27th Apr 2007 07:01
Spirent Communications PLC27 April 2007 SPIRENT COMMUNICATIONS PLC OPERATING REVIEW London, UK - 27 April 2007: Spirent Communications plc ("Spirent" or "the Group ") (LSE: SPT; NYSE: SPM), a leading communications technology company, isannouncing today the results of the first phase of its previously announcedGroup Review and providing an update on current trading. As stated in our preliminary results announcement on 1 March 2007, the chiefpurpose of the Group Review was to decide where to focus our resources and howto be the most efficient and effective competitor in our chosen areas. TheReview is in two parts: an Operating Review encompassing our PerformanceAnalysis business, shared services and corporate functions, and a StrategicReview of the Group, which will also include balance sheet structure and othermatters. It is anticipated that the findings of the Strategic Review will bereported to shareholders in October 2007. Following completion of the Operating Review, the Board is implementing a numberof changes in order to achieve three key objectives: • Improve profitability at current sales levels • Refocus attention on Performance Analysis, which is the largest business within the Group • Optimise future product development investments Improved profitability The Operating Review has been focused on Performance Analysis, shared servicesand corporate overheads with the objective to improve the base level of earningsin order to reduce volatility and to deliver higher operational leverage whensales increase. The operational restructuring has been principally centred onitems that do not affect future revenue growth. The restructuring willeliminate duplicated activities and processes, consolidate manufacturing andreduce general overheads. In addition, corporate overheads will be reducedsignificantly, with a number of activities being integrated into business units. The total annualised cost reductions resulting from the restructuring are £21.5million (US$43.0 million) representing an approximate 12 per cent reduction incosts for Performance Analysis, shared services and corporate overheadscombined. Approximately 70 per cent of the cost reductions will occur inmanufacturing and overhead areas. The benefits will be realised progressivelythrough the second quarter and second half of 2007, such that the £21.5 million of annualised savings are expected to be fully realised in theyear ending December 2008. Refocus on Performance Analysis and optimise product development The Operating Review has confirmed our view of Performance Analysis, the largestbusiness within the Group, as a very high quality business with significantgrowth potential. While underlying sales growth in the Performance Analysisbusiness has more recently been obscured by the declining sales of legacybroadband products, there are significant opportunities for growth in broadbandrevenues, Wireless products and in Spirent TestCenter sales. In order to bestexploit those opportunities, the allocation of development resources has beenadjusted to achieve net sales growth and reduce risk by concentrating on thedevelopment and adoption of Spirent TestCenter and investing in the growth ofWireless and positioning products. The resulting reduction in productdevelopment spending for Performance Analysis will be achieved in significantpart by consolidating projects into a smaller number of locations. One-time charges As a result of the cost reduction actions, Spirent will record a one-time chargein 2007 of £15.0 million, of which £4.0 million will be paid in cash forseverance and other reorganisation costs. The balance of £11.0 million relatesto asset write-downs and a provision for vacant leasehold properties resultingfrom the restructuring. Current trading As stated at the time of the preliminary results, market conditions are suchthat only modest growth in Performance Analysis revenue is expected in 2007. Itis anticipated that Performance Analysis revenue will be slightly ahead in USdollar terms of the same period in 2006. However, the average dollar exchangerate in the first half of 2006 was approximately 10% higher than at present.Accordingly, revenues when translated into sterling are expected to be lower.Service Assurance and Systems revenues are anticipated to decline in line withprevious guidance. Board composition The Group is seeking additional independent Non-executive Directors. Commenting on the outcome of the Operating Review, Edward Bramson, ExecutiveChairman, said: "We anticipate that the actions taken will leave us with a more profitablebusiness, with lower earnings volatility, that is well provided with resourcesto support future profitable growth. We look forward to reporting the resultsof the Strategic Review, which is currently underway, in October." - ends - EnquiriesEdward Bramson, Executive Chairman Spirent Communications plc +44 (0)1293 767704 Eric Hutchinson, Chief Financial Officer Andrew Dowler/Harriet Keen Financial Dynamics +44 (0)20 7831 3113 The Company will host a presentation of the findings of the Operating Review today at 09.45 for 10.00 UK time at the offices of ABN AMRO, 250 Bishopsgate, London, EC2M 4AA About Spirent Communications plc Spirent Communications plc is a leading communications technology company,focused on delivering innovative systems and services to meet the needs ofcustomers worldwide. We are a global provider of performance analysis andservice assurance solutions that enable the development and deployment ofnext-generation networking technologies such as broadband services, Internettelephony, 3G wireless and web applications and security testing. The Systemsgroup develops power control systems for specialist electrical vehicles in themobility and industrial markets. Further information about SpirentCommunications plc can be found at www.spirent.com. Spirent Communications plc Ordinary shares are traded on the London StockExchange (ticker: SPT) and on the New York Stock Exchange (ticker: SPM; CUSIPnumber: 84856M209) in the form of American Depositary Shares ("ADS"),represented by American Depositary Receipts, with one ADS representing fourOrdinary shares. Spirent and the Spirent logo are trademarks or registered trademarks of SpirentCommunications plc. All other trademarks or registered trademarks mentionedherein are held by their respective companies. All rights reserved. This press release may contain forward-looking statements (as that term isdefined in the United States Private Securities Litigation Reform Act of 1995)based on current expectations or beliefs, as well as assumptions about futureevents. You can sometimes, but not always, identify these statements by the useof a date in the future or such words as "will", "anticipate", "estimate","expect", "project", "intend", "plan", "should", "may", "assume" and othersimilar words. By their nature, forward-looking statements are inherentlypredictive and speculative and involve risk and uncertainty because they relateto events and depend on circumstances that will occur in the future. You shouldnot place undue reliance on these forward-looking statements, which are not aguarantee of future performance and are subject to factors that could cause ouractual results to differ materially from those expressed or implied by thesestatements. Such factors include, but are not limited to: the extent to whichcustomers continue to invest in next-generation technology and deploy advancedIP-based services; our ability to manage a significant transition in productrevenues to new product solutions incorporating latest technology; theimplementation of the operating review; the outcome of the business review; ourability to successfully expand our customer base; continuing variable marketconditions; pace of economic recovery; our ability to improve efficiency,achieve the benefits of our cost reduction goals and adapt to economic changesand other changes in demand or market conditions; our ability to develop andcommercialise new products and services, extend our existing capabilities in IPservices and expand our product offering internationally; our ability to attractand retain qualified personnel; the effects of competition on our business;fluctuations in exchange rates and heavy exposure to the US dollar; changes inthe business, financial condition or prospects of one or more of our majorcustomers; risks of doing business internationally; risks relating to theacquisition or sale of businesses and our subsequent ability to integratebusinesses; our reliance on proprietary technology; our exposure to liabilitiesfor product defects; our reliance on third party manufacturers and suppliers;and other risks described from time to time in Spirent Communications plc'sSecurities and Exchange Commission periodic reports and filings. The Companyundertakes no obligation to update any forward-looking statements contained inthis press release, whether as a result of new information, future events orotherwise. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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