Spirent’s (SPT) share price fell on release of a mixed half-year report. While revenue was flat, cost management took the operating margin up from 1.5 per cent to 5.3 per cent. The networks and security division comprises 59 per cent of Spirent’s top line, and generated good sales growth of 11 per cent to $126m (£96.7m). Lifecycle service assurance saw sales fall 13 per cent, although management expects order intake to be second-half weighted. Connected devices suffered from waning smartphone testing, and chief executive Eric Hutchinson says: the future for this division depends on when there is more spending on 5G wireless solutions. That said, Mr Hutchinson is clear that Spirent is “sticking to our strategic focus”.
Spirent saw “softened” demand in Europe and the Americas, but good trading in Asia Pacific. This was particularly evident in the networks and security business, where Spirent worked with New H3C, a Chinese manufacturer of network equipment. This helped to offset issues faced by the division as some customers focused on shifting towards 400G development, causing slowing demand for 100G ethernet testing.
Mr Hutchinson says Spirent is “working and negotiating on some sizeable contracts” in life sciences and assurances, which should help drive momentum in the second half. Management also notes most free cash flow is paid out as dividends and the dividend cover is currently 1.7 times. It is trying to “build a bit more cover” with a view to taking to this to 2.0 or 2.5 times.
Analysts at Liberum forecast adjusted operating income of $57m and EPS of 6.7¢ for FY2017, up from $46.5m and 5.3¢ in 2016.
| SPIRENT (SPT) | ||||
| ORD PRICE: | 116p | MARKET VALUE: | £710m | |
| TOUCH: | 115-116p | 12-MONTH HIGH: | 130p | LOW: 76p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | na | |
| NET ASSET VALUE: | 55¢* | NET CASH: | $110m | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | ($m) | profit ($m) | share (¢) | per share (¢) |
| 2016 | 214 | 2 | 0.16 | 1.68 |
| 2017 | 214 | 14 | 1.85 | 1.68 |
| % change | - | +620 | +1056 | - |
| Ex-div: | 10 Aug | |||
| Payment: | 8 Sep | |||
| *Includes intangible assets of £166m, or 27¢ a share. £1 = $1.32 | ||||
