Spirent's shares took a heavy tumble after the telecoms testing equipment specialist said that concerns over the eurozone crisis had prompted a sharp - and sudden - fall in spending by its customers. But with no let-up in demand for advanced network and data services from end-users, network operators and equipment vendors won't be able to put investment on hold indefinitely, and Spirent is well positioned to target this.
"Our sales team is telling us that the sales funnel has never been stronger," said chief executive Bill Burns, describing the slowdown as a "speed bump" and suggesting that spending could bounce back as sharply as it fell away when sentiment improves. Mr Burns said that spending on next-generation wireless equipment, LTE, remains resilient, and that Spirent remains on the lookout for bolt-on deals to enhance its capabilities, following April's $39.8m (£25.6m) acquisition of Mu Dynamics, a specialist in the fast-growing area of cloud computing security and application testing.
Even so, the outlook for the full year has been moderated, with sales growth in the core performance analysis business expected to slow from 10 per cent in the first half to between 3 per cent and 5 per cent in the second half.
Broker Numis expects full-year pre-tax profits of $135.3m and EPS of 14.1¢ (from $128.8m and 13.8¢ in 2011).
SPIRENT COMMUNICATIONS (SPT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 142p | MARKET VALUE: | £937m | |
| TOUCH: | 141-142p | 12-MONTH HIGH: | 176p | LOW: 104p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 68¢* | NET CASH: | $235m | |
| Half-year to 1 Jul | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 260 | 55.8 | 5.94 | 1.26 |
| 2012 | 262 | 57.3 | 6.07 | 1.39 |
| % change | +1 | +3 | +2 | +10 |
Ex-div: 8 Aug Payment: 13 Sep *Includes intangible assets of $156m, or 24¢ a share £1=$1.55 | ||||
