SPIRENT COMMUNICATIONS PLC
ANNUAL REPORT 2014 AND ASSOCIATED DOCUMENTS
London, UK - 26 March 2015 - Spirent Communications plc (the "Company") (LSE: SPT), a leading communications technology company, announces that its Annual General Meeting will be held on Tuesday 5 May 2015 at 1.00pm at the offices of UBS, 100 Liverpool Street, London EC2M 2RH.
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 2014
· Notice of 2015 Annual General Meeting
· Form of Proxy for 2015 Annual General Meeting
The Annual Report 2014 and Notice of 2015 Annual General Meeting are also available in the Investors section of the Spirent Communications plc website at http://corporate.spirent.com/ .
A condensed set of the financial statements for the year ended 31 December 2014 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 26 February 2015. 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
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Spirent Communications plc |
+44 (0)1293 767676 |
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
26 February 2015
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 2014.
Appendix C: Our principal risks and uncertainties
Risk |
Potential impact |
Mitigation actions |
Macro-economic |
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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 |
Deterioration in economic 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. |
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 large number of geographically diverse customers, which mitigates the impact.
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Technology change |
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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.
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 to enabling Spirent to compete successfully. |
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.
Intellectual property claims can result in significant defence costs, and may affect Spirent's ability to market its products. |
All Spirent's businesses work very closely with customers and remain focused on their requirements.
Each business makes investment decisions specifically related to their solutions portfolio based on market needs. This happens through our formalised Gate Process that has been in place for many years.
Spirent continues to make a significant investment in product development. In 2014 the investment was increased to $115.4 million in order to underpin organic growth initiatives.
Spirent has active intellectual property protection programmes in place to obtain appropriate intellectual property protection in a cost-effective manner.
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Customer dependence |
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The Group sells its solutions and services to a wide range of companies and seeks to continually expand its customer base. In 2014 no one customer accounted for 10 per cent or more of Group revenue although the top 10 customers represented 35 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 timescale, are vital to Spirent's reputation and success.
Changes in our major customers' priorities in technology investments can also have a significant impact on their spending on Spirent products by those in the customers' supply chain.
The industry continues to experience consolidation which can disrupt the spending patterns of those customers affected.
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Loss of one or more of Spirent's major customers could have a significant 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.
Changes in our customers' technology investments can result in reduced spending on our existing solutions before customers, and those in the supply chain, ramp up spending on new technologies. |
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 and 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. |
Competition |
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All Spirent's businesses operate in highly competitive markets which experience rapid technological changes. Establishing and maintaining technological differentiation in our solutions is key to our success.
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.
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Actions by competitors and increased competition can bring about pressure on Spirent's gross margin. These factors could also affect Spirent's competitive position, thereby reducing revenue and consequently affecting financial results. |
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 the development of differentiated products.
Competitor activity is closely monitored with a view to maintaining clear differentiation based on Spirent's products, services and global reach. |
Acquisitions |
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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. |
Underperformance by acquisitions will impact the Group's results and may lead to impairment of goodwill and/or intangible assets.
During 2014 Spirent has completed five acquisitions, details of which are provided in note 32 of Notes to the consolidated financial statements. |
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 reviews post-acquisition performance.
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Business continuity |
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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.
The incidence of cyber security crime is on the rise. Spirent is dependent on its information technology systems for both internal and external communications as well as for its day-to-day operations. |
A significant natural disaster could disrupt the Group's ability to conduct business and adversely impact 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.
If a cyber attack were to be successful it could result in loss of data, confidential information and damage to Spirent's intellectual property, causing major disruption to the business. |
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 sub-contractor has worldwide multiple sites and comprehensive business continuity plans.
Regular meetings are held with contract manufacturers and an 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.
A cyber security and cybercrime diagnostics review has been performed during 2014. A new next-generation firewall has been installed which provides a high level of protection to the network.
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Our people |
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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. |
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. Further information on our employees is provided in Resources and relationships on pages 41 to 43.
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The risks associated with achieving Spirent's strategy are also considered in "Our strategy" on pages 14 and 15.