Spirent Share News (SPT)

Results from telecoms testing group Spirent Communications came in shy of market forecasts, prompting a sharp decline in the company share price. During the first quarter of 2011 revenue rose 14% from a year earlier to $122.8m, with reported operating profit up by 16%, to $23.7 million.Group order intake only rose by 5%, but by 11% in its Performance Analysis division.Gross margin was 65.9% compared with 66.1% for the first quarter of 2010. The company said gross margin reduced in Performance Analysis due to the product mix and in Service Assurance due to the lower software content, but both reductions were within the normal range expected.The company said investment in product development increased by 14%, year on year, to $21.7m while during the quarter the company also splashed out $15m on The Fanfare Group.The firm's free cash flow fell to $13.8m from the year ago figure of $25.6m, due mainly to an increase in working capital of $8.1m, "to fund increased activity and further investment in the business, and the payment of acquisition and integration expenses". "The dynamics in our industry during the first quarter of 2011 reflect the growth trends in data communications seen last year," said Bill Burns, Chief Executive Officer."We look forward to a continuation of the positive start to 2011 throughout the remainder of the year".Despite the share price fall, house broker RBS Hoare Govett described the trading update as "robust" and stuck with its "buy" recommendation and 182p price target. "The only surprise is a 22% decline in order intake in Systems due to a change in the US Medicare reimbursement process. However, management is confident that this will prove to be a temporary impact as customers adjust to the new Medicare system," the broker said.---ab/jh