Driving monitoring systems (DMS) supplier Seeing Machines (SEE:AIM) steers off-course as investors are unimpressed with lower revenue guidance following a reorganisation of the business. Shares fall 10.7% to 3.13p

The company is transferring the management of the supply chain, as well as sales and after sales support to Caterpillar.

Seeing Machines has received £400,000 of revenue from Caterpillar through royalties on products and services in the first quarter, and expects higher revenue in the next quarter due to Caterpillar’s distribution network.

The DMS specialist will be supported in its transition from a low-volume, high-value hardware business to a licensing-based, higher volume and lower unit cost model by revenue from Caterpillar.

For the financial year to 30 June, Seeing Machines expects total revenue to be higher as a result of a one-off Caterpillar license fee of $21.85 million, although excluding this, other sales and service revenue is expected to be lower than the previous year.

Seeing Machines is also working on a spin-out of a separately funded company following the signing of a term sheet with a US-based investment firm, which was flagged by Shares recently.

The firm plans to retain a significant equity stake, providing exposure to an expected rise in driver monitoring systems for cars.

The firm’s fleet business is developing further momentum, which FinnCap says is possible thanks to a record number of assessments and addressing on-road market through telematics suppliers.

The company is developing a DMS for a global car maker and is expected on the road next year. According to CEO Ken Kroeger, approximately $600 million was spent on DMS systems in 2015, highlighting the scale of the opportunity.

Takata, a provider of automotive safety equipment, signed an agreement to incorporate Seeing Machine’s second generation DMS.

In the aerospace sector, the supplier aims to deploy a range of solutions in aircraft and air traffic simulators across the UK, US, Europe, UAE and Australia by the end of the calendar year.

FinnCap maintains its 12p target price.

Issue Date: 31 May 2016