Monday, 30 April 2018

Seeing Machines: Lower FX Risk, Higher Returns

After raising capital in the UK, Seeing Machines faced the problem of holding funds in pounds sterling while most of its costs remained in Australian dollars. With the right support and solutions from HSBC, the company reduced foreign exchange risk and optimised returns.

About Seeing Machines

From its origins at a robotics laboratory at the Australian National University, Seeing Machines has grown into a leading computer vision technology company listed on the London Stock Exchange’s Alternative Investment Market.

The company, headquartered in Canberra, provides technology that teaches machines to see, understand and assist people. The primary application of the technology is in Driver Monitoring Systems, which monitor driver attention, drowsiness and distraction, reducing accidents and helping save lives. The company’s major partners and customers include Caterpillar, General Motors, Toll, Progress Rail, Autoliv and Emirates.

Seeing Machines has more than 200 employees across its offices. It has distribution partners around the world and a presence in the US, the UK, Germany and, soon, Japan. About 80 per cent of the company’s business comes from outside Australia.

The Business Challenge

To meet the growing demand for the company’s technology while supporting its long-term strategy, Seeing Machines decided to fundraise on the Alternative Investment Market in the UK. Due to exceptional interest from the market, it raised GBP35 million – GBP5 million more than the target.

While the funds it received were in pounds sterling, the company’s costs were mainly in Australian dollars, and some were in US dollars. Most of its engineering resources, for example, were in Australia. Keeping the capital in pounds sterling and using it to fund costs in Australian dollars would expose the company to risks from exchange rate fluctuations.

HSBC’s Solution

Seeing Machines has been working with HSBC to address its global liquidity and cash management needs since 2014 and has accounts in Australia, the UK and the US. When it approached HSBC for guidance on its options for managing the funds in pounds sterling, the bank took a consultancy approach to better understand the company’s outflow currencies – Australian and US dollars – against the funds.

“This allowed HSBC to map out the gaps and highlight possible risks should these outflow currencies strengthen against pounds sterling. We then provided Seeing Machines with different options to enhance yield,” says Trevor Morgan, Senior Manager for Client Acquisition and Advisory at HSBC Australia.

James Palmer, Chief Financial Officer of Seeing Machines, presented HSBC’s recommendations to the company board, who agreed to convert the funds into Australian dollars.

“HSBC provided us with a solution at very competitive rates. The team provided detailed information about specific products that could help us get the best investment returns on the funds,” he says. “Now we have the money in the right currency – either in international cash management accounts or ‘at notice’ accounts that allow us to deploy cash to the relevant parts of the business whenever needed.”

What I found really helpful was receiving strong support that simplified a very complex topic into something much more manageable.

The Result

By converting pounds sterling into Australian dollars, Seeing Machines reduced its currency and balance sheet risks. The company also benefited from the currency outlook HSBC provided every month, keeping it updated on developments in the global currency market and helping it to locate the best returns.

What I found really helpful was receiving strong support that simplified a very complex topic into something much more manageable. I was then able to put HSBC’s advice to the board, which helped them make an informed decision,” Mr Palmer says.

A key reason for choosing HSBC was its structure as a global bank.

Future Growth

As Seeing Machines introduces second-generation driver monitoring products and expands global distribution, the company expects to triple its revenue within 12 months. Much of this growth will be driven by the commercial fleet business.

“We see this as an inflection point for the company,” Mr Palmer says. “We’re capitalised for the long term and see a bright future for our technology in the transport segment.”

When it turns the corner to achieve profitability, Seeing Machines expects to look to HSBC for solutions that will help meet its working capital and other financing needs.

“We’re a global company – we need a global bank so we can do business conveniently. A key reason for choosing HSBC was its structure as a global bank,” says Mr Palmer.

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