The sharp drop in Spirent Communications ' (SPT) revenues and profits in the first half had been well flagged by the telecoms and wireless testing provider in a profit warning in July. Management blamed cautious customers delaying capital expenditure plans into the second half and beyond as a result of weak end-market sales. It was the latest blow in an "earnings downgrade cycle that has persisted since August 2012", according to analysts at Bank of America Merrill Lynch.
Reduced demand was most pronounced in Spirent's networks and applications division, where revenues tumbled 29 per cent year on year. Revenue in the wireless and positioning division decreased 10 per cent, but service assurance kept up recent positive momentum by increasing revenues by 8 per cent. That unit has benefited from increased bandwidth demand for cloud applications.
Still, there are early signs the overall downward trend might be reversing. The order book is growing materially, with the book-to-bill ratio increasing by 36 per cent between the first and second quarters. Moreover, Spirent's outlook statement for the second half was cautiously optimistic: "July order intake levels have been satisfactory. Combined with key new product launches, this gives us confidence in performance for the third quarter."
Broker Jefferies forecasts current-year pre-tax profits of $54.9m and EPS of 6.7¢, rising to $87.3m and 10¢ in 2014 (from $111m and 12.5¢ in 2012).
SPIRENT COMMUNICATIONS (SPT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 135p | MARKET VALUE: | £869m | |
| TOUCH: | 135-136p | 12-MONTH HIGH: | 171p | LOW: 106p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 77¢* | NET CASH: | $247m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share** (¢) |
|---|---|---|---|---|
| 2012 | 236 | 52.8 | 5.51 | 1.39 |
| 2013 | 190 | 14.5 | 2.07 | 1.53 |
| % change | -19 | -73 | -62 | +10 |
Ex-div: 7 Aug Payment: 13 Sep £1=$1.53 *Includes intangible assets of $203m, or 31¢ a share **Half-year dividend for 2013 to be paid in sterling, equalling 1.01p a share | ||||
