Last checked at 19 Apr 2012 07:00
For Immediate Release 19 April 2012
Spectra Systems Corporation
Preliminary results for the twelve months ended 31 December 2011
Spectra Systems Corporation, a leading provider of advanced technology solutions for banknote and product authentication, is pleased to announce its preliminary results for the twelve months ended 31 of December 2011.
Financial highlights - all figures in (000's):
- Revenue exceeded expectations at USD 7,416 (2010: USD 7,278)
- Adjusted profit (before stock compensation expense) before taxation of USD 271 (2010: USD 584)
- Adjusted earnings per share (before stock compensation expense); in cents, of USD 0.01 (2010: USD 0.02)
- Basic earnings / (loss) per share; in cents, of USD (0.00) (2010: USD 0.01)
- Strong ungeared balance sheet, with net cash and investments of USD 23,767 (2010: USD 3,370) at December
31.
- USD 20,514 (net) raised on admission to AIM on 25 July 2011
Operational highlights:
- Received and delivered orders for a significantly increased volume of covert consumable materials in 2011.
- Revenues from our phosphor business for 2011 were ahead of plan and significantly outperforming 2010.
- Technology evaluation process continues positively in Reserve Bank of India tender. Final specification and selection of vendors however is stalled due to well publicised issues with all paper suppliers to the RBI.
Commenting on the results, Nabil Lawandy, Chief Executive Officer, said:
"I am pleased to report that the Company's results exceeded expectations with regards to revenue as well as cash flow. Our earnings are in line with forecasts which did not include annual stock exchange expenditures in the calculations. As stated in the interim report, our results for the full year were weighted towards the second half of the year due to both ongoing contracts as well as the delivery in the second half of the year of back up inventory to a major central bank.
The Company has made steady progress in 2011 with the on time delivery of key milestones associated with the development of upgraded sensors for a G8 central bank. All milestones have been met and payments received as part of the acceptance process of the sensor design. Although we expect delays in the delivery of sensors in 2012, our total pipeline of future business continues to grow and we have not suffered any losses of expected business.
The Company has committed much time pursuing appropriate acquisition opportunities and expects to announce at least one acquisition before the end of the third quarter of 2012."
The Board therefore believes that the Company continues to have excellent long term prospects and has the potential to perform strongly in 2012.
Enquiries:
Spectra Systems Corporation | |
Dr. Nabil Lawandy, Chief Executive Officer | Tel: +1 (0) 401 274 4700 |
WH Ireland Limited | Tel: +44 (0) 20 7220 1650 |
Chris Fielding (Head of Corporate Finance) |
Chief Executive Officer's statement
The Company has exceeded its revenue and cash flow from operations projections for 2011. Our earnings are also in line with expectations when first time annual stock exchange expenses for legal, nomad and accounting are factored in. The revenue was driven by higher than expected demand for our covert consumables, the recovery of the phosphor business to its expected levels, and the on time delivery of key development milestones relating to the downstream delivery of upgraded sensors to an existing central bank customer.
The Company has maintained its entire key staff and has effectively utilized the versatility of its employees along with consultants to develop the plans for the new manufacturing facility expected to be online in 2012. Our employees are the underpinning asset responsible for the success of the Company. Most of our employees have been with us for at least a decade, contributing in as many ways as possible to the growth of our business and supporting our customers at the highest levels of service.
Financial overview (000's)
Revenue exceeded expectations for the year with USD 7,416 (2010: USD 7,278). Orders placed in the second half of the year were above expectations. The adjusted profit before and after taxation for the year amounted to USD 271 (2010: USD 584) - before stock compensation expense and recurring listed stock exchange company expenditures.
Cash and investments at the period end amounted to USD 23,767 (2010: USD 3,370). The company has no debt and is poised to execute on its acquisition and manufacturing plans with its cash reserves.
Strategy
The use of public security products as vehicles for the sale of our current and future machine-readable products into new central banks continues to be an important part of the Company's strategy. This approach is currently being implemented through strategic partnerships with companies which are already selling products to the European Central Bank and Asian central banks. These specific partnerships provide preparedness for the possible dissolution of the Euro currency and the opportunities which may arise from this. This strategy is further supported by partnering efforts and contracts which will ensure that our key technologies, current and new, will have full compatibility with polymer banknotes. In this way, we will be able to both maintain our existing users as well as be competitive in tenders where central banks have chosen polymer substrates for their banknotes.
We are planning on developing products for the banknote processing industry which will help central banks be more efficient in their operations and on expanding our in-house manufacturing capabilities to increase our gross margins on consumables.
Management continues to commit considerable time to pursuing acquisition targets within the physical security industry as well as in related areas of security. Specifically, we are targeting companies which provide security to banknotes, tax stamps and other government documents as well as suppliers of software systems to the gaming industry. Both the tax stamp and gaming areas play a key role in harvesting revenues for municipalities and governments and hence we believe that they will exhibit sustainable growth. We are primarily evaluating companies in the US and the UK which can be seamlessly integrated with our operations, and which are profitable. Management is currently in the process of negotiations with several companies which squarely fit into our strategic plans and anticipates concluding at least one acquisition before the end of the third quarter of 2012.
Prospects
We continue to be on schedule with the delivery of engineering development and prototype milestones for the upgraded and new generation sensors. Execution of the materials contract component of the new technology continues to be delayed in spite of the completion of the definitive work scope document with the central bank. Our current estimate is that this development contract will begin in July of this year. However, with regards to the sensor contract, the combination of an unspecified customer prototype evaluation phase which is out of our control and our inability to accelerate the development phase schedule, are likely to shift the contracted delivery schedule by six to nine months. Delays not being at all desirable, the program is contracted and intact and we expect it to be fully implemented.
All of the equipment ordering as well as key staffing for the new in-house manufacturing of consumables is underway and the facility is on schedule to be operational during the fourth quarter of 2012. This facility is expected to produce cost savings on our materials manufacturing and expected to increase net income from the sale of our consumables.
We have executed the second phase of a contract with a supplier of polymer substrates to qualify our machine-readable technology for polymer banknotes. This is a significant large volume note test which will allow our products to be selected by any central bank choosing to use these longer lasting substrates which are expected to be incorporated increasingly in the higher denominations where our technologies are typically implemented.
We have recently received an unexpectedly large order from a current G8 central bank customer as part of an inventory build-up plan they have in place. The order is 70% higher than the standing order and supports the importance of our products and the long view that our customers have towards their continued use.
We also expect to receive orders for three large quality control systems which are part of an upgrade driven by both service protocols as well as environmental compliance requirements which the central bank printing operation needs to implement.
Our submission for a covert security feature, in partnership with an existing supplier to the Reserve Bank of India (RBI) is continuing to progress at a slow pace. The tender has been stalled by the RBI's discovery that all of its paper suppliers have at one point or another supplied out of specification paper. Until this issue is resolved, the evaluation of security features and other banknote parameters will be delayed.
In parallel with the developments in the banknote authentication area, we have had a highly successful large scale test of our material-sensor combinations with one of the largest suppliers of heat sealable plastic films and machines. We expect to have higher level negotiations during the second quarter to explore possible business structures to supply both materials as well as sensors.
Finally, we expect to close on at least one acquisition before the end of the third quarter of 2012 which support the strategic directions of the company.
The Board therefore believes that the Company continues to have excellent long term prospects and has the potential to perform strongly in 2012.
Nabil M. Lawandy
Chief Executive Officer
April 18, 2012
Statement of Income
for the year ended 31 December 2011
2011 | 2010 | ||
Audited | Audited | ||
Note | USD'000 | USD'000 | |
Revenue | 7,416 | 7,278 | |
-------- | ------------------ | ------------------ | |
Cost of sales | (2,897) | (2,929) | |
Gross profit | 4,519 | 4,349 | |
Adjusted operating expenses* | (4,376) | (3,771) | |
-------- | ------------------ | ------------------ | |
Adjusted operating profit | 143 | 578 | |
Other income | 128 | 6 | |
Adjusted profit before taxation | -------- | ------------------ 271 | ------------------ 584 |
-------------------------------------- | -------- | ------------------ | ------------------ |
Taxation | - | - | |
Adjusted profit for the period | 271 | 584 | |
-------------------------------------- | -------- | ------------------ | ------------------ |
Stock compensation expense | (411) | (219) | |
Basic profit / (loss) for the period | (140) | 365 | |
Adjusted earnings per share, in cents | 2 | 0.01 | 0.02 |
Basic earnings per share, in cents | 2 | (0.00) | 0.01 |
-------------------------------------- | -------- | ------------------ | ------------------ |
Diluted earnings per share, in cents | 2 | (0.00) | 0.01 |
-------------------------------------- | -------- | ------------------ | ------------------ |
All of the Group's operations are continuing.
*Adjusted for stock compensation expense of USD 411 and USD 219 for 31 December 2011 and 2010, respectively.
Balance Sheet
as at 31 December 2011
As at | As at |
| |||
31/12/11 | 31/12/10 |
| |||
Audited | Audited |
| |||
USD'000 | USD'000 |
| |||
| |||||
| |||||
Current assets |
| ||||
Inventories | 812 | 839 |
| ||
Trade and other receivables | 586 | 158 |
| ||
Cash and cash equivalents | 3 | 17,861 | 3,370 |
| |
Investments | 3 | 5,906 | - |
| |
Deferred tax asset | 344 | 344 |
| ||
Other current assets | 146 | 74 |
| ||
Prepaid expenses | 80 | 53 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
25,735 | 4,838 |
| |||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
Non-current assets |
| ||||
Intangible assets | 174 | 138 |
| ||
Property, plant and equipment | 241 | 298 |
| ||
Restricted cash | 1,050 | 1,000 |
| ||
Other assets | 17 | 17 |
| ||
Deferred tax asset | 902 | 902 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
2,384 | 2,355 |
| |||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
Total assets | 28,119 | 7,193 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
| |||||
Current liabilities |
| ||||
Trade and other payables | 1,145 | 400 |
| ||
Accrued expenses and other liabilities | 658 | 650 |
| ||
Deferred revenue | 1,780 | 1,471 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
Total liabilities | 3,583 | 2,521 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
| |||||
Contingent liability | - ------------------ | - ------------------ |
| ||
| |||||
Shareholders' equity |
| ||||
Convertible preferred stock | - | 122 |
| ||
Additional paid in capital - |
| ||||
convertible preferred stock | - | 26,041 |
| ||
Common stock | 453 | 95 |
| ||
Additional paid in capital - |
| ||||
common stock | 54,613 | 7,882 |
| ||
Accumulated other comprehensive (loss) | (922) | - |
| ||
Accumulated deficit | -------- | (29,608) ------------------ | (29,468) ------------------ |
| |
Shareholders' equity | 24,536 | 4,672 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
Total liabilities & shareholders' equity | 28,119 | 7,193 |
| ||
-------------------------------------- | -------- | ------------------ | ------------------ |
| |
Statement of Cash Flows
for the year ended 31 December 2011
Year to | Year to | ||
to 31/12/11 | 31/12/10 | ||
Audited | Audited | ||
USD'000 | USD'000 | ||
Operating activities | |||
Profit / (loss) before taxation | (140) | 365 | |
Depreciation and amortisation | 210 | 194 | |
Stock compensation expense | 411 | 219 | |
Trade and other receivables | (428) | 343 | |
Inventories | 26 | (11) | |
Other assets | (64) | 28 | |
Prepaid expenses | (32) | 2 | |
Trade and other payables | 744 | (251) | |
Accrued expenses and other | 8 | (112) | |
Deferred revenue | 309 | (665) | |
Net cash provided by / (used in) operating activities | ------- | ------------------ 1,044 | ------------------ 107 |
-------------------------------------- | -------- | ------------------ | ------------------ |
Investing activities | |||
Purchases of property, plant | |||
and equipment | (84) | (92) | |
Payment of patent costs | (105) | - | |
Purchases of investments | (5,906) | - | |
Increase in restricted cash | (50) | - | |
-------- | ------------------ | ------------------ | |
Net cash used in investing activities | (6,145) | (92) | |
-------------------------------------- | -------- | ------------------ | ------------------ |
Financing activities | |||
Proceeds from initial public offering - net | 20,514 | - | |
-------- | ------------------ | ------------------ | |
Net cash provided by financing activities | 20,514 | - | |
-------- | ------------------ | ------------------ | |
Effect of exchange rate changes on cash | |||
and cash equivalents | (922) ------------------ | - ------------------ | |
Net increase in cash | |||
and cash equivalents | 14,491 | 15 | |
Cash and cash equivalents at | |||
start of period | 3,370 | 3,355 | |
Cash and cash equivalents at | -------- | ------------------ | ------------------ |
end of period | 17,861 | 3,370 | |
-------------------------------------- | -------- | ------------------ | ------------------ |
Notes to financial information
1. Basis of preparation
This report was approved by the Directors on 18 April 2012.
The results for the year ended 31 December 2011 have been prepared in accordance with the AIM Rules for Companies. This financial information has been prepared using the recognition and measurement principles of US Generally Accepted Accounting Principles.
The principal accounting policies used in preparing its financial statements for the year ending 31 December 2011 and are unchanged from those disclosed in the Company's Annual Report for the year ended 31 December 2010.
2. Earnings per share
The calculation of basic earnings per share figures for the year ended 31 December 2011 is based on the profit / (loss) attributable to ordinary shareholders of USD (140) (2010: USD 365) divided by the basic and diluted weighted average number of shares in issue, shown in the table below, which assumes that all preferred shares had converted to common shares prior to 1 January 2010.
Year to 31/12/11 | Year to 31/12/10 | |||
Number of shares | Weighted average | Number of shares | Weighted average | |
Basic- | ||||
shares in issue | 45,251,370 | 34,763,130 | 26,659,050 | 26,659,050 |
Share options | 6,908,317 | 6,376,665 | 5,733,703 | 5,716,396 |
Diluted no. of shares | 41,139,795 | 32,375,446 | ||
3. Cash and investments
Cash and investments; which include a certificate of deposit at Investec Bank expiring in May 2012, at the period end amounted to USD 23,767 (2010: USD 3,370).
4. Copies of this statement will be sent to shareholders and are available to the public from the Registered Office at: 321 South Main Street, Suite 102, Providence, RI 02903 USA.
5. Nature of financial information
The Preliminary Announcement set out above is an extract from the forthcoming Annual Report and Accounts and does not represent statutory accounts for Spectra Systems Corporation. The statutory accounts of Spectra Systems Corporation in respect of the period ending 31 December 2011 will be delivered to the Registrars of Companies before the Company's Annual General Meeting.
It is anticipated that the Annual Report and Accounts will be circulated to shareholders of Spectra Systems Corporation in May.