Annual Financial Report

RNS Number : 1541D

Spirent Communications PLC

25 March 2014

 



SPIRENT COMMUNICATIONS PLC

ANNUAL REPORT 2013 AND ASSOCIATED DOCUMENTS

London, UK - 25 March 2014 - Spirent Communications plc (the "Company") (LSE: SPT), a leading communications technology company, announces that its Annual General Meeting will be held on Wednesday 23 April 2014 at 10.30am at the offices of UBS, 1 Finsbury Avenue, London EC2M 2PP.

In compliance with Listing Rule 9.6.1R, the following documents have today been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM 

·     Annual Report 2013

·     Notice of 2014 Annual General Meeting

·     Form of Proxy for 2014 Annual General Meeting

The Annual Report 2013 and Notice of 2014 Annual General Meeting are also available in the Investors section of the Spirent Communications plc website at www.spirent.com.

A condensed set of the financial statements for the year ended 31 December 2013 together with information on important events that occurred during that financial year and their impact on the financial statements were contained in the Preliminary Results announcement made on 27 February 2014.  That information, together with the information set out in the appendices to this announcement, which is extracted from the Annual Report, constitute the material required by Disclosure & Transparency Rule 6.3.5 which is required to be communicated to the media in full unedited text through a Regulatory Information Service.  This announcement is not a substitute for reading the Annual Report.

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Enquiries

Michelle Balch Assistant Company Secretary

Spirent Communications plc

[phone]

About Spirent Communications plc

Spirent Communications plc is a global leader in test and measurement inspiring innovation within development labs, communication networks and IT organisations.  We enable today's communication ecosystem as well as tomorrow's emerging enterprises to deploy life-enriching communications networks, devices, services and applications.  Further information about Spirent Communications plc can be found at www.spirent.com.

Spirent Communications plc Ordinary Shares are traded on the London Stock Exchange (ticker: SPT).  The Company operates a Level 1 American Depositary Receipt ("ADR") programme with each ADR representing four Spirent Communications plc Ordinary Shares.  The ADRs trade in the US over-the-counter ("OTC") market under the symbol SPMYY and the CUSIP number is 84856M209.  Spirent ADRs are quoted on the Pink OTC Markets electronic quotation service which can be found at www.pinksheets.com.

Spirent and the Spirent logo are trademarks or registered trademarks of Spirent Communications plc.  All other trademarks or registered trademarks mentioned herein are held by their respective companies.  All rights reserved.

This document may contain forward-looking statements which are made in good faith and are based on current expectations or beliefs, as well as assumptions about future events.  You can sometimes, but not always, identify these statements by the use of a date in the future or such words as "will", "anticipate", "estimate", "expect", "project", "intend", "plan", "should", "may", "assume" and other similar words.  By their nature, forward-looking statements are inherently predictive and speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.  You should not place undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to factors that could cause our actual results to differ materially from those expressed or implied by these statements.  The Company undertakes no obligation to update any forward-looking statements contained in this document, whether as a result of new information, future events or otherwise.

Appendices

Appendix A: Responsibility statement

The Annual Report and consolidated financial statements are the responsibility of, and have been approved by, the directors.

Each of the directors confirms that, to the best of their knowledge:

·              the consolidated financial statements of the Group and parent Company financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and the profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·              the Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By Order of the Board

Rachel Whiting

Chief Financial Officer

27 February 2014

Appendix B: Related party transactions

Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the Group, is disclosed in the Report on directors' remuneration.

There were no other material related party transactions during the year ended 31 December 2013.

Appendix C: Our principal risks and uncertainties

Operational

Risk	Potential impact	Impact / Likelihood	Change*
Macro-economic and industry sector
Spirent is a global business exposed to the current world economic conditions, over which it has no control. The business is also exposed to government spending priorities, principally in the United States. We are particularly exposed to conditions in the telecommunications sector into which we sell many of our products and services and which has experienced significant downturns in the past.	Deterioration in economic or sector conditions may lead to a reduction in the level of demand for Spirent's products and services and cause customers to delay their purchasing decisions. During 2013 disruption and structural changes were experienced in our markets which have impacted Spirent's performance.	High / Likely	é
	Mitigation actions
	The Group closely monitors both market and geographic trends in order to respond to changes in demand and be in a position to take timely actions to protect profitability where possible. In addition, Spirent has a broad product portfolio of innovative test solutions and a large number of geographically diverse customers which may mitigate the impact.

Risk	Potential impact	Impact / Likelihood	Change*
Competition
All Spirent's businesses operate in highly competitive markets which experience rapid technological changes. The Group faces competition from new market start-ups as well as the more established and well-resourced companies. Industry consolidation amongst our direct competitors may bring about a shift in competitive advantages.	Actions by competitors and increased competition can bring about pressure on Spirent's gross margin. These factors will also affect Spirent's competitive position, thereby reducing revenue and consequently affecting the financial results.	Medium / Possible	é
	Mitigation actions
	In 2013 we saw intense competition in some of our markets and lost some market share. The Group's broad solution portfolio, market leading capabilities and customer focus continue to address this risk. Spirent aims to maintain market leading positions through significant investment in product development which is being stepped up in 2014. Competitor activity is closely monitored with a view to maintaining clear differentiation based on Spirent's products, services and global reach.

Risk	Potential impact	Impact / Likelihood	Change*
Customer dependence
The Group sells its solutions and services to a wide range of companies and seeks to continually expand its customer base. In 2013 no one customer accounted for 10 per cent or more of Group revenue although the top ten customers represented 38 per cent of Group revenue. In some of our markets certain customers have a dominant market share, which makes doing business with these customers critical to the success of our business. In addition, many of the companies with which we do business are some of the largest global telecommunications corporations and therefore meeting our development obligations, producing high quality products, and in an appropriate time scale, are vital to Spirent's reputation and success. The industry continues to experience consolidation which can disrupt the spending patterns of those customers affected.	Loss of one or more of Spirent's major customers could have a substantial impact on Spirent's financial results. Significant failings in either quality or being able to deliver in the appropriate timescale could cause long lasting damage to Spirent's reputation and relationships. Customer consolidation could result in delays in spending thereby reducing demand for Spirent's solutions and services and also reduce the potential number of customers to whom those solutions and services could be sold.	Medium / Possible	New Risk
	Mitigation actions
	Spirent's strong customer relationships are critical as is providing innovative solutions which meet customers' needs and Spirent's emphasis on providing professional service and support. Many customers have worked with the Group for a number of years. One of the Group's strategic objectives is to deepen our customer relationships. We place engineers on-site with our customers, undertake site surveys of the use and intended plans for the use of test solutions in their business. We seek to establish thought leadership in our industry through participation in standards bodies and industry forums, which in turn creates additional links with customers. Our strategy is to play a key part in the ecosystem of supply in our served markets by aligning with early adopters of technology and with chip developers.

Risk	Potential impact	Impact / Likelihood	Change*
Business continuity risks
Operational risks are present in the Group's businesses. These risks include the risk of failed internal and external processes and systems, human error and external events, such as a natural disaster. For example, a significant portion of our communications operations are located in California which has in the past experienced natural disasters, including earthquakes and wildfires. Contract manufacturers are used for the manufacture of a substantial amount of Spirent's products. The major contract manufacturer is located in Thailand.	A significant natural disaster could disrupt the Group's ability to conduct business and impact adversely revenue and operating results. Disruption or financial problems of contract manufacturers or limitations in the manufacturing capacity at contract manufacturers could either limit supply or increase cost.	High / Possible	çè
	Mitigation actions
	An important component of Spirent's corporate governance is its integrated risk management strategy and its regular self-assessment of risks encompassing all business units. IT disaster recovery plans are in place for all core business systems and ensure that the wider operations are all fully covered. In addition, the Group's largest manufacturing subcontractor has worldwide multiple sites and comprehensive business continuity plans. Regular meetings are held with contract manufacturers and a regular on-site presence is maintained. To minimise the effect on supply that could be caused by disruption at contract manufacturers there are contingency plans in place to transfer manufacturing to other locations.

Risk	Potential impact	Impact / Likelihood	Change*
Intellectual property
Spirent's success is dependent in part on proprietary technology which may be infringed by others inadvertently or otherwise. Protecting the Group's proprietary technology is important in enabling Spirent to compete successfully. Companies in the telecommunications industry often aggressively protect and pursue their intellectual property rights and may assert infringement claims against Spirent.	Such claims can result in significant defence costs, and may affect Spirent's ability to market its products.	Low / Possible	çè
	Mitigation actions
	Spirent has active intellectual property protection programmes in place to obtain appropriate intellectual property protection in a cost effective manner. There are procedures in the development of new products that include consideration of intellectual property rights of third parties. The Group also consults internal and external legal counsel experienced in intellectual property matters.

Strategic

Risk	Potential impact	Impact / Likelihood	Change*
Expand the markets we serve
An important component of the Group's strategy is to leverage Spirent's competencies and capabilities into new and expanding markets and new vertical market segments	Failure to identify, and execute on, these new market opportunities will limit Spirent's capability to achieve its strategy, grow its revenue and maintain its market share.	Medium / Possible	New Risk
	Mitigation actions
	Organisational changes have been made in 2013 to better align the businesses internally so that Spirent can more effectively identify those areas which offer the most significant growth opportunities. In addition, in order to further facilitate knowledge of new market areas outside our served market, individual managers are designated responsibility for investigation, review and to develop action plans arising from such initiatives.

Risk	Potential impact	Impact / Likelihood	Change*
Establish and maintain technology leadership
Spirent sells complex solutions in industries that are characterised by rapid technological changes. Keeping at the forefront of these key future technologies is critical to our success and to ensure that we remain competitive in our markets. It is critical that our product development investment is directed at the right areas to enable Spirent to develop those solutions that our customers need in a timely manner.	If product development investment does not keep pace with the speed of change in technology, or if it is not directed at the right key areas, our competitive position and financial performance will suffer. If Spirent's solutions take longer to develop than anticipated or longer to develop than our competitors then our competitive position and financial performance will also suffer.	High / Likely	é
	Mitigation actions
	Under investment in previous years is one of the factors that caused revenue to fall in 2013. This is being addressed by increasing our investment in product development in order to underpin our organic growth initiates and by reorganising the structure of the business, to sharpen our focus on anticipating our customers' requirements for the future. We also intend to grow our recognition as experts in test and measurement through our increased engagement with industry standards bodies and our close alignment with our customers.

Risk	Potential impact	Impact / Likelihood	Change*
Invest in our people
Spirent is its employees. So attracting and retaining highly qualified and skilled employees is essential in enabling the Group to deliver on its strategy and to the success of the business.	Intense competition is faced for personnel from other companies and organisations and the loss of key employees, the failure to attract and retain other highly skilled employees, or the failure to adequately plan for succession may impair Spirent's ability to run and expand the business effectively.	Medium /Possible	çè
	Mitigation actions
	Investing in people is at the core of the Group's strategy. The aim is to find, keep and engage the highest calibre of employees and encourage their contribution and development. An environment that fosters innovation and collaboration is critical to Spirent's success as is ensuring incentive plans are competitive. Succession planning for senior posts in the Company is regularly reviewed by the Board. Appropriate career paths and internal recognition programmes are developed for both technical and non-technical staff.

Risk	Potential impact	Impact / Likelihood	Change*
Acquire new capabilities and technologies
A key element of Spirent's strategy is to acquire new capabilities and technologies, and this may be through acquisition.	Integration of acquisitions can be a complex process and the results expected from acquisitions may not be achieved due to problems encountered in integration, changes in market conditions or sometimes deficiencies arising in the due diligence processes.	Medium /Possible	çè
	Mitigation actions
	Rigorous strategic and financial evaluations of all acquisition opportunities are carried out. Detailed financial and commercial due diligence are performed. The Board will only authorise transactions after all due diligence has been successfully completed and where the financial hurdles are within the agreed guidelines. Integration plans and processes are carefully considered prior to acquisition. The Board regularly reviews post-acquisition performance.

* The Board's view of how the likelihood of occurrence and / or impact has changed compared to the prior year

 

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