More on Spirent
Spirent: profit warning
Spirent’s performance has deteriorated quite sharply over the last month and its performance analysis division (the better performing of its two core businesses last year) is now expected to make a profit of around £5m less than previously expected.
The transition to new products is clearly proving difficult. We do continue to expect recovery in Spirent’s core market but it now appears likely that this will come next year rather than this.
We are nervous about the outlook, the combination of “delays” and a “competitive environment” has often been the first signs of a serious decline. In addition Spirent’s track record is not looking too good - there was an (even worse) profit warning from the company not much over an year ago.
Spirent, at 36.25p, is now trading on a prospective PE of around 20× - probably a little more. This is expensive but, if things do not go wrong again, there should be a strong recovery next year. We still like Spirent but it is a more risky buy and when we last looked at it.
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