SPIRENT yesterday demonstrated that it had averted financial meltdown as it generated a £1 million interim cash profit despite a costly restructuring in the wake of a severe profits warning last October.
However, the telecoms equipment tester’s recovery was tempered by a warning that market conditions would remain difficult for the rest of 2003 and probably beyond.
Nick Brookes, the chief executive, said: “The market was thinking that we were going to be the next Marconi. Well, we got our heads down and have demonstrated that we can make profits and invest in key areas even in this market.”
The £1 million of positive cashflow came after £21.9 million of charges that followed the October warning. Spirent had to make 230 workers redundant and pay its banks £13.7 million to ease the terms of its borrowing to see it through.
Mr Brookes said that he expected the company to generate a similar amount of cash — without the exceptional charges — in the second half of the year, although no dividend would be paid.
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“We’re not planning on any recovery this year,” Mr Brookes said, adding: “The good news is that the telecoms carriers are holding to their capital investment budgets on which we depend, even if they are down 30 to 40 per cent on last year.”
The profit and loss account for the six months to June showed a loss of £9.6 million, although this was depressed by non-cash charges relating to previous acquisitions. A year ago the loss was £6.5 million.
The figures also revealed that the company had a deficit of £50 million in its pension fund after an actuarial review. Spirent will pay £3 million deficiency contributions starting in 2004, on top of the £1.7 million it pays on behalf of current employees.
Spirent’s core communications division increased operating profits by 11 per cent to £5.1 million. Earnings resilience in its network assurance division, which helps US telecoms carriers maintain high levels of service, more than offset a 71 per cent profit decline in the group’s performance analysis operation. The latter unit tests telecoms equipment made by the industry’s manufacturers.