Spirent suffers in first quarter but spies stronger second

5th May 2015 13:46

Sales slumped more than expected at Spirent Communications in what was expected to be a slow first quarter but the mobile phone testing company said stronger momentum since meant it was confident in hitting its full year targets.Spirent, which dropped out of the FTSE 250 in December, slipped from last year's profit into a $3.6m adjusted operating loss as revenues fell 13.7% to $96.6m in the period since 1 January."Many orders were received too late in the quarter to be converted into revenue, demonstrated by a book to bill ratio of 103," the company said.Order intake was down 2.3% to $99.4m as anticipated muted activity levels were exacerbated by contract timing issues.Last year Spirent received a $12m payment for a shipment of hand-held test tools in the first quarter, while this year a corresponding $16m shipment is scheduled for the second half. Stripping out this order, but adjusting back for the acquisitions of Radvision TBU last July, MobileThink in September and a stub effect for DAX Technologies, implied "circa 8% organic revenue decline" year-on-year, said broker Investec.Management said growth in the wireless and service experience and service assurance divisions was countered by a soft start to the period in networks and applications that only saw a "sharp" improvement in demand at the end of the quarter.Regionally, strong order growth in North America of 7% against the first quarter of 2014 was offset by weaker demand in Asia Pacific, down 11%, and Europe Middle East and Africa, down 9%.In isolation, the update looked weak, said Investec's Roger Phillips, which was impressed by the "surprisingly strong revenue guidance" for the second quarter."As always with Spirent, there are individual customer risks, notably Nokia/Alcatel-Lucent and the adoption of SDN by Verizon."He added: "Versus consensus revenue growth expectations of 6% overall (incorporating circa 1%-2% from minor acquisition benefits), in isolation this leaves the year looking relatively back-end loaded."Shares in Spirent slumped over 4% to 83p but by 14:10 were recovering somewhat to be down 2.3% at 84.75p.