SPIRENT COMMUNICATIONS
PLC
ANNUAL REPORT 2023 AND ASSOCIATED DOCUMENTS
London, UK - 27 March 2024 -
Spirent Communications plc (the "Company") (LSE:
SPT), the leading provider
of automated test and assurance solutions for next-generation
devices and networks, today announces that
its Annual General Meeting will be held on
Wednesday 1 May 2024 at 12.30pm at the offices of UBS at 5
Broadgate, London EC2M 2QS.
In compliance with Listing Rule
9.6.1R, the following documents have today been submitted to the
National Storage Mechanism and will shortly be available for
inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
·
Annual Report 2023
·
Notice of 2024 Annual General Meeting
·
Form of Proxy for 2024 Annual General
Meeting
The Annual Report 2023 and Notice of
2024 Annual General Meeting are also available in the Investors
section of the Spirent Communications plc website at
http://corporate.spirent.com/investors
.
A condensed set of the financial
statements for the year ended 31 December 2023 together with
information on important events that occurred during that financial
year and their impact on the financial statements were contained in
the Preliminary Results announcement made on 5 March 2024.
That information, together with the information set out in the
appendices to this announcement, which is extracted from the Annual
Report, constitute the material required by Disclosure Guidance
& Transparency Rule 6.3.5R which is required to be communicated
to the media in full unedited text through a Regulatory Information
Service. This announcement is not a substitute for reading
the Annual Report.
- ends -
Enquiries
Angus Iveson
Company Secretary
|
Spirent Communications
plc
|
+44 (0)1293 767676
|
About Spirent Communications plc
Spirent Communications plc (LSE:
SPT) is the leading global provider of automated test and assurance
solutions for networks, cybersecurity and positioning. The Company
provides innovative products, services and managed solutions that
address the test, assurance and automation challenges of a new
generation of technologies, including 5G, SD-WAN, Cloud, autonomous
vehicles and beyond. From the lab to the real world, Spirent helps
companies deliver on their promise to their customers of a new
generation of connected devices and technologies. Further
information about Spirent Communications plc can be found at
https://corporate.spirent.com/.
Spirent Communications plc Ordinary
Shares are traded on the London Stock Exchange (ticker: SPT; LEI:
213800HKCUNWP1916L38). The Company operates a Level 1 American
Depositary Receipt (ADR) programme with each ADR representing four
Spirent Communications plc Ordinary Shares. The ADRs trade in the
US over-the-counter (OTC) market under the symbol SPMYY and the
CUSIP number is 84856M209. Spirent ADRs are quoted on the Pink OTC
Markets electronic quotation service which can be found at
https://www.otcmarkets.com/marketplaces/otc-pink.
Spirent and the Spirent logo are
trademarks or registered trademarks of Spirent Communications plc.
All other trademarks or registered trademarks mentioned herein are
held by their respective companies. All rights reserved.
Cautionary statement regarding forward-looking
statements
This document may contain forward-looking statements which are
made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. You can
sometimes, but not always, identify these statements by the use of
a date in the future or such words as "will", "anticipate",
"estimate", "expect", "project", "intend", "plan", "should", "may",
"assume" and other similar words. By their nature, forward-looking
statements are inherently predictive and speculative and involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. You should not place
undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that
could cause our actual results to differ materially from those
expressed or implied by these statements. The Company undertakes no
obligation to update any forward-looking statements contained in
this document, whether as a result of new information, future
events or otherwise.
Appendices
Appendix A: Responsibility
statement
The Annual Report and consolidated
financial statements are the responsibility of, and have been
approved by, the Directors.
Each of the Directors confirms that,
to the best of their knowledge:
the consolidated financial
statements of the Group and parent Company financial statements,
prepared in accordance with the applicable set of accounting
standards,
give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole;
the Annual Report, including the
Strategic Report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
the Annual Report and financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
By Order of the Board
Paula Bell
Chief Financial & Operations
Officer
5 March 2024
Appendix B: Related party
transactions
Remuneration of key management
personnel
The remuneration of the directors,
who are the key management personnel of the Group, is disclosed in
the Report on directors' remuneration.
There were no other material related
party transactions during the year ended 31 December
2023.
Appendix C: Our principal risks and
uncertainties
A -
Macroeconomic change
Spirent is a global business exposed
to current world economic conditions and political and trade
embargo uncertainties over which it has no control.
We have navigated regulatory changes
throughout the year and continue to work closely with our
customers. Trade compliance issues continue to remain a focus,
particularly with China.
The business is also exposed to
government spending priorities, principally in the United
States.
The residual effects of the COVID-19
crisis, the war in Ukraine, inflationary pressures, and rises in
interest rates by major central banks have combined to create
uncertainty to current world economic conditions and government
spending priorities. The Group continues to monitor the impact to
the global economy and possibility of a prolonged recession in the
organisation's key markets.
Potential impact
Deterioration in economic conditions
and a change to the terms of conventional international trade and
embargoing of specific customers may lead to a reduction in the
level of demand for Spirent's products and services and cause
customers to delay their purchasing decisions.
Mitigating actions
The Group closely monitors both
market and geographic trends in order to respond to changes in
demand and be in a position to take timely actions to protect
profitability where possible.
In addition, Spirent has a large
number of geographically diverse customers, which may mitigate the
impact of issues in any one area.
B -
Technology change
Spirent sells complex solutions in
industries that can be subject to rapid and somewhat cyclical
technological changes. Testing new technologies drives our
business, but the opportunity also brings high risk since keeping
at the forefront of these key future technologies is critical to
our success and to ensuring that we remain competitive in our
markets.
It is critical that our product
development investment is directed at the right areas in order to
deliver the solutions that our customers need, when they need
them.
Spirent's success is dependent in
part on proprietary technology which may be infringed by
others.
Open-source tools become more
prevalent providing some of the functionality of our
products.
Due to COVID-19, there is an
increased risk that technology changes may take longer to
occur.
Potential impact
If product development investment
does not keep pace with the speed of change in technologies, or if
it is not directed at the right key areas, our competitive position
and financial performance will suffer.
If Spirent's solutions take longer to
develop than anticipated or longer to develop than our competitors,
then our competitive position and financial performance will also
suffer.
Changes in technologies and
increasing scrutiny on security and privacy may lead to a
short-term pause by our customers investing in our
solutions.
Intellectual property claims can
result in significant defence costs and may affect Spirent's
ability to market its products.
Customers may choose to use
open-source tools instead of some Spirent products to meet part of
their testing needs.
Mitigating actions
All Spirent's businesses work very
closely with customers and remain focused on their
requirements.
Each business makes investment
decisions specifically related to its solutions portfolio based on
market needs.
Spirent continues to focus its
investment into areas that offer the most potential for sustainable
earnings growth. In 2023 the product development investment was
$102.4 million
(2022 $111.3 million) as we find new
ways of investing at lower cost.
Spirent has active intellectual
property protection programmes in place to obtain appropriate
protection in a cost-effective manner.
C -
Business continuity
Operational risks are present in the
Group's businesses, including the risk of failed internal and
external processes and systems, human error, and external events,
such as a natural disaster, climate change, a global pandemic or
cybersecurity attacks. For example, a significant portion of our
operations are located in California which has in the past
experienced natural disasters, including earthquakes and
wildfires.
Our TCFD-related analysis has
considered the potential of increasing intensity and frequency of
storms and concentrated rainfall events, and frequency of
wildfires, and we have assessed that these risks would possibly
cause some disruption to operations. The understanding of climate
change-related risks is incorporated into the risk management
framework.
The Group has therefore taken steps
to manage the increase to business continuity risk, including
invoking business continuity plans in each location, closely
monitoring the impact to the supply chain with additional inventory
procured on key components and by adding alternate suppliers,
making last time buys as necessary, and by boosting the global
Spirent information technology systems to enable the workforce to
work remotely.
Contract manufacturers are used for a
substantial amount of Spirent's products and have experienced a
reduction in orders from Spirent, cost increases, end of life
notices and some elevated lead time challenges, leading to a
limited number of shortages but primarily increased costs during
2023. Spirent's major contract manufacturer is located in
Thailand.
The incidence of cybercrime continues
to rise. Spirent is dependent on its information technology systems
for both internal and external communications, maintaining our
reputation as well as for day-to-day operations.
Potential impact
A significant natural disaster or
global pandemic could disrupt the Group's ability to conduct
business and adversely impact revenue and operating
results.
Higher peak and average temperatures
could lead to increased capital expenditure to expand or upgrade
cooling equipment across multiple Spirent sites.
The shift towards renewables and
away from fossil fuels may result in associated increased costs.
Starting in the short term, energy costs are likely to continue to
increase due to higher investment requirements in low-carbon
technology and expected additional carbon-related levies. We also
expect additional administrative burden on the business, likely
increasing the costs for resource to deliver and report. We do not
estimate the impact to be material to Spirent.
In the medium to long term, our TCFD
climate-related analysis has highlighted the risks of site damage
to building and infrastructure, lost time and productivity and any
associated increased cost of insurance. Additionally, a major
supplier disruption event is a possible key risk, causing an outage
for a period of time which we assess as causing possible delays to
customer shipments and the timing of revenue recognition.
Disruption, financial problems of contract manufacturers or
limitations in their manufacturing capacity could limit supply
and/or increase cost.
Failed internal and external
processes, systems or human error could lead to compliance
issues.
If a cyberattack were to be
successful it could result in loss of data, reputation, and
confidential information as well as damage to Spirent's
intellectual property, causing major disruption to the business.
Any security vulnerabilities in our products could also adversely
impact our customers. There would also be a potential impact on
Spirent's credibility in the security market.
Mitigating actions
An important component of Spirent's
corporate governance is its risk management strategy. IT disaster
recovery plans are in place for all core business systems and
ensure that the wider operations are all fully covered. In 2023, we
performed the annual refresh and test of the Group Business
Continuity and Disaster Recovery Policy and Procedure.
Spirent has mitigation plans for each
of the TCFD physical risks identified, that have been developed as
part of longstanding business continuity and disaster recovery
plans. Spirent engineering centres are situated across the globe,
allowing flexibility and agility should one site become affected.
Where possible we have second source component supply to assist
with the mitigation of interruptions in supply and regular meetings
are held with contract manufacturers. In addition, the Group's
largest manufacturing subcontractor has multiple worldwide sites
and comprehensive business continuity plans.
The Group has appropriate business
interruption insurance in place.
We are working closely with our
contract manufacturers and are in frequent direct consultation with
key component suppliers worldwide to mitigate the impact of the
ongoing supply chain challenges. The situation is dynamic and we
will take appropriate action to mitigate the supply chain risk
including the careful management of planning and
fulfilment.
During 2023, we continued with a
programme of work to enhance processes and procedures in the area
of cybersecurity. Third party providers are used in both the
testing and monitoring of our security profile.
D -
Customer dependence / customer investment plan
The Group sells its products and
services to a wide range of companies and continually seeks to
expand its customer base. In 2023, no one customer accounted for
more than 10 per cent of Group revenue, although the top ten
customers represented 34.4 per cent of Group revenue (2022 36 per
cent).
In some of our markets certain
customers have a dominant market share, which makes doing business
with these customers and their suppliers critical to the success of
our business.
In addition, many of the companies
with which we do business are some of the largest global
telecommunications corporations. Therefore meeting our development
obligations, producing high-quality products and being on time are
vital to Spirent's reputation and success.
Changes in our major customers'
priorities in technology investments can also have a significant
impact on their spending on Spirent products and on those in the
customers' supply chain.
The industry continues to experience
consolidation which does disrupt the spending patterns of affected
customers.
As a result of the current
macroeconomic uncertainty, customer spending patterns remain
uncertain, particularly in our telecommunication markets. The Group
is taking steps to evolve its go-to-market in order to strengthen
relationships with customers and diversify its customer
base.
Potential impact
Loss of one or more of Spirent's
major customers could have a significant impact on Spirent's
financial results.
Spend on Spirent's products is often
capital in nature and so customer spend can fluctuate significantly
from year-to-year.
Significant failings in either
quality or being able to deliver in the appropriate timescale could
cause long-lasting damage to Spirent's reputation and
relationships.
Over recent years there has been
significant consolidation in our customer base amongst service
providers and network equipment manufacturers. This trend continues
and often results in delays in spending, thereby reducing demand
for Spirent's solutions and services. It also reduces the potential
number of customers to which those solutions and services could be
sold.
Changes in our customers' technology
investments can result in reduced spending on our existing
solutions before customers and those in the customers' supply
chains increase spending on new technologies.
Mitigating actions
Strong customer relationships are
critical to Spirent. We aim to provide innovative solutions which
address our customers' larger business problems with products and
services and we place great emphasis on providing professional
service and support.
One of the Group's strategic
objectives is to invest in deepening our customer relationships and
our key account management initiatives assist to ensure robust
relationships with our largest customers. We place engineers on
site with our customers and undertake site surveys of intended
plans for the use of test solutions in their business.
We seek to establish thought
leadership in our industry through participation in standards
bodies and industry forums, which in turn creates additional links
with customers. Our approach is to play a key part in the wider
supply chain to our key service provider customers by aligning with
early adopters of technology.
We also seek to broaden our customer
base to mitigate customer concentration risk, investing in digital
marketing, inside sales, field sales and our partner ecosystem to
expand the number of new customers that we win.
E -
Competition
Spirent operates in a range of highly
competitive niche markets which experience rapid technological
change. In order to compete effectively, it is necessary to
establish and maintain technological differentiation in our
solutions.
The Group faces competition from new
market start-ups as well as more established and well-resourced
companies.
Industry consolidation amongst our
direct competitors may bring about a shift in competitive
advantage.
Potential impact
Actions by competitors and increased
competition can bring about pressure on Spirent's gross margin.
These factors could also affect Spirent's competitive position,
thereby reducing revenue and consequently affecting financial
results.
Consolidation continues within our
sector. The consolidation of competitors may bring opportunities
for Spirent but can also change the competitive landscape as
competitors are able to leverage product capabilities or sales
channels.
Mitigating actions
The Group's broad solution portfolio,
market-leading capabilities and customer focus continue to address
this risk.
Spirent aims to maintain
market-leading positions through significant investment in the
development of differentiated products. We also seek opportunities
for attractive inorganic investments that can strengthen our
competitive advantage.
Competitor activity is closely
monitored with a view to maintaining clear differentiation based on
Spirent's products, services, and global reach.
F -
Acquisitions
A key emerging element of Spirent's
strategy is to develop new capabilities and technologies, and to
expand our addressable markets, sometimes through acquisition.
Integration of acquisitions can be a complex process and the
results expected from acquisitions may not be achieved due to
problems encountered in integration, changes in market conditions,
the rate of adoption of new technologies, or sometimes deficiencies
arising in the due diligence processes.
Potential impact
Underperformance by acquisitions
will impact the Group's results and may lead to impairment of
goodwill and/or intangible assets.
Mitigating actions
Rigorous strategic and financial
evaluations of all acquisition opportunities are carried out.
Detailed financial and commercial due diligence is performed. The
Board will only authorise transactions after all due diligence has
been successfully completed and where the financial hurdles are
within the agreed guidelines.
Integration plans and processes are
carefully considered prior to acquisition.
The Board reviews post-acquisition
performance.
G -
Employee skill base
Employees are crucial to the success
of our business. Attracting and retaining highly qualified and
skilled employees is essential to enable the Group to deliver on
its strategy and to the success of the business.
Potential impact
Competition for personnel is faced
from other companies and organisations and the loss of key
employees, the failure to attract and retain other highly skilled
employees, or the failure to adequately plan for succession may
impair Spirent's ability to run and expand the business
effectively.
Mitigating actions
Investing in people is at the core of
the Group's strategy. The aim is to find, keep and engage the
highest calibre of employees and encourage their contribution and
development. An environment that fosters innovation and
collaboration is critical to Spirent's success, as is ensuring
incentive plans are competitive.
We have refined our employee value
proposition and continue to make Spirent a more inclusive, diverse,
and engaging place to work to attract and retain talent.
Succession planning for senior posts
in the Company is reviewed periodically by the Board.
Appropriate career paths,
professional development plans, and internal recognition programmes
are developed for both technical and non-technical
staff.
Regular reviews are performed to
ensure equitable pay practices and that all elements of
compensation across the Group are competitive with the
market.