Interim Results
Spirent PLC
7 September 2000
REACHING NEW HEIGHTS
Telecoms Testing Drives Rapid Growth
Spirent plc, the international network technology company, today announces
its Interim Results for the half year ended 30 June 2000.
Highlights
£ million Half year Half year Growth %
2000 1999
1999 Restated
Turnover 316 252 25
Operating profit* 60 36 67
Profit before taxation** previous
basis+ 59 45 31
Less deconsolidation of
Interconnection 6 5
Profit before taxation** as reported 53 40 33
Headline earnings per share (pence) 5.76 4.39 31
Interim dividend per share (pence) 1.44 1.33 8
* Before goodwill amortisation of £9 million (1999 £1 million)
** Before goodwill amortisation as above and loss on disposals of £11
million (1999 nil)
* Spirent Communications continues rapid growth: versus H1 1999, turnover
increased 264 per cent to £114 million and operating profit rose 226 per
cent to £39 million. Organic growth was 80 per cent in both.
* Spirent Communications contributed 66 per cent of operating profit* for
continuing businesses.
* Investment in new product development rose 51 per cent to £25.7 million
- 8.1 per cent of sales (H1 1999 £17.0 million, 6.7 per cent of sales).
* Return on sales increased by 4.7 percentage points to 18.8 per cent.
* +Financial results restated to show Interconnection as a joint venture.
Reported earnings per share are unaffected.
Commenting on the results, Nicholas Brookes, Chief Executive, said:
'The first six months of 2000 saw an outstanding performance by Spirent
Communications, which through its rapid growth continues to drive the
profound change in the overall profile of Spirent. It is therefore pleasing
to note that we have now joined the FTSE 100. I would like to thank all of
our people, whose efforts have been marked by the achievement of this
milestone.
'Given the increasing investment being made by the telecommunications
industry and the rapid pace of technological change, Spirent is well
positioned to take advantage of future market potential. We look forward to
a further strong performance during the second half of the year and beyond.'
Enquiries:
Nicholas Brookes, Chief Executive Spirent plc On 07/09/00
Eric Hutchinson, Finance Director +44(0)20 7404 5959
Thereafter
+44 (0)1293 767676
Jon Coles/
Rupert Young Brunswick London +44 (0)20 7404 5959
Sara Strong/Nina Pawlak New York +1 212 333 3810
Spirent plc is an international network technology company providing state-
of-the-art solutions with a focus on high growth, high margin activities. It
is a world leader in advanced telecommunications testing systems and network
products. www.spirent.com
Spirent is quoted on the London Stock Exchange, ticker SPT. The Company
operates a Level 1 American Depository Receipt programme (ticker: SPNUY;
CUSIP number: 84856M100). For information, contact Brian Heston, The Bank of
New York, American Depositary Receipts, 101 Barclay St, 22 West, New York,
NY 10286 Phone: (212) 815 3938, Fax: (212) 571 3050, email:
bheston@bankofny.com www.adrbny.com
2000 INTERIM REPORT
Overview
The first six months of 2000 saw an outstanding performance by our
Communications group. Through successful product development and the early
rewards of its integration programme, Spirent Communications achieved
organic growth in both turnover and operating profit of 80 per cent.
The rapid growth of the Communications group continues to drive the profound
change in the overall profile of Spirent. In the first half, Communications
contributed 66 per cent of continuing operating profit before goodwill
amortisation and loss on disposals of non-core businesses, compared with 37
per cent in the first six months of 1999. In recognition of this shift,
Spirent plc was recently reclassified by the FTSE Global Classification
Committee under the Information Technology Hardware (Telecommunications
Equipment) sector. We are pleased to note that the company is also to enter
the FTSE 100 index of leading quoted companies.
Financial Review
Turnover increased by 25 per cent to £316.4 million (1999 £251.7 million),
while operating profit before goodwill amortisation and loss on disposals
increased by 67 per cent to £59.6 million (1999 £35.5 million). Organic
growth in turnover and operating profit was 24 per cent and 39 per cent
respectively. Product development expenditure increased by 51 per cent to
£25.7 million (1999 £17.0 million), a 1.4 percentage point increase to 8.1
per cent of sales. Return on sales increased by 4.7 percentage points to
18.8 per cent. Profit before taxation, goodwill amortisation and loss on
disposals rose 33 per cent to £52.8 million (1999 £39.5 million).
We have reviewed the accounting treatment for our 51 per cent interest in
WAGO Kontakttechnik GmbH and WAGO Contact SA (Interconnection) in the light
of the requirements under FRS9 'Associates and Joint Ventures'. The
shareholder agreement with the minority shareholder has the effect of
establishing joint rather than sole control. Accordingly, the financial
reporting of the Group's interest in Interconnection has been restated from
that of a consolidated subsidiary to a joint venture. We consider that this
accounting treatment reflects a fairer representation of the financial
results of the Spirent Group.
Prior period results have been restated. Since Spirent's economic interest
remains unchanged, there is no impact on the reported earnings attributable
to shareholders or shareholders' funds. Profit before taxation, goodwill
amortisation and loss on disposals on the previous basis would have been
£59.1 million (1999 £44.9 million) were Interconnection fully consolidated.
Headline earnings per share increased by 31 per cent to 5.76 pence (1999
4.39 pence).
We continued our programme of divesting non-core operations through the sale
of three companies, raising £8.8 million of cash proceeds. The reported
loss on disposals of £11.0 million is after expensing goodwill previously
charged to reserves of £14.6 million.
Operating activities generated £48.7 million of cash, an increase of 61 per
cent over the £30.2 million generated in the first half of 1999, reflecting
the strength of cash generation by Spirent Communications.
Cash inflow was £0.8 million (1999 £2.8 million outflow), before net
expenditure of £23.7 million on acquisitions and acquisition-related earn-
outs less divestment proceeds. Capital investment in the period was £13.6
million (1999 £20.6 million), a decrease of £7.0 million, reflecting the
completion of the major programme of automation and facilities expansion in
Network Products (formerly Cable Management). Cash advances of £20.0
million were made to the employee share ownership trust to purchase shares
in Spirent plc in order to fund long term incentive plans. Net borrowings
amounted to £346.8 million, an increase of £69.5 million in the period as a
result of acquisition expenditure less divestment proceeds, earlier payment
of the final dividend in June and retranslation of US dollar borrowings.
Exchange rates had a negligible effect on the reported operating results.
The interim dividend will increase by 8 per cent to 1.44 pence (1999 1.33
pence). This is payable on 9 November 2000 to shareholders on the register
at the close of business on 13 October 2000. Shareholders may participate
in the Dividend Reinvestment Plan.
Operating Review
Spirent Communications
£ million Half Half Growth Organic
year year growth
2000 1999 % %
__________________________________ _______ _______ _______ _______
Turnover 114.0 31.3 264 80
Operating profit before goodwill
amortisation 38.8 11.9 226 80
Return on sales 34.0% 38.0%
Spirent Communications delivered an excellent performance during the first
six months of the year. Through success with its integration strategy and
continued commitment to product innovation, the group extended its position
as a leader in the fast-growing communications test equipment market.
Spirent Communications supplies key enabling products to communications
equipment and service providers who create the Internet and corporate
networks. On a proforma basis, if the businesses acquired in 1999 were
taken into account, Spirent Communications would have had turnover of £61.3
million and operating profit of £20.7 million in the first half of 1999.
Compared with the second half of 1999, turnover increased by 37 per cent to
£114.0 million and operating profit rose 25 per cent to £38.8 million
reflecting increased product development, marketing and business development
activities.
Important progress has been made in developing sales internationally in Asia
Pacific and Europe. Compared with the second half of 1999, revenue
investment in sales and marketing rose by £6.6 million to £21.7 million and
in product development by £3.6 million to £13.5 million. These investments
combined with increased business development activities have, as expected,
reduced the return on sales by 4 percentage points to 34 per cent.
We expect that the proportion of our profits derived from Spirent
Communications will increase due to the growth in demand created by the
global investment being made by the telecommunications industry and rapid
technological change, both driven by the expansion in traffic over the
Internet.
The group has received a number of prestigious industry awards for recent
product launches. In the 'Best of Show' awards at the May Networld+Interop
trade fair in Las Vegas (widely regarded as the top awards in the
communications industry), Spirent Communications products were named winner
and runner-up in the Performance Test & Measurement category. Selected as
category winner was Terametrics TM, a new open architecture foundation for
our family of SmartBits LAN and IP test systems that enables the integration
of third party test applications. In the same month, the Adtech AX/4000
broadband test system received another industry accolade in being named
'Product of the Year' in the Protocol Analyser category by Network Magazine,
a leading technical publication.
Integration of products from separate divisions of Spirent Communications
has been achieved to create unique solutions for the rapidly growing ADSL
and cable modem markets. We have seen growth in the early developments of
3G wireless testing. We were first to announce to the market a test
solution that offers a 10 Gbps performance capability, our new Adtech OC-
192c system. This product puts us in a leading position in serving the fast
growing terabit router market segment.
Spirent Communications has entered into a strategic marketing alliance with
Quallaby Corporation to supply network service providers with true carrier-
class network management solutions. The alliance creates a powerful union of
high-performance monitoring and analysis features offered by the Adtech
SLAM TM (Service Level Agreement Monitor) system and Quallaby's PROVISO
(Registered) 2.0 carrier-class software for network management and service
assurance.
The integration of our business under the Spirent Communications banner
places us in a leading position in our market worldwide. A strong global
management team has been put in place, alongside the integration of a
unified worldwide sales force. The new share option incentive programme
approved at the Annual General Meeting has been well received. It has
assisted in the recruitment of new employees and enhanced our ability to
retain our key people at all levels in an increasingly competitive global
market. Staff turnover accounted for only 3 per cent of headcount in this
period.
Recent worldwide shortages of certain electronic components, such as flash
chips and passive components, have not significantly impacted the group due
to effective inventory and supply chain management.
Spirent Network Products
£ million Half Half Growth Organic
year year growth
2000 1999 % %
__________________________________ _______ _______ _______ _______
Turnover 90.2 77.4 17 11
Operating profit before goodwill
amortisation 13.5 11.2 21 11
Return on sales 15.0% 14.5%
The Cable Management group has been renamed Spirent Network Products to
reflect more accurately its increased focus on network applications in all
markets. The fastest growing segment of Network Products is its sales to
the telecommunications market which have risen to 20 per cent of turnover
during the first six months of 2000, up from 13 per cent for the whole of
1999. We expect this trend to continue through the development of new
products.
In February we acquired RW Data, a leading UK network products provider,
which is performing well. Its wide product range, which includes systems
for the proposed new Category 6 gigaband standard, makes it exceptionally
well placed to serve installers of state-of-the-art Local Area Networks.
We plan to broaden considerably its customer base through our global
HellermannTyton sales channels, and already have new products under
development for the American, Asian and European markets where they will
complement our existing network product range. We expect the positive trend
in organic growth in turnover for Spirent Network Products to continue,
given the expansion of the market for LAN products.
We have continued to see efficiency improvements resulting from the
completion of our worldwide automation programme. Overall the US trading
performance was strong. In Brazil impressive growth was achieved in the
expanding domestic market. In the UK, efficiency improvements have assisted
in countering the impact of the continued strength of sterling relative to
the euro and the resulting weak UK domestic market. Our German operation,
which relocated during the period to a new automated facility, delivered a
strong performance across all the industries that it serves. Buoyant
European performance in the first half year will further benefit from new
product introductions. Our Japanese associate performed strongly, and we
saw similarly good performance improvements from Singapore and China, in
both the local and export markets.
Spirent Systems
£ million Half Half Change Organic
year year change
2000 1999 % %
__________________________________ _______ _______ _______ _______
Turnover 64.6 67.1 (4) (5)
Operating profit before goodwill
amortisation 1.1 3.8 (71) (69)
Return on sales 1.7% 5.7%
The results for Spirent Systems are being reported separately for the first
time. Airline consolidation and the rationalisation by aircraft
manufacturers have further delayed capital investment by the airline
industry into major IT systems programmes, impacting our revenues this year.
The decrease in profit is due to continued investment in product
development, sales and marketing by our aerospace solutions business.
This investment has led to the development of AuRA TM, the civil aviation
version of our GOLD TM maintenance management software system. The new
product, which will be delivered this month, will have a Windows-style
interface, be web-enabled and offer a modular construction to allow
customers to adopt the system in more manageable phases. Initial
demonstrations of AuRA have been well received by customers including fast-
growing US regional airlines such as Frontier and Sun Country.
As a result of a procurement strategy review the US Air Force has changed
its technical approach for the IMDS programme. We expect that the US Air
Force will no longer fund the current IMDS deployment, including GOLD. We
believe this will have no impact on other government funded programmes
involving GOLD. GOLD is the solution of choice for a number of major prime
contractors (including Lockheed Martin and Boeing) to support a wide range
of US military programmes such as the US Air Force's C17 transport and the
C5 programme, the US Navy's T-45 Goshawk and the more recent US Air Force
F-22 aircraft.
Elsewhere in Spirent Systems, we saw mixed performances among the power
management and environmental businesses, but an improved contribution from
the position controls operation.
Spirent Sensing Solutions
£ million Half Half Growth Organic
year year growth
2000 1999 % %
__________________________________ _______ _______ _______ _______
Turnover 43.5 34.5 26 12
Operating profit before goodwill
amortisation 5.7 5.1 12 10
Return on sales 13.1% 14.8%
The Sensing Solutions group performed well primarily due to growth in the
biomedical products market, successful product launches and greater value
added sales for European automotive and building management system
applications. Humidity sensing sales benefited from a well received new
family of industrial transmitters and the integration of distribution
channels across our operations.
Profits grew by 12 per cent notwithstanding our investment for expansion in
Asia Pacific and Europe, which reduced return on sales. Through our joint
ventures in Japan and Korea we are now positioned for solid growth in the
important Asian markets. In India, where we achieved sales growth of 134
per cent, we have opened an additional facility to satisfy demand for our
export business.
In Europe, we are expanding our sales organisation for our pharmaceutical
thermal validation systems and have recently launched European language
versions of our industry-leading Validator 2000 TM system. We have
strengthened our European humidity offering through the acquisition in March
of Sontay Limited, a provider of controls peripherals for building
management systems which offers expertise in LonWorks systems.
Interconnection Joint Venture
Our share of turnover increased by 14 per cent to £35.9 million and our
share of operating profit increased by 20 per cent to £6.6 million.
Interconnection is growing faster than the rest of its market due to the
launch of new patented products over the past 12 months, which now
contribute substantially to the overall sales result. Interconnection's
digital I/O modules and electronic interface products are enjoying fast
growth due to the winning of some important projects, particularly in the
North American market. Geographic expansion has continued with strong
growth in North America and Asia where our activities in mainland China
continue to develop better than anticipated.
Operating margins have improved as a result of volume growth, which has
utilised the increased capacity installed through prior years' capital
investment.
Board
In April, we were delighted to welcome Richard Moley to the Board as a non-
executive director. Dick was founding Chairman, Chief Executive Officer and
President of Stratacom Inc, a leader in the development of ATM switching and
Frame Relay communications technologies. Following its acquisition of
Stratacom in 1996, Dick joined Cisco Systems Inc as a member of the Board
and Senior Vice President. He has subsequently retired from the company and
is involved with a number of other communications ventures. He was a non-
executive director of Netcom Systems Inc until mid 1999. Through his
breadth of communications industry experience and knowledge, he has already
made a marked contribution to the Board's deliberations.
In June, we were saddened to learn of the death of Dr John Westhead, former
Chief Executive of Bowthorpe plc. John exerted a tremendous influence on
the development of our business. He put in place the foundation stones for
Spirent to become the international network technology company it is today.
Those of us who had the privilege to know and work with John can testify to
his tremendous intelligence, energy and commitment. He will be sadly
missed.
People
The excellent growth we have achieved during this period and our entry into
the FTSE 100 are testaments to the dedication, ingenuity and determination
of Spirent employees to deliver products and solutions that delight our
customers. We would like to thank and applaud all our people worldwide for
this outstanding performance.
In our dynamic technology markets, speed-to-market is a critical concern.
Our focus is to support our people to help them set new records. In
addition to maintaining highly competitive incentivisation plans, we place
great emphasis on creating positive working environments to encourage our
people to act creatively and entrepreneurially.
As a high technology business, our people are our greatest asset. We will
continue to make Spirent an exciting and rewarding place for them to excel.
Outlook
Spirent's excellent first half performance, particularly from our
Communications group, underlines the success of our strategy of focusing on
high growth, high technology businesses. Given the increasing investment
being made by the telecommunications industry and the rapid pace of
technological change, Spirent is well positioned to take advantage of future
market potential. We look forward to a further strong performance during
the second half of the year and beyond.
Consolidated Profit & Loss Account
Year 31
£ million Notes Half year 30 June December
________________________________________________ __________
2000 1999 1999
Continuing Operations as restated as restated
(2) (2)
Ongoing Ac- Dis- Total Total Total
quisitions posals
Turnover: group
and share of
joint venture 341.6 6.6 4.1 352.3 283.3 608.5
Less: share of
joint venture's
turnover (35.9) - - (35.9) (31.6) (64.0)
_______ _______ ______ ______ _______ _______
Turnover 3 305.7 6.6 4.1 316.4 251.7 544.5
_______ _______ ______ ______ _______ _______
Operating
profit 3 49.4 0.6 0.5 50.5 34.5 81.4
_______ ________ ______ ______ _______ ______
Goodwill
amortisation 8.6 0.5 - 9.1 1.0 8.6
Operating profit
before goodwill
amortisation 58.0 1.1 0.5 59.6 35.5 90.0
_______ _______ ______ ______ _______ _______
Income from
interest in
joint venture 6.6 - - 6.6 5.5 9.5
Income from
interests in
associated
undertakings 1.0 - - 1.0 0.7 2.3
_______ __________ ______ ______ __________ ________
Operating profit
of the Group,
joint venture
and associated
undertakings 57.0 0.6 0.5 58.1 40.7 93.2
Loss on disposal
of operations - - (11.0) (11.0) - (6.7)
_______ ______ ______ ______ ______ ______
Profit before
interest 57.0 0.6 (10.5) 47.1 40.7 86.5
_______ ______ ______ ______
Net interest
payable (14.4) (2.2) (12.8)
______ _______ ______
Profit before
taxation 32.7 38.5 73.7
Taxation 4 17.3 12.8 30.2
______ _______ _______
Profit after
taxation 15.4 25.7 43.5
Minority
shareholders'
interest -
equity 0.2 - -
______ _______ _______
Profit
attributable to
shareholders 15.2 25.7 43.5
Dividends 8.8 8.1 27.1
______ ________ ______
Profit retained 6.4 17.6 16.4
====== ======== =======
Basic earnings
per
share (1) 2.48p 4.22p 7.14p
Headline
earnings per
share (1) 5.76p 4.39p 9.83p
Diluted earnings
per
share (1) 2.38p 4.20p 6.84p
Net dividend per
share (1) 1.44p 1.33p 4.42p
(1) Earnings and dividend per share for 1999 have been restated to reflect
the three-for-one share split approved at the AGM on 11 May 2000.
(2) The 1999 figures have been restated to reflect the change in
accounting treatment in respect of the Group's interest in
Interconnection (see note 2).
If Interconnection had been accounted for as a subsidiary company
profit before taxation would have been as follows:
Profit before taxation,
goodwill amortisation
and loss on disposal of
operations 59.1 44.9 98.1
_____ _____ _____
Consolidated Statement of Total Recognised Gains and Losses
£ million Year
Half year 30 June 31 December
____________________ __________
2000 1999 1999
Profit attributable to shareholders 15.2 25.7 43.5
Exchange adjustment on subsidiary
undertakings, joint venture and
associated companies net of taxation 11.8 (2.0) (3.9)
________ ________ ________
Total recognised gains and losses 27.0 23.7 39.6
======== ======== ========
The interim dividend is payable on 9 November 2000 to shareholders
registered at the close of business on 13 October 2000.
Consolidated Balance Sheet
£ million 30 June 31
December
_______________________ ________
2000 1999 1999
as as
restated restated
(1) (1)
Fixed assets
Intangible assets 366.3 52.5 321.3
Tangible assets 113.9 108.8 107.0
Investment in joint
venture
share of gross assets 61.1 53.8 54.1
share of gross
liabilities (22.3) (18.0) (19.2)
______ ______ ______
38.8 35.8 34.9
Investment in
associates 13.1 10.4 11.9
Other investments 31.9 5.6 12.3
_______ ________ ________
564.0 213.1 487.4
_______ ________ ________
Current Assets
Stocks 80.2 75.5 69.3
Debtors 137.8 100.2 115.2
Investments 21.6 3.3 51.0
Cash at bank and in
hand 38.5 13.1 37.7
______ ______ ______
278.1 192.1 273.2
______ ______ ______
Current liabilities
Creditors due within
one year 112.0 112.2 119.6
Loans and overdrafts 54.9 28.3 150.4
______ ______ ______
166.9 140.5 270.0
______ ______ ______
_______ ________ ________
Net current assets 111.2 51.6 3.2
_______ ________ ________
Assets less current
liabilities 675.2 264.7 490.6
Long term liabilities
Creditors due after
more than one year (377.0) (63.2) (234.6)
Provisions for
liabilities and
charges (0.1) (2.9) (0.7)
Accruals and deferred
income (2.6) (0.9) (1.1)
_______ ________ ________
Assets less 295.5 197.7 254.2
liabilities
======= ======== ========
Shareholders' funds -
equity 291.1 194.9 250.3
Minority interests -
equity 4.4 2.8 3.9
_______ ________ ________
295.5 197.7 254.2
======= ======== ========
(1) The 1999 figures have been restated to reflect the change in accounting
treatment in respect of the Group's interest in Interconnection (see note
2).
The Interim Report is unaudited but has been reviewed by the auditors.
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The comparative financial
information, as restated, is based on the statutory accounts for the
financial year ended 31 December 1999. Those accounts, upon which the
auditors issued an unqualified opinion, have been delivered to the Registrar
of Companies.
The Interim Report for the six months ended 30 June 2000 was approved by the
Directors on 7 September 2000.
Consolidated Cash Flow Statement
Year
£ million Half year 30 June 31 December
2000 1999 1999
as restated as restated
(1) (1)
Net cash inflow from operating
activities 48.7 30.2 99.0
Dividends received and capital
payment from/(to) joint venture and
associated undertakings 1.2 (0.7) 1.5
Returns on investments and
servicing of finance (9.8) (2.2) (9.9)
Taxation (5.7) (9.5) (17.7)
Capital expenditure and financial
investment (33.6) (20.6) (39.8)
__________ __________ ___________
Cash flow before acquisitions and
financing 0.8 (2.8) 33.1
Acquisitions and disposals (23.7) (35.6) (232.9)
Equity dividends paid (19.0) - (25.5)
Management of liquid resources 30.4 2.7 (44.8)
Financing 10.5 20.7 283.8
__________ __________ ___________
Net cash (outflow)/inflow (1.0) (15.0) 13.7
========== ========== ===========
Reconciliation of Net Cash Flow to Movement in Net Borrowings
Net cash (outflow)/inflow (1.0) (15.0) 13.7
Cash (inflow) arising from the
increase in debt and lease
financing (7.9) (20.1) (277.5)
Cash (inflow)/outflow arising from
the decrease in liquid resources (30.4) (2.7) 44.8
________ ________ _________
Movement arising from cash flows (39.3) (37.8) (219.0)
Loans and finance leases acquired
with subsidiary - (0.2) (27.2)
Loan to acquire subsidiary (14.2) - -
Loans and finance leases disposed - - 0.3
of with subsidiary
New finance leases - (0.2) (7.3)
Exchange adjustment (16.0) (2.0) 6.1
________ ________ _________
Movement in net borrowings (69.5) (40.2) (247.1)
Net borrowings at 1 January (277.3) (30.2) (30.2)
________ ________ _________
Net borrowings (346.8) (70.4) (277.3)
======== ======== =========
(1) The 1999 figures have been restated to reflect the change in accounting
treatment in respect of the Group's interest in Interconnection (see note
2).
Notes to the Financial Information
1. Basis of Preparation
The Interim Report has been prepared on the basis of the accounting policies
set out in the Group's 1999 statutory accounts. A prior year adjustment has
been made to reflect the change in accounting treatment in respect of the
Group's interest in Interconnection referred to below.
2. Change in Accounting Treatment and Prior Year Adjustment
The Board has reviewed the accounting treatment for our 51 per cent interest
in WAGO Kontakttechnik GmbH and WAGO Contact SA (Interconnection) in the
light of the requirements under Financial Reporting Standard 9 'Associates
and Joint Ventures'. The shareholder agreement with the minority
shareholder has the effect of establishing joint rather than sole control.
Accordingly, the financial reporting of the Group's interest in
Interconnection has been restated from that of a consolidated subsidiary to
a joint venture.
The Board considers that this accounting treatment reflects a fairer
representation of the financial results of the Spirent Group.
Prior period results have been restated.
Since Spirent's economic interest remains unchanged, there is no impact on
the reported earnings attributable to shareholders or shareholders' funds,
although the individual line items in the profit and loss account, balance
sheet and cash flow statement are affected by the change in accounting
treatment.
3. Analysis of Results
£ million Half year 30 June Year
31 December
_______________________ ______________
2000 % 1999 % 1999 %
as as
restated restated
Turnover by source
Europe 94.3 30 84.7 40 166.0 35
North America 199.1 64 113.5 54 278.5 59
Asia Pacific, Rest of
Americas, Africa 18.9 6 12.1 6 27.7 6
________ ___ ________ ___ _________ ___
312.3 100 210.3 100 472.2 100
=== === ===
Divested operations 4.1 41.4 72.3
________ ________ _________
316.4 251.7 544.5
======== ======== =========
Operating profit by source
Europe 11.9 20 13.1 41 23.3 28
North America 45.8 77 18.8 59 61.2 72
Asia Pacific, Rest of
Americas, Africa 1.4 3 0.1 - (0.2) -
________ ____ _______ ___ ______ ___
59.1 100 32.0 100 84.3 100
=== === ===
Divested operations 0.5 3.5 5.7
________ ________ _________
59.6 35.5 90.0
Goodwill amortisation (9.1) (1.0) (8.6)
________ ________ _________
50.5 34.5 81.4
======== ======== =========
Turnover by segment
Communications 114.0 36 31.3 15 114.7 24
Network Products 90.2 29 77.4 37 155.4 33
Systems 64.6 21 67.1 32 130.0 28
Sensing Solutions 43.5 14 34.5 16 72.1 15
________ ___ ________ ___ _________ ___
312.3 100 210.3 100 472.2 100
=== === ===
Divested operations 4.1 41.4 72.3
________ ________ _________
316.4 251.7 544.5
======== ======== =========
Operating profit before
goodwill amortisation by
segment
Communications 38.8 66 11.9 37 43.0 51
Network Products 13.5 23 11.2 35 21.5 26
Systems 1.1 2 3.8 12 8.7 10
Sensing Solutions 5.7 9 5.1 16 11.1 13
________ ___ ________ ___ _________ ___
59.1 100 32.0 100 84.3 100
=== === ===
Divested operations 0.5 3.5 5.7
________ ________ _________
59.6 35.5 90.0
======== ======== =========
Average exchange rates
United States 1.57 1.62 1.62
Euro 1.63 1.49 1.52
4. Taxation
£ million Year
Half year 30 June 31 December
________________________ ___________
2000 1999 1999
as as
restated restated
UK taxation 0.7 1.7 2.3
Overseas taxation 14.0 8.9 21.8
Tax arising on disposals - - 1.1
________ _______ ________
14.7 10.6 25.2
Share of joint venture and
associated companies taxation 2.6 2.2 5.0
________ _______ ________
17.3 12.8 30.2
======== ======= ========
5. Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
£ million
Operating profit 50.5 34.5 81.4
Depreciation 11.3 10.5 21.9
Profit on disposal of tangible
fixed assets (0.6) (0.1) (0.7)
Amortisation of goodwill 9.1 1.0 8.6
Deferred income
received/(released) 1.5 (0.1) 0.1
Increase in debtors (18.8) (9.2) (18.5)
Increase in stocks (8.2) (4.0) (6.2)
Increase/(decrease) in creditors 3.9 (2.4) 12.4
________ ________ _________
Net cash inflow from operating
activities 48.7 30.2 99.0
======== ======== =========
Five Year History
£ million
As restated (2)
Turnover
Year 31 December
__________________________________________
1999 1998 1997 1996 1995
_____ _____ _____ _____ _____
Communications 114.7 52.4 30.8 13.4 3.5
Network Products 155.4 145.7 139.3 138.6 131.6
Systems 130.0 130.8 114.2 105.4 99.1
Sensing Solutions 72.1 57.8 51.0 51.6 38.0
_____ _____ _____ _____ _____
472.2 386.7 335.3 309.0 272.2
Divested operations 72.3 83.5 97.5 106.8 93.7
_____ _____ _____ _____ _____
Total 544.5 470.2 432.8 415.8 365.9
===== ===== ===== ===== =====
Operating Profit
Communications 43.0 18.4 9.3 3.5 0.3
Network Products 21.5 20.2 20.0 22.0 19.9
Systems 8.7 14.5 12.1 11.4 8.5
Sensing Solutions 11.1 8.9 7.7 7.6 5.2
_____ _____ _____ _____ _____
84.3 62.0 49.1 44.5 33.9
Divested operations 5.7 9.0 11.3 14.8 16.7
_____ _____ _____ _____ _____
Total 90.0 71.0 60.4 59.3 50.6
===== ===== ===== ===== =====
Basic earnings per share (1) 7.14p 8.92p 8.74p 6.96p 7.67p
Headline earnings per share 9.83p 9.07p 8.74p 8.33p 7.67p
(1)
Diluted earnings per share 6.84p 8.87p 8.72p 6.92p 7.62p
(1)
(1) Earnings per share has been restated to reflect the three-for-one share
split approved at the AGM on 11 May 2000.
(2) The figures have been restated to reflect the change in accounting
treatment in respect of the Group's interest in Interconnection (see note 2).
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