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Spirent realises growth aspirations

Despite slowing third-quarter sales in the US, Spirent returned to top-line growth
February 27, 2015

Soaring demand for mobile data and streaming videos has strained the capacities of network equipment manufacturers and telecom operators worldwide. Growing numbers turned to Spirent (SPT) to test and troubleshoot their devices and services last year, helping the wireless connectivity specialist return to top-line growth.

IC TIP: Hold at 88p

Spirent contended with a third-quarter slowdown in its key US market, but still posted full-year sales growth. Acquisitions were responsible for 43 per cent of the revenue growth. Spirent shelled out $86m (£55.7m) for five businesses as part of an ongoing shift in focus from hardware to emerging, high-margin markets such as cybersecurity, virtual networks and data analytics. The purchase of customer-experience management specialist DAX Technologies helped more than double operating profit at its service assurance division to $21m.

The group risked disappointing investors with sharp declines in operating profits in both of its main divisions, networks and applications and wireless and service experience. That sent group adjusted operating profit down 8 per cent to $46m. Margins suffered due to increased investment in product development, sales and marketing and support services.

Broker Panmure Gordon forecasts pre-tax profits of $57.2m for 2015, giving EPS of 8.2¢, up from $44.9m and 6.3¢ in 2014.

SPIRENT (SPT)
ORD PRICE:88pMARKET VALUE:£535m
TOUCH:87-88p12-MONTH HIGH:113pLOW: 66p
DIVIDEND YIELD:2.9%PE RATIO:40
NET ASSET VALUE:71¢*NET CASH:$99.8m

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201048211211.82.50
201147111413.22.93
201247210812.13.22
2013414395.13.54
2014457243.43.89
% change+11-38-34+10

Ex-div: 5 Mar

Payment: 8 May

*Includes intangible assets of $273m, or 45¢ a share £1=$1.55