14th Jun 2006 07:01
Spirent Communications PLC14 June 2006 SPIRENT COMMUNICATIONS plc TRADING UPDATE London, UK - 14 June 2006: Spirent Communications plc (LSE: SPT; NYSE: SPM), aleading communications technology company, is issuing the following tradingupdate today. Summary • Revenues for the six months ending 2 July 2006 are expected to be in line with market expectations, during a period of significant product transition. • Profitability in the Performance Analysis division for the first half is expected to be lower than previously anticipated in our statement on 3 May 2006 by £4 million to £6 million, which we do not expect to be recovered during the second half. • The Company will continue to carefully manage the balance between the cost base and maintaining the capability to generate long term growth. Current trading We reported at the time of the Annual General Meeting on 3 May 2006 that revenuefor the first quarter, albeit typically our quietest, was ahead of expectationsbut that trading was characterised by variable market conditions and a verycompetitive market place. These trends have continued into the second quarterwhere we have seen a tough market background with volatility in demand, as hasalso been reported by other companies in the test and measurement sector. In addition some short term delays to product launches and our decision tocontinue to incur a higher level of investment in product development and salesand marketing, to create a stronger long term market position, has also affectedprofitability in the second quarter. Although we expect that revenues will be in line with market expectations forthe first half, risk remains as to the final outcome as the bulk of our revenuesfor the second quarter are usually realised during the last weeks of June. Performance Analysis • Performance Analysis Broadband continues to manage a significant transition in product revenues, as sales of older platforms decrease and are replaced by the sales of the new product solutions incorporating latest technology. This month we have launched the next release of Spirent TestCenter(TM), which addresses the needs of the IPTV development market and delivers a significant improvement in time to test, unmatched by other providers. We believe that this will deliver significant competitive advantage. However, the launch date was later than planned as we undertook extended engineering efforts to develop and test the latest product release, particularly the increased ability to test large-scale devices to meet leading-edge market requirements. This has delayed revenue upside expected to fund the additional investment in product development during the second quarter. In addition we have extended the period of increased spending on sales and marketing in order to gain market position for the long term, further reducing profits in the short term. • Performance Analysis Wireless has experienced a slowing in demand in the WCDMA market due to delays in deployment of location based technologies and for conformance test. In addition there have been delays to order intake, resulting in lumpy demand patterns in some parts of the business. Service Assurance • The Service Assurance division is expected to meet its planned first half performance; however we expect revenues on legacy products to continue to decline year on year through the second half. We continue to believe that we are well placed to serve the needs of carriers to monitor next-generation networks, however revenues for such solutions are now not expected to be achieved until 2007. We will continue to manage the division to maintain a near break-even result. Systems • The Systems group continues to perform profitably and in line with expectations. Intangibles amortisation and goodwill impairment under International FinancialReporting Standards ("IFRS") Under IFRS the expected revenue decline in the Service Assurance division islikely to necessitate a further goodwill impairment at the interim stage. In addition, as required by IFRS, an exercise is being carried out to identifyand to determine the fair value of the intangible assets in relation to theacquisitions of SwissQual and QuadTex. Intangible assets identified will be amortised over their remaining lives as an operating expense. Initial indications are that the annualised amortisation charge will be in the region of £2.5 million. Goodwill impairment and amortisation of intangibles do not impact the cash flowsof the Company. Anders Gustafsson, Chief Executive, commented: "As we indicated previously, 2006 is a year of product transition as theincreased capability of our new products and solutions is expected to enable usto gain market share. However delay in orders, the competitive market place andour increased investment are likely to impact profitability in the short term. "To date we have been encouraged both by the performance of our new products andby the response of our customers with a considerable number of trials of SpirentTestCenter(TM) now underway." Spirent Communications plc will issue its interim results on 10 August 2006. - ends - EnquiriesAnders Gustafsson,Chief Executive Spirent Communications plc +44 (0)1293 767676Eric Hutchinson, Chief Financial Officer Reg Hoare/Katie Hunt/Libby Young Smithfield +44 (0)20 7360 4900 About Spirent Communications plc Spirent Communications plc is a leading communications technology companyfocused 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; our abilityto successfully expand our customer base; continuing variable market conditions;pace of economic recovery; our ability to improve efficiency, achieve thebenefits of our cost reduction goals and adapt to economic changes and otherchanges in demand or market conditions; our ability to develop and commercialisenew products and services, extend our existing capabilities in IP services andexpand our product offering internationally; our ability to attract and retainqualified personnel; the effects of competition on our business; fluctuations inexchange rates and heavy exposure to the US dollar; changes in the business,financial condition or prospects of one or more of our major customers; risks ofdoing business internationally; risks relating to the acquisition or sale ofbusinesses and our subsequent ability to integrate businesses; our reliance onproprietary technology; our exposure to liabilities for product defects; ourreliance on third party manufacturers and suppliers; and other risks describedfrom time to time in Spirent Communications plc's Securities and ExchangeCommission periodic reports and filings. The Company undertakes no obligation toupdate any forward-looking statements contained in this press release, whetheras a result of new information, future events or otherwise. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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