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Spirent nearly doubles profits

The telecoms testing provider bumped up its half-year dividend by 12 per cent
August 6, 2020

Spirent’s (SPT) operating profit almost doubled in the first half, with revenues driven by a strong uptick in its 400G Ethernet test solutions and the acceleration of the roll-out of 5G. Its networks and security business, which makes up over half of the group’s top line, posted an 8 per cent boost to sales. 

IC TIP: Buy at 273p

But the company was not untouched by the fallout from coronavirus, with management noting that customer spending patterns are still uncertain – especially for its lab and government markets. Indeed, some clients have delayed the launch of 5G-enabled devices. Still, Spirent insists that the market is holding up, with signs that China and the US are accelerating their plans for 5G.

The group has been selected by Amazon (US:AMZN) as one of only two authorised test labs in the US for its virtual assistant Alexa to be built into devices, which should strengthen Spirent’s reputation in audio and acoustic testing.  

Management noted some softness in order intake in the early part of the second quarter, although it recovered in June. Overall, the telecoms testing provider’s order book grew 6 per cent in the period, and chief executive Eric Updyke is “cautiously optimistic” about the road ahead, although corporate investment decisions are still being put on the back burner. 

Factset consensus places EPS at 10.43 cents per share in the year ended in December 2020, rising to 11.03 in 2021. 

SPIRENT COMMUNICATIONS (SPT)  
ORD PRICE:275pMARKET VALUE:£1.7bn
TOUCH:274.5-275p12-MONTH HIGH:283pLOW: 152p
DIVIDEND YIELD:1.2%PE RATIO:23
NET ASSET VALUE:66p*NET CASH:$221m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
201921718.72.721.94
202023436.05.282.17
% change+7+93+94+12
Ex-div:13 Aug   
Payment:11 Sep   

*Includes intangible assets of £159m, or 26p a share

£1=$1.31