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Seeing Machines says it is gaining traction, DSS expected to generate increasing value going forward

In its interim results statement, Seeing Machines (AIM: SEE) said its products are gaining traction with the application of its DSS technology in the mining industry expected to generate increasing value going forward. In the six-months ended 31 December 2009, the company achieved revenue growth of 25% against the preceding half, additionally the company said its strong expenditure controls enabled it to maintain cash reserves throughout the period.

Overall the company reported a net loss of A$402,568 compared to a A$358,099 net profit in the equivalent six month period to 31 December 2008. The company said that whilst H1 was a difficult trading period, it achieved revenue growth over the prior six months and managed to sustain its cash levels, which according to Seeing Machines, reflects the benefits of the decisive restructuring undertaken by management in early 2009.

"Although we reported a loss for the half year the recently announced DSS deals in the mining sector are an illustration of the increased traction our products are now generating in the market, and in-line with the board's strategy to significantly develop our DSS Mining business”. Seeing Machines chief executive Nick Cerneaz commented. “We believe this new aspect of our business will generate increased shareholder value going forward."

Since the close of the reporting period, Seeing Machines has converted two significant trials of its DSS technology for the mining industry. Through the deals with Freeport McMoRan (NYSE: FXC) and BHP Billiton (LSE: BLT, ASX: BHP), Seeing Machines will install the product into the vast mining vehicles operating at a number of mining operations.

The driver fatigue monitoring equipment directly monitors the drivers for distraction and fatigue events and provides a series of interventions aimed at managing these events and averting potential disasters. The company said that the new installations typically represent the initial pilot phase of wider deployments as anticipated by the respective clients. Seeing Machines said it anticipates that a number of pilots will mature into substantial commercial deployments during the next 6 months and beyond.

Seeing Machines said it is well advanced in negotiations for a number of other DSS deals, and it is also progressing distributor arrangements in a number of countries to service the resources sector including South Africa, Botswana, Brazil and Chile.

The DSS product itself has developed substantially during the period, and as evidenced by recent deals, the product is proven to solve real commercial issues around driver fatigue and distraction at an affordable price point, Seeing Machines stated. In the reporting period, DSS contributed A$346,259 to overall revenues, the company said it expects strong revenue growth in the current half due to the large number of opportunities available to be converted to sales.

In the six months ended 31 December 2009, revenue from product sales was A$2.3 compared to A$2.8 compared with the corresponding period last year, which included a one-off license fee payment of US$1m. The company said that whilst year-on-year revenues were down, the revenue performance represents a considerable improvement on the preceding half ended 30 June 2009.

Net expenditure was A$2.80m compared with A$2,87m for the equivalent period in the last financial year. Seeing Machines also noted that, unlike 2008 which included A$0.9m of capitalised costs, the first half expenditure includes all development expenses.

Whilst acknowledging its good progress, the company cautioned that, as a result of delayed revenue growth and changes in accounting treatment of development costs, it does not expect its full-year results to 30 June 2010 to achieve current market expectations.

Disclosure: The author holds no positions in the company