UK-listed telecoms and connectivity testing equipment manufacturer Spirent Communications (SPT) saw its share price rally close on 7% on Thursday after the company saw plenty of demand for new high-speed internet and 5G mobile network investment.
Shares in the FTSE 250 business jumped 14p to 226.5p.
With 5G next generation mobile networks launching and new, faster ethernet broadband technology in the pipeline, Spirent has been on a hiring binge to meet client demand, adding a slew of new managers and building out its sales and marketing teams.
The strategy is paying off. Pre-tax profit before one-off items jumped nearly 20% to a record $93.9m in calendar year 2019, on revenues up 5.6% to $503.6m. Earnings per share (EPS) of $0.132 beat consensus expectations of $0.13, particularly impressive given double-digit upgrades by analyst after January’s trading update.
This plays into Spirent’s key objective to build a far more reliable and sustainable growth model, increasingly built on recurring revenue streams. It’s early days but the signs are certainly promising at this stage.
RUDE FINANCIAL HEALTH
Free cash flow (FCF) was also strong at $100m, leaving the company with $183m of net cash in the bank, a comforting reserve to fall back if the coronavirus outbreak sparks an even greater clampdown on corporate investment spending. So far, Sprient sees little sign of this, but it is watching customers orders closely.
‘We continue to be extremely vigilant and at this time we have not assumed a financial impact to our outlook’, the company said. ‘We will continue to analyse potential implications and implement government guidelines as the situation evolves.’
That would seem less likely to impact Spirent given its $532m order book, up more than 13% to its fattest in 10 years.
The company has also announced a 20% increase in its full year dividend, or up 25% in sterling terms. The final dividend of $0.345 is set to be paid in May 2020.
‘We have market-leading technology in which we continue to invest and innovate and our strong financial platform affords us great flexibility to evolve and grow our business,’ said chief executive Eric Updyke, completing his first year in the top job.
‘At present, the board is confident that the group will continue to see steady profitable growth in 2020’, Spirent predicts.
Analysts at Liberum are keeping forecast unchanged for now, anticipating EPS of $0.14 in 2020 and $0.1459 in 2021.
