Spirent Communications confident after challenging 2023

(Sharecast News) - Spirent Communications said in an update on Tuesday that, despite facing a challenging year in the telecommunications sector, its 2023 full-year results aligned with its revised expectations. The FTSE 250 company said revenue for the year closed at $474m, down from $607m in 2022.

It said it anticipated delivering an adjusted operating profit in line with market consensus.

To adapt to the challenging market dynamics in the telecommunications sector, Spirent said it was accelerating its focus on non-telecom segments, which were currently showing more positive trends.

They had seen promising growth in order intake for their Positioning business and from Hyperscalers.

Additionally, the company secured a significant deal with a world-leading financial services organisation, opening up a new end market for them.

Spirent said it was taking proactive steps to optimise its cost base while preserving its technology leadership.

It said it had implemented several key initiatives, including a merger of its high-speed ethernet business with lifecycle service assurance and a reduction in headcount by approximately 8%, all without compromising essential research and development product roadmaps.

Furthermore, the company said it was reducing its office footprint to reflect the changing post-Covid-19 working environment.

Those initiatives, expected to incur an exceptional restructuring cost of $15m, had already generated cost savings in 2023 and were projected to yield significant savings in 2024, which would offset cost inflation.

The expected payback period for the changes was less than two years.

In terms of its financial position, Spirent maintained a robust balance sheet with a cash position of $103m, supported by efficient working capital management.

It repurchased $72m worth of shares during the year, demonstrating disciplined investment practices.

Looking ahead, Spirent said it was optimistic about the new financial year, starting with a growing order book.

It said it was well-positioned to make strategic and operational progress, with growth opportunities in non-telecom end customer markets.

While continuing to invest in leading technology solutions across its portfolio, the company said it was ready to capitalise on market recoveries when they occurred.

"We are making good progress diversifying and expanding our customer base whilst our telco end market key customers are managing their own challenges driven by the macroeconomic environment," said chief executive officer Eric Updyke.

"Whilst we cannot predict the duration of the current market challenges, we remain confident in our mid-term targets with the long-term structural growth drivers for our business continuing to be compelling, including the evolution of global 5G infrastructure and further development of ORAN, leveraging our market-leading solutions."

Updyke also said growth in next-generation cloud and AI data centre needs for Hyperscalers would gather pace, driving growth for the firm's 400G and 800G high-speed Ethernet test solutions.

There was also a heightened need for automated testing and assurance to help our customers benefit from both performance and cost efficacy.

"Demand for highly accurate location-based solutions for growing defence, aerospace and automotive applications," Eric Updyke added.

At 0912 GMT, shares in Spirent Communications were up 5.61% at 122.3p.

Reporting by Josh White for Sharecast.com.