UK-listed Spirent Communications (SPT) is mulling a cash return to shareholders after reporting solid growth and better-than-expected profit margins. The manufacturer of telecoms and connectivity testing and analysis kit saw adjusted operating margins of ‘almost’ 20% in 2020 (to 31 December).

This was the first time since 2012 that profit margins have been this high, a development that analysts at Stifel called ‘symbolic’. The market had been anticipating 18% operating margins, according to consensus estimates.

‘Supported by a strong financial and operational platform, we begin the new financial year well placed, with our main drivers intact and with leading technology solutions across our portfolio’, said chief executive Eric Updyke.


Spirent said its annual revenue rose 4% to $522 million, and while that was slightly shy of $530 million estimates, the FTSE 250 company continues to see strong demand as clients roll-out 5G mobile networks technology.

‘Our customers continue to invest in 5G-related infrastructure, devices and services, a trend we expect to continue’, said Updyke.

But there is little doubt that hints of a possible cash return bonanza down the line are feeding investor optimism.

‘Spirent has, finally, opened up the possibility of a special dividend to shareholders while acquisitions still remain on the table’, said Stifel analyst Luke Holbrook.


More detail is expected to be given at the full-year results, scheduled for 11 March, and ‘we recall the last special dividend was $30 million in 2018 when net cash was half the level it is now’, said Holbrook.

Spirent has net cash of $241 million and a similar payout to 2018’s would be worth roughly 36p per share, based on current exchange rates. That would equate to a 13.4% yield after today’s 2%-plus stock rise to 268p.

But the company did flag ongoing uncertainty to customer spending because of the pandemic, suggesting that 2021 growth will be ‘second half weighted’, something for investors to watch closely.

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Issue Date: 18 Jan 2021