Spirent maintains guidance as 5G drives growth
By Josh White
Date: Friday 08 Nov 2019
(Sharecast News) - Test, measurement, analytics and assurance technology company Spirent Communications updated the market on its trading for the third quarter on Friday, reporting that it saw continued business growth, and remained confident that it would show progress in 2019.
The FTSE 250 firm said its expectations for the full year remained unchanged.
It said that, as it entered a "period of upcycles" driven by 5G and the move to higher-speed ethernet testing, the company delivered a "solid performance" in the three months ended 30 September, continuing to see healthy order intake growth, in line with that seen in the first half.
Following the appointment of new chief executive Eric Updyke's on 1 May, a number of initiatives had started, in a bid to "evolve the strategic direction" of Spirent to maximise market opportunities and create a "more agile, customer-focussed" organisation.
Those initiatives included a strategic focus on recurring revenue streams over time; a strengthened leadership team, with a number of new experienced leaders having already joined the organisation including a new general manager for lifecycle service assurance and executive-vice president for global sales, and development of the sales and marketing structure to drive improved effectiveness to exploit the company's technologies.
The one-off exceptional cost of those planned changes was around $4m, with the large majority of the cost expected to be incurred in the current financial year.
In networks and security, Spirent said order intake and revenue in the third quarter showed "robust growth" on the same period in 2018, underpinned by continued positive momentum of US government spending for the company's positioning products and solutions offsetting some timing of order placement for high-speed ethernet products, driven by customers' own technical challenges earlier in the year.
Its pipeline build was said to be positive, and the outlook for growth remained unchanged.
In the 'Lifecycle Service Assurance' operation, Spirent said it was still well-positioned to support key customers as they purchased 5G lab assurance, as well as analytic solutions for the live environment.
It explained that, while it experienced some delays in order intake in the quarter, it did still expect orders to show "good growth" in the full year compared to 2018.
A new general manager with "deep experience" of the service assurance market was appointed to lead the segment in the quarter.
Finally, in connected devices, the company said it remained on track to meet the planned demand for 5G device testing, with increasing interest from its customer base and a new solution set for delivery in 2020.
The industry was continuing to focus on 5G radio as a priority, which the company expected to be followed by a move to new services and applications across the 5G air link.
It said it expected that to drive demand for its offerings during 2020.
"Our business has maintained a good level of traction with our customers and overall we delivered a solid third quarter," said chief executive officer Eric Updyke.
"We saw the benefit of the diversity of our portfolio as increased demand for our positioning products offset some short-term lumpiness in order placement in other areas.
"I see an ever-increasing number of market opportunities for our technologies but we need to move faster to capture the full opportunity."
To ensure the company can best take advantage of those, Updyke said it was focusing on building more recurring revenue streams over time, and to do that it had augmented our experience and capabilities with some new senior leaders.
"We are also evolving the organisation to further improve the effectiveness of our sales and marketing investment whilst investment in future technologies is undiminished to underpin planned growth.
"We are on track to show full year progress on 2018 with, as in previous years, revenue and earnings performance weighted to the second half of the year and in particular to the final quarter.
"Our expectations for the full year remain unchanged."
At 1016 GMT, shares in Spirent Communications were up 0.75% at 202.5p.
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