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Seeing Machines raises £27.5mln as Caterpillar royalties drive first-half gross profit growth

Seeing Machines is arming itself with more money to help fund the next stage of its growth as carmakers increasingly look to add its fatigue monitoring technology in their vehicles

caterpillar truck
Caterpillar uses Seeing’s technology in its new diggers and trucks

Seeing Machines Limited (LON:SEE) revealed it has raised A$51.3mln (£27.5mln) from investors to help it take advantage of the growing demand for driver monitoring systems as the AIM-listed firm reported its first-half results.

The company, whose technology tracks eye movements to make sure drivers are paying attention, has issued 916.7mln new shares at 3p a piece – below yesterday’s closing price of 4.6p. Shares fell 30% to 3.2p to reflect that discount. Among the participants was its largest shareholder, VS International.

WATCH: Seeing Machines talk development strategy after successful capital raise

Seeing Machines said it is to offer certain other existing shareholders the chance to buy shares at the same price, which, if fully taken-up, will raise another A$12.7mln (£6.8mln).

The new shares, if all are issued, could account for around half of the company’s total share capital.

“The proceeds from this fundraise will enable us to further develop and build on our leading market position within the driver monitoring technology market, whilst funding the Group to deliver on its substantial pipeline of existing and anticipated OEM programs,” said chief executive Ken Kroeger.

“We believe DMS will continue to become a more integral part of global transport safety standards, as demand for it is driven by the end customers, OEMs and industry legislation.”

Caterpillar royalties drive gross profits higher

The fundraise came as Seeing Machines reported higher half-year gross profits, thanks to a sharp rise in royalties collected from Caterpillar Inc (NYSE:CAT) and its Progress Rail train manufacturing division.

Caterpillar and Progress have both been installing Seeing Machines’ driver monitoring systems (DMS) in new diggers and trains that roll off their production lines and they pay a royalty every time they do so.

Revenues in this division more than trebled to A$4.6mln (H1 17/18: A$1.3mln) in the six months ended 31 December as Seeing Machines continued to grow its long-standing partnerships with the pair.

The high-margin nature of these royalties helped gross profit across the group jump to A$8.9mln (H1 17/18: A$6.6mln) in the first half.

Seeing Machines’ services business, which provides post-sales support and consultancy to customers, also enjoyed a strong six months, with revenues doubling to A$2.4mln (H1 17/18: A$1.2mln).

In talks with more carmakers

Those two divisions more than offset declines in the automotive and fleet businesses, which fit Seeing Machines’ fatigue-monitoring tech into cars and lorries and buses, respectively.

Automotive revenues fell to A$4.7mln (H1 17/18: A$6.9mln), although this is merely a reflection of the lumpy nature of non-recurring engineering payments which Seeing receives from customers during the initial development process.

The company has agreements in place with six carmakers in Germany, the US and China, most of whom will start production on the cars containing Seeing’s FOVIO DMS within the next 18 months or so.

Discussions with five other companies are underway and more information is expected on these by the end of this year.

Manufacturing delays hit Fleet revenues

As for the Fleet division, revenue fell to A$4.2mln (H1 17/18: A$5.9mln) as a result of production and supply chain issues.

A restructuring earlier in the year saw a new management team brought in, which moved immediately to close the US office in order to focus more on “higher value potential markets” such as UK and Europe, Australasia and Latin America.

Several blue-chips have installed the firm’s Guardian DMS in their buses and lorries, such as FirstGroup and Total.

Talks with manufacturers are ongoing to make sure the production issues don’t arise again.

Regulatory shift is beneficial

“We are continuing to benefit from global regulatory drivers that are accelerating the implementation of driver monitoring systems across all vehicle types,” said CEO Kroeger in a separate statement.

“We have agreed several further partnership deals with leading global original equipment manufacturers (OEMs) and now have six agreements in total, including with two premium German and three US-based global automakers.

“The restructuring of our Fleet business is almost complete, and we are now focused on targeting geographic markets and industry categories that will deliver profitable business.

He added: “We remain well placed to meet the rising demand for our technology from the global automotive sector, as DMS is increasingly acknowledged a key element required for transport safety in all vehicles.”

-- Updates heading with share placing --

Quick facts: Seeing Machines Ltd.

Price: 4.3 GBX

AIM:SEE
Market: AIM
Market Cap: £144.7 m
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Watch

Seeing Machines LIVE 2019 results presentation - CEO Paul McGlone

Seeing Machines Limited (LON:SEE) CEO Paul McGlone talks through the firm's full year results to June 2019. Revenue rose 4% to A$31.9mln from A$30.7mln the year before but in the current fiscal year, the company is expecting it to rise to somewhere between A$45mln and A$50mln.

on 09/24/2019

4 min read