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Spirent Q3 statement
Telecoms test equipment and testing services supplier Spirent has performed slightly worse in the third quarter than in the first half of the year, with constant currency revenue decline of 12% compared to 12%.
Operating profit has fallen 13% in constant currencies for the year to date. Spirent does not disclose this number for the quarter, but as the increase in sterling terms is similar to that for the year to date, it is likely that the decline in constant currency terms is also similar.
Free cash flow was slightly lower than the average for the first two quarters. It is still 31% higher than in the previous year: not quite as good as the 52% bounce in the first half, but still very encouraging. This represents a cash conversion (FCF/operating profit) of 90%, which is also very encouraging.
At the current price of 94p, Spirent is trading on a prospective PE of 15×. The current revenue decline is worrying, but the company has good long term prospects as the telecoms industry moves to new technologies (4G mobile and 10Gb ethernet): however this reliance of telecoms capex means that the company’s recovery is likely to lag the (global, not UK) economy’s.
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