The Mail on Sunday

For steady profit stream, tap into the 5G revolution

- Joanne Hart OUR SHARES GURU WITH THE GOLDEN TOUCH Traded on: Main market Ticker: SPT Contact: spirent.com or 0371 384 2126

IN 2013, around 2.5 billion people used the internet worldwide. Today, more than five billion citizens are online daily, sending texts and emails, watching YouTube and TikTok videos, streaming films, using satellite navigation or logging on to Google for all things great and small.

Our reliance on internet connectivi­ty is predicted only to increase, with forecaster­s suggesting that, by the end of this decade, nine out of ten people over the age of six will be doing something digital most days of the week. Not only will the number of internet users increase, but the amount they do online is also expected to soar, as networks move from 4G to 5G technology.

The shift has already started, with the number of 5G connection­s expected to climb from 500 million last year to 1.3 billion by the end of 2022. But it will pick up pace, more than tripling to 4.8 billion in five years’ time, so we can all do much more online in much less time. Geeks cannot wait. More old-fashioned folk may find it unsettling, but 5G is coming our way and nothing will stop it.

For Spirent Communicat­ions, the trend is fabulous news. The company specialise­s in testing new technology and is one of the biggest players in the field, working with well-known names from Apple and AT&T to BT and Vodafone to Nokia and Siemens.

These companies are big fans of 5G, but the tech is much more complex than anything that has gone before, so comprehens­ive testing is essential. In the past, Spirent would simply sell testing products to its customers and let them get on with it.

Under chief executive Eric Updyke, the group has begun to do considerab­ly more – devising tests for businesses, identifyin­g bugs and automating much of the process so that new technology can be introduced faster, at a cheaper price and with less effort.

The approach is delivering results. In the first six months of this year alone, Spirent won 350 new 5G contracts from more than 130 customers worldwide. But Spirent does not just work with mobile phone specialist­s. The group also tests cloud technology for internet giants such as Amazon and Google, it provides cybersecur­ity testing for large businesses and has recently begun to test virtual and augmented reality kit for Facebook’s parent company, Meta. ‘Location awareness’ is another specialist area for Spirent. A crucial component of satellite navigation and driverless cars, the technology highlights where people and objects are as they move about.

Taken up enthusiast­ically by consumers and carmakers, the technology has a military use as well and Spirent provides testing services for the US government among others, ensuring that missiles and drones go where they are supposed to. Mistakes in this area could, clearly be disastrous, so Spirent’s involvemen­t in this field is testament to the quality of its work.

Spirent tests kit before it is rolled out and once technology is up and running, too. This area of the business now accounts for a substantia­l proportion of group turnover and should continue to grow as software becomes increasing­ly complicate­d and reliance on digital connection­s increases.

Testing is a competitiv­e market, but Updyke is determined to keep Spirent ahead of the pack, spending around 20 per cent of annual sales on research and developmen­t, and constantly eyeing up opportunit­ies in new countries and sectors of the market.

Interim results earlier this month were encouragin­g and analysts are optimistic about the business, predicting an 8 per cent increase in this year’s sales to $625million (£511 million), rising to $675 million in 2023. A 12 per cent profits increase to $132million has been pencilled in for 2022, rising to $147million next year.

The group reports in dollars because, even though it is headquarte­red in Crawley, West Sussex, more than half of its sales are generated in the US, most customers are American and the majority of its employees are based in the US, including Updyke, though he travels to the UK on a regular basis.

Spirent has a strong balance sheet and a policy of rewarding shareholde­rs with decent dividends. These are declared in dollars but paid to UK shareholde­rs in sterling, with 7.6 cents (6.22p) expected for this year and 8.48 cents for next.

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 ?? ?? WELL-CONNECTED: Spirent Communicat­ions is growing fast and specialise­s in testing technology for 5G networks
WELL-CONNECTED: Spirent Communicat­ions is growing fast and specialise­s in testing technology for 5G networks

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