing market expectations.

The demand for DSS products and services by the mining and resource industry is substantial and is expected to continue to underpin most of the company's revenue and profit growth over the next two to three years.

During this time the company will be developing new markets in road transport, bus and segments where machine and plant operators face significant risk of fatigue and distraction.

Terry Winters Chairman 22 March 2013	Ken Kroeger Managing Director & CEO 22 March 2013

Statement of Financial Position

			Consolidated
			31 DEC 2012	30 JUN 2012
AS AT 31 DECEMBER 2012			A$	A$
ASSETS
CURRENT ASSETS
Cash and cash equivalents			927,518	578,022
Trade and other receivables			2,804,225	1,656,303
Inventories			332,549	86,151
Other current assets			17,856	222,139
TOTAL CURRENT ASSETS			4,082,147	2,542,615
NON-CURRENT ASSETS
Property, plant and equipment			364,538	256,254
Intangible assets			426,836	479,573
TOTAL NON-CURRENT ASSETS			791,374	735,827
TOTAL ASSETS			4,873,521	3,278,442
LIABILITIES
CURRENT LIABILITIES
Trade and other payables			1,319,911	1,515,610
Provisions			426,733	408,717
TOTAL CURRENT LIABILITIES			1,746,644	1,924,327
NON-CURRENT LIABILITIES
Provisions Non-Current			233,628	203,966
TOTAL NON-CURRENT LIABILITIES			233,628	203,966
TOTAL LIABILITIES			1,980,272	2,128,293
NET ASSETS			2,893,249	1,150,149
EQUITY
Contributed equity			17,088,651	15,024,112
Accumulated losses			(14,885,379)	(14,567,460)
Other reserves			689,977	693,497
TOTAL EQUITY			2,893,249	1,150,149

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

Statement of Comprehensive Income

			Consolidated
			2012	2011
FOR THE HALF-YEAR ENDED 31 December 2012			A$	A$
Continuing operations
Sale of goods and license fees			4,114,298	2,623,901
Rendering of services			572,498	424,509
Revenue			4,686,796	3,048,410
Cost of Sales			(1,799,296)	(1,209,167)
Gross Profit			2,887,500	1,839,243
Other income			1,006,838	746,550
Research and Development Expenses			(774,711)	(607,318)
Distribution Expenses			(563,669)	(291,208)
Marketing expenses			(897,160)	(597,348)
Occupancy and facilities expenses			(371,206)	(376,270)
Administration and support expenses			(1,538,572)	(1,701,382)
Other expenses			(69,939)	50,932
Loss before income tax			(317,919)	(936,801)
Income tax expense			-	-
Loss after income tax			(317,919)	(936,801)
Net Loss for the period			(317,919)	(936,801)
Other comprehensive income
Foreign currency translation - items that may be reclassified subsequently to profit or loss			(3,520)	(7,648)
Other comprehensive income net of tax
Total comprehensive income			(321,439)	(944,449)
Earnings per share for profit attributable to the ordinary
equity holders of the company:
·        Basic earnings per share			(0.077)	(0.226)
·        Diluted earnings per share			(0.077)	(0.226)

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

Statement of Changes in Equity

			Contributed Equity	Accumulated Losses	Foreign Currency Translation Reserve	Employee Equity Benefits Reserve	Total Equity
FOR THE HALF-YEAR ENDED 31 DECEMBER 2012			A$	A$	A$	A$	A$
At 1 July 2011			14,813,612	(12,832,383)	44,994	648,259	2,674,482
Loss for the half-year			-	(936,801)	-	-	(936,801)
Other comprehensive income			-	-	(7,648)	-	(7,648)
Total comprehensive income			-	(936,801)	(7,648)	-	(944,449)
Transaction with owner in their capacity as owner
Shares Issued			210,500	-	-	-	210,500
At 31 December 2011			15,024,112	(13,769,184)	37,346	648,259	1,940,533
At 1 July 2012			15,024,112	(14,567,460)	45,238	648,259	1,150,149
Loss for the half-year			-	(317,919)	-	-	(317,919)
Other comprehensive income			-	-	(3,520)	-	(3,520)
Total comprehensive income			-	(317,919)	(3,520)	-	(321,439)
Transaction with owner in their capacity as owner
Shares Issued			2,064,539	-	-		2,064,539
At 31 December 2012			17,088,651	(14,885,379)	41,718	648,259	2,893,249

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

Statement of Cash Flows

					Consolidated
					2012		2011
	FOR THE HALF-YEAR ENDED 31 December 2012				A$		A$
	Cash flows from operating activities
	Receipts from customers				4,860,046		3,132,981
	Receipt of R&D tax offset				-		702,803
	Payment to suppliers and employees				(6,171,125)		(4,388,295)
	Interest received				6,627		21,747
	Net cash flows used in operating activities				(1,304,452)		(530,764)
	Cash flows from investing activities
	Purchase of plant and equipment				(143,116)		(11,029)
	Payments for intangible assets				(16,415)		(28,912)
	Net cash flows used in investing activities				(159,531)		(39,941)
	Cash flows from financing activities
	Proceeds from issue of shares				1,832,414		-
	Cost of Capital Raising				(15,415)
	Net cash flows from financing activities				1,816,999		-
	Net decrease in cash and cash equivalents				353,016		(570,705)
	Net foreign exchange differences				(3,520)		(7,648)
	Cash and cash equivalents at beginning of period				578,022		1,648,786
	Cash and cash equivalents at end of period				927,518		1,070,433

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

This information is provided by RNS

The company news service from the London Stock Exchange

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