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Spirent steadies the ship amid wireless market lull

Spirent is looking a little more stable after a difficult few years
August 4, 2016

Spirent 's (SPT) business of testing communications networks and devices is subject to rapid technological change, making it critical that the company is in the right place at the right time. To that end, these results provide some reasons for optimism. Adjusted operating profit jumped over 70 per cent to $10.4m (£7.8m) as damage limitation in the wireless business kicked in.

IC TIP: Hold at 87p

The wireless arm has been hit by fierce competition in smartphone testing and a lull in manufacturer demand as 4G matures. First-half wireless revenue dropped 15 per cent to $56m, but cost-cutting and a better margin mix meant operating profit almost doubled to $4.7m. The service assurance business, meanwhile, managed to increase operating profit by over two-thirds to $6.1m, despite a fall in revenue as a large contract ended.

In a bid to offset weakness in these areas, Spirent is angling at the bits of the market where big telcos are spending their capex. Spirent says high-speed ethernet, cloud and cyber security are among the most promising. All of these sit within its networks business, which saw a 6 per cent increase in first-half revenue.

Broker Jefferies expects adjusted pre-tax profit of $45m for the full year, giving EPS of 5.48¢ (from $41.6m, 4.98¢ in 2015), rising to 6.82¢ in 2017.

SPIRENT (SPT)
ORD PRICE:87pMARKET VALUE:£532m
TOUCH:86.5-87p12-MONTH HIGH:95pLOW: 64p
DIVIDEND YIELD:3.4%PE RATIO:45
NET ASSET VALUE:64¢*NET CASH:$96.1m

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2015219-2.3-0.21.68
20162142.00.21.68
% change-2---

Ex-div: 11 Aug

Payment: 9 Sep

*Includes intangible assets of $246m, or 40¢ a share £1=$1.32