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Spectra Systems banking on record year


Spectra Systems Corporation LON:SPSY [LON:SPSC] reports its results on Monday (20th March).

Not many people will know a great deal about this Rhode Island-based company, but most of us will be carrying around at least one of their products every day.

Spectra has been at the cutting-edge of polymer banknote technology since 1998 and listed in London in July 2011.

Plastic fantastic

Five years later, the first plastic bank notes went into circulation when Clydesdale Bank released its plastic GBP5 note. By 2017 paper currency was being consigned to the pages of history in the UK and plastic polymer has now replaced paper in over 30 countries.

Polymer banknotes usually have three levels of security devices. Primary security devices are easily recognisable by consumers and may include intaglio, metal strips, and the clear areas of the banknote. Secondary security devices are detectable by a machine. Tertiary security devices may only be detectable by the issuing authority when a banknote is returned.

Polymer notes are said to be much more durable than paper notes, harder to forge and the Bank of England said that it will save around GBP100m in the next ten years. Polymer banknotes cut down on money laundering, literally and figuratively, as they don’t get as dirty and tatty as paper notes and their security features mean that criminals find cash harder to move, hide and forge. I guess they will always have cryptocurrency.

The potential market for polymer currency is growing, and there are numerous environmental reasons for switching, the IMF is pushing greater adoption in light of the Paris Agreement on climate change although the Fed and ECB are lukewarm on adoption.

Security and protection

Spectra Systems Corporation has developed its business around developing advanced materials, coatings, and authentication technologies that are used to protect banknotes and other secure documents from counterfeiting and fraud. The technology firm’s customers include central banks, commercial banks, currency printers, and other organizations that require high levels of security and protection for their financial transactions, products, and information.

The company offers secure inks and coatings for banknotes; banknote authentication technologies, such as sensors and detectors; secure document tracking solutions, including software and hardware, and; brand protection technologies, such as anti-counterfeiting labels and tags.

In its last set of results, for the six months to end-June 2022, Spectra reported a 15% rise in revenue to USD9.3m. The firm also saw earnings rise 8% to USD3.8m, and profit also rose 8% to USD3.7m. The firm also completed a share buyback of 350,000 shares and paid an annual dividend of 11 cents per share in June 2022, USD5m in total.

The company reported a: “strong, debt-free balance sheet, with cash of USD17.9m [as] at 30th  June.”

Counterfeiting measures

A significant contributor to Spectra’s revenue was central bank sensors, but apart from banknotes Spectra also executed an agreement with a strategic partner for dairy and transit licences in India and was in discussions with a cigarette supplier in China to produce holographic authentication products for their packs of cigarettes to combat fraud and counterfeiting.

In September 2022 the AIM-listed company announced that it was well on track to meet guidance and have its most profitable year to date. CEO, Nabil Lawandy said at the time: “The board therefore believes that the company is on track to achieve record earnings and meet market expectations for the full year.”

The company opened trading today (17th March) at 150p and has offered a year-to-date return of -10.3% and a one-year return of 19.1%. The 52-week SPSC share price swung between 120p and 170p. Spectra has a market capitalisation of GBP1.6m.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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