Continued demand for high-tech mobile gadgets and the rapid escalation of internet traffic has underpinned growth at wireless testing specialist Spirent. But, with the service assurance business still struggling, chief executive Bill Burns is not expecting "a return to more solid growth" until 2013.
The adoption of third-generation (3G) networks in emerging territories and the roll-out of fourth-generation (4G) networks in the US helped drive sales in the core performance analysis business, which swelled 14 per cent to $416.4m (£261.2m).
This has helped to offset sustained weakness in the service assurance business, which suffered from further declines in legacy operations – such as broadband testing – and a hiatus in spending by cautious service providers. As such, sales contracted 5 per cent to $54.1m. Moreover, impairments on an old contract and an inventory charge dragged the division's operating profit down by 46 per cent to $7m. Mr Burns cautions that, while ethernet expansion is rapid, Spirent is still "struggling" to offset the declines in legacy business, and he is expecting this trend to continue this year.
That said, analysts remain excited about the company's longer-term prospects, which are underpinned by the proliferation of high-tech devices and connectivity.
Analysts at Investec Securities expect pre-tax profits of $134.8m, and EPS of 13.9¢ (from $125.8m and 13¢ in 2011).
SPIRENT COMMUNICATIONS (SPT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 148p | MARKET VALUE: | £979.8m | |
| TOUCH: | 147.6-148p | 12-MONTH HIGH: | 164p | LOW: 104.4p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 68¢ | NET CASH: | $236.5m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 237 | 17.80 | 2.05 | nil |
| 2008 | 258 | 49.60 | 10.1 | 1.10 |
| ($m) | ($m) | (¢) | (¢) | |
| 2009 | 427 | 84.9 | 13.7 | 1.93 |
| 2010 | 482 | 112 | 11.8 | 2.50 |
| 2011 | 528 | 123 | 14.2 | 2.93 |
| % change | +10 | +10 | +20 | +17 |
Ex-div: 7 Mar Payment: 3 May *Includes intangible assets of $123.2m, or 20¢ a share £1=$1.59 | ||||
