November 10, 2009
LONDON -- Spirent Communications plc (“Spirent”, the “Company” or the “Group”) (LSE: SPT), a leading communications technology company, announces the following unaudited Interim Management Statement for the period since 28 June 2009.
Trading to date
Trading performance for the period since 28 June 2009 to date is in line with the Board’s expectations.
Bill Burns, Chief Executive Officer, commented:
“During the third quarter we have seen a return to market stability and we have increased profitability. The outlook for the fourth quarter is positive. We continue to deliver new, innovative, market leading test solutions and as a result Spirent is well placed to capitalise on any recovery in end markets in 2010.”
Third Quarter 2009
Third quarter revenue of £63.1 million was in line with our revenue projections. Group operating profit grew by £1.9 million to £13.6 million, as a result return on sales for the Group increased to 22 per cent compared to 18 per cent in the third quarter of 2008. Earnings per share grew by 10 per cent.
Year to date revenue is up 9 per cent in sterling terms to £202.2 million, down by 12 per cent in constant currencies. Operating profit increased by 15 per cent in sterling to £37.6 million, down by 13 per cent in constant currencies.
Year to date return on sales for Performance Analysis has increased to 23 per cent compared to 22 per cent, on a revenue decrease of 13 per cent in dollar terms. More importantly, we have now experienced three consecutive quarters of increased order intake and the book to bill ratio at 1.00 times for the quarter allowed us to maintain a solid order book.
Stability returned to the market in the third quarter, with signs of a somewhat more optimistic view by customers. Customers increased their spending on applications and data center test capabilities, whilst investment in mobile packet core test grew markedly. Wireless device performance test benefited from the growth in development of new wireless data devices such as Smartphones. The market for 4G wireless (“LTE”) testing is beginning to accelerate; this has also stimulated investment in existing technologies, such as CDMA and UMTS, with the development of new data devices capable of supporting all these technologies. This is positive for future expansion in the wireless test market, in which Spirent is well placed with its wide range of product solutions.
Product mix was favourable in the quarter resulting in an increased gross profit margin, whilst overheads reduced compared to the prior year.
Profitability for the third quarter of 2009 increased to a 20 per cent operating return on sales compared to 10 per cent for the third quarter of 2008. Gross profit margin has improved and overheads have been reduced.
There is strong demand for 10 GbE in network monitoring devices, increasing demand for monitoring in wireless backhaul networks and interest in the latest generation of hand held test equipment. Whilst legacy revenues are down year-on-year, masking growth in new products and services, the fundamental direction for the division is sound.
Profitability has been maintained in difficult market conditions. This is especially true in the market for motor controllers for use in industrial equipment, where there are signs that the industrial business is starting to recover.
Free cash flow for the quarter was £12.2 million (3rd quarter 2008: £9.3 million). In the quarter the 2009 interim dividend of £3.7 million was paid and there was an inflow of £1.3 million from the exercise of share incentives. The closing cash position at the end of the third quarter was £91.3 million compared with £80.5 million at the end of the first half of 2009.
Markets appear to have stabilised during the third quarter which will allow Spirent to continue to deliver on expected performance. The prospects for the fourth quarter are good, especially in wireless device performance test.
Spirent Communications plc
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