Seeing Machines Limited Half Year Results to 31 December 2016 (6219Z)

TIDMSEE

RNS Number : 6219Z

Seeing Machines Limited

16 March 2017

Seeing Machines Limited

("Seeing Machines", the "Company" or the "Group")

Half Year Results to 31 December 2016

16 March 2017

Seeing Machines (AIM: SEE), the AIM listed technology company with a focus on operator monitoring and intervention sensing technologies and services is pleased to announce its unaudited financial results for the six months to 31 December 2016.

2016 was a transitional year for Seeing Machines, with the business moving from a direct-to-market model in mining to a royalty arrangement with Caterpillar, allowing the Company to refocus its efforts toward the Automotive, Fleet, Aviation and Rail markets and technologies.

Operational

-- Automotive: Pipeline of automotive opportunities has strengthened, in addition to the previously announced major US automotive OEM customer orders. Applications expanding from dealing with drowsiness/distraction issues, to enabling semi/fully autonomous and next generation displays

-- Automotive: Company remains on track with its US OEM customer for first semi-autonomous vehicle with integrated Fovio Driver Monitoring System ("DMS") to be launched in 2017

-- Automotive: Expanded DMS research platform to additional leading OEMs and automotive research bodies

-- Automotive: Leveraging work from globally recognised funded research program to design our next generation driver state monitoring systems

-- Fleet: Development of sales channels including a global distribution partnership signed with MiX Telematics

-- Fleet: Global pipeline continues to build and new assessments engaged. There are currently over 60 assessments in progress including significant and prominent global freight brands

-- Mining: Post period end, appointment of Tim Crane, General Manager Caterpillar Services to Seeing Machines Limited Board, to drive safety related revenues for both companies

-- All markets: System in Package ("SiP") to provide cost effective validated solution capable of powering the majority of our applications, and providing a scalable DMS solution

Financial

   --      Fleet: 134% increase in Fleet revenue to A$1.6m 

-- Fleet: Total value of contracts signed (to be recognised over the term of the contracts) with new Guardian customers in the first half was A$6.9m - equal to the total value of contracts signed in FY15 and FY16 combined. However, this has not translated to sales revenue as quickly as expected, as customer fleet managers continue to implement the equipment roll out, managing their fleet utilisation and down time

-- Fleet: Reduced expectations for full year revenues due to the above mentioned roll out timeframes and near term sales expectations

-- Mining: Despite the current state of the resources sector, high margin royalties of A$789,000 received from Caterpillar

-- Group: Loss before tax of A$14.1m (H1FY16: profit before tax of A$11.3m) reflecting investment in the Group including core technology platform, and expected R&D refundable tax offset (other income) and one off CAT license revenue in H1FY16

-- Group: GBP16.4m fund raise closed post period end and therefore not included in the period end balance sheet. Full ownership retained of the Automotive business ensuring all intellectual property including data, SiP DMS chip and all key staff will remain available to all Seeing Machines' target markets

Ken Kroeger, CEO of the Company said:

"We continue to grow our business in the Automotive, Fleet, Aviation, Mining and Rail markets and technologies with strong support from our shareholders. Revenue in our Fleet business has more than doubled, with long-term contracted business and a stronger pipeline developed across a number of regions and channels worldwide. The nature of the revenue is also evolving from one-off hardware sales to a longer-term predictable subscription based revenue stream.

Our progress on the development of the Fovio vision processor and SiP platform will not only enable scalability within the Automotive business, but will also be leveraged across most of Seeing Machines' segments and broader artificial intelligence applications. Retaining Automotive within Seeing Machines is already benefiting the broader business and our progress with automotive OEM opportunities is very pleasing. The recent announcement that Intel Corp will buy Mobileye for US$15 billion indicates the very strong interest in the market for advanced automotive vision technologies.

Our reputation is growing from that of driver monitoring system pioneer to the industry benchmark and we will continue to leverage this across all areas of the business to continue our growth and penetration. Overall, I am pleased with the progress towards the achievement of our long-term goals as our multi-sector strategy continues to gain momentum."

The financial report for the half year ended 31 December 2016 is available for download from the Company's website: www.seeingmachines.com

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries:

 
 Seeing Machines Limited     www.seeingmachines.com / 
                              [phone] 
 Ken Kroeger, Managing       [e-mail] 
  Director and CEO 
 Media inquiries             [e-mail] 
 finnCap Ltd, Broker for Seeing Machines 
 Ed Frisby / Emily Watts, 
  Corporate Finance          [phone] 
 Tim Redfern, Corporate 
  Broking 
 

About Seeing Machines

Seeing Machines, (AIM: SEE) is focused on operator monitoring and intervention sensing technologies and services. With more than 15 years of experience, Seeing Machines uses advanced detection and prevention safety assistance technologies to track eye and facial movement in order to monitor fatigue, drowsiness and distraction events, such as microsleeps, texting and cell phone use as they occur, while providing for a real-time intervention strategy, which improves operator, driver and environmental safety, preserves assets, and reduces risk. 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, Electro Motive Diesel, Progress Rail, Boeing, Takata, SEMCo, and Eye Tracking Inc among its partners.

Directors' report

Financial Results

-- Total value of contracts signed with new Guardian customers in the first half was A$6.9m - equal to the total value of contracts signed in FY15 and FY16 combined. However, this has not translated to sales revenue as quickly as expected due to a longer than anticipated time lag between Guardian customer orders being signed and the units being delivered and installed in customer fleets. The half year's customer wins reflect a significant volume of forward booked fleet contracts in place (with 36 to 60 month terms), securing long term predictable revenue with significant potential for additional growth.

-- Sales revenue in the half year ended 31 December 2016 was A$3,620,748 (2016: A$29,320,940). Prior year revenue included direct sales of DSS mining products and services of A$5,765,019 and a one-off license fee of A$21,850,452 following a global product development, licensing and distribution agreement with Caterpillar Inc.

-- Revenue from the Guardian division increased by 134% to A$1,637,875 (2016: A$699,968). See division highlights below.

-- Revenue from the Automotive division was in line with expectations and the prior period and totalled A$992,934.

-- Revenue from other sources includes the Aviation business which was mainly secured through funded R&D programs with Aviation OEMs, carriers and major industry integrators. Other income totalled A$1,162,838 (2016: A$2,363,323).

-- The Company made a net loss of A$14,138,699 for the period, compared with a net profit of A$11,174,353 for the period to 31 December 2015. Main reasons for drop in profitability include:

   -       FY16 profit included one-off Caterpillar license revenue of A$21.85m 

- Increased investment in Research & Development (R&D) in 2017 (see Automotive division highlights below)

- R&D refundable tax offset is included in the prior period but not this period - a similar value refund is anticipated in the second half of FY17 subject to a successful claim

Revenue for the half year for the Automotive, DSS, and Fleet product lines, the Caterpillar license fee, and Other Income compared to the same period last year is shown in the following table:

 
                                 Segment Revenue             Segment Profit 
                               Dec-16       Dec-15        Dec-16         Dec-15 
 FOR THE HALF YEARED         A$           A$            A$             A$ 
  31 DECEMBER 
 
 
 Revenue 
 Automotive                     992,934      978,970    (2,672,072)    (2,812,458) 
 DSS mining/ Caterpillar 
  license fees & royalties      789,939   27,642,002    (1,043,951)     26,126,013 
 Fleet /(Guardian)            1,637,875      699,968   (10,870,924)   (11,295,716) 
 Other revenue sources          200,000          (0)      (714,590)    (3,206,809) 
 Total for continuing 
  operations                  3,620,748   29,320,940   (15,301,537)      8,811,030 
                             ==========  ===========  =============  ============= 
 Total other income           1,162,838    2,363,323      1,162,838      2,363,323 
                             ----------  -----------  -------------  ------------- 
 Total Consolidated 
  Revenue/(Loss)/Profit       4,783,586   31,684,263   (14,138,699)     11,174,353 
                             ==========  ===========  =============  ============= 
 

Cash as at 31 December 2016 has decreased compared to 30 June 2016 due to the half year loss, offset in part by the monetisation of most of the amounts owed by Caterpillar for the one-off license fee. This cash balance does not include the proceeds from the recent capital raise totalling GBP16.4m (A$27m) which was received in January 2017. Trade and other receivables have decreased due to the monetisation of most of the amounts owed by Caterpillar for the one-off license fee. Increase in the intangibles balance is due to the capitalisation of development costs consistent with prior year.

Highlights Summary:

-- With the transition from a direct-to-market mining business to a royalty arrangement with Caterpillar, the Company has refocussed its efforts toward the Automotive, Fleet, Aerospace and Rail markets and technologies.

-- The Company is building a strong pipeline of Fleet sales across several regions, driven by several assessments and opportunities as outlined in our recent quarterly Fleet update (published in December 2016, and available at https://www.seeingmachines.com/investors/announcements/). We are also confident of increased activity and sales through Caterpillar across their broad target markets of construction, cement and quarry, forestry, and mining as this market recovers from an extended period of low ore prices.

-- The Company has cemented itself as the market pioneer and leader of driver monitoring system (DMS) technology by securing a follow-on order from a major US automotive OEM, and has received strong levels of interest for developing programs with several major European automotive OEMs as they seek to adopt DMS for their ADAS and semi-autonomous capable vehicles.

-- A pivotal achievement for Seeing Machines has been the development of its System in Package (SiP) - essentially a very cost-effective chipset that runs Seeing Machines' core algorithms, capable of powering all our applications.

Operational Highlights - Fleet (Guardian)

-- In December 2016, the Company announced a global distribution partnership with MiX Telematics (JSE: MIX, NYSE: MIXT), a leading global provider of fleet and mobile asset management solutions. Formalising this Agreement represents a significant step forward for the Guardian brand. Mix is a credible player in the fleet management space and have recognised the value that partnering with Guardian brings.

-- During the half year two additional distributor agreements were signed in Asia Pacific - Kiatana (Thailand) and Autosense (NZ). Both distributors purchased inventory as part of these deals and have signed up multiple customers under assessment.

-- The global pipeline continues to build and new assessments engaged. There are currently over 60 assessments in progress including significant and prominent global freight brands. Advancements in the US have been particularly pleasing with assessments now being converted to contracts.

-- Total Lifetime Contracted Value as at 31 December 2016 is A$13.9m, of which A$6.9m new contract value was derived in the half year, and in total A$7.5m of this A$13.9m has been recognised as revenue in this and prior financial reporting periods. As noted above, this contracted value has not translated to sales revenue as quickly as originally anticipated. Our sales revenue is recognised when a unit is shipped to a customer and monitoring revenue is first recognised once the unit is installed and monitoring services are being delivered. As these large customer deals have been negotiated, customer preferences are emerging such that units are shipped over time to align with how quickly a customer is prepared to make its fleet available for installation of units. This creates a time lag between signing up a customer and being able to recognise sales revenue.

Operational Highlights - Mining

-- Despite the current state of the resources sector and Caterpillar's (CAT) slower than anticipated growth of the business, royalties of A$789,000 represents material revenue for the Company.

-- The gradual turnaround in the resources sector translates to a strengthened sales pipeline for CAT and they anticipate signing up another new global mining customer during 2017.

-- Delivery of the Seeing Machines engineered, next generation DSS Mining product remains on track for the second half of the financial year.

   --      Strengthened relationship with CAT as evidenced by: 

- their agreement to accelerate most of their payments to the Company with no discount in return for the delivery of certain agreed engineering services

- the appointment of Mr Tim Crane, General Manager - Cat Services, Marketing & Digital Division to Seeing Machines' Board of Directors

Operational Highlights - Automotive (Fovio)

-- The Company has decided to keep Fovio within the Group rather than spinning it out into a separately funded entity. This decision is in the best interests of shareholders given synergies with other parts of the Group. As a result, we proceeded with a capital raise which was concluded in January successfully raising GBP16.4m to fund Fovio within the Group.

-- During the half-year, we have completed key hires of CEO and other senior management personnel and grown the automotive engineering and sales teams significantly. These resources were deployed on OEM program delivery, on-going Fovio chip automotive qualification, customer prototyping, and OEM/Tier 1 PC-DMS R&D programs.

-- Fovio has successfully passed every major delivery milestone for its major OEM customer whose first semi-autonomous vehicle with integrated DMS is expected to be launched in 2017.

-- Strong progress was made on the business development pipeline for other OEM opportunities as the automotive industry rapidly converges on the understanding of how critical DMS technology is for both mitigating drowsiness and distraction issues, and as a critical part of the technology stack for semi/fully-autonomous driving and next generation display systems. A sample of Fovio's technology engagements was on show at the CAR-ELE JAPAN show as well as CES 2017 which generated a high level of interest from industry leaders.

-- The Company has made tremendous strides on the development of the Fovio vision processor and System in Chip (SiP) platform. The first processors are in automotive qualification. This platform will provide the Company with a market leading DMS performance platform, in a simple to integrate product for OEM/Tier1 customers which will be key to enabling a rapidly scalable business for Fovio as well as for use across most product segments such as Guardian and other new applications/markets being researched.

Operational Highlights - Aviation

-- The first half has seen significant progress for Aviation with the following funded strategic and exploratory engagements:

- Installation and data collection within a pilot and crew training facility with globally recognised carriers

- Installation and data collection with a leading global OEM in an operational aircraft to capture and interpret pilot fatigue and alertness data

- Initial engagement with a Tier 1 Avionics provider to understand pilot and crew fatigue status in a simulated environment

- Joint study with an OEM and Air Navigation service provider to support more effective training and assessment in air traffic control

- Global first data collection of helicopter pilot scan patterns and situational awareness in critical scenarios with a major player in helicopter operations.

-- These engagements are the foundation of our developing product roadmap leveraging core capability for both aftermarket product and service and ultimately a production line product solution, with a key focus on:

   -       Pilot and crew training and assessment 
   -       Pilot and crew operational monitoring 
   -       Air Traffic Control and Console Operator monitoring 

Operational Highlights - Rail

-- Rail - the Company is in final negotiation stage for a global agreement with Progress Rail. We expect an agreement to be in place during 2017.

Summary

The Board expects the Company's revenue sources to continue to evolve with the recent change of DSS business revenue to a Caterpillar royalty fee for DSS and the increase in our Fleet direct to market business. As our Fleet business matures we expect direct sales to be less dominant with growth over time in non-direct sales channels. Other revenue streams include engineering services in the automotive space in the short term but this will also move to an annuity stream from the sale of our technology into newly manufactured passenger vehicles.

The Directors remain committed to delivering significant growth in shareholder value and we look forward to reporting on our continued progress during this year.

 
 
   Terry Winters    Ken Kroeger 
   Chairman         Managing Director & CEO 
   16 March 2017    16 March 2017 
 
 
 

Interim Consolidated Statement of Financial Position

 
 
                                                     31 DEC 2016    30 JUN 2016 
 AS AT 31 DECEMBER 2016                                   A$             A$ 
--------------------------------------------------  -------------  ------------- 
 ASSETS 
 CURRENT ASSETS 
 Cash and cash equivalents                             11,603,910     16,948,300 
 Trade and other receivables                            3,597,270      6,786,046 
 Inventories                                            6,901,966      8,420,350 
 Current financial assets                                 241,159        241,159 
 Deferred Taxation                                              -         85,581 
 Other current assets                                   1,439,056        663,615 
 TOTAL CURRENT ASSETS                                  23,783,361     33,145,051 
                                                    -------------  ------------- 
 
 NON-CURRENT ASSETS 

 Property, plant and equipment                            527,090        691,961 
 Intangible assets                                      5,130,872      4,404,268 
 Non-current financial assets                             140,191        140,191 
 Trade and other receivables                            1,797,236      6,284,468 
                                                    -------------  ------------- 
 TOTAL NON-CURRENT ASSETS                               7,595,389     11,520,888 
 TOTAL ASSETS                                          31,378,750     44,665,939 
 
 LIABILITIES 
 CURRENT LIABILITIES 
 Trade and other payables                               1,142,538      1,801,771 
 Provisions                                             1,677,764      1,591,987 
 Deferred revenue                                       1,987,951        728,959 
 Income tax payable                                             -         85,581 
 TOTAL CURRENT LIABILITIES                              4,808,253      4,208,298 
                                                    -------------  ------------- 
 
 NON-CURRENT LIABILITIES 
 Provisions                                                44,689         33,324 
 TOTAL NON-CURRENT LIABILITIES                             44,689         33,324 
                                                    -------------  ------------- 
 TOTAL LIABILITIES                                      4,852,942      4,241,622 
                                                    -------------  ------------- 
 
 NET ASSETS                                            26,525,808     40,424,317 
                                                    =============  ============= 
 
 EQUITY 
 Contributed equity                                    70,806,624     70,592,134 
 Treasury shares                                      (1,191,078)    (1,226,938) 
 Accumulated losses                                  (43,875,933)   (29,737,234) 
 Other reserves                                           786,195        796,355 
                                                    -------------  ------------- 
 
 Equity attributable to the owners of the parent       26,525,808     40,424,317 
 Non-controlling interest                                       -              - 
                                                    -------------  ------------- 
 TOTAL EQUITY                                          26,525,808     40,424,317 
                                                    =============  ============= 
 

Interim Consolidated Statement of Comprehensive Income

 
 
                                                 2016          2015 
 FOR THE HALF-YEARED 31 DECEMBER 
  2016                                            A$            A$ 
------------------------------------------  -------------  ------------ 
 Continuing operations 
 Sale of goods and license fees                 1,669,995    27,558,018 
 Rendering of services                          1,950,753     1,762,922 
 Revenue                                        3,620,748    29,320,940 
                                            -------------  ------------ 
 
 Cost of sales                                (4,093,322)   (4,238,008) 
 
 Gross (loss)/profit                            (472,574)    25,082,932 
                                            -------------  ------------ 
 
 Other income                                   1,162,838     2,363,323 
 
   Expenses 
 Research and development expenses            (6,275,599)   (4,218,989) 
 Customer support and marketing 
  expenses                                    (4,355,506)   (3,891,880) 
 Occupancy and facilities expenses            (1,094,867)     (891,894) 
 Corporate services expenses                  (3,102,957)   (2,935,867) 
 Other expenses                                      (34)   (4,241,864) 
 
 (Loss) / profit before income 
  tax from continuing operations             (14,138,699)    11,265,761 
 
 Income tax expense                                     -      (47,501) 
                                            -------------  ------------ 
 (Loss) / profit from continuing 
  operations after income tax                (14,138,699)    11,218,260 
 (Loss) from discontinued operations 
  after income tax                                      -      (43,907) 
 
 (Loss) / profit for the period              (14,138,699)    11,174,353 
                                            -------------  ------------ 
 Attributable to: 
 Equity holders of parent                    (14,138,699)    11,194,111 
 Non-controlling interests                              -      (19,758) 
                                            -------------  ------------ 
                                             (14,138,699)    11,174,353 
                                            -------------  ------------ 
 
 Other comprehensive (loss) / 
 income to be reclassified subsequently 
 to profit and loss 
 Exchange differences on translation 
  of foreign operations                          (55,470)     (317,689) 
 Other comprehensive income net 
  of tax                                         (55,470)     (317,689) 
 
 Total comprehensive (loss) / 
  income                                     (14,194,169)    10,856,664 
                                            =============  ============ 
 
 Total comprehensive income attributable 
 to: 
 Equity holders of parent                    (14,194,169)    10,854,032 
 Non-controlling interests                              -         2,632 
                                            -------------  ------------ 
 Total comprehensive (loss) / 
  income for the year                        (14,194,169)    10,856,664 
                                            =============  ============ 
 
 Earnings per share for (loss) 
  / profit attributable to the 
  ordinary 
 equity holders of the company: 
 -- Basic earnings per share                    (0.01316)       0.01215 
 -- Diluted earnings per share                  (0.01316)       0.01181 
 

Interim Consolidated Statement of Changes in Equity

 
                    Contributed    Treasury     Accumulated      Foreign     Employee       Total       Non-Controlling      Total 
                     Equity          Shares        Losses       Currency       Equity                       Interest         Equity 
                                                               Translation    Benefits 
                                                                 Reserve      & Other 
                                                                              Reserve 
 FOR THE                A$            A$             A$            A$           A$            A$              A$               A$ 
 HALF-YEARED 
 31 DECEMBER 
 2016 
 At 1 July 
  2015               57,490,870   (1,301,823)   (27,997,987)     (544,438)   1,312,148     28,958,770         1,175,516     30,134,286 
 Profit/(loss) 
  for the 
  half-year                                       11,194,111             -           -     11,194,111          (19,758)     11,174,353 
 Other 
  comprehensive 
  income                                                   -     (340,259)           -      (340,259)            22,390      (317,869) 
                   ------------  ------------  -------------  ------------  ----------  -------------  ----------------  ------------- 
 Total 
  comprehensive 
  income                      -                   11,194,111     (340,259)           -     10,853,852             2,632     10,856,484 
                   ------------  ------------  -------------  ------------  ----------  -------------  ----------------  ------------- 
 
 Transaction 
 with owner 
 in their 
 capacity 
 as owner 
 Shares issued          297,759             -              -             -           -        297,759                 -        297,759 
 Employee Share 
  Loan Plan                                                                    176,577        176,577                          176,577 
 At 31 December 
  2015               57,788,629   (1,301,823)   (16,803,876)     (884,697)   1,488,725     40,286,958         1,178,148     41,465,106 
                   ============  ============  =============  ============  ==========  =============  ================  ============= 
 
 At 1 July 
  2016               70,592,134   (1,226,938)   (29,737,234)     (764,810)   1,561,165     40,424,317                 -     40,424,317 
 
 (Loss) for 
  the half-year               -             -   (14,138,699)             -           -   (14,138,699)                 -   (14,138,699) 
 other 
  comprehensive 
  income                      -             -              -      (55,470)           -       (55,470)                 -       (55,470) 
                   ------------  ------------  -------------  ------------  ----------  -------------  ----------------  ------------- 
 Total 
  comprehensive 
  income                      -             -   (14,138,699)      (55,470)           -   (14,194,169)                 -   (14,194,169) 
                   ------------  ------------  -------------  ------------  ----------  -------------  ----------------  ------------- 
 
 Transaction 
 with owner 
 in their 
 capacity 
 as owner 
 Shares issued          214,490             -              -             -           -        214,490                 -        214,490 
 Treasury Shares              -        35,860              -             -           -         35,860                 -         35,860 
 Employee Share 
  Loan Plan                   -             -                            -      45,310         45,310                 -         45,310 
 At 31 December 
  2016               70,806,624   (1,191,078)   (43,875,933)     (820,280)   1,606,475     26,525,808                 -     26,525,808 
                   ============  ============  =============  ============  ==========  =============  ================  ============= 
 

Interim Consolidated Statement of Cash Flows

 
                                               Consolidated 
                                            2016           2015 
 FOR THE HALF-YEAR ENDED 31 
  DECEMBER 2016                              A$             A$ 
-------------------------------------  -------------  ------------- 
 
 Operating activities 
 Receipts from customers (inclusive 
 of GST)                                  13,470,938     19,604,534 
 Payments to suppliers and 
  employees (inclusive of GST)          (17,835,288)   (20,427,209) 
 Government Grants                           103,125              - 
 Interest received                             1,087         20,019 
 Net cash flows used in operating 
  activities                             (4,260,138)      (802,656) 
                                       -------------  ------------- 
 
 Investing activities 
 Purchase of plant and equipment           (141,724)      (295,706) 
 Payments for intangible assets            (889,105)      (951,325) 
 Net cash flows used in investing 
  activities                             (1,030,829)    (1,247,031) 
                                       -------------  ------------- 
 
 Financing activities 
 Proceeds from issue of shares                     -              - 
 Cost of capital raising                           -              - 
 Repayment of borrowings                           -              - 
                                       -------------  ------------- 
 Net cash flows from financing                     -              - 
  activities 
                                       -------------  ------------- 
 
 Net increase/(decrease) in 
  cash and cash equivalents              (5,290,967)    (2,049,687) 
 Net foreign exchange differences           (53,423)        176,506 
 Cash and cash equivalents 
  at 1 July                               16,948,300     12,035,741 
 Cash and cash equivalents 
  at 31 December                          11,603,910     10,162,560 
                                       =============  ============= 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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March 16, 2017 03:01 ET (07:01 GMT)