Sprout Social, Inc. Annual Report 2023

FY2023 Annual Report · Sprout Social, Inc.

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Unlocking new
possibilities

Spirent Communications plc
Annual Report 2023

Unlocking new
possibilities

Discover how in our spotlights
featured throughout this report
Spirent is the leading global
provider of automated test and
assurance solutions for networks,
cybersecurity, and positioning.
With a strong track record of
innovation and a dedicated
team, Spirent is driving
momentum and broadening its
reach with pioneering solutions
that help shape the future across
many industries.

Discover how in our spotlights
featured throughout this report

Strategic report
1. Our strategic roadmap
2. 2023 highlights
Investment case
3.
4. Spirent at a glance
6. Spotlights
8. Chairman’s statement
10. Chief Executive Officer’s review
12. Spotlights
14. Our markets
16. Our business model
18. Spotlight on 5G
20. Our strategic priorities
22. Key performance indicators
24. Stakeholder engagement
28. Spotlights
30. Our people and culture
32. Sustainability
40. Operating review
48. Financial review
55. Principal risks and uncertainties
61. Non-financial & sustainability

information statement

Corporate governance
62. Chairman’s introduction

to governance
64. Board of Directors
66. Board statements
67. Directors’ statement on

corporate governance

74. Nomination Committee report
77. Audit Committee report
83. Report on Directors’ remuneration
110. Directors’ report
114. Directors’ responsibilities statement

Financial statements
115. Independent auditor’s report
127. Consolidated income statement
128. Consolidated statement of
comprehensive income
129. Consolidated balance sheet
130. Consolidated statement of

changes in equity

131. Consolidated cash flow statement
132. Notes to the consolidated
financial statements

172. Parent Company balance sheet
173. Parent Company statement of

changes in equity

174. Notes to the parent Company

financial statements

192. Full list of subsidiary undertakings

Other information
194. Financial history
196. Alternative performance measures
198. Shareholder information
199. Glossary
IBC. Contact details

STRATEGIC REPORT

Our strategic roadmap

Our purpose and ambition
Spirent’s ambition is to be the global leader and trusted partner for innovative technology
test and assurance solutions.

Read more on pages 32 to 39

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSpotlight:
Accelerate time to market

Faster

Unlocking new opportunities
to accelerate next-generation
chipset development

Data centre applications
Sophisticated chipsets at the heart of data centres and other high-performance applications
are becoming ever more complex as demand for greater capabilities and increased data
bandwidths continues unabated. Unleashing new capabilities of system-on-chip (SoC) designs
and getting these to the market faster places huge demands on design accuracy, as issues
found after SoCs have been fabricated can cause costly delays.

Recognising the opportunity to incorporate early-stage advanced chipset testing, Spirent
worked closely with long-time partner Cadence to create an integrated solution that bridges
the gap between pre- and post-silicon validation, addressing design and test challenges of
complex Ethernet chipsets for next-generation networking products. The seamless integration
delivers large scale, high-speed Ethernet traffic generation, testing and troubleshooting
capabilities to pre-silicon verification, helping accelerate the entire silicon development lifecycle.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSpotlight:
Reduce complexity and cost

Easier

Unleashing the best digital
experience for banking
customers worldwide

Financial services
Today’s financial services customers expect a seamless online digital experience. To help
ensure this, one of the world’s leading financial services organisations turned to Spirent to help
automate its global network of test labs, with the goal of making it easier to accelerate delivery
of new products, version upgrades, and services to customers, while ensuring strict compliance
and achieving major productivity gains and cost savings.

Manual, siloed approaches to testing enterprise networks are no longer viable because of
the complexity of these increasingly disaggregated networks, and the speed and frequency
at which they must be updated. Using its leading expertise in test automation and assurance,
Spirent created a comprehensive solution that helps reduce testing procedure times from months
to a matter of hours. The project represents an expansion of Spirent’s reach beyond its existing
telco and enterprise customers into the financial services sector.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTChairman’s statement

Navigating a
tough market

Sir Bill Thomas
Chairman

Spirent Communications plc Annual Report 2023

I am pleased to present our
Annual Report for the year
to 31 December 2023.

Performance during the year
2023 was without doubt a very difficult year. After several
years of year-on-year growth, we saw a sharp reverse
in our performance in terms of revenue and profitability.
This performance was driven by a general slowdown in
the telco market, Spirent’s largest. Spirent’s two biggest
customer segments, telecom service providers and network
equipment manufacturers were adversely affected, as
investment in the roll-out of new 5G networks was delayed.
It is scant comfort to our shareholders and the Board that
all of our competitors also saw significant contraction where
they compete in the markets that we serve.

In the face of a difficult market, it has been necessary to
right-size our workforce whilst continuing to invest in our
R&D technical leadership positions. Those of our colleagues
who have left the business we have sought to treat fairly,
sympathetically and with respect. We wish them well.
Notwithstanding the current headwinds, the Board will
continue to ensure that we invest in areas where we see
potential for future growth.

Notwithstanding a difficult year, it was certainly not without
bright spots. I should first mention the excellent performance
of our Positioning business unit, unaffected by the telco
market, which saw significant orders growth during the year.

We were also excited to win our first significant automation
deal at a tier-one financial institution in the North American
market. This win represents an example of how we might
reduce our reliance over time on the telco market and
demonstrates how we can take our testing and automation
expertise and apply it to different end markets. Spirent is
an innovative company and this beachhead in the financial
services sector is a great example of how our innovative and
thoughtful approach to solving the problems of customers
can offer new growth opportunities for the Company.

The Board approved and executed a £56 million
($71.6 million) share buyback during the year.

Revenue decreased by 21.9 per cent to $474.3 million and
adjusted operating profit fell by 65.1 per cent. Reported profit
before tax was down from $114.6 million to $22.9 million.

We ended the year with cash of $108.1 million. The Board
will continue to look at both organic and inorganic
opportunities to grow, although it will be mindful of
depleting cash in the current market environment. We
are glad to see that our purchase of octoScope® in 2021
continues to perform strongly, and we expect the Wi-Fi
space to offer significant opportunity for growth in 2024
and beyond. We also completed a small purchase of a
Layer-1 switching business in the year, which rounds out
our automation offering for the financial services sector.

STRATEGIC REPORT

Our employees and the right culture
As indicated, it has been a difficult year for all of our
colleagues. Resilience and hard work have been the
order of the day.

On behalf of the Board, I thank every one of our colleagues
for continuing to strive to deliver for our customers and for
your continued investment in the future success of Spirent.
Through our employee engagement surveys we see
continued high levels of engagement which is pleasing
in the current environment.

Through our workforce engagement sessions, our
Non-executive Directors are keen to understand the
challenges our colleagues face and how we might move
the Company forward. This year we have spent our sessions
listening to our sales organisation in each of our three
regions to better understand the drivers of customer buying
behaviour in the current market.

We must also not lose sight of our successes and the progress
we have made during the year. We continue to deliver exciting
new products and we have been successful in new customer
verticals and geographies. Where markets have offered us
opportunities, we have executed well.

Sustainability
In late 2020, Spirent set an ambitious Sustainability Strategy
with medium and long-term goals. Our strategy and goals
are set out publicly in our annual Sustainability Report, as is
the progress we have made against those goals. By the end
of 2022, we had achieved our shorter term aims of achieving
CarbonNeutral® Company certification and the calculation of
all our Scope 3 emissions. At the end of 2023 we set ourselves
our next medium-term goal, and publicly committed to the
Science Based Targets initiative to reduce our emissions
to ensure that the planet does not warm by more than
1.5 degrees centigrade. That is a significant challenge for
our business to achieve and I look forward to reporting on
our progress in the coming years.

Outlook
It is notoriously difficult to predict when the telco market
will improve. We will continue to invest in our market-
leading technologies and will look at how our expertise and
technology can be applied to other markets. We will be well
positioned to secure our share of the upside when the market
begins to improve.

Customers are currently continuing to exercise caution in
their spending, and so we will look to continue innovating to
offer cost-effective solutions to customers with compelling
value propositions.

Sir Bill Thomas
Chairman
5 March 2024

Our 2023 Sustainability Report

We established our FuturePositive programme to address our ESG
progress in 2014. Since 2017 we have published an annual Sustainability
Report, which is intended to inform all of our stakeholders of our progress.

See pages 32 to 39 for more detail on Sustainability

See pages 35 to 37 for more detail on TCFD

Read our Sustainability Report here: corporate.
spirent.com/sustainability/sustainability-reports

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTChief Executive Officer’s review

Well placed for
strategic and
operational
progress

Eric Updyke
Chief Executive Officer

Revenue

$474.3m

(2022 $607.5m)

Orderbook1

$293.7m

(2022 $288.1m)

Note
1.

Orderbook is an alternative performance measure as defined
on page 196.

Spirent Communications plc Annual Report 2023

2023 was a challenging year for
many of the markets we serve.
Despite our customers experiencing the challenging
economic environment resulting in delays to their technical
programmes, Spirent continued to deliver value for our
customers, innovate and diversify its end markets.

Market overview
We maintain confidence in our mid-term growth prospects
supported by our key market drivers. While 5G rollouts
experience delays, our Open RAN offerings align with
evolving customer needs and the market landscape. As
Wi-Fi 7 deployment unfolds, our standing as the global
leader in Wi-Fi testing positions us for substantial benefits.

The evolution of data centres, the rise of artificial intelligence
(AI)/machine learning, and the expanding presence of
hyperscalers is a developing vector for our high-speed
Ethernet business. With our leadership position in 800G,
we are well-prepared for future spending in this domain.
Simultaneously, our world-class Positioning portfolio is set
to expand, catering to the increasing demand for location
awareness, global navigation satellite system (GNSS) testing
and the emergence of low earth orbit (LEO) satellites.

We cannot predict the timing of the recovery of telecom
customer spending; however, we are well positioned to
benefit as the recovery comes through and our strategic
focus on diversification across end markets remains steadfast.
Notably, Spirent’s Positioning business delivered good
growth serving diverse sectors such as government,
automotive, aerospace, defence and other verticals and
our recent win in financial services and advancements
in our automation portfolio underscore our commitment
to diversify and exploit new growth segments and
core markets.

Strategy
To realise our ambition to be the global leader and trusted
partner for innovative technology test and assurance solutions, our
strategic pillars remained: Customer Centricity, Innovation
for Growth, and Operational Excellence.

Customer Centricity
As our customers faced tighter budgets, our commitment to
collaboration deepened as we worked together to address
their foremost business challenges through value-added
services and solutions. We continue our shift from selling
features to emphasising outcomes and value. This resulted
in strengthened relationships with our customers. It solidified
our significance in their accounts, especially during times
of economic uncertainty and cautious spending on capital
and operations.

Strategically, we are focused on broadening our customer
base and venturing into new verticals. In 2023, we extended
support to over 1,100 customers spanning more than
54 countries.

STRATEGIC REPORTInnovation for Growth
To maintain and expand our technical leadership position,
we continued to make smart investments, both organic
and inorganic, to capture emerging market opportunities.
We continued to invest in all key product road maps and
in research and development in 2023. We brought several
key new solutions and services to market, including our
Wi-Fi 7 solution and an enhanced end-to-end Open RAN
testing solution. We invested in key partnerships, including
participating in the 5G Open Innovation lab.

To enhance our automation portfolio, we acquired the Test
Lab Automation business from NetScout®, which delivers
physical layer switching capabilities, critical to configuration
and connectivity in automated labs. As manual methods
for testing enterprise networks are no longer viable, our
automation solution enables customers to significantly
accelerate delivery of new products, version upgrades, and
services to their customers, while ensuring strict compliance
and benefiting from major productivity gains and cost
savings. This innovative offering appeals to multiple customer
verticals, as showcased by our major win with a financial
services customer this year.

In the high-speed Ethernet testing domain, our strategy
focuses on broadening our customer base to include data
centres and enterprises. This expansion aims to focus
on every phase of next-generation network and cloud
infrastructure evolution, ranging from pre-silicon verification
to high-density, large-capacity systems. Our leadership
in 800G high-speed Ethernet test is critical for data centre
evolution to support AI. We supported H3C to complete
the industry’s first large-scale 800G and won the industry’s
prestigious Interop Best of Show Award 2023 Special Prize.

Our worldwide leadership in positioning, navigation and
timing (PNT) testing, further establishes us as the go-to
partner for professionals in PNT technology. Our extensive
portfolio emphasises multi-sensor integration, ensuring
clients in emerging sectors like LEO satellites, chipsets, and
automotive technology can realise their PNT aspirations.
Our Positioning division witnessed growth in orders, driven
by government expenditures and fresh prospects in the
burgeoning LEO satellite sector. We further broadened
our Positioning operations in the enterprise and automotive
sectors, securing a managed services win with a top-tier
mining communications equipment provider.

Operational Excellence
In response to the unpredictable nature of the market,
we implemented targeted cost-saving measures to
ensure the sustainability of our operations. The focus
was on preserving critical investments, while grappling
with the inherent difficulties posed by the unpredictable
business environment.

As the nature of our workplace continued to be mainly
hybrid or remote, we continued the journey of consolidating
our real estate footprint. This initiative required a delicate
balance between optimising costs and providing a
work environment that meets the evolving needs of
our workforce.

We made some organisational changes to better align
ourselves with the market dynamics. First and foremost, we
have taken an approach to better enable solutions selling.
We have been on a journey to be a more solutions-centric
organisation for the last few years and have now integrated
our Lifecycle Service Assurance and Cloud & IP business
units from 1 January 2024. This change will align products
into “value streams” to better package them into solutions
that solve customer business problems. We expect it to
drive more efficiency, including our R&D oversight, enabling
functions to drive better prioritisation, common platforms,
and consistent user interface/user experience across
products. Our Positioning business, which has different
end markets and customers, will be reported separately
going forward.

Sustainability remains a key pillar of our operational
excellence. In 2023, we successfully rolled out certified
regional ISO 14001 Environmental Management Systems
for North America and EMEA. We introduced sustainability
clauses into our supplier contracts, and we have improved
our carbon data quality. You can read more about the full
scope of our work in the area of ESG on pages 32 to 39 and
in our annual Sustainability Report.

Capital allocation approach
Our capital allocation policy remains unchanged. We invest
in R&D to maintain and expand our leadership positions
in the market, and in inorganic investments where we see
attractive opportunities that support our strategic growth
agenda, whilst maintaining a robust balance sheet. We
maintain a progressive dividend policy and in the financial
year we concluded a share buyback programme of 33.1
million shares.

Eric Updyke
Chief Executive Officer
5 March 2024

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSpotlight:
Optimise user experience

Simpler

Helping NTT Docomo
unlock the Open RAN
revolution’s potential

Open RAN
When NTT Docomo set out its global plan to become the partner of choice for telecom
operators adopting Open RAN (O-RAN), it turned to Spirent’s O-RAN test solutions to help
unlock the technology’s potential. Offering customisable solutions to design, integrate, test,
deploy and operate O-RAN systems, Docomo wanted to demonstrate to customers that
its multi-vendor O-RAN solutions can deliver the performance required in the world’s largest,
most demanding networks.

Through its O-RAN service brand OREX™, Docomo chose Spirent’s solutions to provide
comprehensive 5G core emulation, critical to simplifying validation of multi-vendor
interoperability, standards compliance, and real-world performance. Combining Spirent’s
industry-leading realistic network emulation with advanced performance and security testing
in a unified, automated solution gives Docomo confidence in demonstrating the viability and
performance of O-RAN for customers worldwide.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSpotlight:
Ensure robustness

Smarter

Meeting the daunting
data demands of
artificial intelligence

Artificial intelligence
One of the world’s largest hyperscalers is also leading the way in the development of artificial
intelligence (AI), as AI becomes a growing force in digital transformation. While wrestling with
the capabilities that AI is already delivering, the company is all too aware of the daunting
demands it will put on data capacity requirements for the future, as AI integration becomes
ever more ubiquitous.

Seeing 800G as the future workhorse of the cloud’s high-speed Ethernet backbone, the
hyperscaler invested in Spirent’s market-leading 800G test solutions, making it simpler to test
and validate today the reliability and potential of the 800G ecosystem of the near future, and
ensuring it can continue its work at the bleeding edge of AI development with confidence.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTOur markets

Unlocking new
opportunities

Spirent invests to sustain
and expand our leadership
and support our profitable
growth in key technologies
and growth markets.

We are evolving deeper and broader partnerships with
an increasingly diverse base of customers, helping them
address their larger business problems with innovative
solutions and services, not just products. We are leveraging
subject matter expertise gained from our leadership in lab
test and validation to address our customers’ live network
challenges, as they advance towards complex cloud-native
5G standalone networks and employ continuous integration
and continuous delivery models. We are applying our
industry-leading expertise to key emerging areas such 5G
private networks, the expansion of telco cloud, data centre
upgrades to support artificial intelligence (AI) workloads,
open radio access networks (Open RAN), and low earth
orbit (LEO) satellite constellations. Diversifying our markets
and our customers provides us with new opportunities to
grow and to build additional recurring revenue streams
that support sustainable, profitable growth.

Non-terrestrial networks and LEO

Market driver
Growth in non-terrestrial networks (NTN) and LEO mega
satellite constellations continues apace with over 5,700
satellites in orbit, and over 58,000 satellites estimated to
be in active orbit by 2030, delivering mobile broadband,
emergency services and Internet of Things connectivity
directly to devices, while offering resilient positioning,
navigation and timing (PNT). Being close to Earth, these
new constellations enable more robust and secure
connectivity to remote, underserved communities,
mission-critical industries, and military theatres.

Opportunities for Spirent
Space is an incredibly complex environment, so it is
critical to validate satellite communications and PNT
performance in the lab before deployment. Numerous
technology and performance challenges must be tested,
from signalling delays and timing variations to large
Doppler shifts and signal degradation from atmospheric
conditions and interference.

Our response
Spirent, as the industry leader in satellite PNT and
end-to-end mobility testing, is well positioned to help
the industry deliver on NTNs’ promises and bridge
the technology divide between satellite providers and
mobile operators. Spirent is already deeply engaged
with leading players across the ecosystem, helping to test
the complex performance and resiliency requirements
of a new generation of SATCOM and PNT services.

Spirent Communications plc Annual Report 2023

Satellite D2D consumer segment revenue

Emergency
<$100 million

SMS
+$100 million

Voice
+$1 billion

Data
+$10 billion

60,000

50,000

40,000

30,000

20,000

10,000

n
o

i
l
l
i

m
D
S
U

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

3GPP
Release 17

3GPP
Release 18

Analysys Mason estimate a $137 billion revenue opportunity (cumulative
between 2022 to 2032) for direct-to-device (D2D) SATCOM services.

Source: Analysys Mason/NSR.

386m

direct satellite-to-device subscribers by 2030

Source: NSR an Analysys Mason Company 1 August 2022.

STRATEGIC REPORT
800G and data centre
networking for AI

Financial services
(digital transformation)

Market driver
The rapidly-increasing appetite for applications
such as cloud gaming, streaming services, industrial
connectivity, and a new wave of AI workloads is
driving bandwidth demands ever higher. Cloud
service providers are focusing on AI infrastructure
for learning clusters which require high bandwidth
connectivity, and for inferences which require
low latency.

This is all stimulating rapid evolution in Ethernet
backbones and interconnects in data centres that
underpin the cloud and provide support for enterprises,
driving refresh cycles from 400G to 800G, as well as
early 1.6 Terabit research and development.

Opportunities for Spirent
With the rapid acceleration towards 800G, customers
are demanding higher-density testing capabilities.
Flexibility is needed to validate the next generation of
routers and data centre fabrics for cloud computing
and streaming service quality of service, for
performance and latency of data centre switches,
and for the latest generation of terabit core routers.

Our response
Spirent has developed the industry’s highest-density,
award-winning multi-rate 800G high-speed
Ethernet test solution, leveraging our decades of
leadership in Ethernet testing.

Spirent’s 800G solution helps accelerate 800G
adoption across next-generation chipsets, routers,
switches, and data centre fabrics, and lays the
foundation for future 1.6 Terabit evolution.

Forecast (23–27) – front-end AI networks

100%

)

(
s
t
n
e
m
p
h
S
t
r
o
P

2020 2021

2022 2023e 2024e 2025e 2026e 2027e

100Gbps

200Gbps

400Gbps

800Gbps

1,600Gbps

Deployments in front-end connectivity for AI clusters to drive 800G
demand with nearly 2/3 of ports being 800 Gbps by 2027.
Source: Dell’Oro Group.

Market driver
Financial services organisations are embarking on
large-scale digital transformation and automation
programmes driven by competitive pressures,
heightened security risks, legacy IT systems and
a heritage of costly and inefficient siloed labs and
manual testing processes.

This is compounded by the need for continuous
regulatory compliance and certification testing while
meeting aggressive sustainability targets across
growing IT and data centre real estates.

Opportunities for Spirent
Manual methods for testing enterprise networks,
regulatory compliance and the provision of new
digital services are no longer viable because of
the complexity, speed and frequency at which
increasingly disaggregated networks need to
be updated.

By automating test lab capabilities, world-leading
financial services companies will be able to significantly
accelerate delivery of new products, version upgrades,
and services to their customers, while ensuring strict
compliance and benefiting from major productivity
gains and cost savings.

Our response
Spirent’s proven lab and test automation solutions
are fully applicable to these transformation
programmes and to continuous testing within
enterprise sectors, including financial services.
This expanded market opportunity for Spirent was
showcased by a large deal we won with a leading
global financial services organisation in 2023.

Banking, Financial Services, & Insurance (BSFI)
market dynamics

$310bn

Digital Transformation spending by 2032, growing
at a compound annual growth rate (CAGR) of 16.6
per cent from 2023 to 2032.1

$8.79bn

Robotic Process Automation spending by 2030
to automate repetitive tasks, streamline complex
processes, and reduce human errors, growing
at a CAGR of 39.4 per cent from 2023 to 2030.2

Sources: 1. Allied Market Research; 2 Grand View Research.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT

Our business model

Unleashing the value of
transformative technologies

Using our
resources
effectively

Financial strength
To invest in research
and development

Intellectual property
Protected IP and patents

Organisational capital
Unique systems and processes

Human capital
Talented and driven workforce

Social capital
Strong partnerships with
customers and suppliers

e l e r a t e t ime to market
Lab
D e velop

m
i

rie
n

Harden
security
defences

Live

Deplo

y
t
i
x
e
l
p
m
o
d c
n

Reduce cost a

We stand behind the promise of our increasingly
diverse customer base to deliver a new generation of
transformative products and services to their customers.
We are with them in every phase of the lab to live lifecycle
from development to operation, ensuring new technologies
work and new revenue streams are unleashed.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT

Making new technologies work

Non-terrestrial
networks and LEO
satellites

Telecom and
financial digital
transformation

AI networking
and 800G for
data centres

The next wave
of 5G, Wi-Fi and
the cloud

Spirent’s unique value

We Unblock
development for
faster releases

Our automated test and digital
twin solutions realistically model
real-world networks so providers
can rapidly validate new concepts
for non-terrestrial networks (NTN),
artificial intelIigence (AI) data
centre networking, 5G standalone/
advanced, Wi-Fi 7, next-generation
positioning and more. Our managed
solutions offer our critical technology
and methodology skills and expertise,
allowing customers to streamline
their labs and testing.

We Unlock
agility and
cost savings

Our continuous testing solutions
and automated test frameworks
empower our diversified customer
base across industries such as
telecom and financial services
to transform legacy testing
workflows and silos into automated,
collaborative test environments.
This enables supplier ecosystems to
work together seamlessly, improving
agility, accelerating releases,
and increasing resource and
energy efficiency.

We Unleash
new services
and revenues

Our active continuous monitoring
solutions create a foundation for a
new generation of AI, NTN, 5G, Wi-Fi 7,
and positioning services that offer
high-growth revenue opportunities.
We enable service differentiation
across new dimensions: latency, loss,
security, scalability, and managed
service level agreements. Our
proactive, automated root cause
isolation allows customer issues
to be resolved before customers
are impacted.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSpotlight on 5G

Unleashing 5G
standalone with
its new revenue
opportunities
and efficiencies

5G standalone on the cusp
5G standalone (SA) network deployments growth stalled
during 2023, largely due to delays in capital expenditure
investment and delays in overcoming the formidable technical
challenges of deploying and integrating new, cloud-native
5G core technologies. However, growth is forecast to
rebound in 2024, as mobile operators focus on advanced
revenue-generating use cases which simply cannot be
supported without the move to 5G SA. This comes against
a background of expanding demand in enterprise private
networks, gaming and metaverse applications, government
and military use cases, and energy efficiency/sustainability,
all representing near-term areas of opportunity for Spirent.

Already 121 operators in 55 countries are investing in 5G
SA networks. Cloud providers, operators and network
equipment manufacturers are all launching private 5G
SA-based offerings. Leading chip and device equipment
manufacturers are launching 5G SA advanced capable form
factors, while premium 5G SA services are being tested and
launched, including secure network slices, voice over new radio
and reliable low-latency solutions for industrial applications.

Clearly, suppliers and operators see a 5G SA market
that’s ready to scale, and we anticipate controlled growth
deployments beginning in mature markets during 2024,
scaling nationally throughout the coming years, with the
longer tail of operators following, providing an enduring
test and assurance opportunity for Spirent.

Advanced revenue-generating
use cases simply cannot
be supported without the
move to 5G SA.

Stephen Douglas
Head of Market Strategy, Spirent

Spirent Communications plc Annual Report 2023

Private 5G networks
The market for enterprise private networks saw steady
adoption throughout 2023. In 2024 and beyond, we expect
private networks to see significant growth – and become a
meaningful source of incremental revenue for our customers
– thanks to rising demand from enterprises, government and
military customers, and their growing willingness to pay a
premium for assuring network service level agreements (SLAs)
to guarantee business outcomes and return on investment.

This growth in enterprise private networks will also fuel
associated investment in cloud and multi-access edge
computing (MEC). It’s already clear that many enterprises
have strict requirements for assuring security and data
privacy on-site. At the same time, many of the most
compelling private network use cases, especially those
using latency-sensitive or artificial intelligence/machine
learning-driven applications, will benefit from the performance
gains derived from local application processing.

Spirent’s strategy is well aligned to help our customers
unleash the revenue potential of private 5G and MEC. An
acknowledged industry leader in 5G core and edge network
testing, offering innovative solutions such as automated
and continuous testing and assurance, together with flexible
business models such as test-as-a-service, Spirent is helping
enterprises to unlock new business outcomes and operators
and suppliers to deliver new premium and assured revenue
generating services.

STRATEGIC REPORTLifecycle Service
Assurance
Helping customers unleash new
forms of differentiation, assured
revenue generating services and
increased savings.

As early 5G non-standalone (NSA)
networks mature, focus naturally
shifts towards 5G SA to deliver the
true promise of 5G and guarantee
performance, with SLAs helping to
ensure new revenue streams and
competitive advantage.

With new complexity from
5G SA’s cloudification, and a
transformation of many integration
and deployment workflows,
demand is growing for network
automation and continuous
test and assurance across the
5G lifecycle.

Spirent’s market leadership in
5G SA core network testing,
our vendor-independent status
and cutting-edge expertise in
automation and continuous test
and assurance uniquely positions
us to help the industry make the
move to true 5G with confidence.

Spirent’s global leadership in 5G
core testing was again showcased
in 2023 with leading operators,
equipment manufacturers and
cloud providers, with over 65
unique customer engagements,
including within adjacent satellite
industry, government and
military markets.

Networks & Security

Managed Solutions

Helping customers unlock
increased agility and faster time
to market.

Helping our customers address
technology risks, operational
overheads and skill set shortages.

The growth in 5G deployments
and the move to SA with its
disaggregated, cloud-native
architecture highlight the
dependency on a high-capacity,
tightly synchronised, low-latency
and secure internet protocol
transport network capable of
supporting thousands of additional
cell sites, new edge locations
and geographically distributed
data centres.

Spirent’s high-speed Ethernet and
application-aware security testing
leadership was complemented in
2023 by CloudSure, an innovative
solution designed to ensure
the reliability, fault tolerance,
and scalability of cloud-native
deployments to deliver robust and
resilient 5G services.

Spirent’s 5G telco cloud leadership
was highlighted in 2023 at one of
the world’s largest 5G operators,
helping them validate 5G core
network cloud native function
resilience when running on various
cloud infrastructures and stacks,
safely accelerating their time to
launch their new 5G SA network.

5G’s increased complexity,
combined with an exponential
increase in the velocity and volume
of software releases, inconsistent
tools and processes, and a lack of
in-house expertise, presents major
challenges to our customers.

Managed Solutions help address
these challenges by offering
our unparalleled subject matter
expertise, tools and methodologies
as a service, enabling an
innovation pipeline between
development and operations.

Spirent’s Managed Solutions
leadership was showcased in
2023 at a leading north American
operator with one of the world’s
largest 5G SA networks, which
utilised Spirent’s Test-as-a-Service
managed solution to deliver
lab and field testing of new
mobile devices to validate their
performance for data and
next-generation voice-enabled
services on its new 5G SA network.

$24.1bn

Forecasted 5G SA network
infrastructure (core and
cloud) spend between
2024–20271

300

Commercial 5G launches
out of 578 operators
investing in 5G2

Commercial 5G SA
launches with another
74 operators currently
investing towards 5G SA3

>60,000

Private 5G/LTE networks by 20284

Sources
1. Omdia (September 2023).
2. Global Mobile Suppliers Association (GSA) (December 2023).
3. Dell’Oro Group & GSA (December 2023).
4. Analysys Mason (December 2023).

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTOur strategic priorities

We are
focused on
three strategic
priorities

To realise our ambition to be the
global leader and trusted partner
for innovative technology test and
assurance solutions, we are focused
on three strategic priorities, or pillars:

Customer Centricity
Our mindset of customer centricity enables us to take a
broader role on our customers’ behalf, solving their larger,
most pressing problems and adding more value.

Innovation for Growth
We must continue to relentlessly innovate and invest to stay
ahead on key, emerging technologies, and to maintain
market leadership.

Operational Excellence
Our focus on operational excellence and upholding our core
values is a key differentiator that enables our sustainable,
profitable growth.

We are building on the progress
we have made in addressing
our customers’ larger and most
pressing business problems by
selling outcomes and value.

Eric Updyke
Chief Executive Officer

Spirent Communications plc Annual Report 2023

Customer Centricity

What we achieved
We remained dedicated to supporting our customers
during difficult times by staying connected with
them. Our primary focus was on enhancing the
return on investment enabled by our portfolio,
ultimately saving our customers’ time, effort and
money throughout their journey.

The success of our key account programme
persisted, driven by major customers directing
their budgets toward automation and essential
investments. Our partner ecosystem demonstrated
impressive performance yet again, achieving robust
outcomes by strategically targeting rapidly-growing
segments and regions.

In addition, we increased our share of the market
among existing customers while simultaneously
expanding into new target segments like hyperscalers
and financial services. A significant milestone was
reached with a financial services organisation,
highlighting our leadership in modernising and
automating labs and winning customers beyond
our core base.

Priorities for 2024
• Continue diversifying our customer base.

• Continue driving our shift from selling product
features and functions to selling outcomes
and value.

• Drive solutions and services that specifically tackle

our customers’ existing challenges, particularly those
related to productivity and efficiency objectives.

• Utilise our globally leading automation solutions
to expedite the achievement of our customers’
energy-saving goals.

• Expand on our landmark services deals to win

more strategic services opportunities.

1,100+

customers served in 2023

STRATEGIC REPORTInnovation for Growth

Operational Excellence

What we achieved
We continued to make smart investments in our
future growth, including R&D, key talent and business
model innovation, with a continuing focus on our
drivers of 5G and Open RAN (O-RAN), cloud growth,
digital transformation and location awareness.

Our Positioning business, with its unique end markets,
achieved robust bookings with its world-class portfolio
of solutions. Our extensive portfolio now emphasises
multi-sensor integration, ensuring clients in emerging
sectors like low earth orbit (LEO) satellites, chipsets and
automotive technology can realise their positioning,
navigation and timing (PNT) aspirations.

We introduced our Wi-Fi 7 solution to the market to
address the evolving demands of the next generation
in Wi-Fi testing. This cutting-edge solution not
only enhances performance but also sets a new
standard for reliability and speed in wireless
connectivity testing.

Priorities for 2024
• Invest in scaling and management of our services
delivery capability and increasing the software
content in our solutions.

• Leverage the breadth of our 5G portfolio to address
evolving customer needs as 5G moves beyond the
lab to deployment and production networks.

• Leverage our industry leadership in Wi-Fi test

and validation to address technology evolution
to Wi-Fi 7 and the growing Wi-Fi market need for
Test-as-a-Service offerings.

• Maintain and expand leadership in high-speed
Ethernet with continued 800G innovation and
quality/usability enhancements.

• Expand PNT leadership in space, chipset and live

assurance applications.

• Focus on maximising opportunities in O-RAN and

5G private network markets.

$102.4m

(2022 $111.3m)

invested in research and
development in 2023,
representing

21.6%

(2022 18.3%)

of revenue

What we achieved
Our prioritisation of operational excellence resulted
in continuing diligent management of our cost base
throughout 2023, ending the year with $108.1 million
of cash and no debt. The adjusted operating margin
decreased by 12 percentage points to 9.5 per cent.
We continued to invest in our people and made
significant progress in our diversity, equity and
inclusion strategy.

In light of the market’s unpredictable nature, we
embraced the challenging yet essential task of
implementing cost-cutting measures to navigate
economic headwinds. This entailed making difficult
decisions and executing targeted cost-saving
initiatives to secure the sustainability of our operations.
Our primary objective was to preserve critical
investments while grappling with the inherent challenges
presented by the unpredictable business environment.

Our approach to cost optimisation demanded
surgical precision, with a heightened awareness of
the delicate balance between fiscal responsibility and
the imperative to safeguard our capacity for growth.

We made some organisational changes to better
align ourselves with the market dynamics, including
reorganising our business units to better enable
solutions selling. We expect it to drive more efficiency,
including a single R&D organisation to drive better
prioritisation, common platforms and consistent user
interface/user experience across products.

Priorities for 2024
• Continuously assess and expand our portfolio,
pursuing both organic and inorganic growth
to align with strategic goals and capitalise on
lucrative market opportunities.

• Unwavering commitment to operational efficiency,
encompassing the execution of our site strategy
and optimisation of our operating model.

• Prioritise sustainability and ESG objectives

to uphold our commitment as a responsible
corporate citizen.

• Execute the 2024 objectives outlined in our

diversity, equity and inclusion strategy.

• Sustain investments in our IT infrastructure,

tools and processes, to bolster support for our
ongoing growth.

• Maintain a robust balance sheet to ensure strategic
flexibility and long-term viability, particularly during
periods of macroeconomic uncertainty.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTKey performance indicators

Performance in
a difficult
environment

Spirent’s strategy focuses on medium to long-term growth
and therefore its achievement cannot be measured by just
looking at performance in 2023 compared to the prior year;
trends over a number of years must also be considered.
Executive Director remuneration is linked to certain financial,
strategic and operational key performance indicators (KPIs)
with further information available in the Report on Directors’
Remuneration on pages 83 to 109.

Book to bill1
Ratio

101

1
1
1

6
0
1

3
0
1

1
0
1

Revenue
$ million

Adjusted operating profit2
$ million

Adjusted operating margin3
%

$474.3m

$45.2m

4
.
2
2
5

6
.
3
0
5

5
.
7
0
6

0
6
7
5

3
.
4
7
4

5
9
2
1

5
8
1
1

5
.
3
0
1

9
.
2
9

9.5%

8
9
1

6
0
2

3
.
1
2

4
8
1

2
.
5
4

5
9

22 23

Reason for measurement
The ratio of orders booked
to revenue recognised is a
measure of the visibility of
future revenue at current
levels of activity and
provides an indication of the
underlying trend in Spirent’s
future revenue stream.

Performance
Order intake was greater
than revenue in the year
resulting in a book to bill
ratio of 101 as we continue
to win larger, longer-term
contracts that improve
revenue visibility and
build repeatable business
(2022 103).

Relevance to strategy
The book to bill ratio is an
indicator of the underpin to
future revenue and whether
activity levels are rising or
slowing, and therefore how
effective we have been in the
execution of our strategy.

Reason for measurement
Spirent monitors growth in
revenue as this shows how
successful Spirent has been
in expanding its markets and
growing its customer base.

Reason for measurement
Adjusted operating profit
is the measure used
to evaluate the overall
performance of the Group
as well as each of the
operating segments.

Reason for measurement
Adjusted operating margin
is a measure of the Group’s
profitability. Spirent operates
in markets which have high
operating returns and strives
to achieve best-in-class
operating margin compared
with its peers.

Performance
21.9 per cent revenue
decrease in 2023, following
a 5.5 per cent increase in
2022. 5G is expected to be
a strong driver of future
business across our solution
portfolio in the mid term;
however, during the year,
customers delayed their
investments to manage
economic challenges.

Relevance to strategy
Revenue demonstrates
the effectiveness of our
strategy: our success in
expanding our markets both
organically and through
acquisition; maintaining
technology leadership; and
our strong relationships with
our customers, all of which
ensure that we continue to
win and maintain business.

Performance
Adjusted operating profit
decreased by 65.1 per cent
to $45.2 million, from
$129.5 million in 2022, as a
result of challenging trading
conditions partly offset by
continued focus on
cost control.

Performance
The decrease in adjusted
operating margin
to 9.5 per cent, from
21.3 per cent in 2022,
reflects challenging
trading conditions partly
offset by cost control.

Relevance to strategy
Adjusted operating profit
indicates our financial
strength and our ability
to invest in the business to
support the growth agenda.

Relevance to strategy
Adjusted operating margin is
a measure of how successful
we are in our overall strategy
and demonstrates our ability
to improve profitability
through efficient operations
whilst being mindful of the
need to invest for the future.

Spirent Communications plc Annual Report 2023

Reason for measurement

Long-term growth in

To maintain its competitive

Spirent’s success is

Free cash flow is a measure

adjusted basic EPS

is a fundamental

driver to increasing

shareholder value.

position, Spirent must invest

dependent on its talented

of the quality of Spirent’s

at suitable levels to support

employees and retaining

earnings. The aim is to

further organic growth

initiatives in line with the

them is extremely important.

achieve a high conversion

Voluntary employee turnover

of earnings into cash.

strategic objectives, whilst

compared to the industry

driving improved productivity

average is the measure used

and effectiveness.

to assess how well the Group

has performed.

Performance

In 2023, product

development spend of

$102.4 million (2022

$111.3 million) benefited

from transferring North

American activities to lower

cost regions.

Performance

Our 2023 voluntary

turnover rate of 5.6 per

cent remains well below

Performance

Free cash flow in 2023 was

positive at $23.7 million.

Free cash flow conversion

the global industry average

for 2023 was 54 per cent

of 14.2 per cent.

of adjusted earnings

(2022 91 per cent).

Performance

Spirent aims to achieve

growth in adjusted basic

EPS. Part of the Executive

Directors’ remuneration is

dependent on achieving

EPS targets. In 2023,

adjusted basic EPS

decreased 60.0 per cent as

a result of the decrease in

adjusted earnings.

Relevance to strategy

Adjusted basic earnings per

It is critical that Spirent’s

We cannot avoid the fact that

Having strong free cash

share is a measure of how

product development

some of our employees will

flow reflects Spirent’s

successful we are in our

investment keeps pace

move on but we can avoid a

ability to generate funds

strategy and ultimately how

with the speed of change

skills shortage by appropriately

for future investment. It

Spirent increases value for

in technology, and that

managing, recognising

provides financial strength

its shareholders.

it is directed at the right

key technology areas;

and rewarding our people.

and flexibility and the ability

Voluntary employee turnover

to pay sustainable dividends

this enables us to expand

is a measure of how successful

to our shareholders.

our markets and to

maintain our technology

leadership position.

Spirent is in its strategy of

retaining and investing in

its people.

STRATEGIC REPORTNotes
1.

Ratio of orders booked to
revenue recognised in the period.
Before acquired intangible
asset amortisation, share-based
payment and other adjusting
items amounting to $26.8 million
in total (2022 $16.8 million).

Adjusted operating profit as
a percentage of revenue in
the period.
Adjusted basic earnings
per share is based on
adjusted earnings as set
out in note 11 of Notes to
the full year consolidated
financial statements.

Cash flow generated from
operations, less tax and net
capital expenditure, after interest
paid and/or received, payment
of lease liabilities, finance
lease payments received and
excluding acquisition related
other adjusting items and
one-off contributions to the UK
pension scheme.

Items with notes 1 to 5 are
non-GAAP alternative performance
measures; see pages 196 and 197
for more detail.

Reason for measurement

The ratio of orders booked

Spirent monitors growth in

Adjusted operating profit

to revenue recognised is a

revenue as this shows how

is the measure used

Adjusted operating margin

is a measure of the Group’s

measure of the visibility of

successful Spirent has been

to evaluate the overall

profitability. Spirent operates

future revenue at current

in expanding its markets and

performance of the Group

in markets which have high

levels of activity and

growing its customer base.

as well as each of the

operating returns and strives

provides an indication of the

underlying trend in Spirent’s

future revenue stream.

operating segments.

to achieve best-in-class

operating margin compared

with its peers.

Performance

Order intake was greater

21.9 per cent revenue

Adjusted operating profit

The decrease in adjusted

than revenue in the year

resulting in a book to bill

decrease in 2023, following

decreased by 65.1 per cent

operating margin

a 5.5 per cent increase in

to $45.2 million, from

ratio of 101 as we continue

2022. 5G is expected to be

$129.5 million in 2022, as a

to win larger, longer-term

a strong driver of future

result of challenging trading

reflects challenging

to 9.5 per cent, from

21.3 per cent in 2022,

business across our solution

conditions partly offset by

trading conditions partly

continued focus on

cost control.

offset by cost control.

contracts that improve

revenue visibility and

build repeatable business

(2022 103).

portfolio in the mid term;

however, during the year,

customers delayed their

investments to manage

economic challenges.

Relevance to strategy

The book to bill ratio is an

Revenue demonstrates

indicator of the underpin to

the effectiveness of our

future revenue and whether

strategy: our success in

Relevance to strategy

Adjusted operating profit

indicates our financial

strength and our ability

Relevance to strategy

Adjusted operating margin is

a measure of how successful

we are in our overall strategy

activity levels are rising or

expanding our markets both

to invest in the business to

and demonstrates our ability

slowing, and therefore how

organically and through

support the growth agenda.

to improve profitability

effective we have been in the

acquisition; maintaining

execution of our strategy.

technology leadership; and

our strong relationships with

our customers, all of which

ensure that we continue to

win and maintain business.

through efficient operations

whilst being mindful of the

need to invest for the future.

Adjusted basic earnings
per share4 (EPS)
Cents

Product development spend
as a percentage of revenue
%

Voluntary employee turnover
%

Free cash flow5
$ million

7.55¢

6
8
8
1

9
5
6
1

8
6
4
1

0
4
.
3
1

5
5
.
7

21.6%

2
.
9
1

7
.
9
1

3
.
8
1

6
.
1
2

5.6%

6
.
7

2
.
7

7
.
6

1
.
0
1

6
5

$23.7m

1
.
0
0
1

6
.
2
0
1

8
.
3
0
1

9
.
1
9

7
.
3
2

22 23

Reason for measurement
Long-term growth in
adjusted basic EPS
is a fundamental
driver to increasing
shareholder value.

Performance
Spirent aims to achieve
growth in adjusted basic
EPS. Part of the Executive
Directors’ remuneration is
dependent on achieving
EPS targets. In 2023,
adjusted basic EPS
decreased 60.0 per cent as
a result of the decrease in
adjusted earnings.

Relevance to strategy
Adjusted basic earnings per
share is a measure of how
successful we are in our
strategy and ultimately how
Spirent increases value for
its shareholders.

Reason for measurement
To maintain its competitive
position, Spirent must invest
at suitable levels to support
further organic growth
initiatives in line with the
strategic objectives, whilst
driving improved productivity
and effectiveness.

Performance
In 2023, product
development spend of
$102.4 million (2022
$111.3 million) benefited
from transferring North
American activities to lower
cost regions.

Reason for measurement
Spirent’s success is
dependent on its talented
employees and retaining
them is extremely important.
Voluntary employee turnover
compared to the industry
average is the measure used
to assess how well the Group
has performed.

Performance
Our 2023 voluntary
turnover rate of 5.6 per
cent remains well below
the global industry average
of 14.2 per cent.

Reason for measurement
Free cash flow is a measure
of the quality of Spirent’s
earnings. The aim is to
achieve a high conversion
of earnings into cash.

Performance
Free cash flow in 2023 was
positive at $23.7 million.
Free cash flow conversion
for 2023 was 54 per cent
of adjusted earnings
(2022 91 per cent).

Relevance to strategy
It is critical that Spirent’s
product development
investment keeps pace
with the speed of change
in technology, and that
it is directed at the right
key technology areas;
this enables us to expand
our markets and to
maintain our technology
leadership position.

Relevance to strategy
We cannot avoid the fact that
some of our employees will
move on but we can avoid a
skills shortage by appropriately
managing, recognising
and rewarding our people.
Voluntary employee turnover
is a measure of how successful
Spirent is in its strategy of
retaining and investing in
its people.

Relevance to strategy
Having strong free cash
flow reflects Spirent’s
ability to generate funds
for future investment. It
provides financial strength
and flexibility and the ability
to pay sustainable dividends
to our shareholders.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTStakeholder engagement

Considering
stakeholders
in key business
decisions

No successful business
can operate in isolation.
Without a thorough
understanding of its key
stakeholders and their
differing perspectives,
a business will struggle
to deliver sustainable
long-term growth to
shareholders and
other stakeholders.

Directors are bound by their duties under the
Companies Act 2006 (the “2006 Act”), but the
principles underpinning Section 172 are not only
considered at Board level, they form part of
everything we do as a Company.

Supported by the Company Secretary & General
Counsel, the Board, management and all those
tasked with preparation of Board materials must
give consideration to relevant stakeholders in
matters requiring decision making, including
strategic decisions.

The following pages comprise our Section 172(1)
Statement and set out how the Board has, in
performing its duties over the course of the year,
had regard to the matters set out in Section
172(1) (a) to (f) of the 2006 Act, giving details of
how each key stakeholder has been engaged
and considered, including examples of how
stakeholders were considered in key Board
decisions. Further information can also be found
throughout the Strategic Report.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTEmployees

Shareholders

We are a people business and our
1,500+ colleagues around the world
are fundamental to the long-term
success of our Company.

Spirent is committed to engaging
with current and potential shareholders
through continued transparent and
effective communication.

Topics covered
• Reinforcing understanding of our mission, vision, values

Topics covered
• Financial performance.

and strategy.

• Ensuring employees understand what is expected of them

and know the role they play in our success.

• Spending quality time with line managers so that they
feel listened to and supported, enabling employees to
feel confident that they have the skills to do their job
well while identifying potential training needs for their
future development.

• Making sure that employees feel part of a thriving

Spirent community.

How we listen and engage
• Global and regional internal communication and

• Capital management and distribution.

• Long-term sustainability strategy.

• Corporate governance and stewardship.

• Executive remuneration, including share plans.

How we listen and engage
• Investor roadshows after the full and half year results.

• Open door policy with investors: CEO and CFO regularly
meet investors virtually and, when possible, face-to-face.

• The Annual General Meeting (AGM) and related follow-up.

• Remuneration Committee Chair consults with

collaboration platforms to provide access to information
for all colleagues.

shareholders on application of the Group’s Executive
Director Remuneration Policy and share plan changes.

• Learning and knowledge sharing forums for our

technology and sales communities.

• Biannual colleague engagement surveys to monitor

developments in workforce sentiment.

• Engagement events with global and local management

representatives, including Non-executive Directors.

2023 highlights including Board decision making
and Section 172 considerations
• Non-executive Directors met with employee groups
based in their home geography through hosted
sessions with small groups of colleagues (face-to-face
where possible, but also online), with feedback from
engagement sessions being used to inform Board and
Committee discussions.

• Biannual employee surveys have consistently achieved
strong response rates, with results indicating that we
continue to have a highly engaged workforce.

• Management Matters engagement programme continues

to support people managers within the business.

• Employee wellbeing programmes refreshed with

improved access to support ranging from awareness
campaigns to mental health first aid training.

• Employees who departed during the 2023 right sizing
all dealt with fairly, sympathetically and with respect,
with follow-up reporting to the Board.

2023 highlights including Board decision making
and Section 172 considerations
• All resolutions successfully passed at 2023 AGM with votes

cast representing more than 81 per cent of the issued
share capital.

• Directors fully available to answer shareholder questions

at the AGM.

• Return of capital to shareholders by buying back and

cancelling £56 million of shares, the Board having sought
broker views on market sentiment beforehand.

• Continuing payment of dividends, better aligned to

profitability and cash flow.

• Regular broker updates to the Board on market

sentiment, as well as other presentations to the Board
on investor feedback.

• Ongoing engagement with major shareholders on share
plan changes, including use of restricted shares, before
finalising AGM resolutions.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTStakeholder engagement continued

Suppliers

Spirent engages with a number
of different suppliers across
the business.

Topics covered
• Long-term trusted partnerships facilitating real

margin improvement.

• Strong working relationships.

• Collaboration.

• Fair contract and payment terms.

• Management of relationships through global supply

chain disruption.

How we listen and engage
• Active management and monitoring of key suppliers and

supply chain trends.

• Meetings held with key suppliers.

• Supplier surveys as an embedded part of the

procurement process.

• Supplier Code of Conduct assessments.

2023 highlights including Board decision making
and Section 172 considerations
• Continued supply chain audit programme, auditing

30 suppliers.

• Engaging with suppliers in preparation for additional

Scope 3 disclosures on greenhouse gases (GHG) emissions.

• Mitigation of global component shortage, reported to

the Board.

Customers

Providing solutions and services
to help our customers keep their
promises to their customers.

Topics covered
• Understanding the challenges our customers face.

• Developing solutions and services to help our customers
to manage the complexity of their devices, networks
and services.

• Working collaboratively with customers and their partners.

How we listen and engage
• Investment in an agile, collaborative organisation so that

we can be responsive to customer needs.

• Regular client updates and acting on their feedback.

• Extension of our thought leadership to stay ahead in

key technologies in sustainable growth areas.

2023 highlights including Board decision making
and Section 172 considerations
• Awards won at 2023 Lightwave Innovation Reviews (Lab/
Production Test Equipment and Field Test Equipment) and
2023 Interop Tokyo Best of Show (Testing Special Prize
and Testing Grand Prize).

• Teaming up with customers to innovate and create

leading technology.

• Acceleration of our digital-first marketing approach with

targeted always-on digital marketing campaigns to grow
interaction and drive demand.

• Continued expansion of our library of downloadable
resources with high-quality, targeted content to share
thought leadership and technological expertise.

• Extending geographical reach and customer

engagement through an ever-expanding social media
networking programme.

• Review and reorganisation of business units, agreed

and monitored by the Board.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTThe world around us

Spirent has a diverse network
throughout the world around us
which is critical to the ongoing
success of the business, from
governments and regulators to
educational facilities and our
local communities.

Topics covered
• Being mindful of our environmental impact.

• Being a responsible corporate citizen.

• Supporting our local communities through

charitable giving.

• Being a trusted partner to customers around the world.

• Providing work experience and early career

development programmes.

• Engaging with global think tanks and trade associations
to understand research priorities and opportunities, and
offer expertise to shape policy and industry positions.

• Participating in global thought leadership conferences

and roundtable events.

How we listen and engage
• Participation in environmental reporting surveys.

• Enhancement of reporting framework to ensure

compliance with Task Force on Climate-related Financial
Disclosures (TCFD) requirements.

• Apprenticeship, graduate and work experience

schemes to encourage a diverse pipeline of new and
developing talent.

2023 highlights, including Board decision making
and Section 172 considerations
• Expanded our early career talent programme,

launching a new internal network and an engineering
development programme.

• Active move towards ongoing flexible working to reduce

real estate footprint and carbon emissions, with reporting
to and monitoring by the Board.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSpotlight:
Position the future

Sooner

Proving the potential of LEO’s
positioning future

Low earth orbit
Growth in low earth orbit (LEO) satellite constellations will open up huge new opportunities
for developers, but a key challenge is designing, building and testing devices to utilise LEO
services before the constellations are fully deployed. Hexagon NovAtel needed to establish
the performance of its LEO receivers with Xona’s PULSAR™ LEO constellation, which, when
completed, will improve positioning, navigation and timing (PNT) resilience and accuracy
by augmenting existing global navigation satellite systems.

However, with limited satellites currently in orbit and live-sky testing only available for a few
minutes per day, NovAtel employed Spirent’s GSS7000 simulator and industry-first SimXona
simulation software to successfully test NovAtel receivers’ ability to track Xona PULSAR™ signals.

Utilising Spirent’s simulation expertise, NovAtel was able to successfully demonstrate its new
receiver’s capability to track Xona’s PULSAR™ LEO network signals in the lab, showcasing
Spirent SimXona’s value to developers of future LEO PNT innovations.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT
Spotlight:
Empower consumers

Better

Moving Wi-Fi 7 into the
consumer mainstream

Wi-Fi 7
Gearing up to bring the benefits of Wi-Fi’s next-generation to its customers, a North American
tier-one service provider turned to Spirent to help with the development of its new Wi-Fi 7
residential gateway devices. Along with many benefits, Wi-Fi 7 also introduces tough new
technological challenges to grapple with before it can be moved into the mainstream and
unleashed into consumers’ homes.

Identifying Spirent as the undisputed leader in Wi-Fi testing innovation, the service
provider made a significant investment in Spirent’s octoBox® platform to create a controlled,
automated environment in which to emulate real-world conditions for testing its Wi-Fi
enabled devices.

With comprehensive new Wi-Fi 7 testing capabilities already built in, octoBox® equips the
service provider to meet the exacting new testing requirements of Wi-Fi 7 and launch its
next-generation Wi-Fi residential gateway, confident that customers will experience the
enhanced performance and capability benefits.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT
Our people and culture

An engaging
and inclusive
culture

Spirent is proud of the supportive
and inclusive environment in which
its employees thrive. Our people are
key to our success.

The way we work

Rooted in our culture, our values serve as our foundation,
shaping the way we collaborate with both our team
members and customers. Complemented by a range of
flexible working practices, our commitment to employee
wellbeing not only minimises our carbon footprint but also
fosters knowledge sharing, innovation and collaboration.
This comprehensive approach not only aids in talent
attraction but also plays a crucial role in talent retention.

Measuring our engagement

In our pursuit of prioritising what is most important to our
team members, we advocate for psychological safety,
encourage direct feedback, and emphasise continuous
improvement. Our biannual employee survey serves as a
tool to gauge engagement levels, with consistently high
participation rates. In 2023, we launched the “Business
Bottleneck” anonymous feedback form to surface and
resolve process inefficiencies. We encourage in person
planning, knowledge sharing, and social events to build and
strengthen connections across the Company, and continue
our Spirent Celebrates programme to honour the rich
diversity of our global workforce.

Diversity and inclusion strategy

Our values

2023 priorities

Collaborate with customers, partners
and employees to drive success.

Create new possibilities and make
change happen.

1 Join forces
2 Find a better way
3 Play to win
4 Inspire, challenge
5 Take ownership

Aim high and win responsibly.

and coach
Enable and empower our people.

Embrace responsibility and seek to
deliver impact wherever you go.

Spirent Communications plc Annual Report 2023

Equitable pay
Our focus on pay equity continues. We established the
framework and tools to review pay parity in our business-
as-usual compensation reviews.

Invest in skills, training and development
Spirent has well-established learning and development
programmes and a continuous improvement and coaching
culture. We are passionate about science and engineering,
but we recognise that there are barriers that prevent
talented young people from studying science, technology,
engineering and mathematics (STEM) subjects and
pursuing careers in technology. Our STEM Ambassadors
Programme enables us to engage with young people and
foster an interest in STEM subjects that we hope will lead
them to fulfilling careers in science and engineering.

In 2023, we expanded our early career development
programmes. These offer structured pathways into a career
in technology through internships, apprenticeships, university
sponsorships, and on-the-job development – the latter of
which includes our Aspire Network and Sales Development
Representatives (SDR) Programme.

Celebrating diversity
Our Spirent Celebrates programme, which honours the rich
diversity of our global workforce, continued to grow in 2023.
We expanded the number and range of cultures, awareness
days, and environmental advocacy that we spotlighted to
include the likes of Black History Month, Neurodiversity
Celebration Week, National Apprenticeship Week, Onam,
and the Mid-Autumn Festival. Additionally, we acknowledge
the meaningful contributions of our employees who dedicated
their volunteer time off to give back to their local communities.

STRATEGIC REPORTThe campaign has also allowed us to recognise the
incredible talent we already have within our business.

Bringing our
culture to life

Our #LifeAtSpirent campaign, and internal ‘Get
to Know’ employee spotlight series, allowed us to
recognise and better connect the incredible talent
we already have across our business. The campaign
highlights our Company’s development opportunities,
social responsibility, diversity and inclusion, employee
benefits, sustainability efforts and more.

Our culture in action:
supporting early careers

“ My technical, problem-solving, and interpersonal
skills have been taken to a new level! Thanks to the
support I’ve been given and the opportunities to join
my more experienced colleagues in meeting both new
and established customers, I’ve gained experience in
situations that I’ll no doubt encounter soon.”

“ The ongoing development, support and networking
opportunities provided as part of the Spirent Sales
Development Representatives Programme (SDR)
has been incredible! I’ve received great training from
both a technical and sales perspective and feel well
prepared to pursue a career in sales.”

Haocheng Cao – Associate System Engineer

Shuang (Claire) Liang –
Sales Development Representative

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSustainability

About
FuturePositive

Our sustainability strategy is
focused on five key missions:

FuturePositive is our
sustainability programme.
Through this programme, we have embedded the highest
standards of environmental management, social practices
and corporate governance in our business and supply
chain and help our customers tackle important global
sustainability challenges.

eliver a s

Be accountable
and transparent
Our promise
We will expand our sustainability
governance structures and reporting, and
communicate regularly with staff on
FuturePositive targets and progress.

Promise of a
sustainable future
Our promise
We will showcase the environmental
benefits that our solutions deliver for
customers and embed sustainability
into our go-to-market strategy.

Operate
responsibly
Our promise
We will roll out ISO 14001
management system
practices globally and
work towards sending
zero waste to landfill. We
will embed circular
economy principles in
our product design and
reduce sustainability
impacts in our
supply chain.

Vision
Our solutions will help deliver
on the promise of a sustainable
future for all.

We will operate with integrity,
respecting the environment and
people everywhere.

n
t
e
g
r
i
t
y

Net zero
carbon
Our promise
We aim to achieve
CarbonNeutral® Company
certification in two years,
and work towards net
zero carbon by 2035
through energy efficiency,
100 per cent renewable
electricity and
carbon offsets.

Promote diversity
and invest in people
Our promise
We will take action on diversity and set clear expectations.
We will attract and develop talent and skills to drive
innovation and support long-term sustainable growth.
We will also enable and embed flexible working across
all our operations.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT

Vision
Our solutions will help deliver
on the promise of a sustainable
future for all.

We will operate with integrity,
respecting the environment
and people everywhere.

Progress in 2023

Key achievements
• Net zero carbon: We maintained CarbonNeutral®
Company certification for Scope 1 and 2 and
some Scope 3 emissions.

• Diversity and inclusion: We expanded our early

careers programme.

• Environmental management system: We

extended our ISO 14001 certification to include our
headquarters in Crawley and our Paris office.

• Lab and estates strategy: We agreed a new lab

and estates strategy which will reduce our Scope
1 and 2 emissions by 62 per cent in the next three
years, by moving to high-efficiency offsite data
centre using renewable energy and downsizing
our offsite estate.

• Product energy performance: We conducted

detailed energy performance assessments of 15
of our key products, helping us better report our
product ‘in-use’ emissions.

• Supplier sustainability: We have collaborated
with key suppliers on sustainability and have
established supplier sustainability agreements.

We manage our material sustainability impacts and
opportunities through our FuturePositive programme.

Our comprehensive programme not only ensures we
comply with legislation and stakeholder expectations but
has positive social and environmental impacts for customers
and for our own business.

The Board has designated the CEO as the Board member
responsible for ESG matters within the Group. We have
appointed Brite Green as ESG advisers and Challenge
Sustainability as assurance auditors for ESG data.

The Board is given updates on our sustainability
programme, FuturePositive, at least twice a year as part
of our formal Board calendar. The Audit Committee also
receives frequent updates on risk throughout the year,
including cybersecurity.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

During 2023 we submitted
our short-term science-based
target for approval to SBTi and
agreed a new lab and estates
strategy that will help reduce
our Scope 1 and 2 emissions
by 62 per cent in three years.

Angus Iveson
Company Secretary & General Counsel, Spirent

Sustainability at Spirent
We are committed to embedding the highest standards
of environmental management, social practices and
governance into our operations and products and across
our supply chain.

We look to create long-term value for our shareholders by:

• protecting our reputation and ability to grow;

• focusing on winning business from customers who

value strong environmental, social and governance
(ESG) performance;

• enhancing our efficiency;

• enabling our people to work productively in a safe and

inclusive environment;

• helping us to attract and retain diverse talent, and

encouraging employees to take pride in working for us; and

• reducing the risk of incidents and their associated costs.

Our material sustainability issues
Our material sustainability issues were updated in 2022
using a risk-based approach. The review identified climate
change and carbon neutrality as priority issues, including
the role our solutions can play in helping our customers
reduce their impacts. Diversity, equity and inclusion, staff
health and wellbeing were identified as important, along
with responsible business practices, sustainable product
design, human and labour rights and robust sustainability
governance. Water use is an emerging issue, especially in
raw materials and manufacturing in supply chains. The
materiality assessment will be updated in 2024.

Policies
Spirent maintains a suite of responsible business policies
which commit the Group to compliance with high standards of
ethics and business integrity, environmental management,
and employee and community welfare.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT

Sustainability continued

Sustainability at Spirent continued

Deliver a sustainable future
We aim to showcase the environmental benefits that our
solutions deliver for customers and embed sustainability into
our go-to-market strategy.

This year we worked with customers across the project
lifecycle to help them improve their sustainability performance.
From working with equipment manufacturers to test and
validate new, more efficient components for 5G, to our work
with lab and network operators to automate and streamline
operations, Spirent is helping to drive the transition to a
low-carbon economy.

You can read more in our Sustainability Report which is
available on our website at corporate.spirent.com.

Be net zero carbon
We set out to achieve CarbonNeutral® Company certification
by 2023, and work towards net zero carbon (ie all emission
sources in scope 1, 2 and 3, for which we are responsible) by
2035. In 2023 we developed a net zero carbon roadmap,
which will deliver our short term carbon reduction targets
through energy efficiency, office and lab consolidation, 100
per cent renewable electricity and promising and contractual
mechanisms. We will not require offsetting to achieve our
short term goals.

During 2023, we maintained our CarbonNeutral® Company
certification for our Scope 1 and 2 and some Scope 3 emissions
sources, which include electricity transmission and distribution,
waste from building operations, business travel and homeworking.
We also submitted our short-term science-based carbon
target to SBTi for approval and agreed a comprehensive
reduction strategy covering our labs, estates and across our
value chain.

We continued to source all our electricity from renewable
sources through on-site generation at our Paignton site and
the purchase of Energy Attribute Certificates (EACs).

When purchasing EACs and carbon credits, we have conducted
due diligence to give us comfort as to their quality and traceability.
We have only selected those from high-quality and reputable
projects which are independently verified to recognised
global standards. We have worked with Climate Impact
Partners to source carbon credits in line with our regional
emissions and to purchase national EACs based on our
energy usage in each country we operate in.

Energy use
Spirent is within scope of the Streamlined Energy and Carbon
Reporting (SECR) Regulations. Spirent’s total global energy
use decreased by 2.7 per cent in 2023 to 12,807MWh (2022
13,157MWh). This is due to a reduction in the size of our
estate and rationalisation work on lab equipment. Gas use
increased in the year by around 17.4 per cent to 402MWh
(2022 344MWh). 2022 had been very low and 2023 usage is
well below (2021 usage 548MWh). Total energy usage in the
UK during 2023 was 742MWh (2022 718MWh). UK energy use
comprises Gas: 83MWh, purchased electricity: 613MWh, onsite
generation from renewables: 46MWh. UK energy use is 6 per
cent of our global total and 3 per cent of total location-based
carbon emissions.

Spirent Communications plc Annual Report 2023

Greenhouse gas emissions
Spirent is committed to combating climate change and reporting
our progress. Our total Scope 1 and 2 (location-based) emissions
decreased by 1.8 per cent from 2022, however our emissions
per $ million of revenue increased 26 per cent due to the
reduction in revenue. We have reduced our total location-based
emissions by 38 per cent since our 2014 baseline. Carbon
emissions arising from our UK operations in 2023 were 142
tonnes CO2e (2022 134 tonnes CO2e). Emissions from UK
operations represent 3 per cent of the Group’s total worldwide.

Due to our purchasing 100 per cent renewable electricity,
our market-based emissions are significantly lower
than our location-based total: 58.5 tonnes CO2e in 2023
(2022 44.9 tonnes CO2e).
The total Scope 3 emissions for the year is around 28,426
tonnes CO2e with the largest component of our Scope 3
footprint coming from customer use of our products. A full
breakdown by source is set out in our Sustainability Report
which is available on our website at corporate.spirent.com.

The Group responded to the Carbon Disclosure Project in
2023, completing the Climate Change and Supply Chain
questionnaires. In 2023, we achieved a Climate Change rating
of B (Management) (2022 C). The average for our sector is B-.

Emissions from:
Combustion of fuel and operation
of facilities (Scope 1)
Electricity, heat, steam and
cooling purchased for own use
(Scope 2)
Total emissions (Scope 1 and 2)
Scope 3
Total emissions (Scope 1, 2 and 3)
Emissions intensity metrics:
Normalised per FTE employee
Normalised per square metre of
gross internal area of our facilities
Normalised per $ million
of revenues

2023
Tonnes
of CO2e

2022
Tonnes
of CO2e

73.6

62.7

4,118.8

4,208.2

4,192.4
28,426
32,618

2.53
0.121

4,270.9
44,415
48,686

2.58
0.113

8.84

7.03

Methodology
Reporting on emission sources is required under the
Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 and these sources fall within our
consolidated financial statements. We have reported on all
the emission sources that the Group is responsible for and
which fall within our consolidated financial statements.

We do not have any responsibility for any emission sources that
are not included in our consolidated financial statements.
We report our emissions using the location-based methodology.
We have used the GHG Protocol Corporate Accounting
and Reporting Standard (Revised Edition), along with data
gathered to fulfil our requirements under these Regulations,
and the most recent emission factors available: UK Government
GHG Conversion Factors for Company Reporting 2023 for the
UK, US EPA 2023 eGrid emissions factors for the applicable
individual states in the US, and the latest emissions factors for
all other countries were sourced from the International Energy
Agency’s 2023 data set.

STRATEGIC REPORTA “limited” level of assurance for the energy use and
greenhouse gas emissions has been conducted, to meet
the requirements of the International Standard on Assurance
Engagements (ISAE) 3000 revised.

Over the course of 2023, a number of investors and customers
have engaged with us on the importance of climate change,
and we have incorporated their expectations into our
materiality, strategy and reporting planning.

Performance against targets
We set a target to achieve CarbonNeutral® Company
certification for the Group by 2023, and have achieved this
target. The Group has set a target to reduce energy use by
25 per cent from 2019 levels by the end of 2025. In 2023 our
energy use was 2.7 lower than the previous year.

Strategy
Spirent recognises the importance of climate change as an
environmental threat that the world faces, and as such we
have carefully considered the impact of such risk across our
operations. Climate risks are entirely integrated into our risk
management process.

In 2023 we committed to a programme to move our labs to
high-efficiency site totally powered by renewable energy and
a lab and estate strategy to shrink our office footprint. To the
end of 2023 we have reduced energy use by 11.4 per cent from
from the 2019 baseline.

We have identified the following risks across a variety of time
horizons. The risks consider the potential for increased exposure
to extreme weather events at a Group location or key supply
chain site. In addition, likely changes to the regulatory system
in which the Group operates have been considered.

Energy Savings Opportunity Scheme (ESOS)
Spirent qualifies for ESOS. We completed an ESOS
compliance energy audit for Stage 2 and submitted the
relevant disclosure to the Environment Agency. We are
planning our participation in Stage 3 in 2024.

Task Force on Climate-related
Financial Disclosures (TCFD)
Climate change creates new risks and opportunities for
companies. In accordance with the requirements of Listing
Rule 9.8.6R, Spirent has provided disclosures against all 11
disclosure recommendations that span four key areas of
governance, strategy and climate change scenario analysis,
risk management, and metrics and targets. These disclosures
also meet the mandatory CFD requirements and form part of
the NFSI statement.

Governance and risk management
The Board considers sustainability issues (including climate
change) at least twice a year and oversees the consideration
of climate-related risks and opportunities under the TCFD
disclosure requirements, as well as monitoring progress
against our future positive sustainability strategy, including
climate related goals and targets.

A detailed review of how climate change may impact
our business in the future was completed in 2021 and the
assumptions and findings were reviewed in 2022, with only
minor changes being made. The significant climate-related
risks and opportunities were initially identified via an analysis
conducted by a sustainability consultant which considered
physical, regulatory and commercial factors across various
scenarios, all of which were examined through a senior manager
workshop, including Executive Directors, General managers
of our Business Units and Supply Chain, and Operational
Executives. These are reviewed on an ongoing basis by the
Executive Director-led ESG Management Committee, the
Audit Committee and its Risk Sub-Committee, as part of our
business risk and financial planning processes, with the CEO
having overall responsibility for sustainability matters. The
materiality of the potential climate impact is assessed using
the Group’s materiality criteria.

For the purpose of evaluating climate change-related risks,
the Group has defined the following time horizons, which also
ensue that other timeframes, such as business planning and
viability are aligned:

Short term

0–2 years

Medium term

Long term

2–10 years

10+ years

In consideration to Tables A1.1 and A1.2 of the TCFD
Implementation Guidance 2021, we have considered all
climate related risk themes and their potential impact on
the Group, the most important of which are as follows:

Transitional risks
It is expected that there will likely be a large and radical change
in global markets, with a drive to shift quickly towards renewables
and away from fossil fuels, resulting in increased carbon taxes
across all regions in the short and medium term. This may
result in associated increased costs. Starting in the short term,
costs are likely to increase by an immaterial amount due to
higher investment requirements in low-carbon technology
and expected additional carbon-related levies and we also
expect additional administrative burden on the business, likely
increasing the costs for resource to deliver and report.

We have modelled the impact of carbon credits using a price
per tonne CO2e of up to £250 and the impact is not material.
Transitional risks are also unlikely to lead to any impairments
or write-offs. We expect to purchase carbon credits in the
short to medium term in line with our commitment to achieve
CarbonNeutral® Company certification, but expect energy
efficiency and renewable energy to reduce the requirement
for carbon credits as we progress towards net zero carbon in
2035. Over the course of 2023 and with the help of an external
adviser, we further developed and refined Spirent’s plan to
reach net zero. We have agreed a new lab and estates strategy
which will allow our labs over time to be moved to high-
efficiency site which is powered 100 per cent by renewable
energy. This move will allow us to further consolidate our labs
and decrease our overall estates footprint significantly. We
also aim to expand the size of our on-site solar installation
at Paignton. The proposed strategy will reduce Scope 1 and 2
emissions by 62 per cent in the next three years.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSustainability continued

Task Force on Climate-related
Financial Disclosures (TCFD) continued

Transitional risks continued
In addition, we have agreed a programme to reduce
our indirect carbon emissions. A key area is the use of our
products and we will draw on a range of approaches to help
reduce our impact in this area. These include our continued
migration from hardware to software test solutions and the
use of more efficient white-box hardware, improved energy
management in our bespoke hardware, supporting customers
with test automation and scheduling, and improved data
about how our products are used.

We will also work closely with our supply chain, and set
requirements to reduce and report carbon emissions through
supplier sustainability agreements.

Physical risks
Acute
Considering the potential of increasing intensity and frequency
of storms and concentrated rainfall events, and frequency of
wildfires, we have assessed that these risks would possibly
cause some disruption to operations. Wildfire risks are most
relevant to our operations in Calabasas, CA, and flooding in
our principal contract manufacturer, based in Thailand.

In the medium to long term, risks include Spirent 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.

Spirent has mitigation plans for each of these physical
risks identified, which have been developed as part of
longstanding business continuity and disaster recovery plans.
Spirent engineering centres are situated in various different
locations allowing a level of flexibility and agility should one
site become affected. We endeavour to dual source key
components wherever possible. Additionally, the Group has
appropriate business interruption insurance in place.

Chronic
Higher peak and average temperatures are likely to result
in increased energy demand and cooling capacity required
for lab and office environments. This could lead to increased
capital expenditure to expand or upgrade cooling equipment
across multiple Spirent sites. In addition, increased heatwaves
and droughts could have an impact on the health of more
vulnerable employees and their families possibly resulting in
higher staff absence levels.

It is possible that the rise in average temperatures may reduce
natural gas use for space heating. Additionally, there is already
a market opportunity for existing products, relating to the
provision of emerging energy-efficient Spirent products.

We have identified a number of areas of opportunity to reduce the
energy footprint of our solutions in order to support competitive
advantage as well as opportunities to reduce costs and improve
efficiencies, especially from estates consolidation and automation
within our labs. We also expect that a greater focus on climate
change will increase our resilience from climate related weather
events, both within our estate and across our supply chain, through

Spirent Communications plc Annual Report 2023

resilience planning, upgraded infrastructure as well as enhanced
preparedness and response procedures.

We also recognise our role in supporting clients to develop
new technology. We recognise that there may be opportunities
for new use cases for our existing test solutions to support
climate mitigation, in particular in the area of lab automation
and consolidation.

The Group is still exploring the opportunities that climate
change presents and therefore they have not been incorporated
into the modelling.

Scenario analysis
This was last conducted in 2021 and aligned to the IPCC
representation concentration pathway (RPC) models. We
have defined modelling assumptions for both scenarios for
each relevant risk category in order to assess the financial
and commercial impact to the Group. The impact of each of
the risks identified above has been assessed, quantified and
considered in two climate change-related scenarios:

• aggressive mitigation – emissions halved by 2050, average

temperature increase of 1.5°C; and

• strong mitigation – emissions stabilised at half of today’s

emissions by 2080, average temperature increase of 2.4°C.

These scenarios were selected as they would include the
most aggressive policy responses (which are likely to have the
greatest impact on our business in the next three to five years)
and because we believe that aiming to limit climate change to
1.5°C still remains the right policy objective.

In terms of modelling horizon, we have considered the impacts
over the short, medium and long term, and with regard to
the occurrence of the risks identified and also in comparing
with the horizons adopted by peers, the most appropriate
time horizon to model is 15 years, which covers short to
long term). The most recent strategic three-year plans have
been extrapolated to form the base case long-term plans
from which to sensitise, using growth rates and assumptions
consistent with other forward-looking financial statement
items (goodwill impairment, viability) and assumptions.

Given the modelling horizon, there is not likely to be a significant
difference between the two scenarios in relation to our exposure
to physical risks – a change of 1.5°C is expected by 2030
under all scenarios, with the same likelihood and distribution
of extreme weather events and chronic changes in weather
patterns and temperatures. The major differences appear
between 2040 and 2080, which falls outside of the scope
of our long-term plans and provides sufficient time for the
business to adapt if required. In terms of transitional risk,
we do expect a difference between the two scenarios, most
notably in the size of increases to energy costs and the size of
anticipated carbon tariffs across all regions.

Based on the modelling we have performed and given
the significant financial headroom Spirent has, the relative
magnitude of the impact the risks present, the mitigation
plans, and the insurance cover in place, it is not anticipated
that the climate-related risks identified will have a material
impact in the short term and being less than 5 per cent
of revenue. The longer-term impact on the organisation’s
strategy and plans is currently being further assessed
but initial analysis does not suggest a significant financial
impact. Therefore, Spirent is considered resilient to climate
change-related scenarios.

STRATEGIC REPORTOpportunities
As part of the scenario process, a number of opportunities
have been identified:

• reduction in costs and efficiency, especially in relation to

office estate and automation in labs;

• improved resilience from physical and transitionary risks;

• additional testing opportunities to support the development
of new technologies to mitigate and adapt to a changing
climate; and

• expanding demand for test solutions that help reduce

customer emissions, including lab automation and efficiency.

Metrics and targets
We monitor carbon emissions sources that fall within Scopes 1,
2 and 3 and report our carbon emissions annually within the
Annual Report and Sustainability Report (see page 34). We
have considered cross industry climate related metrics and
do not consider these to be material. The Executive Directors’
annual bonus targets also include relevant climate related
metrics and targets.

We have set clear targets to source electricity from 100 per
cent renewable sources, and work towards net zero carbon
by 2035. We have targeted a 25 per cent reduction in our
energy usage by 2025.

In 2023 we committed to the Science Based Targets initiative
(SBTi) which commits us to a medium term carbon emissions
reduction targets of 39 per cent by 2030. We will continue to
evaluate whether additional metrics and targets are required
as part of our existing business strategy and risk management
processes, in particular in relation to supply chain risks, as we
further refine our longer-term strategy and plans.

Promote diversity and invest in people
We aim to take action on diversity. We will attract and develop
talent and skills, and support long-term sustainable growth.
Despite the initiatives and progress detailed below, due to
workforce reductions and limited hiring across the Group,
our diversity metrics remained flat compared to 2022.

Diversity in talent acquisition
In 2023, we ran programmes to support more diverse hiring,
provide family-friendly benefits, and support early career
development and leadership. We continued our partnerships
with Historically Black Colleges and Universities (HBCUs)
Morgan State University and Prairie View A&M University,
and consulted with an internal focus group of African American
employees to understand how we can recruit Black candidates
more effectively. With the help of this focus group, we created
a recruitment video which we shared with students we met on
campus and our HBCU partners.

Early career development
Spirent’s early career programme offers a structured
pathway into a career in technology through internships,
apprenticeships and university sponsorships. Our early
career pathway incorporates resources, tools and training
for managers and early career staff to help young, talented
people start a career in technology.

In 2023, we supported 26 interns across our North American
and APAC regions, who worked in our Engineering, Sales,
Legal, IT and HR divisions. Our UK Positioning Technologies
business empowered Engineering, IT and HR apprentices
to develop the skills and knowledge they need for a reward
career in their chosen fields.

We currently have 25 Aspire Network members who work
in teams across our business, and our Sales Development
Representatives (SDR) scheme helped eight employees to
jump-start their career in technical sales through training,
on the job learning and mentorship.

We collaborated with 40 research partners in universities
across the world through our Academia Programme, and
supported undergrad, post-grad and post-doctorate students
in their research.

Equality and diversity
The Group employs a diverse workforce and prides itself on
providing equal opportunities for all. High value is placed on
rewarding our people for their commitment, their integrity
and their service. Our commitment to a fair and inclusive
workplace is governed by our Business Ethics and HR Policies
which ensure that no one is discriminated against, directly or
indirectly, on the grounds of colour, race, ethnic and national
origins, sexual orientation or gender, marital status, disability,
religion or belief, being a part-time employee, or age.

More detail can be found in our Sustainability Report
available on our website at corporate.spirent.com.

At 31 December 2023, our gender diversity was:

Level of organisation

Female

Male

Other or no gender reported

Board
Executive management1
Senior management2
Total employees

3
4
6
352

38%
40%
9%
23%

5
6
64
1,174

62%
60%
91%
77%

–
–
–
–

Total

8
10
70
1,526

Notes
1. The data for executive management includes the CFO and direct reports to the CEO only, excluding executive assistants.
2. The data for senior management includes all other Vice Presidents (including Regional Sales VPs and Client Partner Executives) and Senior Directors.

The Board is committed to increasing the representation of women on boards and in other leadership roles. This work will
continue with a focus on developing diversity of all types in executive and senior management roles and throughout the
talent pipeline.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTSustainability continued

Promote diversity and invest
in people continued

Gender pay gap
Having fewer than 250 employees in the UK, Spirent is not
currently required to comply with the Gender Pay Gap
Reporting Regulations introduced in 2017. However, data
for the 5 April 2023 snapshot date has been collected on a
voluntary basis and is set out below.

UK gender pay gap

Median hourly pay difference
between male and female
employees
Mean hourly pay difference
between male and female
employees

UK bonus gap

Median bonus difference between
male and female employees
Mean bonus difference between
male and female employees

UK quartile split

Male employees receiving a bonus
Female employees receiving
a bonus

2023
%

2022
%

18.1

22.3

18.8

16.4

2023
%

2022
%

28.5

36.3

(35.0)

(45.0)

2023
%

79.8

2022
%

95.5

74.5

86.7

We are committed to
empowering our employees
to progress personally and
professionally by investing in
career development, diversity
and inclusion initiatives,
and health and wellness
programmes.

Ann Menard
Global Head of Human Resources, Spirent

Spirent Communications plc Annual Report 2023

The snapshot to the 5 April 2023 shows an increase in the
gender pay gap. This reflects the full year effect of highly
compensated male hires made in late 2021 and early 2022.

As the results are sensitive to very small movements in
the employee population, but for a very small number of
individuals hired, we would have seen the gap narrow.

Business ethics and human rights
Spirent’s values and principles are set out in the Group’s
Business Ethics Policy. These principles apply to all dealings
with our customers, suppliers and other stakeholders, and
are considered in pre-contract due diligence and monitored
through ongoing supplier audits.

The Group has a zero-tolerance approach to all forms of
bribery and corruption. As a UK registered Company, Spirent
Communications plc is bound by the laws of the UK, including
the Bribery Act 2010, in respect of its conduct both at home
and abroad. In addition, we will uphold all laws relevant to
countering bribery and corruption, including the US Foreign
Corrupt Practices Act, as well as human rights protection, in
all jurisdictions in which we operate.

Regular anti-bribery training is required to be taken by
certain employees.

Health and safety
The Board has designated the CFO as the Board member
responsible for health and safety within the Group and
procedures are in place for incidents to be reported through
the Audit Committee to the Board as necessary.

The health and safety risk profile for the Group remained
low during 2023, with no reported accidents (2022 nil). There
were no reportable accidents under the RIDDOR Regulations
or required hospitalisations during the year.

Training and skills
Spirent provides all its employees with a wide range of
technical and business training opportunities. We manage
training through personal development plans which are
assessed by all managers and updated periodically.

STEM initiatives and community impact projects
Spirent actively encourages its employees to become
STEM (science, technology, engineering and mathematics)
Ambassadors around the globe.

We provide all our employees with volunteering time off to
make a positive contribution to the communities in which
they work.

Through financial donations and volunteering, Spirent has
continued to support community projects worldwide.

STRATEGIC REPORTOperate responsibly
We operate with integrity. We are rolling out our ISO 14001
management system practices globally and are working
towards zero waste to landfill. We are also embedding
circular economy principles in our product design and
reducing the sustainability impacts of our supply chain.

In 2023, we expanded our ISO 14001 certification, engaged
with suppliers on sustainability and continued our supplier
audit programme.

Spirent’s full Statement on Modern Slavery and Human
Trafficking can be found on the Company’s website at
corporate.spirent.com.

Electronic waste and use of hazardous materials
Spirent’s business units comply with the EU’s Waste
Electrical and Electronic Equipment Regulations 2013, the
EU’s Restriction of Hazardous Substances Directive (RoHS),
the Batteries Directive and the California Electronic Waste
Recycling Programme.

ISO 14001
We set a target to expand the coverage of formal environmental
management systems and achieve ISO 14001 certification at
one major engineering site by 2022 and all major sites by the
end of 2025.

In 2023 we completed the implementation of our environmental
management system at our headquarters in Crawley and our
Paris site.

Conflict minerals
The Group is not directly required to comply with or report
under Section 1502 of the Dodd-Frank Act or the US Conflict
Minerals Law. However, it has robust procedures in place
to ensure that it would be in compliance if it were brought
within the scope of this legislation. The Group is subject to
the EU Directive on Conflict Minerals; we are monitoring the
development of the legislation and are confident our existing
practices meet the specifications required.

Circular economy training
The design of our products significantly influences the
environmental impact of our products across the whole
lifecycle. We have seen significant improvements since
implementing sustainability metrics in our product design
process and to support further gains in this area, we set an
objective to roll out training on circular economy for our engineers.

In 2022 we developed a bespoke circular economy training
course, which incorporates both an introduction to key aspects
of theory and how it applies to Spirent’s product and design
process specifically. We commenced the roll-out of our circular
economy training, with 20 engineers in the UK. We will expand
this to engineers globally in 2024.

Information security
Spirent takes data security and privacy seriously. We continually
review the security of our data systems and procedures in
order to comply with all legislation and so we can react to
areas of heightened risk promptly and effectively.

We operate robust information security procedures and
our Applications & Security business based in Plano and
San Jose operates an ISO 27001 certified information
management system.

Our procedures restrict the type and quantity of confidential
information collected and stored and there are robust
procedures in place to protect customer data from
unauthorised access and disclosure.

Vendor assessment and auditing
Vendors are required to abide by our Code of Conduct which
sets out our expectations for environmental management,
labour and human rights, health and safety, and business
ethics. They are assessed using a detailed questionnaire.

Periodic information security risk assessments are performed,
and training is provided to staff with the aim of preventing
information security breaches. We have a whistleblowing
procedure in place for staff to report information security or
any other concerns.

Spirent has implemented a response procedure to manage
breaches of confidential information if they were to occur.

Confidential waste is shredded if in hard copy and certificates
of destruction are provided for electronic storage devices
disposed of at end of life.

Be accountable and transparent
We aim to communicate regularly with staff on our
FuturePositive strategy and the progress made.

The Board and Audit Committee oversaw our climate change
and sustainability programme.

Priority suppliers are audited by Spirent’s procurement
team: 30 supplier audits were conducted in 2023, meeting the
target we set. No material issues were identified. Three minor
non-conformances were identified. More than 84 per cent
of our hardware supply chain spend is from companies
audited by us, our contract manufacturers, or through the
RBA VAP audit programme. We have expanded our supplier
ESG partnerships, working closely with CALNEX (a strategic
supplier) to conduct joint supplier audits and to improve
packaging design; reducing material used and removing
non-recyclable materials. We have also started working with
smaller suppliers to provide support to improve their ESG
management.

Modern slavery and human trafficking
We comply with the requirements of the UK Modern Slavery
Act 2015 and the California Transparency in Supply Chains
Act 2010. We require slavery and human trafficking to be
eradicated from our direct supply chain for the products
we sell, and we monitor suppliers by performing regular
evaluation surveys to assure ourselves of each supplier’s
commitment in this area.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTOperating review

Lifecycle Service
Assurance

Our Lifecycle Service Assurance
portfolio boasts the industry’s
most comprehensive set of
end-to-end solutions aimed
at accelerating customers’
initiatives as they develop,
deploy and optimise new
devices, technologies and
services. From lab
environment transformations
to pre-production and live
networks, we dramatically
reduce the time, costs and
risks associated with bringing
new technologies such as 5G
standalone (SA) and Wi-Fi 7
to market.

2023 performance highlights
• Despite 5G SA delays towards commercial

deployments during 2023, our industry-leading
Landslide 5G Core test solution which is pivotal for
5G SA, was selected by over 30 operators.

• We expanded our live assurance offering with

the launch of our Mobile Test Platform providing
unique end-to-end visibility critical for our
customers to monetise 5G and private networks.

Revenue

$199.1m

(2022 $264.5m)

Adjusted operating profit1

$16.9m

(2022 $51.0m)

Note
1.

Before other adjusting items of $6.1 million charged in 2023 (2022 $0.9 million). See note 3.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTStrategy
Our Lifecycle Service Assurance strategy is: 1) deliver a leading
active assurance platform for 5G and next-generation service
delivery and user experience assurance; 2) help service
providers and enterprises automate critical lab environments
and test activities, as the industry moves towards an always-on
continuous test environment; 3) leverage our product
offerings, together with our deep test and assurance expertise,
to deliver a new portfolio of outcome-driven service offerings.
Three key attributes set Spirent apart in the Lifecycle Service
Assurance market:

Coverage
Spirent is the only vendor to offer both lab and live solutions
as both a contiguous and continuous test offering. With the
broadest coverage in the industry, from the user device
into the radio access network, across the cloud and mobile
backhaul, and into the mobile core, our solutions provide
the broadest end-to-end visibility in the industry. The breadth
and depth of our expertise and our portfolio enables
us to quickly address net-new opportunities including
direct-to-device communications from non-terrestrial
networks and next-generation access networks including
Open RAN (O-RAN).

Automation
Automation continues to become a growing priority across
both the telecom eco-system and enterprises, with the
objective of improving agility and operational efficiency.
Legacy labs, testing and service assurance activities have
been mostly siloed, manual, reactive and time consuming.
As continuous integration and continuous delivery (CI/CD)
principles become mainstream, automated testing and
assurance are becoming essential to support the CI/CD
model across all layers. Automation enables use cases such
as lab transformation, new service activation, continuous
monitoring and automated troubleshooting to be seamlessly
integrated with network management systems, with a goal
of establishing fully autonomous operations. Spirent is at the
forefront of this journey.

Analytics
Spirent continues to advance our machine learning (ML)
and artificial intelligence (AI) based analysis providing
actionable insights that allow our customers to detect,
isolate and eliminate potential service interruptions or
degradations before subscribers are impacted. This in turn
allows rapid reduction in mean-time to-repair by alleviating
the unnecessary escalations typically found in traditional
operational support models. In 2023 we expanded our
analytics coverage through a new over-the-air (OTA) mobile
test platform, giving service providers unique insights into
what their customers experience, including end-to-end
visibility of service and network performance.

Impact:
The testing, validation and benchmarking programmes
provide confidence in newly launched services, help
improve the quality of existing offerings, and allow
the operator to use more of its valuable spectrum
on differentiated new revenue-generating, business
oriented services.

Monetising 5G
Unlocking 5G standalone’s value

Challenge:
Having made huge investments in 5G spectrum, a
North American tier-one network operator is naturally
eager to take advantage of the new opportunities to
monetise that investment. Key to this is providing ‘true
5G’, anchored to the 5G standalone core network,
which requires rigorous testing to ensure its readiness
to unlock the potential for new 5G revenues.

Solution:
Already a close partner of Spirent in multiple areas
of its business, this network operator made significant
further investment in the relationship to expand its
Spirent Fit4Launch programmes and evolve its new 5G
offerings. Combining lab and field testing in multiple
markets, the programme includes live network testing
of 5G devices, and new capabilities such as 5G fixed
wireless access and 5G voice over new radio.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTOperating review continued

Lifecycle Service Assurance continued

5G active assurance
Tier-two turns to Spirent to
tackle 5G OTA testing

Impact:
Using VisionWorks OTA, the operator is now able to run
a fully automated suite of scheduled tests 24x7 at a
variety of cell locations to assure the performance of its
growing 5G network.

Challenge:
To accelerate its 5G standalone (SA) evolution, a
leading tier-two operator in North America wanted
to extend its proactive service assurance philosophy
into the live network with OTA testing of its 5G service.
Having invested heavily in a new 5G mid-band
spectrum, it wanted to assure the balance of speed,
capacity, coverage and penetration that make
mid-band so appealing.

Solution:
Already a Spirent active assurance customer for its 5G
core, the operator chose Spirent’s VisionWorks Mobility
Service Assurance (MSA) to deliver an expansion of its
automation and proactive health checks approach.
Adding MSA’s scalable test tools and single interface
provides the operator with comprehensive, proactive
OTA testing capabilities around the clock, as well
as the capacity to segment its network between the
radio access network and the network core to better
isolate issues.

What we test and assure
Our Lifecycle Service Assurance offerings support the full
lifecycle for any new technology roll-out. From pre-production
test and validation to post-production troubleshooting, to
transforming labs and processes into agile continuous test
environments through automation, we help our customers
maximise the monetisation of any new technology and reduce
costs. The following key areas were instrumental in growing
pipeline and sales in 2023, and offer continued expansion
opportunities into 2024 and beyond:

5G core
For both standalone and non-standalone flavours of
5G, Spirent provides continuous testing capability across
the entire lifecycle for any initiative. Beginning with the
network equipment manufacturer, through service provider
deployments and enterprise service consumption, our 5G
offering bridges the gaps traditionally found between the
develop, deploy and operate phases of a new technology.
Focus areas include 3GPP network function testing, interoperability,
performance and security testing. In 2023 we enhanced our
5G core solution with support for 3GPP R17 capabilities for
new use cases around public safety, non-terrestrial networks
and private networks.

Spirent Communications plc Annual Report 2023

Next-generation access technologies
(Open RAN and Wi-Fi)
Spirent is industry’s first vendor to deliver a single, fully
integrated, and automated Open RAN (O-RAN) offering
supporting full wrap-around testing of the O-RAN network
functions and end-to-end testing. 2023 highlighted
the continuing progress of O-RAN in the market and
demonstrated our strategy in action as we supported market
leaders NTT-Docomo test their multi-vendor eco-system,
established partnerships with National Instruments and
Anritsu, and played a significant role in the O-RAN Alliance
Plugfest programmes.

Wi-Fi: Following the acquisition of octoScope in 2021, Spirent
is the market leader in Wi-Fi test and certification. With the
adoption of Wi-Fi 6E in full swing and Wi-Fi 7 scheduled
for release in 2024, Spirent added early comprehensive
support for Wi-Fi 7 testing during 2023. In addition, the
recent harmonisation of radio spectrum represents a unique
opportunity for Spirent as the industry forges a pathway
towards co-existence and convergence of Wi-Fi and 5G.

STRATEGIC REPORTWhile 2023 was a challenging
year in the telecom market we are
poised well for the acceleration
to true 5G standalone while our
diversification strategy towards
enterprise automation, Open RAN
and Wi-Fi provides us enduring
new opportunities, even in the face
of macroeconomic uncertainty.

Doug Roberts
General Manager, Lifecycle Service Assurance, Spirent

Telecom and enterprise lab
transformation (automation)
Telecom providers and enterprises are prioritising
digitisation programmes aimed at improving efficiency
and reducing costs. The automation of lab environments,
testing, lifecycle management activities and network operations
is at the heart of these programmes. Spirent’s lab and test
automation solutions enable customers to consolidate
and transform physical labs into web accessible resources
for remote, automated testing. In 2023 Spirent acquired
NetScout’s® Layer-1 switch product lines to make lab
automation even easier and showcased a large deal
with a leading global financial services organisation.

Performance
Lifecycle Service Assurance revenue was $199.1 million and
was impacted by current macroeconomic challenges, which
saw our telecom customers increasingly delay spend as the
year progressed as high interest rates and inflation affected
their budgets. As a result, adjusted operating profit for the
segment was $16.9 million (2022 $51.0 million).

The impact was primarily felt on our mobility (5G) test
portfolio as service providers delayed 5G rollouts and
standalone (SA) upgrades.

Wi-Fi 6 and 6E infrastructure continues to be tested against
evolving standards. In addition, Wi-Fi 7, the latest generation,
is now transitioning from equipment manufacturers’ labs
towards commercial availability, creating substantial
opportunities and broader demand for testing.

We also saw progress around our lab and test automation
portfolio as we continued to expand capabilities, allowing
us to move into adjacent enterprise markets with a
substantial order from a financial services organisation
demonstrating the broader applicability and market
opportunity of our portfolio.

Accomplishments
Spirent’s industry leading automated modular test platform
for Wi-Fi devices, octoBox®, added comprehensive support
for testing the demanding new requirements of Wi-Fi 7.

We completed the launch of our comprehensive O-RAN
testing portfolio including unique subscription-based
automation test libraries and the industry’s first real-world
application testing.

Our live assurance portfolio continued to expand beyond
the core network out to the handset with the launch of our
Mobile Test Platform providing unique end-to-end visibility
critical for our customers to monetise 5G and guarantee
private network service level agreements.

We advanced our strategy towards lab and lifecycle test
automation, with the acquisition of NetScout’s® Test Lab
Automation business, along with advancements in our
market-leading Velocity automation portfolio, allowing
greater diversification outside of telecoms.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT
Operating review continued

Networks & Security

Revenue

$275.2m

(2022 $343.0m)

Adjusted operating profit1

$39.0m

(2022 $86.8m)

Networks & Security is a world
leader in high-speed Ethernet/
internet protocol (IP) performance
testing and automotive Ethernet,
and develops test methodologies,
tools and services for virtualised
networks, data centre connectivity
fabrics and the cloud. We provide
consulting services, test tools,
methodologies and proactive
security validation solutions.
We are leveraging our world
leadership in global navigation
satellite system (GNSS) simulation
solutions and services as we
expand further into the broader
positioning, navigation and
timing (PNT) market including
low earth orbit (LEO) satellites
and autonomous vehicles.

2023 performance highlights
• We continued to demonstrate our leadership in
800G which will be critical for the evolution of
data centres to underpin AI growth by supporting
H3C to complete the industry’s first large-scale
800G test, and won the industry’s prestigious
Interop Best of Show Award 2023 Special Prize.

• Our Positioning business delivered strong order
growth benefiting from government spending
and new opportunities in the emerging LEO
satellite market.

• We continued to expand our Positioning business
into enterprise and automotive verticals, including
a key managed services win with a leading
provider of mining communications equipment.

Note
1.

Before other adjusting items of $7.3. million charged in 2023 (2022 $2.1 million). See note 3.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTStrategy
We are maintaining and expanding our market leadership
in high-speed Ethernet test, with a focus on diversifying our
customer base into data centres and enterprises, driving
growth through involvement in all stages of next-generation
network and cloud infrastructure development, from verification of
pre-silicon and silicon to high-density, high-capacity systems.

We are working to drive industry standards that enable
rapid adoption of technologies such as generative artificial
intelligence (AI), 5G, Open RAN (O-RAN), cloud, secure access
service edge (SASE)/zero trust and automotive Ethernet,
expanding our test domain expertise and delivering more
managed services.

We are addressing additional enterprise and government
demands through partnerships with network equipment
manufacturers, cloud providers and service providers on
performance and security validation essential for their
development and deployment, with solutions and services
addressing cloud-native, 5G/edge, AI data centres testing
and SASE environments.

We are building on our global PNT test leadership, extending
our reach and influence as the trusted partner of researchers,
developers and integrators in the field of PNT technology. Our
broad portfolio of solutions and managed services is increasingly
multi-sensor oriented, assuring that our customers in growth
segments such as LEO satellites, chipsets and automotive
technologies are able to achieve their PNT ambitions.

We are leveraging our subject expertise gained from
design and verification of GNSS technologies in the lab into
geospatial prediction services to help ensure safe and reliable
navigation of vehicles, aircraft including drones and devices.

What we test and assure
High-speed Ethernet/IP, cloud and virtualisation
Our high-speed Ethernet/IP, cloud and virtualisation
test solutions enable network vendors, carriers and cloud
service providers to test the performance and security of
next-generation networks, applications and data centre
connectivity fabrics by simulating real-world conditions in
the lab and on the network. Our portfolio addresses physical
data centres and virtualised networks, applications and
services. Our solutions enable architects, developers and test
engineers to create and transmit complex and high-capacity
traffic and safely assess the performance, scalability and
resilience of their products. Our customers benefit from our
wide network of industry partnerships and active contributor
role in standards development, enabling them to leverage the
latest technology and best practices.

Applications performance and cybersecurity
Spirent is a single source for security assurance of all network
infrastructure elements. We provide comprehensive security
and performance validation capabilities covering all elements
of any production environment: physical and virtual security
domains, distributed edge, 5G and internet of things use
cases, whether legacy or virtualised and cloud. Our flexible
solutions and services offerings provide hyper-realistic
assessment based on real-world application, service and
threat traffic emulation.

IP network validation
Testing the next generation of a nation’s communication networks

Impact:
With Spirent TestCenter, BBPPT can provide advanced
testing features that include high scalability,
automation, and real-time reporting for complex
network systems that will benefit Indonesia and its
neighbouring countries.

Challenge:
With the advent of 5G, Indonesia’s Ministry of
Communication and Information Technology decided to
create its own national telecommunication equipment
testing centre (BBPPT) to help ensure that next-generation
telecoms equipment and devices perform at the highest
levels. A vital element for the labs is a state-of-the-art IP
networking test system, essential for ensuring the quality
and performance of ICT equipment.

Solution:
Having identified Spirent as the leader in the field
of network testing and backed by the strong IP
expertise of Spirent’s local partner in the region, the
BBPPT selected Spirent TestCenter as a foundational
component of the new facility. With its unrivalled end-
to-end testing capabilities, Spirent TestCenter is used
by leading service providers and network equipment
manufacturers across the world, and will help BBPPT
ensure equipment and device performance.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTOperating review continued

Networks & Security continued

High-speed Ethernet
Proving the 800G route to the high-speed AI future

Impact:
Results from the test validated both the high
performance and reliability of H3C’s new 800G
switch series, paving the way for the company to help
customers achieve major improvements in the scale
and computing power of their computing clusters in
response to the AI challenge.

Challenge:
AI-generated content and the large-scale AI workloads
that come with it are driving demand for computing
power. With 800G expected to become the standard
for data exchange, leading digital infrastructure
equipment developer HC3 was eager to demonstrate
the credentials of its new generation of high-
performance 800G Ethernet switches for data centres.

Solution:
Seeking the support of Spirent, HC3 jointly developed
a test programme utilising Spirent’s recently launched
high-density TestCenter 800G test platform and set out
to complete the industry’s first large-scale high-density
800G Ethernet test, with a staggering 64 800G Ethernet
ports. The test results showed a total switching capacity
of up to 51.2 Terabits per second, with all 64 Ethernet
ports operating as expected at 800G.

What we test and assure continued
Positioning, navigation and timing
We are market leaders in addressing the PNT research and
development, verification and integration testing needs
of customers from national government, military and
space contractors to commercial PNT chipset and device
developers, automotive, precision agriculture and survey
players. Our market-leading radio frequency simulation
environments and record/playback systems offer a practical
and robust framework to audit receiver, system or application
resilience in the face of increasing threats to GNSS-based
PNT. We are leaders in the testing of hybrid positioning and
sensor fusion under real-world conditions for connected
and autonomous vehicle development. Our latest innovation
is a patented service that provides predictions of GNSS
performance to assure safe and reliable navigation in
live deployment scenarios for the aviation (e.g. drones),
automotive and other industries.

Performance
Networks & Security revenue was $275.2 million as we
managed a challenging year in the telecommunications
sector impacted by macroeconomic uncertainty. We continue
to focus on new growth markets including data centre networking
needs to support AI and earlier stages of the R&D lifecycle
around pre-silicon testing. As a result, adjusted operating
profit was $39.0 million (2022 $86.8 million).

We expected a recovery in 2023 in China for high-speed
Ethernet demand, following an extended period of COVID-19
affecting our customers’ ability to enter their lab facilities,
progress their programmes and procure our solutions.
However, the Chinese economy struggled in 2023 and
expenditure plans were stalled.

Our Positioning business, which operates within diversified
end markets, saw good order intake growth in 2023, building
a robust orderbook as we enter 2024 due to continued
solid spending in government and commercial markets,
reinforcing our position as market leader. We also saw
continued momentum with our business expansion into larger
addressable markets in LEO, aerospace and automotive.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTI am delighted by our demonstrated
leadership in 800G high-speed
Ethernet which positions us well
for the rapidly-growing data
centre market to support both the
traditional (front-end) and growing
AI (back-end) networks, while
market demand for our ultra-high
performance network security and
application test platform grows.

Aniket Khosla
Vice President - Product Management, Cloud & IP, Spirent

Accomplishments

High-speed Ethernet/IP, cloud and virtualisation
• Our leadership in 800G Ethernet was highlighted with
the industry’s first large-scale 800G test with H3C and
our solution was honoured with the prestigious Interop
Tokyo 2023 Best of Show Award Special Prize, chosen
by a panel of leading industry analysts and experts.
As demand in next-generation cloud and data centre
networking testing for AI gathering pace in 2024, we
anticipate growth for our 400G and 800G test solutions.

• Our cloud resiliency and impairment solutions continued
to gain momentum with mobile operators as they began
to upgrade to 5G SA with the new cloud native core.

• We partnered with Anritsu to bring together our extensive

portfolio of automotive vehicle-to-everything test
solutions in a single unified framework.

• We joined the Ultra Ethernet Consortium alongside

industry leaders AMD, Arista, Broadcom, Cisco, HPE, Intel,
Meta, Microsoft and Oracle, to advance new capabilities
for Ethernet to meet the growing network demands of AI
and high-performance computing at scale.

Applications performance and cybersecurity
• We released a powerful new zero trust network access
testing capability as organisations worldwide evolve to
give their hybrid workforces secure, flexible connectivity
from anywhere, beyond the limitations of legacy virtual
private networks.

• Demand for our CF400 ultra-high performance network
security and application test platform help drive revenue
growth, as well as a strong opportunity pipeline for 2024.

Positioning, navigation and timing
• We saw continued momentum with government and
military segments, growth in space and commercial
sectors especially in the rest of APAC (outside of China)
and EMEA, and continued growth in automotive testing,
especially in China.

• We launched the industry-first satellite constellation

simulator to support the XONA commercial PNT service
built on a backbone of LEO small satellites.

• Our Positioning business was honoured with the highest
accolade, platinum award, as the UK Employer of the
year (50–249 people) at the 2023 Investors in People
Award. Investors in People is the international standard
for people management, defining what it takes to lead,
support and manage people effectively to achieve
sustainable results.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORT
Financial review

Proactive
response to
current
challenging
environment

Paula Bell
Chief Financial & Operations Officer

Revenue

$474.3m

(2022 $607.5m)

Gross margin

72.4%

(2022 72.0%)

Closing cash

$108.1m

(2022 $209.6m)

Spirent Communications plc Annual Report 2023

Group overview
The geopolitical and inflationary pressures at the end of
2022 continued into 2023 resulting in rising costs and a
slowdown in economic growth. This inevitably impacted
Spirent’s business environment, specifically within the
telecommunications market, particularly evidenced
by increasingly delayed expenditure and technology
investments by our customers as they responded to
higher interest rates. We did however see several areas of
important progress within our non-telecommunications
markets such as Positioning, and in November 2023 secured
an important strategic automation and test solution for a
brand new customer segment in Financial Services.

Against this challenging economic backdrop, revenue
was $474.3 million, compared to $607.5 million for
2022. However, the orderbook closed at $293.7 million
(2022 $288.1 million), providing a solid base as we enter
the new financial year.

Effective supply chain management and robust customer
pricing meant gross margin was maintained at 72 per cent.

To optimise our cost base whilst protecting our technology
leadership, a number of key initiatives have been completed
or are underway:

• Organisation restructure – from 1 January we are merging
our High-Speed Ethernet business unit within our Lifecycle
Service Assurance segment to better support how we
sell to our customers increasing numbers of solutions,
including more products from across our portfolio.

• We reduced our headcount by circa 8 per cent through

the year, including as part of the organisation restructure
mentioned above. We have taken a very targeted
approach to ensure all key R&D product road maps
remain intact.

• We are reducing our overall office footprint, reflecting a
more flexible office working environment post COVID-19.

The initiatives, with a restructuring cost of $13.5 million
have driven cost savings of $14 million during 2023 and are
expected to deliver further savings of circa $17 million for
2024 which will more than mitigate cost inflation. The overall
payback of the change initiatives is expected to be less than
two years.

The revenue reduction in the year significantly impacted
adjusted operating profit which reduced to $45.2 million
from $129.5 million in 2022. Reported operating profit
decreased from $112.7 million in 2022 to $18.4 million in 2023.

Other adjusting items were $14.2 million (2022 $3.6 million)
which comprise restructuring and strategic evaluation costs
of $13.5 million and acquisition costs of $0.7 million. The
majority of the strategic costs relate to people exits, with
the remainder being rationalisation and downsizing or
exiting office space. Acquisition costs relate to the purchase
of the Test Lab Automation business of NetScout® Systems,
Inc., a small carve-out based in New Jersey, USA. Whilst
the financial impact of this technology business is relatively
small, it brings important intellectual property which will
enable us to expand our test lab automation capabilities.
Adjusting items are further detailed on page 51.

STRATEGIC REPORTThe effective tax rate reduced from 12.9 per cent to 10.8 per cent mainly driven by the mix of profit generation by region.
Adjusted basic earnings per share decreased by 60.0 per cent, down from 18.86 cents last year to 7.55 cents for 2023.

On 3 April 2023, the Company commenced a Share Buyback Programme of $71.6 million (£56.0 million) which was successfully
completed on 24 August 2023. These 33 million shares, representing circa 5.4 per cent of the Company’s issued share capital,
have been cancelled.

Cash closed at $108.1 million (2022 $209.6 million), following payment of the ordinary dividend of $46.5 million and repurchase of
shares through the Share Buyback Programme of $71.6 million.

The following table shows summary financial performance for the Group:

$ million

Orderbook1
Order intake2
Revenue
Gross profit
Gross margin (%)
Adjusted operating costs3
Adjusted operating profit3
Reported operating profit
Reported profit before tax
Effective tax rate4 (%)
Adjusted basic earnings per share5 (cents)
Reported basic earnings per share (cents)
Closing cash

2023

293.7
477.0
474.3
343.6
72.4
298.4
45.2
18.4
22.9
10.8
7.55
4.30
108.1

2022 Change (%)

288.1
625.7
607.5
437.1
72.0
307.6
129.5
112.7
114.6
12.9
18.86
16.46
209.6

1.9
(23.8)
(21.9)
(21.4)
0.4pp
(3.0)
(65.1)
(83.7)
(80.0)
(2.1pp)
(60.0)
(73.9)
(48.4)

Notes
1. Orderbook is an alternative performance measure as defined in the appendix on page 196.
2. Order intake represents commitments from customers to purchase goods and/or services that will ultimately result in recognised revenue.
3. Before acquired intangible asset amortisation, share-based payment and other adjusting items amounting to $26.8 million in total (2022 $16.8 million).
4. Effective tax rate is the adjusted tax charge, before tax on adjusting items, expressed as a percentage of adjusted profit before tax.
5. Adjusted basic earnings per share is based on adjusted earnings as set out in note 11 of Notes to the full year consolidated financial statements.

Note on Alternative Performance Measures (APM)
The performance of the Group is assessed using a variety of performance measures, including APMs which are presented to
provide users with additional financial information that is regularly reviewed by management. These APMs are not defined
under IFRS and therefore may not be directly comparable with similarly identified measures used by other companies.

The APMs adopted by the Group are defined in the appendix. The APMs which relate to adjusted income statement lines are
presented and reconciled to GAAP measures using a columnar approach on the face of the income statement and can be
identified by the prefix “adjusted” in the commentary. All APMs are clearly identified as such, with explanatory footnotes to the
tables of financial information provided, and reconciled to reported GAAP measures in the Financial Review or Notes to the full
year consolidated financial statements. The reported GAAP measures give the complete measure of financial performance.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTFinancial review continued

Revenue

$ million

Revenue by segment
Lifecycle Service Assurance
Networks & Security

Revenue by geography
Americas
Asia Pacific
Europe, Middle East and Africa

2023

% of total

2022

% of total

199.1
275.2

474.3

268.1
153.9
52.3

474.3

42.0
58.0

100.0

56.5
32.5
11.0

100.0

264.5
343.0

607.5

336.3
205.8
65.4

607.5

43.5
56.5

100.0

55.3
33.9
10.8

100.0

Overall Group revenue declined by 22 per cent, with Lifecycle Service Assurance and Networks & Security down 25 per cent
and 20 per cent respectively, compared to the prior year.

Revenue at Lifecycle Service Assurance was adversely impacted in 2023 due to customer spending delays. Nonetheless there
were several contract wins within the developing technology of Open RAN including closing a significant deal with a world
leading financial services organisation. This represents a new end market for the Group.

Total Group maintenance and support services revenue remained consistent at $184.0 million (2022 $185.4 million).

Geographical revenue as a percentage of total revenue in the regions was similar to last year.

Gross margin

$ million

Lifecycle Service Assurance
Networks & Security

2023

147.8
195.8

343.6

74.2
71.1

72.4

2022

198.0
239.1

437.1

74.9
69.7

72.0

Gross margin remained robust at 72.4 per cent (2022 72.0 per cent) driven by effective supply chain management, robust
customer pricing and change in product mix.

Operating costs

$ million

Product development
Selling and marketing
Administration1

Operating costs1

Lifecycle Service Assurance
Networks & Security
Corporate

Operating costs1

Adjusted 1
2023

Reported
2023

Adjusted
2022

Reported
2022

102.4
133.9
62.1

298.4

130.8
156.9
10.7

298.4

102.4
133.9
88.9

325.2

136.9
164.2
24.1

325.2

111.3
138.9
57.4

307.6

147.0
152.3
8.3

307.6

111.3
138.9
74.2

324.4

147.9
153.8
22.7

324.4

Note
1. Before acquired intangible asset amortisation, share-based payment and other adjusting items amounting to $26.8 million in total (2022 $16.8 million).

Total Group adjusted operating costs decreased given the continued focus on financial management of our cost base and a
number of initiatives implemented during the year. Actual reported costs increased in 2023 due to the strategic restructuring
initiatives as outlined in note 5.

The overall investment in product development decreased year-on-year from $111.3 million to $102.4 million, driven by
cost-saving initiatives as we transferred activities to lower-cost regions whilst retaining the same R&D headcount.

Selling and marketing costs decreased by $5.0 million, from $138.9 million to $133.9 million, which includes lower incentivisation
reward as order bookings fell. Administration costs reflect investment into our support functions and infrastructure to sustain our
growth agenda, increasing compliance requirements, as well as inflationary increases.

We continued to invest in our world-class employees, supporting their professional development and wellness, which has
contributed to an employee retention rate significantly higher than the industry average.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTOperating profit

$ million

Lifecycle Service Assurance
Networks & Security
Corporate

Adjusted operating profit1

Adjusting items:
Acquired intangible asset amortisation
Share-based payment
Other adjusting items

Reported operating profit

Adjusted
operating

margin 1,2

8.5
14.2

Adjusted
operating

margin 1,2

19.3
25.3

2022

51.0
86.8
(8.3)

9.5

129.5

21.3

(4.7)
(8.5)
(3.6)

112.7

2023

16.9
39.0
(10.7)

45.2

(5.0)
(7.6)
(14.2)

18.4

Notes
1. Before acquired intangible asset amortisation, share-based payment and other adjusting items amounting to $26.8 million in total (2022 $16.8 million).
2. Adjusted operating profit as a percentage of revenue in the period.

Adjusted operating profit and reported profit was $45.2 million (2022 $129.5 million) and $18.4 million (2022 $112.7 million),
respectively, impacted by the decline in revenue and negative operating leverage.

Total adjusting items of $26.8 million in 2023 increased from $16.8 million in 2022, mainly due to the rationalisation and strategic
review of the Group’s operating model which commenced at the end of 2022.

Acquired intangible asset amortisation and share-based payment
The acquired intangible asset amortisation charge increased slightly over the prior year to $5.0 million (2022 $4.7 million) due to
the amortisation of the intangible assets recognised on the acquisition of the NetScout® business carve-out in September 2023,
generating a charge of $0.3 million in 2023.

Share-based payment decreased to $7.7 million in 2023 (2022 $8.9 million), of which $7.6 million (2022 $8.5 million) have been
treated as an adjusting item.

Other adjusting items

$ million

Restructuring
Acquisition related transactions

Restructuring

$ million

R&D engineering plan
Finance transformation
Organisational restructure
Facilities downsize

2023

13.5
0.7

14.2

2022

2.8
0.8

3.6

2023

2022

0.7
1.1
8.8
2.9

13.5

1.5
–
1.3
–

2.8

The initiatives, with a restructuring cost of $13.5 million have driven cost savings of $14 million during 2023 and are expected
to deliver further savings of circa $17 million for 2024 which will more than mitigate cost inflation. The overall payback of the
change initiatives is expected to be less than two years.

We embarked on a strategic evaluation of our operating model, taking into account the need to serve our customers with
solutions involving a combination of our portfolio offerings, as well as the need to drive cost efficiency during a challenging
trading environment.

We concluded our R&D engineering site plan to relocate activities from North America to lower cost regions for our High-Speed
Ethernet business. This incurred severance and retention costs of $0.7 million (2022 $1.5 million) and delivered material cost savings.

In order to embed standardised global finance processes, we moved certain accounting activities from North America to the UK,
incurring $1.1 million of costs including $0.5 million consultancy.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTForward foreign currency exchange contracts are entered into
to manage the exposure arising from transacting in currencies
other than US Dollars.

Although the most significant currency exposure arises in
relation to movements in Pound Sterling against the US Dollar,
there are other less significant currency exposures, notably the
Euro and Chinese Yuan.

Finance income and costs
Interest income of $4.8 million was earned from bank interest
(2022 $2.1 million) and $0.6 million (2022 $0.8 million) of
interest income was recognised in relation to the UK defined
benefit pension plans. The growth in bank interest received
year-on-year reflects the increase in US Dollar and Sterling
interest rates. Surplus funds are held principally in the United
Kingdom and United States on short-term or overnight
deposits and earn market rates of interest.

Finance costs in 2023 were $0.9 million (2022 $1.0 million),
relating to interest on lease liabilities.

Tax
The adjusted effective tax rate, being the adjusted tax charge
expressed as a percentage of adjusted profit before tax
shown on the face of the consolidated income statement, was
10.8 per cent in 2023, compared with 12.9 per cent in 2022.

Spirent’s effective tax rate continues to benefit from the United
Kingdom Patent Box Scheme, the United States R&D Tax Credit,
and the US foreign-derived intangible income deduction.

Going forward it is anticipated that Spirent’s effective tax
rate will rise slightly over time, due to the geographical mix
of profits, but 2024 will likely be similar to 2023 at 11 per cent
if statutory tax rates do not materially change. As a large
proportion of the Group’s profit is generated in the United
States, the effective tax rate is exposed to changes in US tax
legislation. Between currently proposed US tax law changes
and the fact that 2024 is an election year, we will be closely
monitoring all proposed corporate tax rates and other tax
legislative changes for their impact on the Group’s effective
tax rate.

Financial review continued

Acquired intangible asset amortisation and
share-based payment continued
Restructuring continued
We reduced headcount by 8 per cent and incurred $8.3 million
of costs mainly relating to severance and exit costs of people.
At the end of 2023, we also incurred an additional $0.5 million
of restructure costs in relation to the organisational change to
merge the High-Speed Ethernet businesses into the Lifecycle
Service Assurance segment to better serve our customers’
requirements for portfolio solutions.

Our facilities and office sites were reviewed and we exited
and downsized three of our North American facilities which
gave rise to a non-cash $2.9 million impairment of assets,
therefore reducing the cost of our office space going forward.

Acquisition related transactions
On 8 September 2023, the Group completed the asset
purchase of a small test lab automation business carve-out
from NetScout® Inc. Direct acquisition transaction costs
of $0.4 million and integration costs of $0.3 million were
incurred during 2023.

Prior year acquisition costs reflect the Group acquisition of
octoScope in 2021 which relate to direct acquisition costs
of $0.6 million, acquisition related performance credit
adjustment of $0.1 million and integration costs of $0.3 million.

The tax effect of other adjusting items is a credit of $2.5 million
(2022 $0.9 million). There will be a total net cash outflow of
$11.3 million in respect of other adjusting items charged in
2023, $10.3 million of which was in 2023 (2022 $3.6 million
outflow with $1.7 million paid in 2022). The cash outflow in
2023 in respect of other adjusting items charged in 2022 was
$1.9 million (2022 $0.9 million).

The total cash outflow in respect of other adjusting items is
reported within cash flows from operating activities in the
consolidated cash flow statement.

Currency impact
The Group’s revenue and costs are primarily denominated in
US Dollars or US Dollar-linked currencies. Currency exposures
arise from trading transactions undertaken by the Group in
foreign currencies and on the retranslation of the operating
results and net assets of overseas subsidiaries.

The Group’s income statement includes a foreign exchange
loss, included in administration costs, of $0.9 million (2022
$0.2 million gain) arising from transacting in foreign
currencies, primarily US Dollars, in the United Kingdom,
and the translation of foreign currency cash balances.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTEarnings per share
Adjusted basic earnings per share was down 60.0 per cent to 7.55 cents (2022 18.86 cents). Basic earnings per share was 4.30
cents (2022 16.46 cents). There were 586.7 million (2022 607.0 million) weighted average Ordinary Shares in issue. See note 11 of
Notes to the full year consolidated financial statements on page 153 for the calculation of earnings per share.

Acquisition
On 8 September 2023, Spirent completed the asset purchase of a small test lab automation business carve-out from
NetScout® Inc. for a total cash consideration of $7.8 million. The acquisition was funded from the Group’s cash resources.

The business carve-out from NetScout® is a US-based technology business that develops and manufactures Layer-1 switches
and control software which will further accelerate opportunities within our lab automation solutions and services. This business
was incorporated into our Lifecycle Service Assurance operating segment.

The acquisition gave rise to goodwill of $3.9 million, and acquired intangible assets of $4.3 million with an estimated useful life
of six years. Details on the net assets acquired and performance of the business acquired are detailed separately in note 33 of
Notes to the full year consolidated financial statements.

Treasury management
The key objective of the Group’s treasury function is to manage the financial risks of the business and to ensure that sufficient
liquidity is available for the Group. All treasury activity operates within a formal control framework. The Board has approved
treasury policies and guidelines and periodically reviews treasury activities. Additionally, it is the Group’s policy that speculative
treasury transactions are expressly forbidden.

Spirent’s financial risk management objectives and policies and its exposure to risks are discussed in note 28 of Notes to the full
year consolidated financial statements.

Financing and cash flow
Cash flow from operations was $45.8 million in 2023 (2022 $140.6 million) driven by the reduction in adjusted operating profit.
Cash flow from operations is detailed in note 32 (page 170). An explanation on free cash flow as an alternative performance
measure can be found on page 197.

Free cash flow conversion represented 54 per cent of adjusted earnings (2022 91 per cent).

Free cash flow is set out below:

$ million

Cash flow from operations
Tax paid

Net cash inflow from operating activities
Interest received
Net capital expenditure
Payment of lease liabilities, principal and interest
Lease payments received from finance leases
Acquisition related other adjusting items (note 5):
– Direct acquisition transaction costs
– Acquisition related performance payments
– Acquisition integration costs
One-off employer contribution to UK pension scheme

Free cash flow

2023

45.8
(13.9)

31.9
5.4
(6.1)
(8.8)
0.6

0.4
–
0.3
–

2022

140.6
(22.8)

117.8
1.5
(8.2)
(9.6)
0.6

0.6
(0.1)
0.3
0.9

23.7

103.8

Net capital expenditure of $6.1 million was lower than over the same period last year (2022 $8.2 million) and was predominantly
related to demonstration and test equipment.

In 2023, the final dividend for 2022 and an interim dividend for 2023, totalling $46.5 million was paid (2022 $39.9 million).
No shares were purchased or placed into the Employee Share Ownership Trust (ESOT) (2022 7.1 million shares at a cost of
$22.9 million).

On 3 April 2023, the Company commenced a Share Buyback Programme which completed on 24 August 2023, resulting in a
cash outflow of $71.6 million and the cancellation of 33 million issued shares.

Following these payments, cash closed at $108.1 million at year end, compared with $209.6 million in the previous year.
There continues to be no bank debt.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTFinancial review continued

Defined benefit pension plans
The Group operates two funded defined benefit pension
plans in the United Kingdom which are closed to new entrants.

In order to protect the balance sheet from further risk of
market movements affecting the valuation of pension
liabilities, in October 2022, the Trustees, with the Company’s
support, purchased a bulk annuity insurance policy from
specialist UK insurer Pension Insurance Corporation (PIC), in
respect of the largest plan, the Staff Plan. The premium was
met from the plan’s assets and sufficient assets remain to
meet the plan’s ongoing costs. This pension buy-in secures
an insurance asset from PIC that matches the remaining
pension liabilities of the Staff Plan, such that the Company
no longer bears any investment, inflation, longevity or other
demographic risks.

Following the purchase of the bulk annuity insurance
policy, the Group does not expect to make any further cash
contributions to this plan.

The accounting valuation of the funded defined benefit
pension plans at 31 December 2023 was a net surplus of
$6.7 million (31 December 2022 net surplus of $8.0 million).

There is also a liability for an unfunded plan in the UK of
$0.5 million (31 December 2022 $0.5 million).

The Group operates an unfunded deferred compensation
plan for employees in the United States. At 31 December 2023,
the deficit on this deferred compensation plan amounted to
$9.2 million (31 December 2022 $6.9 million).

Balance sheet
The consolidated balance sheet is set out on page 129.

Overall, net assets decreased by $89.4 million to $375.8 million
at 31 December 2023, from $465.2 million at 31 December 2022.

Cash decreased by $101.5 million within current assets to
$108.1 million (2022 $209.6 million) as a result of the reduction
of operating profit, the payment of dividends amounting
to $46.5 million (2022 $39.9 million) and the repurchase of
shares through the Share Buyback Programme of $71.6 million
(2022 nil).

Overall, liabilities of $208.0 million fell at 31 December 2023
(2022 $240.1 million) reflecting the decrease in trading
performance, and therefore, a reduction in trade payables of
$14.3 million and accrued employee bonuses of $11.6 million.

Liquidity and dividend policy
The Board’s intention is to maintain a cash positive balance
sheet over the medium to long term. This should allow
the Company to maintain a strong capital position in the
face of business risks, trading fluctuations and working
capital demands.

The cash generation of the Group allows continued investment
into R&D to maintain our market-leading positions and
inorganic investments where opportunities support growth
plans. If and when it is considered appropriate, the Company
may take on modest gearing to fund inorganic investments.

The Board will regularly review the Company’s balance
sheet in light of current and expected trading performance
and cash generation, working capital requirements and
expected organic and inorganic investments. To the extent
the Company has excess cash, it will consider returning such
cash to shareholders. The Board will consider from time to
time the appropriate mechanism for returning surplus cash
to shareholders. The Board has implemented a progressive
dividend policy.

Dividend
No final dividend is being recommended.

Paula Bell
Chief Financial & Operations Officer
5 March 2024

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTPrincipal risks and uncertainties

Like all businesses, Spirent is exposed to a number of risks and
uncertainties. These risks may arise from internal factors, but
some will be a result of external factors over which the Group
has little or no direct control. It is the effective management of
these risks that supports Spirent in delivering on its strategic
objectives, safeguards the Group’s assets and, over time, will
enhance shareholder value.

The process to identify and manage the principal risks and
uncertainties of the Group is an integral component of the
internal control system.

The risk assessment process starts in the businesses, where
risk registers are maintained as part of the normal operating
and control procedures, and is facilitated by the Head of
Risk & Internal Audit. Each business identifies its key risks and
mitigating factors and nominates a risk owner. The impact
and the likelihood of occurrence of each risk is ranked, which
assists the Group Executive Committee in assessing the likely
impact in aggregate of each risk to the Group as a whole.
The individual businesses are required to update their risk
registers regularly to reflect new or emerging risks as they
are identified to keep them up to date.

The approach includes a process to identify, clarify and
communicate emerging risks for Board discussion and
assessment, along with agreed mitigating action plans.

It is not possible to identify every risk that could affect the
business and the actions described below to mitigate those
risks cannot provide absolute assurance that the risk will
not occur or adversely affect the operating or financial
performance of the Group.

The Board has classified the principal risks by the impact the
risk would be expected to have on the Group should it occur,
and the anticipated likelihood that risk may occur using the
following classifications:

Risk

Impact

Likelihood of occurrence

Impact

High

Medium

Low

Likely

Possible

Unlikely

The Board takes the view that a high-impact risk could lead to
a 10 per cent or more reduction in revenue, a medium-impact
risk a 5 to 10 per cent reduction in revenue and a low-impact
risk a reduction of up to 5 per cent in revenue.

The Audit Committee reviews and monitors the Group’s risk
processes and reports to the Board on their effectiveness.
Risk is considered by the Audit Committee at least twice
each year, at which time the risk registers are reviewed.
The Audit Committee challenges and debates the risks with
reference to risk tolerance and appetite, as set by the Board.
Progress made and any further actions to be taken regarding
mitigation plans, as well as any changes to the risk profile,
are discussed.

Identifying and assessing risk

Risk
assessment

Review

Identify, assess
and mitigate

Business units,
functional leads
and Group
Executive Committee

Governance

Board and Audit
Committee

The Board has identified the following principal risks, each of
which is discussed on pages 57 to 60:

Risk

Impact

Likelihood Change

A. Macroeconomic change High

B. Technology change

C. Business continuity

D. Customer dependence/

customer investment plans

High

Likely

No change

E. Competition

F. Acquisitions

Medium Possible

No change

Medium Likely

No change

G. Employee skill base

Medium Possible

No change

Current topical risks, uncertainties and emerging risks
Topical risks and uncertainties along with emerging risks are
covered in detail in the table of principal risks and uncertainties,
but some of the more pertinent ones are described below.

Macroeconomic uncertainty
Spirent is a global business exposed to current world
economic conditions over which it has no control. Global
market economic conditions have been impacting some of
our customers, particularly our telecommunication customers,
resulting in delays to their investment decisions.

Wars in Ukraine and the Middle East
The organisation has negligible activities within Ukraine, Russia
and the Middle East and, therefore, these wars are expected to
continue to have an immaterial direct financial impact on the
Group unless they escalate and broaden further.

US/China trade and sanctions
The geopolitical landscape is turbulent with continuing
US/China trade challenges. We have navigated regulatory
changes throughout the year and continue to work closely
with our customers and regulators. We make sales across a
broad range of customers in China. Changes to existing US
regulations to embargoed customers may impact our ability
to supply affected customers in both the short and medium
term. A conflict between Taiwan and the Chinese military
could lead to a global recession and have an impact on the
global supply of Taiwan’s microchips which the organisation
is currently heavily reliant upon. We maintain a watching brief
as legislative requirements and these geopolitical tensions
continue to evolve.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTPrincipal risks and uncertainties continued

Current topical risks, uncertainties and
emerging risks continued
Task Force on Climate-related Financial Disclosures (TCFD)
We have undertaken TCFD-aligned scenario analyses, which
involved senior management, to assess our exposure to
climate-related physical and transition risks. This workstream
is overseen by an Executive Director-led management
committee that has been established to consider ESG matters
including climate-related risks and opportunities, with
updates reported regularly to the Audit Committee and the
Board. More details can be found on pages 32 to 37.

From a transitional risk perspective, it is expected that there
will likely be a shift quickly towards renewables and away
from fossil fuels, resulting in increased carbon taxes across
all regions in the short and medium term. This may result in
associated increased costs; however, we do not estimate the
impact to be material to Spirent.

From a physical risk perspective, the potential of extreme
weather events has been considered and could cause some
disruption to our operations or those of our key suppliers.
Spirent has mitigation plans for each of these physical risks
identified, including appropriate insurance coverage, and
these plans have been developed as part of longstanding
business continuity and disaster recovery plans.

Responding to climate change also offer opportunities for
businesses and, as part of the scenario process, a number of
opportunities have been identified.

• Reduction in costs and efficiency, especially in relation to

office estate and automation in labs.

• Improved resilience from physical and transitionary risks.

• Additional testing opportunities to support the development

of new technologies to mitigate and adapt to a
changing climate.

• Expanding demand for test solutions that help reduce

customer emissions, including lab automation and efficiency.

See pages 32 to 37 for further detail of our approach to
environmental sustainability and climate change.

Supply chain
Supply chain issues have been experienced around the world,
particularly with respect to the supply of semi-conductors, in
2023 due to the residual effects of COVID-19, the ongoing war
in Ukraine, macroeconomic issues, war in the Middle East,
and a number of other localised factors that are expected
to continue at a lower scale in the medium term. There has
been no material impact on our ability to deliver goods and
services to customers. However, the impact of the component
shortages has meant that we are experiencing longer lead
times, supply chain cost increases and supply constraints, and
there has been some disruption to the delivery timelines of
hardware to our customers. This is causing us to hold more
inventory, make longer-term commitments to suppliers and
re-engineer some products to use more readily available
components. We have seen a significant reduction in supply
chain challenges and have reached what appears to be a
steady state of somewhat elevated lead times.

We continue to monitor any effect from these disruptions on
the sourcing of components and the effect that this may have
on our ability to manufacture hardware and deliver products
to our customers on a timely basis.

Spirent Communications plc Annual Report 2023

Risk appetite and developing
the long-term Viability Statement
The UK Corporate Governance Code requires the Board to
explain how it has assessed the prospects of the Group and
state whether it has a reasonable expectation that the Group
can continue to operate and meet its liabilities, taking into
account its current position and principal risks.

The Board has determined that a three-year period should
be used when assessing viability, as explained on page 113 of
this Annual Report.

The Board has sought to frame its risk appetite in terms of
the markets and technologies in which it is prepared to make
significant investments, and those in which it would expect its
scale of investment to be more modest. Except where very
attractive opportunities were to present themselves to achieve
greater scale in well understood markets, which would
be inherently cash generative, the Board would expect to
maintain a net cash position.

Management, together with members of the Board,
considered which of the principal risks, either alone or
in combination, might threaten the Group’s viability. The
expected aggregate impact of the principal risks were
modelled based on historical trends experienced across
the Group. A severe but plausible combination of those risks
was considered for the purposes of determining the revenue
and free cash flow scenarios that should be stress tested via
financial modelling.

A number of scenarios that encompass the principal risks and
uncertainties were modelled over the three-year period, using
the Group’s strategic three-year plan as a basis, and are set
out in the table below. The analysis also included a reverse
stress test scenario to illustrate the revenue reduction in the
12 months following approval of the financial statements that
would lead to the Group ceasing to be a going concern.
Scenario

Principal risks

Revenue reduction in year 2,
no growth in year 3

Revenue reduction in year 1,
no growth in years 2 or 3

3. Major trade embargo

4. Major supplier disruption

Reverse stress test

B, E

A, D

n/a

The impacts arising from the principal risks relating to
employee skill base and acquisitions were not modelled as
they arise as a result of specific events or transactions, the
financial effects are less extreme than other risks or they
would be expected to take longer to materialise.

The analysis included assumptions in relation to the ability of
the Group to take realistic and successful mitigating actions
to avoid or reduce the impact or occurrence of the underlying
risks, including the ability to make significant reductions in
its operating costs. In doing so an appropriate and realistic
adjustment was made for the cost of taking those actions.

In performing the Viability Statement modelling the Board
took into consideration the Group’s healthy cash balance
of $108.1 million at 31 December 2023 and the ability of the
Group to continue to generate positive free cash flow over
the three-year period even in stressed scenarios, as has
historically been the case.

STRATEGIC REPORTThe Board reviewed and discussed with management:

• the process undertaken by management to decide which

scenarios to stress test;

• the results of the stress testing performed, including
an illustration of the reduction in revenue and cash
generation and consequently the availability of cash to fund
operations; and

• the ability of management to successfully take the

mitigating actions identified.

Based on the results of this analysis, the Directors have
a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the three-year period. The Viability Statement is set out in
the Directors’ Report on page 113.

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.

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.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTPrincipal risks and uncertainties continued

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.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTD – 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.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTPrincipal risks and uncertainties continued

F – Acquisitions

G – Employee skill base

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.

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.

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTNon-financial & sustainability information statement

This section of the Strategic Report constitutes the Non-Financial & Sustainability Information Statement
of Spirent Communications plc, produced to comply with Sections 414(C)(A) and 414(C)(B) of the
Companies Act 2006. The information listed in the table below is incorporated by cross-reference.

Reporting requirement

Environmental matters

Employees

Social matters

Policies and standards which
govern our approach

Group Environment Policy
Group Sustainability Policy
Supplier Code of Conduct

Business Ethics Policy
Whistleblowing Policy
Occupational Safety Policy
Diversity and Inclusion Policy

Additional information and risk management

Stakeholder engagement (pages 24 to 27)
Sustainability (pages 32 to 39)
Task Force on Climate-related Financial Disclosures
including CFD
(pages 35 to 37)
Sustainability Report at corporate.spirent.com

Stakeholder engagement (pages 24 to 27)
Sustainability (pages 32 to 39)
Sustainability Report at corporate.spirent.com
Audit Committee report (pages 77 to 82)
Nomination Committee report (pages 74 to 76)
Report on Directors’ remuneration (pages 83 to 109)

Group Environment Policy
Group Sustainability Policy
Diversity and Inclusion Policy
Supplier Code of Conduct

Stakeholder engagement (pages 24 to 27)
Sustainability (pages 32 to 39)
Sustainability Report at corporate.spirent.com
Nomination Committee report (pages 74 to 76)
Directors’ report (pages 110 to 113)

Respect for human rights

Modern Slavery Statement
Diversity and Inclusion Policy

Anti-corruption and bribery

Business Ethics Policy
Group wide Dealing Policy
Supplier Code of Conduct

Stakeholder engagement (pages 24 to 27)
Sustainability (pages 32 to 39)
Sustainability Report at corporate.spirent.com
Nomination Committee report (pages 74 to 76)

Sustainability (pages 32 to 39)
Directors’ statement on corporate governance
(pages 67 to 73)
Audit Committee report (pages 77 to 82)
Directors’ report (pages 110 to 113)

Description of the business model

Our business model (pages 16 to 17)

Description of principal risks and
impact of business activity

Non-financial key
performance indicators

Our business model (pages 16 to 17)
Principal risks and uncertainties (pages 55 to 60)
Task Force on Climate-related Financial Disclosures
(pages 35 to 37)

Strategic Report (pages 1 to 61)
Key performance indicators (pages 22 to 23)

The policies mentioned above form part of Spirent Communications plc’s Group policies, which act as the link between our
strategy, purpose and values and how we manage our day-to-day business. The Board has determined that the policies remain
appropriate, are consistent with the Company’s values and support its long-term sustainable success.

Approval
Pages 1 to 61 form part of the Strategic Report, which has been reviewed and approved by the Board.

Angus Iveson
Company Secretary
5 March 2024

Spirent Communications plc Annual Report 2023

STRATEGIC REPORTChairman’s introduction to governance

Diversity
As at the financial year end, the Board comprised five
male and three female Directors, meaning that just
under 40 per cent of our Board is now female, with two
Board members from ethnic minority backgrounds. The
under-representation of women at all levels of Spirent and
throughout the technology sector is a key challenge and
there remains significant work to do in this area.

Evaluating the Board’s effectiveness
Each year, the Board undertakes a formal evaluation of
its effectiveness and this year we carried out an internally
facilitated evaluation to assist in the development of the
Board. The results of the Board evaluation confirmed that
the Board continues to function effectively and that there
are no significant concerns among the Directors about its
effectiveness. The Board members were seen as engaged
and committed while the Board’s culture remains open,
respectful and constructive. A number of actions were
identified to further enhance the Board’s effectiveness, as
set out in the Directors’ statement on corporate governance.

People and culture
Our business is built on the commitment, abilities and drive
of our people. In the year, both the Board and management
have continued to review results of our bi-annual employee
engagement programme and are pleased to see we have
a highly engaged workforce. Further details may be found
in the Stakeholder engagement section.

Re-election of Directors
In accordance with the 2018 Code provisions and following
a performance evaluation of those Directors standing
for re-election at the 2024 Annual General Meeting, I
can confirm that they all continue to be effective and
committed to their roles and have sufficient time available
to perform their duties. Accordingly, as recommended by
the Nomination Committee, all Directors will be offering
themselves for re-election at the Company’s Annual General
Meeting to be held in May 2024.

Annual General Meeting (AGM)
The AGM of the Company will take place at the offices of
UBS at 5 Broadgate, London, EC2M 2QS in May 2024. All
Directors routinely attend each AGM, so as to provide an
opportunity for shareholders to ask questions. I look forward
to meeting any shareholders who can join us at our AGM
and extend my thanks to you all for your continued support
as we move through 2024.

Sir Bill Thomas
Chairman
5 March 2024

Sir Bill Thomas
Chairman

Dear shareholder
On behalf of the Board, I am pleased to present the Governance
Report for the year ended 31 December 2023. This review
and the reports of the Nomination, Audit and Remuneration
Committees that follow summarise the Board’s activities
during the year. The Board is committed to high standards
of corporate governance, and decisions are made based
on what the Board believes will most benefit stakeholders
by promoting and maintaining the long-term success of the
Company and its reputation.

Compliance with the 2018 UK Corporate
Governance Code (the 2018 Code)
Our approach to governance is based on the concept
that good corporate governance enhances longer-term
shareholder value and sets the culture, ethics and values
for the Group. Consistent with our belief in the importance
of corporate governance, I am pleased to report that,
throughout the year under review, the Company has been
in full compliance with the principles and provisions of
the 2018 Code. A copy of the 2018 Code can be found
at www.frc.gov.uk. The Board notes the introduction of
a new UK Corporate Governance Code in January 2024
and intends to adopt the provisions of this Code where it is
able to do so.

Board composition and succession planning
During the year under review, the Nomination Committee
discussed succession planning for Executive and Non-executive
Directors and the progressive refreshing of the Board.
Further information about the Nomination Committee’s
work can be found in the Nomination Committee Report.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCECompliance with the UK Corporate Governance Code
As a premium listed company on the London Stock
Exchange, the Company is reporting in accordance
with the UK Corporate Governance Code (the “Code”)
published in July 2018. The Code sets out standards
of good practice in relation to Board leadership and
Company purpose; division of responsibilities; composition,
succession and evaluation; audit, risk and internal control;
and remuneration. The Code is published by the UK
Financial Reporting Council (FRC), a copy of which is
available from the FRC website. The Board confirms that
the Company is fully compliant with the Code.

Composition, succession and evaluation
The Nomination Committee report describes its activities
during 2023, including information on succession planning
and diversity and inclusion matters. Details of the Board’s
effectiveness review which took place during the period
and of Board composition are set out in the Directors’
statement on corporate governance.

Audit, risk and internal control
The Audit Committee report describes the work of the
Committee and how it discharges its roles and responsibilities.
The Board, supported by the Audit Committee and its
Risk Sub-Committee, completed a robust assessment
of the Company’s emerging and principal risks during
the period under review and has well-established
procedures to manage risk. The Company’s disclosures
regarding principal risks are set out in the Principal risks
and uncertainties section.

Remuneration
The Report on Directors’ remuneration describes the work
of the Remuneration Committee during 2023, and sets out
how executive remuneration is aligned with the Company’s
purpose, values and strategy and how workforce remuneration
and related policies have been considered in its decision
making regarding executive remuneration.

Board leadership and Company purpose
The Board’s ultimate objective is the long-term
sustainable success of the Company. Read more about
our strategy in our Strategic Report and how the Board
achieves this through, amongst other things, stakeholder
and workforce engagement (set out in the Stakeholder
engagement section), establishing a clear and aligned
Company purpose, strategy and values (see Investment
case) and how the Board assesses and monitors culture
(see Our people and culture).

Division of responsibilities
The Board consists of two Executive Directors, five Independent
Non-executive Directors and the Non-executive Chairman,
who was considered independent on appointment to
the Board. Additional external appointments of Board
members routinely require prior Board approval.
Directors’ other time commitments are in line with the
key institutional investor and investor body guidelines.

Board composition

Gender

Ethnicity

Tenure

Male

Female

Director of colour

White

0–2 years

3–5 years

6–9 years

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEBoard of Directors

Sir Bill Thomas
Chairman

Eric Updyke
Chief Executive Officer

Paula Bell
Chief Financial &
Operations Officer

Jonathan Silver
Senior Independent
Non-executive Director

A N R

Appointed
Jonathan was appointed
to the Board in June 2015
as Non-executive Director,
appointed Chair of Audit
Committee in August 2015, and
appointed Senior Non-executive
Director in November 2016.

Skills and experience
Jonathan brings experience in
finance, risk, control, governance
and international business
expertise. He was Chief Financial
Officer at Laird plc until 2015,
having held a variety of roles in
his 30 years with the company.

Jonathan is a member of
the Chartered Accountants
of Scotland.

Other roles
Non-executive Director of Baillie
Gifford China Growth Trust plc;
Non-executive Director and
Chairman of Audit Committee
of East and North Hertfordshire
NHS Trust; Non-executive
Director and Chairman of Audit
Committee at Henderson High
Income Trust PLC.

Appointed
Eric was appointed to the
Board in May 2019 as Chief
Executive Officer.

Appointed
Paula was appointed to the
Board in September 2016 as
Chief Financial Officer.

Skills and experience
Most recently, Eric was on the
executive management team of
Amdocs reporting directly to the
CEO. In his capacity as Group
President, Services at Amdocs
Ltd he had global responsibility
for the entire Managed Services,
Testing and SI businesses. This
business encompassed 10,000
employees and roughly $2 billion
in revenue. Prior to that role,
Eric was Division President for
North America at Amdocs where
he managed a $1 billion P&L
and was responsible for the
relationship with North American
communications service
providers. Prior to his time at
Amdocs, he held executive roles
at Nokia Siemens Networks and
AT&T. Eric has a great track
record of success, has functional
expertise in every facet of the
business and has excelled in
multi-cultural global companies.

Eric has an MBA in Finance
and a bachelor’s degree in
Electrical Engineering from
Cornell University.

Other roles
Since 2019, Non-executive
Director of Symend, Inc.

Skills and experience
Paula has extensive PLC main
board experience both as an
Executive and Non-Executive
Director, and in particular,
working with large scale global
technology, engineering and
industrial businesses. Paula was
previously CFO at John Menzies
Plc from 2013, a £2 billion
revenue business with 35,000
employees, and CFO at Ricardo
Plc from 2006 to 2013.

Paula has also held senior
leadership roles at BAA plc,
AWG plc and Rolls-Royce
Plc, with extensive breadth of
responsibility, including leading
business development, strategy,
significant M&A activity and
leading organisational change.

Paula is a Fellow of the Chartered
Institute of Management
Accountants and a Chartered
Global Management Accountant.

Other roles
Appointed as a Non-executive
Director at Keller Group plc in
September 2018, then Chair of
Audit and Risk Committee in
January 2019. Paula was also
previously with Laird Plc from 2012
to 2018 as Non-executive Director,
Senior Independent Director and
Chair of the Audit Committee.

Appointed
Sir Bill was appointed to the
Board in December 2016
as Non-executive Director
and appointed Chairman
in May 2017.

Skills and experience
Sir Bill brings strong commercial
and management experience
to the Board. His extensive
international technology
experience, together with his
track record in leading major
change in large organisations,
provides valuable insight.
Sir Bill stepped down as a
Non-executive Director of
The Co-operative Bank in
October 2023 and was also
previously Senior Vice President
at Hewlett Packard and on the
executive committee of EDS
plc as Executive Vice President.
Until March 2022, Sir Bill was
Chairman of Clarkson PLC.

Other roles
Chairman of Node4, a private
equity-owned IT services firm.

Sir Bill was awarded a
knighthood in the New Year
Honours 2020.

Committee key

A Audit Committee

N Nomination Committee

R Remuneration Committee

Committee Chairman

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEGary Bullard
Independent
Non-executive Director

Maggie Buggie
Independent
Non-executive Director

Wendy Koh
Independent
Non-executive Director

Edgar Masri
Independent
Non-executive Director

A N R

Appointed
Gary was appointed to the
Board in December 2016
as Non-executive Director
and appointed Chair of
Remuneration Committee in
May 2017.

Skills and experience
Gary brings extensive experience
in senior management positions,
including sales and marketing
roles, at IBM and BT Group
plc and was a Non-executive
Director of Chloride Group plc.
Until 2012 he was President at
Logica UK and a member of
the Executive Committee of
Logica plc.

Other roles
Non-executive Chairman
of Gooch & Housego PLC;
Non-executive Chair of AFC
Energy PLC.

Appointed
Maggie was appointed
Non-executive Director in
April 2021.

Appointed
Wendy was appointed to
the Board in January 2018 as
Non-executive Director.

Appointed
Edgar was appointed to
the Board in January 2018 as
Non-executive Director.

Skills and experience
Prior to this role, Maggie was
SVP and Chief Business Officer
at SAP Customer Success
Services and before that,
General Manager and Global
Head of Innovation Services
and Solutions at SAP. She has
significant experience building
fast-growth digital businesses
and previously led Digital Sales,
Markets and Industries globally
at Capgemini and Global Cloud
Sales and Consulting for Fujitsu.

Maggie serves on the
International Committee of the
UK Chartered Management
Institute and also served on the
Board of Green Token by SAP,
winning the “Women in the City”
technology category award.
She is on the next generation
committee at Leap, a charity that
helps young people manage
conflict. She advises scale-ups
in the sustainability, customer
experience and enterprise
AI segments.

Maggie holds both a Master
of Letters and a BBS Lang in
Business and French from Trinity
College, Dublin. She also holds
a degree from the Grande École
de Commerce de Rouen, France.

Other roles
Maggie is a technology industry
executive, adviser and speaker,
and is currently Chief Operating
Officer at Normative.

Skills and experience
Wendy is a seasoned leader in
the IT industry with 27 years of
experience driving growth in the
APAC region. She has a strong
background in partnership
strategy, relationship building,
go-to-market planning, and
sales & business development.
In her role as Vice President
Pathways, Alliance & Strategy
APAC at NetApp, Wendy led
APAC business partnerships and
drove business value by helping
partners generate opportunities
in the hybrid cloud and
supporting customers on their
digital transformation journeys.
At Juniper Networks, Wendy
served as Senior Vice President
Global GTM Strategy and
Business Development, where
she was responsible for leading
transformational strategy and
establishing partnerships to
increase the value proposition
for customers. With a strong
track record of developing
competitive and high-performing
businesses, Wendy is an expert
in driving growth and delivering
outstanding service.

Wendy holds a Bachelor of
Engineering in Electrical and
Electronics from Nanyang
Technological University
and a Graduate Diploma
in Marketing Management
from the Singapore Institute
of Management.

Other roles
Executive Vice President/
Managing Director South East
Asia at Capgemini.

Skills and experience
Edgar brings to the Board
wide-ranging experience of
managing companies across
the technology sector with a
focus on driving investment and
profitability. Edgar is currently
board adviser at Liqid, Inc,
a leader in the design and
development of GPU clustering
solutions. Prior to this, Edgar was
Chief Executive Officer of the
Accton Group, a global leader in
the design and manufacturing
of networking products. Prior
to this, Edgar was President
and Chief Executive Officer
of Qualtre, Inc., a US-based
start-up acquired by Panasonic
Corporation in December 2016.
Prior to this, Edgar was President
and CEO of 3Com Corporation,
a leading global data
networking company, bringing
the company to record revenue
and gross margins before it was
taken into private ownership.

Edgar holds a Diplôme
d’Ingénieur from Ecole Centrale
de Paris, a Master of Science
degree in Electrical Engineering
from the University of California
at Berkeley, and a Master of
Business Administration with
distinction (Arjay Miller Scholar)
from Stanford University.

Other roles
Venture Partner at Sway
Ventures; Chairman of the Board
of Kollective Technology, Inc.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEBoard statements

Board statements

Requirement

Compliance statement

Where to find
further information

Strategic Report

The Strategic Report was approved by the Board of Directors on 5 March 2024. Pages 1 to 61

NFR statement

The Company has complied with the Non-Financial Reporting Directive
contained in Sections 414CA and 414CB of the Companies Act 2006.

Page 61

Section 172 of the
Companies Act 2006

The Board of Directors, through the Strategic Report, provides information
for shareholders to help them assess how the Directors have performed
their duty, under Section 172, to promote the success of the Company and,
in doing so, had regard to the matters set out in that section. This includes
considering the interests of other stakeholders which will have an impact
on the long-term success of the Company.

Pages 24 to 27

Compliance with the
UK Corporate
Governance Code

In accordance with the Listing Rules of the UK Listing Authority, the Company
confirms that throughout the reporting period and at the date of this Annual
Report, it was in full compliance with all relevant provisions of the 2018 UK
Corporate Governance Code.

Pages 62 to 114

Going concern

Viability Statement

Robust assessment of
the principal risks
facing the Group

Annual review of the
systems of risk
management and
internal control

“Fair, balanced and
understandable”
statement

Report on Directors’
remuneration

Competition and
Markets Authority

Modern Slavery Act
2015

Task Force on
Climate-related
Financial Disclosures
(TCFD)

After making appropriate enquiries and taking into account the matters set
out in this Annual Report, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for
the foreseeable future and therefore continue to adopt the going concern
basis when preparing the financial statements.

Page 113

The Directors confirm that they have a reasonable expectation that the
Group will continue in operation and meet its liabilities as they fall due over
the three-year period under review.

Page 113

The Directors confirm that they have carried out a robust assessment of the
principal and emerging risks facing the Group, including those that would
threaten its strategy, business model and future performance. The Directors
also assessed the Group’s risk appetite with regard to each risk and
considered how to manage and mitigate such risks.

Pages 55 to 60

During the period ended 31 December 2023, the Audit Committee provided
transparency on the Group’s systems of risk management and internal control.

Pages 77 to 82

The Board agrees with the recommendation of the Audit Committee that
this Annual Report, taken as a whole, is fair, balanced and understandable.

Page 77

The Directors confirm that their report on remuneration for the period
ended 31 December 2023 complies with the requirements of the Listing
Rules of the UK Financial Conduct Authority, Schedule 8 of the Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations
2013 (as amended) and the provisions of the 2018 UK Corporate
Governance Code.

The Audit Committee considers that the Company complied with the
mandatory audit processes and Audit Committee responsibility provisions
of the Competition and Markets Authority Audit Order for the period ended
31 December 2023.

The Directors confirm, for the financial year ended 31 December 2023, that
steps have been taken in relation to our responsibilities under Section 54 of
the Modern Slavery Act 2015 and that the Board approved a statement
setting out the steps that have been taken to combat modern slavery in
the Group’s supply chain.

Pages 83 to 109

Page 81

Page 39

The Directors confirm that the Company has complied with the recommendations
of the Task Force on Climate-related Financial Disclosures as required by
Listing Rules of the UK Financial Conduct Authority.

Pages 35 to 37

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEDirectors’ statement on corporate governance

Board governance framework

Spirent Communications plc Board

Executive
Directors

Audit
Committee

Disclosure
Committee

Nomination
Committee

Remuneration
Committee

ESG
Management
Committee

Risk
Sub-Committee

The Board
The Board of Directors is collectively responsible to the
Company’s shareholders for the direction and oversight
of the Company to ensure its long-term success.

The Board met regularly throughout the year to approve
the Group’s strategic objectives, to lead the Group within
a framework of effective controls which enable risk to
be assessed and managed, and to ensure that sufficient
resources are available to meet the objectives set.

There are a number of matters which are specifically reserved
for the Board’s approval. These are set out in a clearly defined
schedule which includes: matters relating to the Group’s
strategic plan; approving the annual business strategy and
objectives; the nature and extent of principal risks to be
taken to achieve the strategic objectives; changes relating to
structure and capital; approval of trading statements, half year
results, final results and Annual Report and Accounts; declaring
interim dividends and recommending final dividends; the
Group’s policies and systems of internal control and risk
management; approving capital projects, acquisitions and
disposals, within agreed financial parameters; and provision
of adequate succession planning.

The schedule of matters reserved for the Board is typically
reviewed annually.

Board composition
At the date of this Report, the Board comprises the Non-executive
Chairman, five Independent Non-executive Directors and two
Executive Directors.

The Chairman and the Non-executive Directors contribute
entrepreneurial leadership and external expertise and experience
in areas of importance to the Company, such as strategic
investments including specific knowledge, understanding and
experience of growth areas, corporate finance, general finance
and corporate governance. They also contribute independent
challenge and rigour to the Board’s deliberations and assist
in the development of the Company’s strategy, scrutiny of
the performance of management in meeting agreed goals
and targets and satisfying themselves of the integrity of the
Company’s internal controls and risk management systems.

The Chairman holds regular discussions with the Non-executive
Directors, both individually and as a group, without the
Executive Directors present to ensure a free and frank
exchange of views on the effectiveness of the Executive
Directors and senior management.

Committees of the Board
Certain specific responsibilities are delegated to the
Committees of the Board, notably the Audit, Nomination
and Remuneration Committees, which operate within clearly
defined terms of reference and report regularly to the Board.
Further details are set out in the reports of each Committee
that follow this statement.

A Disclosure Committee of the Board is also in place, to
ensure that adequate procedures, systems and controls are
maintained and operated to enable the Company to fully
comply with its obligations regarding the timely and accurate
identification and disclosure of all information to meet the
legal and regulatory obligations and requirements arising
from the Companies Act 2006, the FCA’s Listing Rules, the
Disclosure Guidance and Transparency Rules and the EU
Market Abuse Regulation, as it forms part of retained EU law.
The Board notes, however, that the existence of a Disclosure
Committee does not absolve it from its obligations in this area.
This Committee comprises the CEO, the CFO and the Company
Secretary, with the Chairman and the Senior Independent
Non-executive Director authorised to act as alternates in the
event that a quorum of two members cannot be met. By its
nature, the Disclosure Committee meets on an ad hoc basis,
when circumstances require.

Membership of each Committee of the Board is typically
reviewed annually, with minutes of Committee meetings
made available to all Directors on a timely basis. The written
terms of reference for the Audit, Disclosure, Nomination and
Remuneration Committees, all of which were reviewed,
updated where necessary and approved during the year, are
available on the Company’s website at corporate.spirent.com.

The Chairmen of the Audit, Nomination and Remuneration
Committees intend to be available at the Annual General
Meeting to answer questions on the work of their
respective Committees.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEDirectors’ statement on corporate governance continued

Committees of the Board continued
An Executive Director-led Management Committee has been
established to lead and monitor ESG matters and co-ordinate
the reporting of issues and updates to the Board. Further
information on the issues dealt with by this Committee are set
out in the Sustainability section of this Annual Report.

There is also a formal Risk Sub-Committee of the Audit
Committee to monitor risks and uncertainties at corporate
and business unit levels. Further details of this Sub-Committee
can be found in the Audit Committee report.

Chairman and CEO
The roles of the Chairman and the CEO are separately held.
The division of their responsibilities is clearly established, set
out in writing, and agreed by the Board to ensure that no one
person has unfettered powers of decision. The Chairman is
responsible for the operation and leadership of the Board,
ensuring its effectiveness and setting its agenda. The CEO is
responsible for leading and managing the Group’s business
within a set of authorities delegated by the Board and the
implementation of Board strategy and policy.

Authority for the operational management of the Group’s
business has been delegated to the CEO for execution or
further delegation by him for the effective day-to-day running
and management of the Group.

Senior Independent Director
The role of Senior Independent Director is to act as a sounding
board for the Chairman and to serve as an intermediary for
other Directors as required. He is also available to shareholders
to convey concerns to the Board which they have been unable
to convey through the Chairman or through the Executive
Directors. During the year, led by the Senior Independent
Director, the Non-executive Directors have met without
the presence of the Chairman (including to appraise the
Chairman’s performance).

Non-executive Directors
In addition to their responsibilities for strategy and business
results, the Non-executive Directors play a key role in providing
a solid foundation for good corporate governance and
ensure that no individual or group dominates the Board’s
decision making. They each occupy, or have occupied, senior
positions in industry, bringing valuable external perspective
to the Board’s deliberations through their experience and
insight from other sectors which enables them to contribute
significantly to Board decision making. The formal letters of
appointment of the Non-executive Directors are available for
inspection at the Company’s registered office.

Company Secretary
The Company Secretary & General Counsel is responsible
for advising and supporting the Chairman and the Board
on corporate governance matters as well as ensuring that
there is a smooth flow of information to enable effective
decision making. All Directors have access to the advice
and services of the Company Secretary and can take
independent professional advice in respect of their duties,
at the Company’s expense.

Independence
The independence of each Non-executive Director is
reviewed on appointment and at least annually. The Board
determined that the current Non-executive Directors are
each independent in character and judgement, save for the
Chairman who was deemed independent by the Board at
the date of his appointment. None have been employed by
the Company previously in any capacity or have any current
material business relationship with any Group company.

Non-executive Directors at Spirent receive no remuneration
from the Company other than their fees (detailed in the Report
on Directors’ remuneration). Each Non-executive Director
has confirmed that they do not represent any significant
shareholder in the Company. No individual or group of
individuals dominates the Board’s decision making and the
Code requirement stating that at least half of the Board
(excluding the Chairman) should comprise independent
Non-executive Directors is satisfied.

Appointments to the Board
There is a formal, rigorous and transparent procedure for
the appointment of new Directors to the Board. Details are
available in the Nomination Committee report, which also
provides details of the Committee’s role and activities.

Commitment
The letters of appointment for the Chairman and Non-executive
Directors set out the expected time commitment required
of them and are available for inspection at the Company’s
registered office and at the Annual General Meeting.

The Board is mindful of investors’ concerns on ‘overboarding’
and the particular attention given to the time commitment
and availability of Directors. The external commitments
of each Director are monitored to enable the Board to be
assured that all of the Directors devote sufficient time and
attention as is necessary in order to perform their duties.
The list of external appointments held by Directors can be
found in the Board of Directors section.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEBoard development
New Directors participate in an induction programme on the operations and activities of the Group, the role of the
Board and the matters reserved for its decision, the Group’s corporate governance practices and procedures and their
duties, responsibilities and obligations as directors of a listed public limited company. This programme is normally then
supplemented by visits to key locations and meetings with, and presentations by, senior executives.

Ongoing training for Directors is available as required and can be provided by means of external courses, internal
computer-based training, briefings from specific consultants or in-house presentations. In addition, the Board’s knowledge
and understanding of the legal and regulatory environment are updated through the provision of information by the Group’s
advisers and by means of regular updates from the Company Secretary.

New Directors are encouraged to take advantage of opportunities to meet with major shareholders and attend presentations
to analysts where possible.

Further details of the appointment and induction process are set out in the Nomination Committee report.

Board meetings
The Board meets at regular intervals during the year, as well as for ad hoc matters, as required from time to time. Discussion
papers for Board and Committee meetings are provided to Directors in advance of each meeting. Should a Director be unable
to participate in a meeting either in person or remotely, the Chairman will, where appropriate, solicit their views in advance of
the relevant meeting, so that these can be shared at the meeting.

The attendance of the Directors at scheduled Board and Committee meetings during the year under review is shown in the table
below. There was full attendance, except for Maggie Buggie, due to unavoidable diary commitments.

Sir Bill Thomas
Paula Bell
Eric Updyke
Maggie Buggie
Gary Bullard
Wendy Koh
Edgar Masri
Jonathan Silver

Board

10/10
10/10
10/10
10/8
10/10
10/10
10/10
10/10

Audit
Committee

Nomination
Committee

Remuneration
Committee

–
–
–
3/3
3/3
3/3
3/3
3/3

3/3
–
–
3/3
3/3
3/3
3/3
3/3

–
–
–
7/7
7/7
7/7
7/7
7/7

Information flow
The Company Secretary manages the provision of information to the Board at appropriate times in consultation with the
Chairman and CEO. In addition to formal meetings, the Chairman and CEO maintain regular contact with all Directors.
The Chairman also holds informal meetings with Non-executive Directors, without any of the executives being present, to
discuss any issues affecting the Group, if this is thought necessary. Regular management updates are sent to Directors to keep
the Non-executive Directors informed of events and developments throughout the Group between Board meetings and to
ensure that they are kept fully advised of the latest issues affecting the Group.

Conflicts of interest procedures
The Company has procedures in place, which were reviewed and updated during the year, to deal with the situation where a
Director has a conflict of interest.

As part of this process, the Board:

• considers each potential conflict situation separately on its particular facts;

• considers the potential conflict situation in conjunction with the rest of the Directors’ duties under the Companies Act 2006;

• keeps records and Board minutes as to authorisations granted by Directors and the scope of any approvals given; and

• regularly reviews conflict authorisation.

At the start of each Board meeting, the Directors are reminded of their duties under the Companies Act to declare any interests
in the matters to be discussed and to withdraw from the meeting prior to any voting being held on any such issue. Any Director
having such an interest would not be considered to form part of the quorum for discussions on that specific matter.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEDirectors’ statement on corporate governance continued

Board activities during the year
At each Board meeting the CEO presents an update on performance, strategy and business issues such as M&A pipeline
developments across the Group and the CFO presents a detailed analysis of the financial performance of the business units.
Senior executives below Board level attend relevant parts of Board meetings in order to make presentations on their areas of
responsibility; this gives the Board access to a broader group of executives and helps the Directors make ongoing assessments
of the Group’s succession plans. The Board has a rolling programme of visits to business unit locations to deepen its appreciation
of the different opportunities and challenges that each unit faces.

Key issues considered by the Board during 2023

Governance/compliance

Finance

January

February

Early March • Full year compliance and Annual Report

review plus Modern Slavery
Statement review

• AGM Notice and Proxy Card approval
• Legal update

Late March

Early May

May AGM • AGM voting review

June

• CFO update
• Full year trading update review

• Budget update

• CFO update
• Full year results review
• Dividend Policy review
• Capital Policy review
• Receive Audit Committee report on

internal controls, risk management and
Viability Statement

• Budget review
• Share Buyback Programme

• Q1 Trading Update review

• CFO update

Business/strategy

• CEO update

• CEO update
• Capital markets update

• CEO update including sales

and customer briefings

• CEO update

• CEO update
• Broker update
• People update
• Strategy presentations

July

• H1 corporate governance and

• Half year update

• CEO update

compliance review

• NED Workforce
• Engagement and Board
• Effectiveness
• Review
• Legal Update
• Group Insurance Renewal

August

• CFO update
• Share Buyback Programme

October

• Stakeholder engagement feedback

• CFO update

(investors)

November

• Board and Committee effectiveness
review kick-off, Director Conflicts

• CFO update
• Q3 results review

December

• Board Matters Reserved and
Committee TORs, Board and
Committee effectiveness results,
NED fees

• CFO update
• Preliminary Budget, Dividend and
Capital Allocation Policy review

• CEO update
• Project update

• CEO update
• Sales update
• CIO update

• CEO update
• Capital markets update
• Cyber update

• CEO update
• Strategy update

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEBoard performance review
The effectiveness of the Board and its Committees is reviewed
at least annually and conducted according to the principles
of the Code and the supporting FRC Guidance on Board
Effectiveness. As the 2021 review was facilitated externally,
the 2023 review was conducted internally by the Chairman
and Company Secretary.

Evaluation process
Following discussions between the Chairman and Company
Secretary, which included the provision of internal policy
documents, an initial questionnaire was developed for
the Board and its Audit, Nomination and Remuneration
Committees. Directors completed the confidential survey
online, with their answers forming a report to be discussed
by the Board. The conclusions and insights gained were
discussed, with areas of focus for 2024 identified for final
discussion by the Board.

Evaluation findings
The review concluded that there continued to be a firm
understanding of strategy and success factors over the short,
medium and longer term, as well as strengths, weaknesses,
challenges and threats, with the Company’s values, as defined
to employees, fully aligned to strategy. Also, it was felt that the
composition of the Board remained appropriate, with further
additions to the Board to be in line with agreed diversity and
succession plans.

Board action plan
The Board’s key areas of focus for 2024 include:

• focus on the risks and opportunities arising from the merger

of the CIP and LSA business units;

• explore further diversification opportunities from our

traditional core markets;

• review, in detail, the strategic plans for each of the value

streams in the new organisational model;

• continue to focus on ensuring a culture of innovation across

the Group;

• receive further external perspectives on core markets and
diversification opportunities, building on any prior year
activities; and

• more deeply explore R&D, including greater correlation to

new markets segments and clarity on spend.

Election and re-election of Directors
All Non-executive Directors undertake a fixed term of
three years subject to annual re-election by shareholders.
The fixed term can be extended and, consistent with best
practice, would not go beyond nine years unless exceptional
circumstances were deemed to exist.

The Board confirms that each of the Directors standing
for re-election has been subject to a formal performance
evaluation by the Chairman in relation to their duty to
act in the long-term interests of the Company, while also
having regard to other stakeholders. The evaluation of the
Chairman’s performance was carried out by the Senior
Independent Non-executive Director.

Biographical details, including information on other roles
held, can be found in the Board of Directors section; an
assessment of skills held by Board members can be found
in the Nomination Committee report.

Financial and business reporting
The Board recognises its responsibility to present a fair,
balanced and understandable assessment of Spirent in all
of its reporting obligations. This responsibility covers the
Annual Report and extends to the Half Year Report and
other regulatory announcements. The Directors consider this
Annual Report, taken as a whole, to be fair, balanced and
understandable, providing the information necessary for
shareholders to assess the Company’s performance, business
model and strategy. In arriving at this position, the Board
asked the Audit Committee to review and confirm a process
is in place to support this assessment. The Audit Committee
confirmed that a robust approach is in place to support the
fair, balanced and understandable assessment, details of
which can be found in the Audit Committee report.

Business model
A description of the Company’s business model for sustainable
growth is set out in “Our business model”. This section provides
an explanation of the basis on which the Group generates
value and preserves it over the long term and its strategy for
delivering its objectives.

Going concern
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, and consistent with the guidance contained
in the document titled “Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting”
published by the FRC, they continue to adopt the going
concern basis in preparing the annual financial statements.

Internal control and risk management
The Board acknowledges its responsibilities for the
Group’s system of internal control in order to facilitate the
identification, assessment and management of risk, the
protection of shareholders’ investments and the Group’s
assets. The Directors recognise that they are responsible for
providing a return to shareholders which is consistent with
the responsible assessment and mitigation of risks.

Effective controls ensure that the Group’s exposure to avoidable
risk is minimised, that adequate accounting records are maintained,
that the financial information used within the business is
reliable and that the consolidated accounts preparation
and financial reporting processes comply with all relevant
regulatory reporting requirements. The dynamics of the Group
and the environment within which it operates are continually
evolving, together with its exposure to risk.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEDirectors’ statement on corporate governance continued

Internal control and risk management continued
Internal controls can only provide reasonable and not
absolute assurance against material misstatement or loss.
The Directors confirm that there is an ongoing, robust process
for identifying, evaluating and managing the principal risks
faced by the Group and the operational effectiveness of the
related controls; this has been in place for the year under
review and up to the date of approval of the Annual Report
and Accounts. They also confirm that they have regularly
reviewed the system of risk management and internal
controls utilising the review process set out below.

In terms of the power to govern, the Proxy agreement
vests certain powers solely with the Proxy holders and
certain powers solely with Spirent. For example, the Proxy
holders cannot carry out any of the below without Spirent’s
express approval:

• sell or dispose of, in any manner, capital assets or the

business of Spirent Federal;

• pledge, mortgage or encumber assets of Spirent Federal

for purposes other than obtaining working capital or funds
for capital improvements;

The Directors confirm that a robust assessment of the
principal risks facing the Company has been carried
out, including those risks that would threaten its business
model, future performance, solvency or liquidity. Ongoing
consideration is also given to potential emerging risks and
whether or not any of those identified have the potential to
become a principal risk to the business in the medium to
long term. More details are set out in the Principal risks and
uncertainties section.

Management and control of US subsidiary
Spirent Federal Systems Inc (Spirent Federal), which
contributed approximately $45.7 million to the Group’s
revenue in 2023 (2022 $46.1 million), operates under a Proxy
agreement, as detailed below, with the remainder of the US
business operating outside the Proxy regime and therefore
allowing the same reporting lines and processes as the
Group’s other, non-regulated businesses.

Spirent Federal and the Proxy arrangement
Spirent Federal Systems Inc is a wholly owned subsidiary of
Spirent in the United States. It has been placed under a Proxy
arrangement as it is required by the US National Industrial
Security Program to maintain facility security clearances
and to be mitigated of the risks of foreign ownership, control
or influence for the business it undertakes. Under the Proxy
agreement, Spirent Federal and the US Department of
Defense (DoD) are parties to a Proxy agreement that relates
to the management and operation of Spirent Federal.

In addition to their powers as Directors, the United
States Government expects the Proxy Holders to exercise
independently the prerogatives of share ownership of Spirent
Federal. The Proxy holders have a fiduciary duty, and agree,
to perform their interests in the best interests of Spirent as a
shareholder (including the legitimate economic interest), and
in a manner consistent with the national security interests of
the United States. Spirent may not remove the Proxy holders
other than for acts of gross negligence or wilful misconduct or
for breach of the Proxy agreement (and always only with the
consent of the US Defense Security Service).

• merge, consolidate, reorganise or dissolve Spirent

Federal; and

• file or make any petition under the federal bankruptcy laws
or similar law or statute of any state or any foreign country.

Spirent can require the above to be carried out and these are,
therefore, considered to be significant participative features.

Spirent maintains its involvement in Spirent Federal’s activities
through normal business interaction and liaison with the Chair
of the Proxy Board. Members of Spirent’s senior management
team attend meetings of the Proxy Board periodically.

Standards
Guidelines on the minimum Group-wide requirements for
health and safety and environmental standards are set out in
policy documents and procedures. There are also guidelines
on the minimum level of internal control that each of the
business units should exercise over specified processes.
Each business has developed and documented policies and
procedures to comply with the minimum control standards
established, including procedures for monitoring compliance
and taking corrective action.

High-level controls
All businesses prepare annual operating plans and budgets
which are supplemented by regular forecasts throughout
the year. Performance against budget is monitored both at
operational level and centrally, with variances being reported
promptly. The cash position at Group and operational level is
monitored constantly and variances from expected levels are
investigated thoroughly. Clearly defined guidelines have been
established for capital expenditure and investment decisions.
These include the preparation of budgets, appraisal and
review procedures, and delegated authority levels.

Financial reporting
Detailed management accounts are prepared every month,
being consolidated in a single system and reviewed by senior
management and the Board. They include a comprehensive
set of financial reports and key performance indicators
covering commercial and operational issues. Performance
against budgets and forecasts is discussed regularly at
Board meetings and at meetings between operational and
Group management. The adequacy and suitability of key
performance indicators is reviewed regularly.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEInternal audit
All of the internal audit activities are co-ordinated by the
Head of Internal Audit & Risk who has direct access to the
Board Chairman and to the Audit Committee Chairman and is
accountable to the Audit Committee.

Board relations with workforce
Employee feedback during the year was gathered in a
number of ways including two employee engagement surveys
and virtual town-hall meetings for all employees and/or
smaller sub-groups.

The Board continues to engage with the workforce through its
local Non-executive Directors designated as the liaison point
for employees in the three geographical areas in which the
Company operates:

Americas – Edgar Masri;

APAC – Wendy Koh; and

EMEA – Gary Bullard.

Meetings for each of the three areas took place either in
person or on a virtual basis, with feedback being reported
to the Board at its regular meetings.

Annual General Meeting (AGM)
The Board continues to view the AGM as a valuable
opportunity to communicate with private shareholders in
particular, for whom it provides the opportunity to ask questions
of the Chairman and, through him, the Chairmen of the key
Committees and other Directors. The 2024 AGM is planned to
take place as an in-person meeting, but notifications of any
alternative arrangements that arise after the publication of this
Annual Report will be published on the Company’s website at
corporate.spirent.com/shareholder-information/agm and by
announcement via a Regulatory Information Service.

To ensure transparent representation of shareholder views,
resolutions are normally subject to poll voting. This gives
shareholders the ability to vote directly on the resolutions
either in person at the meeting, or by submitting their proxy
instructions to the Company’s Registrar, in advance of
the meeting.

All Group businesses are required to comply with the Group’s
financial control framework that sets out minimum control
standards. A key function of the Group’s internal audit
resource is to undertake audits to ensure compliance with the
financial control framework and make recommendations for
improvement in controls where appropriate.

Senior members of the Group finance team meet with the
Chairman of the Audit Committee as appropriate but at least
annually, without the presence of executive management,
and have direct access to the Chairman.

Remuneration
The Report on Directors’ remuneration provides details of
our Remuneration Policy and how it has been implemented,
together with the activities of the Remuneration Committee.

Board relations with shareholders
The Board is committed to maintaining good communications
with shareholders. The Chairman, CEO and CFO have regular
one-to-one contact with individual institutional shareholders
in order to develop an understanding of their views. These
are then discussed with the Board. Key themes for discussion
in 2023 have continued to include developments in the
Company’s growth strategy.

All Directors are offered the opportunity to develop a
dialogue with major shareholders to listen to their views.
Presentations are made to analysts, investors and prospective
investors covering the full year and half year results. Executive
Directors receive regular reports prepared by an independent
capital markets advisory firm which provides comprehensive
information relating to the Company’s major shareholders.

The Company seeks to maintain a dialogue with the various
bodies which monitor the Company’s governance policies
and procedures.

The Company is always keen to hear the views of its private
shareholders and we encourage them to access our website
at corporate.spirent.com for our Company reports and
business information. Detailed enquiries can be sent to our
shareholder mailbox at investor.relations@spirent.com.

Any concerns raised by shareholders or their representatives,
whether expressed directly or through voting patterns at
the Company’s AGM, are discussed by the Directors. An
appropriate response is given either specifically to the
concerned party or, if it is felt to be of wider benefit, made
available to all shareholders via the Company’s website at
corporate.spirent.com.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCENomination Committee report

Sir Bill Thomas
Committee Chairman

Members
During the year under review and as at the date of this Annual
Report, the Nomination Committee comprised as follows:

Sir Bill Thomas (Chairman)

Maggie Buggie

Gary Bullard

Wendy Koh

Edgar Masri

Jonathan Silver

Key duties
The terms of reference of the Nomination Committee
are typically reviewed annually and are available on
the Company’s website at corporate.spirent.com.

In accordance with its terms of reference, the Nomination
Committee’s key duties include:

• regularly reviewing the Board structure, size and composition
(including the skills, knowledge, independence, experience
and diversity) and making recommendations to the
Board about suitable candidates for the role of Senior
Independent Director, and membership of the Audit
and Remuneration Committees, in consultation with the
Chairmen of the relevant Committees;

• considering plans for orderly succession on the Board and
in the Company’s senior leadership with a view to ensuring
the continued ability of the organisation to compete in the
marketplace; and

• leading the search process and making recommendations to

the Board for the appointment of new Directors.

Board composition and succession
As part of the annual Board and Committee effectiveness
review, the Committee concluded that there was no significant
skills gap in the composition of the Board and it was well
equipped for its role of implementing the strategy of the
Company, in order to successfully deliver for stakeholders.
Also, given the tenure of some Board members, preparations
are ongoing to ensure a timely recruitment and succession
process, with further additions to the Board also being kept
under review with diversity and succession planning in mind.

The Company has begun the recruitment process for a new
Audit Committee Chair and although Jonathan Silver will offer
himself for re-election at the upcoming AGM, he is expected
to step down from the Board later in 2024.

Time commitment
The Committee is mindful of investors’ concerns on
“overboarding” and the particular attention given to the
time commitment and availability of Directors. The external
commitments of each Director are monitored to enable the
Board to be assured that all of the Directors devote sufficient
time and attention as is necessary in order to perform their
duties. The Director biographies in the Board of Directors
section include a list of external appointments and also set out
skills and experience.

Performance review
The performance of the Committee was reviewed as part of
the annual Board effectiveness evaluation and the Committee
was found to be operating effectively.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCERe-election of Directors
All Non-executive Directors undertake a fixed term of
three years subject to annual re-election by shareholders.
The fixed term can be extended and, consistent with best
practice, would not go beyond nine years unless exceptional
circumstances were deemed to exist.

The Committee reviews the results of the annual Board
effectiveness evaluation that specifically relate to the
composition of the Board, and whether the time commitment
of those who fulfil the roles of Chairman, Senior Independent
Director and Non-executive Director was appropriate.

Succession planning for senior leadership
A key part of the Committee’s role is to maintain an ongoing
assessment of the senior leadership depth and improving the
effectiveness of the internal talent pipeline continues to be one
of the Board’s priorities.

An update to the leadership development and the internal
succession pipeline was undertaken during the year, with
the aim of enhancing visibility and awareness of the Group’s
leadership talent, strengths and gaps, while also providing
an open, honest leadership team dialogue on what teams
contribute and how. The Committee continues to support
management in recognising that understanding and deploying
the Group’s talent is a critical and dynamic business planning
process that can help the organisation to make huge strides in
cross-functional collaboration and the sharing of knowledge
and experience.

Spirent’s commitment to
diversity in talent acquisition
The talent pools we recruit from determine our
diversity and we have made a concerted effort to
reach a wider audience when we recruit. We have
developed and maintain a network of university
partners and recruitment channels to help us
to both recruit from groups that are currently
under-represented, especially female engineers
and people of colour, and support students to
reach their full potential.

Spirent’s commitment to
a diverse and inclusive
work environment
At Spirent, we know that having a diverse and
inclusive workforce is essential if we are going to
deliver on our mission to be global leader and
trusted partner for innovative technology test and
assurance solutions. We know how critical diverse
and inclusive teams are to fuel our innovation and
genuinely connect with the communities in which
we live and work. We embrace a culture where
difference is valued and openness, mutual respect,
collaboration and fairness are fundamental.
Spirent does not tolerate discrimination or offensive
behaviour of any kind. We are committed to creating
workplaces that genuinely reflect the diversity of
the world we serve and provide an environment
where everyone feels empowered to bring their full,
authentic self to work.

We strive to enable:

• workforce representation that reflects the

talent market;

• equitable reward and advancement; and

• a culture of trust, fairness and respect.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCENomination Committee report continued

Diversity and inclusion
The Committee, the Board of Directors and the Spirent
Group as a whole continue to pay full regard to the
benefits of diversity, including gender and ethnic
diversity, when searching for candidates for the Board,
its committees (Remuneration, Audit and Nomination)
the senior management team and other appointments.
We believe that better business decisions can be made by
having representation from different genders and cultural
backgrounds with differing skill sets, experience and
knowledge, which reflect our customer base and the wider
population in our markets.

Diversity of Board members is important to provide the
necessary range of background experience, values and
diversity of thinking and perspectives to optimise the decision

making process. Gender and ethnicity are important aspects of
diversity which the Chairman and the Committee consider when
deciding upon the most appropriate composition of the Board.

Spirent as a whole recognises the benefits of diversity beyond
that of gender, taking account of diversity of social and
ethnic backgrounds and cognitive and personal strengths
when considering appointments at all levels, whilst ensuring
appointments are made on merit and ability to enhance the
performance of the business.

At the year end, the Group’s performance against the diversity
targets set out under the FCA Listing Rules 9.8.6(9) and 14.3.33,
are as set out below. All diversity data is collected in line
with the Department for Business and Trade (DBT) FTSE 350
Companies: Ethnic Diversity Voluntary Census.

Gender identity

Men
Women
Not specified/prefer not to say

Ethnic background

White British or other White (including
minority White groups)
Mixed/multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say

Number
of Board
members

Percentage
of the Board

5
3
–

62.5
37.5
–

Number
of Board
members

Percentage
of the Board

6
–
1
–
1
–

75.0
–
12.5
–
12.5
–

Number
of senior
positions
on the
Board 1

3
1
–

Number
of senior
positions
on the
Board 1

4
–
–
–
–
–

Number
in executive
management 2

Percentage
of executive
management 2

5
3
–

62.5
37.5
–

Number
in executive
management 2

Percentage
of executive
management 2

7
–
–
–
1
–

87.5
–
–
–
12.5
–

Notes
1. Chairman, CEO, CFO and SID.
2. Excludes CEO, includes CFO and direct reports to the CEO only (excluding executive assistant and Chief of Staff).

The Committee notes that the Company has achieved each of the targets set out in the relevant Listing Rules with the exception
of the Board comprising at least 40 per cent women. Two of the four most recent appointments to the Board have been women,
and the Committee is committed to requiring a diverse candidate list for all future Board appointments in order to continue to
improve against this target.

Sir Bill Thomas
Chairman, Nomination Committee
5 March 2024

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEAudit Committee report

Jonathan Silver
Committee Chairman

Fair, balanced and
understandable
In making its recommendation to the Board that the
Annual Report, taken as a whole, is fair, balanced
and understandable, the Committee applied robust
governance arrangements, including:

• clear guidance and instruction of the disclosure

requirement provided to contributors;

• comprehensive Group and subsidiary accounts
processes, with written confirmations provided
by each business unit;

• management teams on the health of the financial

control environment;

• a verification process applied to factual content

with the aim of providing the information
necessary to assess the Company’s performance,
business model and strategy;

• reviews of the Annual Report undertaken at

different levels of the Group and by the senior
management team that aim to ensure consistency
and overall balance;

• additional scrutiny by senior management
including focused review of risk registers;

• additional Committee reviews of the draft Annual

Report in advance of final sign-off; and

• oversight of the external audit process.

Final approval of the Annual Report is provided
by the Board, on the recommendation of
the Committee.

Dear shareholder
On behalf of the Audit Committee, I am pleased to present
its report for the period ended 31 December 2023 and
to recommend to the Board that the Annual Report,
taken as a whole, is fair, balanced and understandable.
In making this recommendation, and in addition to the
external audit review, the Committee has applied robust
governance measures.

I expect this to be my last Audit Committee Report as
Chairman of the Audit Committee. Although I will be offering
myself for re-election at the forthcoming AGM, a search
has begun for my successor as I near the limit of the period
in which I will be considered independent. I will stand
down from the Board and my role as Audit Chair after
my successor is appointed. I have very much enjoyed my
involvement with the Company in the time I have spent on
the Board and would like to thank the finance team within
the Company for their dedication and the support which
they have given me over the years.

I look forward to meeting with shareholders at the Annual
General Meeting to answer any questions on the work
of the Committee.

Jonathan Silver
Chair, Audit Committee
5 March 2024

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEAudit Committee report continued

Members
During the year and at the date of this report, Committee
members were:

Jonathan Silver (Committee Chair)

Maggie Buggie

Gary Bullard

Wendy Koh

Edgar Masri

As required, the Audit Committee is comprised of at least
three members, all of whom are Independent Non-executive
Directors of the Company, with the necessary range
of financial and commercial expertise to challenge
management. Two members may constitute a quorum.

The Code also requires the inclusion of one financially
qualified member (as recognised by the Consultative
Committee of Accountancy Bodies) with recent and relevant
financial experience. Currently, the Committee Chair fulfils
this requirement.

Key duties
In accordance with its terms of reference, the Audit
Committee’s key duties include:

• monitoring the integrity of the Group’s financial statements
and any formal announcements relating to the Company’s
performance by reviewing significant financial reporting
judgements contained in them before their submission to
the Board for approval;

• reviewing and challenging on matters of financial reporting,
where necessary, the consistency of and any changes to
accounting and treasury policies, for example considering
whether the Group has followed appropriate accounting
policies and made appropriate estimates and judgements,
the clarity and completeness of disclosure, significant
adjustments resulting from the audit, and the going concern
assumption and compliance with auditing standards;

• at the request of the Board, reviewing the content of the
Annual Report and Accounts and advising the Board
on whether, taken as a whole, it is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy;

• as requested by the Board, assisting in relation to the

Board’s assessment of the principal and emerging risks
facing the Company and the prospects of the Company for
the purposes of disclosures required in the Annual Report
and Accounts;

• reviewing the effectiveness of the Group’s internal financial

controls, including the policies and overall process for
assessing established systems of internal financial control
and timeliness and the effectiveness of corrective action
taken by management;

• reviewing the most appropriate fulfilment of the internal
audit function and agreeing and assessing the annual
internal audit plan and its effectiveness in the context of the
Company’s overall risk management system;

• overseeing the Group’s policies, procedures and controls for
preventing bribery and identifying money laundering, and
the Group’s arrangements for whistleblowing; and

• overseeing the relationship with the Group’s External
Auditor, reporting to the Board each year whether it
considers the audit contract should be put out to tender
taking into account any legal requirements for tendering or
rotation of the audit contract, reviewing and monitoring its
objectivity and independence including seeking information
from the external auditor on an annual basis about its
policies and procedures for maintaining independence,
agreeing the scope of its work and fees paid to it for
audit, assessing the effectiveness of the audit process,
and agreeing the policy in relation to the provision of
non-audit services.

How the Committee operates
Committee members are expected to be financially literate
and to have an understanding of the following areas:

• the principles of, and developments in, financial reporting

including applicable accounting standards and statements
of recommended practice;

• key aspects of the Company’s operations including corporate

policies and the Group’s internal control environment;

• matters which may influence the presentation of accounts

and key figures;

• the principles of, and developments in, company law,

sector-specific laws and other relevant corporate legislation;

• the role of internal and external auditing and risk

management; and

• the regulatory framework for the Group’s businesses.

The Committee invites the Chair, the CEO, the CFO, the
Head of Internal Audit & Risk and senior representatives of
the external auditor to attend its meetings in full, although
it reserves the right to request any of these individuals
to withdraw.

During the year, the Committee held two meetings with
Deloitte LLP, and two meetings with the Head of Internal Audit
& Risk, without the Executive Directors present.

The Committee has unrestricted access to Company
documents and information, as well as to employees of the
Company and the external Auditor.

The Committee’s effectiveness is reviewed on an annual basis
as part of the Board’s performance evaluation process and in
2023 the Committee was found to be operating effectively.

The terms of reference of the Audit Committee were reviewed
and approved during the year and can be viewed on the
Company’s website at corporate.spirent.com.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEMeetings
The Audit Committee met three times during the year, with the
Committee agenda typically linked to events in the Group’s
financial calendar.

Activities during the year
The Audit Committee’s activities, again, principally related to
financial reporting, internal control and risk management,
preparation of the viability statement and scrutiny of the
external audit. The Committee considered all material
controls, including financial, operational and compliance
controls and their effectiveness and monitored the internal
audit plan as carried out by the Head of Internal Audit &
Risk, assisted by PwC. This work also encompassed other
related areas, such as the Group’s approach to IT controls,
site security and cybersecurity, as well as examining the
disclosures in this Annual Report based on the Task Force
on Climate-related Financial Disclosures. The Committee
was also kept abreast of new reporting and governance
requirements and preparations by management for
reporting on such.

Risk Sub-Committee
During the period under review, the Audit Committee had
oversight of a Sub-Committee dealing with the risks and
uncertainties being dealt with on a Group and business
unit level.

The Risk Sub-Committee met regularly throughout the year to
monitor the Group’s risk appetite and registers.

Financial reporting and significant issues
During the year, the Audit Committee:

• reviewed the full year and half year financial statements,
trading updates, key accounting policies and significant
financial reporting judgements contained therein (with
particular reference to the critical accounting assumptions
and judgements as set out in the notes of the consolidated
financial statements) and recommended the financial
statements to the Board for approval;

• reviewed whether the Annual Report, taken as a whole, is

fair, balanced and understandable and formed an opinion
thereon prior to recommending it to the Board;

• reviewed and monitored risk management processes and

the potential for risks to impact on the viability of the Group;

• reviewed and considered assumptions in relation to the

going concern basis for preparation of financial statements;

• reviewed, challenged and monitored the appropriateness

of alternative performance measures; and

• reviewed the external auditor’s report on the interim review
and year end audit and management’s responses to the
issues raised.

The Committee Chair reports any significant findings or
identified weaknesses to the Board.

Significant financial issues considered and
addressed in relation to the financial statements
The Audit Committee gives careful consideration to those
aspects of the financial statements that required significant
accounting judgements or where there is estimation
uncertainty. These areas are set out in the notes to the
consolidated financial statements. The Committee received
detailed reports from both the CFO and External Auditor on
these areas and on many other matters which they believed
should be drawn to the Committee’s attention and challenged
the treatment and assumptions where it was felt necessary to
ensure that the judgements were robust and supportable. The
external auditor’s report on the financial statements was also
reviewed, with particular reference to those matters reported
as carrying risks of material misstatement.

Management override of controls
The Audit Committee is aware of the risk that management
overrides the controls environment that is in place in order to
misrepresent performance by the business. The effectiveness
of internal controls is monitored and challenged by the
Committee both directly and through the continuing internal
audit work undertaken by the Head of Internal Audit &
Risk and PwC.

The Committee is aware that International Standards on
Auditing require the External Auditor to presume risk of
fraud in respect of management override of controls and
that as part of its audit programme Deloitte considers the
higher areas of risk deriving from inappropriate posting of
journals, unintentional or intentional management bias in key
judgements used in material estimates and accounting for
transactions outside the ordinary course of business.

Revenue recognition
The Committee is mindful of the risk that continuing
pressure on management to meet certain targets and to
respond to specific customer requests may drive additional
deal complexity which could, in turn, lead to complex or
judgemental accounting, in particular due to the impact
of external factors on business sentiment. This may result
in inappropriate recognition of revenue and associated
balances. It is also aware of the heightened risk around the
high volume of orders fulfilled around the period end, which is
highlighted as an additional fraud risk as an area that could
be manipulated by management.

Management updates the Committee on significant contracts
in the year. The Committee also receives regular reports
on management’s oversight of areas where significant
judgement is exercised and challenges findings to ensure
compliance with accounting standards.

As part of its update to the Committee, Deloitte discussed
the procedures performed in relation to reviewing specific
large and judgemental transactions and revenue recognised
around the period end. Deloitte and the Committee also
discussed the procedures performed in relation to the Group’s
arrangements for sales through distributors or with the
assistance of agents.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEAudit Committee report continued

Adjusting items
• The Committee kept the definition and use of adjusting
items under review throughout the period, in particular
because of the potential impact upon the Group’s reported
profitability. The Committee paid close attention to the
treatment of costs connected to the items related to the
restructuring in 2023.

The Board is responsible for the effectiveness of the Group’s
system of internal control, which has been designed and
implemented to meet the particular requirements of the
Group and the risks to which it is exposed. Details can be
found below on the Group’s internal control environment,
how risk is managed and the Committee’s review of
the effectiveness of the risk management and internal
control systems.

Pensions
• The Committee receives regular updates on the

accounting for the funded defined benefit pension plans.
The Committee monitors the approach and assumptions
made by management and advisers in relation to
recognition of the current surplus or deficit.

Tax accounting
• The Committee received regular updates from the VP
of Global Tax and Group Financial Controller on the
appropriateness of recognised tax provisions, recoverability
of deferred tax assets and the key tax judgements. The
Committee evaluated updates from management in
respect of uncertain tax positions, the tax provision and the
deferred tax position. The Committee was satisfied that
management’s approach to the accounting for taxation
was appropriate. The Committee also noted Deloitte’s
use of tax specialists and considered its view on the tax
accounting matters.

Goodwill impairment
• The Committee receives a report setting out the approach
and outcomes of the Group’s annual goodwill impairment
exercise which takes place each year, together with additional
reviews of the impact on the goodwill position of specific
events or changes to the assumptions made.

Misstatements
Management reported to the Committee that it was not
aware of any material or immaterial misstatements made
intentionally to achieve a particular outcome. The External
Auditor reported to the Committee misstatements it had
found in the course of its work. After due consideration the
Committee concurred with management that no adjustments
were required.

Internal control and risk management
During the year the Audit Committee:

• monitored and reviewed internal control and risk

management systems;

• reviewed and approved the internal audit programme for

the year; and

• reviewed regular reports on taxation, treasury operations,

health and safety and cybersecurity.

Spirent Communications plc Annual Report 2023

Internal control environment
The primary aim of the Group’s internal controls is to operate
a system which is appropriate to the business and which
can support the Group in delivering its strategic objectives,
safeguard the Group’s assets and, over time, enhance shareholder
value. The system is designed to identify, evaluate and manage
the significant risks faced by the Group rather than to eliminate
the risk of failure to achieve business objectives and can only
provide reasonable and not absolute assurance against
material misstatement or loss. This is in accordance with the
latest Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting issued by the FRC.

The CFO is responsible for internal financial control and for
ensuring that the finance department employs a level of
management and specialists appropriate for maintaining
financial records and processes that provide financial
information that is relevant and reliable, complies with
applicable laws and regulations, and is distributed both
internally and externally in a timely manner. A review of the
consolidation and financial statements is undertaken by senior
management to ensure that the financial position and
results of the Group are appropriately reflected. All financial
information published by the Group is subject to the approval
of the Audit Committee prior to it being approved by
the Board.

The following key elements comprise the internal
control environment:

• an appropriate organisational structure with clear lines

of responsibility;

• an experienced and qualified finance function which

regularly assesses the possible financial impact of the risks
facing the Group;

• a comprehensive annual business planning process

and strategy review; systems of control procedures and
delegated authorities which operate within defined
guidelines, and approval limits for capital and operating
expenditure together with other key business transactions
and decisions;

• a robust financial control, budgeting and forecast system
which includes regular monitoring, variance analysis, key
performance indicator reviews and risk and opportunity
assessments at Board level; procedures by which the
consolidated financial statements are prepared, which
are monitored and maintained through the use of
internal control frameworks addressing key financial
reporting risks arising from changes in the business and
accounting standards;

• established policies and procedures setting out expected

standards of integrity and ethical standards which reinforce
the need for all employees to adhere to all legal and
regulatory requirements;

CORPORATE GOVERNANCE• an annual internal controls compliance checklist; and

• the Head of Internal Audit & Risk, who is supported by

a co-sourced internal audit resource. In 2017, the Group
adopted co-source arrangements and appointed PwC,
which continues to support the Head of Internal Audit & Risk
to formulate and execute the Group’s internal audit plan.
The plan for 2023 was approved to ensure that there was
appropriate coverage of the internal control environment,
strategic priorities and key risks identified by the Board. At
each Committee meeting the Head of Internal Audit & Risk,
assisted by PwC, gives an update on the progress of the
internal audit plan, which is reviewed to ensure that it is in
line with the Committee’s expectations.

During the year the internal audit plan was amended so
that additional areas were added to the plan based on
the changes that gave rise to increased levels of risk. These
changes to the agreed audit plan were approved by the
Committee.

The Head of Internal Audit & Risk has direct access to the
Board Chair and to the Committee Chair and is accountable
to the Committee, meeting regularly with both the Committee
and its Chair, without the presence of management, to
consider the work of internal audit.

The effectiveness of the execution of the internal audit plan is
monitored at each Audit Committee meeting and also forms
part of the Board’s annual evaluation process.

The 2023 evaluation confirmed that the Directors are satisfied
with the arrangements and approach currently in place.

Risk management
Members of the Executive Risk Committee meet to challenge
and debate the assessment of risk including emerging risks,
for the Group as a whole and within each business unit, which
have submitted local risk registers for analysis and ranking
together with Company-wide risks to form a robust corporate
risk register. This corporate risk register is presented to the
Audit Committee at least twice each year. Actions arising from
the Audit Committee’s review of the corporate risk register are
fed back to the business units for their management.

Committee oversight
Day-to-day responsibility for effective internal control and risk
management and monitoring rests with senior management
at business unit level. During the year, the CFO and Head of
Internal Audit & Risk attended all Audit Committee meetings to
report on internal control and risk management and notified
the Committee of any control weaknesses, control failings and
risks, their impact and the actions taken to deal with the issues.

Detailed updates on specific areas, such as cybersecurity or
business continuity, are provided at the Committee’s request.

Business Ethics Policy
A policy that sets standards of professionalism and integrity
for all employees and operations was relaunched in 2020
and is regularly refreshed. The Business Ethics Policy includes
sections relating to bribery and corruption to ensure that
all of Spirent’s systems, controls and training comply with
the anti-bribery and corruption legislation in the countries
in which we operate, and that a culture of prevention and
detection of all forms of bribery and corruption is in place.
Anti-bribery training is required to be taken by certain
employees periodically.

Acquisitions and divestments
Disciplined due diligence processes and post-acquisition
integration programmes are in place.

Fraud
The Board of Directors is aware that it bears the primary
responsibility for the detection and prevention of fraud. The
Directors are aware of the potential for fraud and this features
as an element of the Board’s risk assessment and corporate
governance procedures. The Audit Committee reviews these
procedures to ensure that they are in place and working
effectively. This oversight is supported by the work of the
Head of Internal Audit & Risk and PwC as part of their internal
audit work.

The Group’s Business Ethics Policy, which has been
communicated to all employees, makes clear that employees
also have a responsibility for fraud prevention and detection
and any suspicion of fraud will be reported immediately and
investigated vigorously.

Raising concerns at work
The Committee aims to ensure that employees are able
to raise any concern in confidence about any possible
improprieties in business practices or other matters. A
Group-wide Whistleblowing Policy is in place and is regularly
highlighted to employees and an external third party reporting
service is available to employees for the reporting of any concerns.

Disclosures under this arrangement are investigated promptly
by the Company Secretary and the Head of Internal Audit
& Risk, and are escalated to the Executive Directors and the
Committee as appropriate, with follow-up action being taken
as soon as practicable thereafter.

The Committee is satisfied that the means for employees to
raise concerns at work are appropriate to the size and scale
of the Group.

External audit
The Committee is responsible for overseeing the Company’s
relations with the External Auditor.

The Committee places great importance on ensuring that
high standards of quality and effectiveness are maintained
within the external audit process. It considers a number of
areas in relation to the External Auditor: its performance
in discharging the audit and interim review of financial
statements, its independence and objectivity, and its
re-appointment, remuneration and feedback on these
matters is given to the External Audit Partner.

Auditor appointment
Each year the Committee assesses and reports to the Board
on the qualification, expertise, resources and effectiveness, as
well as the independence of the External Audit Partner and
their team.

The Committee notes and confirms compliance with the
Competition and Markets Authority Order 2014 (the CMA
Order) in respect of statutory audit services for large companies.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEAudit Committee report continued

Auditor appointment continued
Following a thorough tender process in 2020, Deloitte LLP was
appointed by the Company at its Annual General Meeting in
April 2021, to audit the financial statements of the Company
for that and subsequent financial periods. Jane Makrakis
succeeded Robert Knight as audit partner during the year.

There are no contractual obligations in existence that restrict
the Company’s choice of auditor.

Auditor effectiveness
The Committee assesses the effectiveness of the audit
process on an ongoing basis, with particular attention to the
mindset and culture, skills, character and knowledge, quality
control and judgement of the External Auditor in its handling
of key judgements, its responsiveness to the Committee
and its commentary where appropriate on the systems of
internal control.

The Committee holds regular private meetings with the
External Auditor to assist with its assessment, including
discussion of:

• how the External Auditor has identified and addressed

potential risks to audit quality;

• the controls in place within the External Audit firm to identify
risks to audit quality, including the results of internal and
external inspections of the External Audit team and firm;

• whether the External Auditor has met the agreed audit plan,

in particular how it has responded to any changes that
have been required during the process;

• feedback from the key people involved in the audit; and

• the content of the External Auditor’s management letter.

In addition, the Committee monitors the External Audit
partner’s involvement in their team’s work to ensure
sufficient oversight and direction of work was evident, in
particular with regard to the audit of significant components
involving judgements.

The effectiveness of the External Auditor also forms part
of the Board’s annual evaluation process.

Auditor independence
The Committee assesses the independence and objectivity
of the External Auditor annually, taking into consideration
relevant UK law, regulation, the FRC Revised Ethical Standard
and other professional requirements. Deloitte has provided
a letter confirming its belief that it remained independent
throughout the period under review and has discussed
with the Committee the threats to its independence and the
safeguards applied to mitigate those threats.

As part of this review, the Committee examined in particular:

• a report from the External Auditor describing its

arrangements to identify, report and manage any conflicts
of interest; and

• the extent of non-audit services provided by the

External Auditor.

Policy on non-audit services
The Committee is responsible for pre-approving the
engagement of the External Auditor for any and all non-audit
services, with the objective of ensuring that the provision
of such services by the External Auditor does not impair its
independence or objectivity. Taking into account relevant
ethical guidance, the Committee’s policy precludes a
number of non-audit services, including those relating to the
accounting records and financial statements, internal audit,
IT consulting, legal and investment services and other services
deemed by regulators to be precluded.

The Committee accepts that certain work of a non-audit nature
may be best undertaken by the External Auditor. The policy is
reviewed annually and financial limits for the provision of
non-audit services, including audit-related fees and other
fees, are set on the same annual basis (2023 $0.3 million
(2022 $0.3 million)). These were less than one-third of the
Group’s audit fee of $1.7 million (2022 $1.4 million). The
Committee can confirm that no non-audit services were
provided by Deloitte during the period under review other
than the interim review fee of $0.1 million (2022 $0.1 million).

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration

year to the broader question of pay structure - in particular
long-term incentives - where the divergence between UK and
US practice causes as many issues for competitiveness as do
pay levels.

Over the course of this year, the Committee has developed
proposals which I have discussed with our major shareholders
in two rounds of consultation. I have been encouraged that
most have come to our discussions with an open mind,
willing to listen to the challenges of operating in the global
market for technology talent, and to hearing our proposals
for how to meet those challenges. There is no doubt that the
broader conversations about the challenges faced by global
companies listed in London have helped move this debate on
and rightly so.

Following our consultation, we are proposing to put to the
AGM in April 2024 a Policy that will give us future flexibility to
use both restricted shares and performance shares, and to
increase the levels of long-term incentive award. However,
we have made a clear undertaking not to use either facility
for this coming year. Moreover, all elements of pay for the
two Executives Directors are frozen at last year’s levels in
recognition of the challenging year we have experienced.

I summarise below both the pay outcomes for 2023 and our
proposed Policy changes; and set them out in much more
detail in the rest of this report.

Executive remuneration outcomes in 2023
2023 has been a very challenging year for the telecommunications
market. Turbulence in the geopolitical landscape and the current
economic environment have resulted in key customers delaying
their investment plans, impacting timing of order placements
and contributing to ongoing uncertainty and reduced visibility
in the near term. This is reflected in the remuneration outcomes
for the year against the challenging targets we set ourselves.
Despite this, our confidence in 5G as an enduring growth driver
remains intact and actions taken by the management team in
the year ensure that Spirent is well positioned to capitalise on
these opportunities in the medium term.

The Annual Incentive for 2023 was based on the achievement
of targets for profitability, revenue and strategic and operational
priorities. For 2023, the annual bonus will pay out at between
15.5 per cent and 16.7 per cent of maximum. Full details of
the specific financial and non-financial targets set and the
performance against those targets can be found on pages 86
to 87. One-third of the Annual Incentive achieved for 2023 will
again be deferred into shares, to be retained for a period of
three years.

The Long-term Incentive Plan awards granted to the
Executive Directors in 2021 were based on stretching
Earnings Per Share and Absolute Total Shareholder Return
performance conditions. Unfortunately, measurement against
both of these elements will mean that the awards lapse in full.
Full details of the targets set and the performance against
those targets can be found on page 89.

The incentive outcomes above have resulted in a total single
figure for the CEO of £1.4 million (2022 £2.2 million) and for
the CFO of £0.8 million (2022 £1.1 million).

In the Committee’s view, the Policy acted as intended in 2023
and therefore no discretion was exercised in respect of the
pay outcomes.

Spirent Communications plc Annual Report 2023

Gary Bullard
Committee Chairman

Compliance statement
The Report on Directors’ remuneration for the year
ended 31 December 2023 describes how the Board,
via the Remuneration Committee (the Committee),
has complied with the provisions of the 2018 UK
Corporate Governance Code.

The Report is presented in two parts: the Directors’
Annual Remuneration Report and the Directors’
Remuneration Policy, the former setting out details of
how the Remuneration Policy was implemented for
the year ended 31 December 2023 and how it will be
applied for the year ending 31 December 2024.

Dear shareholder
I am pleased to present the Directors’ Remuneration Report
for the year and our proposed Remuneration Policy which
will be put to the AGM in May 2024.

As ever, the overarching duty of the Committee is to ensure
the Company has a remuneration structure that allows it to
recruit and retain executives of the high calibre required to
run a complex global organisation and pay them in a way
that is both motivational and aligned with investors’ interests.
Our triennial review of the Remuneration Policy (Policy) is an
opportunity to assess whether our structures are working as
intended and propose change where necessary. However,
readers of previous reports will know that we have been
acutely aware for quite some time of the tension between
the exigencies of a US-led business whose operations and
sales are both largely centred in the US, with the standard
pay model for a UK-listed company.

Last year, we adjusted the salary for our US-based
Chief Executive. Before doing so, I talked to many of our
shareholders, who mostly understood the need to make
this change but some of whom did not feel able to support
the increase. As I signalled then, we intended to return this

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Remuneration Policy
The principal proposed change under the new Policy is the
implementation of a hybrid long-term incentive (LTI) plan in
place of the current Performance Share Awards (PSA). This
hybrid plan involves making two, distinct award grants; one
element of the plan would operate as a PSA, in line with the
current approach, while the other element would operate as
a Restricted Share Award (RSA).

The proposed hybrid plan aligns better with market practice
in the US, which represents the majority of Spirent’s operations
and sales, and is the home location of the majority of the
Executive Committee, including our CEO. Additionally,
introducing such a plan provides the opportunity in the
future for consistency between our Executive Directors and
a number of our senior leadership team in the US, where
individuals receive RSAs alongside their PSA awards.

The Committee does not currently intend to use the additional
headroom under the new Policy, nor the ability to use RSAs,
for either of the two current Executive Directors and would
consult with shareholders if this position changes in the future.
However, the Committee believes that this structural change
to the Policy is necessary to remain competitive, particularly
if we were to need to recruit externally from the US market in
the future.

I have set out further details on the intended operation of
the structure below. Full details of how the Policy will be
implemented in 2024 is set out in the ‘Executive Remuneration
in 2024’ section below:

• Structure: the proposed LTI plan will incorporate both a
PSA and an RSA, better aligning with the US market and
to enable Executive Directors to have both an element of
performance based and time based awards.

• Award Mix: The mix of the PSA and RSA will be determined by
the Remuneration Committee each year. The Remuneration
Committee will normally consult with shareholders if it intends
to change the mix for executive directors from the prior year.

• Quantum: The maximum on-target opportunity is 200 per

cent of salary, which will be made up of:

– Performance Share Awards (PSA), for which the on-
target value is half the face value, i.e. for every £1 of
on-target award value, the maximum opportunity is £2.

– Restricted Share Awards (RSA), for which the on-target

value is equivalent to their face value.

The Policy allows for a maximum on-target opportunity of
200 per cent of salary to enable higher grants where these
may be necessary, for example when recruiting from the
US market.

• PSA performance measures: The Committee will review

and decide on performance measures prior to the
commencement of each performance cycle, taking into
account business priorities.

• RSA underpin: The RSA will be subject to continued
employment and to satisfactory assessment of a
performance underpin.

Spirent Communications plc Annual Report 2023

Shareholder Consultation
As part of the Committee’s process of reviewing the Policy,
we consulted with circa 30 shareholders, who each hold over
1 per cent of the Company’s share capital and who account
for approximately 70 per cent of the Company’s issued share
capital. We were grateful to those who took the time to meet
with us to discuss our proposals and were pleased that
virtually all shareholders were open to the use of a hybrid
plan and understood our rationale for introducing one today
to give us the flexibility to use the arrangement over the
duration of the new Policy cycle if it is needed. Shareholder
questions primarily focused on how the Committee intends
to implement the Policy in 2024, details of which are set
out below.

Executive remuneration in 2024
We took the time to discuss the outcome of the vote on the
remuneration report at the 2023 AGM with shareholders
during the consultation and this informed the proposed
implementation for the coming year.

We are not proposing to make any changes to Executive
Director packages for 2024. This means that neither Executive
will receive a base salary increase, which is in line with the
wider employee base, where most employees received no
increase at all during 2023.

For the Annual Incentive, the metrics of profitability, revenue
and strategic and operational priorities remain the same, with
the targets for the financial metrics updated to require growth
from the achievements of 2023. The Committee believes the
targets they have set to be challenging and appropriate;
details of the actual targets will be disclosed in the 2024
Annual Report. One-third of the Annual Incentive achieved
will be deferred into shares, to be retained for a period of
three years.

No changes are proposed to the LTIP grants to the current
Executive Directors for 2024, with the grant levels as follows:

• CEO PSA: 200 per cent of salary face value (i.e. on-target

value of 100 per cent of salary).

• CFO PSA: 175 per cent of salary face value (i.e. on-target

value of 87.5 per cent of salary).

Neither Executive Director will receive an RSA component
in 2024. Given there is no change to LTI quantum for 2024,
these awards are permissible under the current Policy and it
is therefore the intention to make the awards at the normal
time (i.e. shortly after announcement of full year results) rather
than waiting until after the vote on the new Policy at the AGM.
The 2024 PSA award will be assessed against an EPS growth
metric for 50 per cent of the award, a relative TSR metric
for 40 per cent of the award and an ESG measure for 10 per
cent of the award. In line with the approach for the 2023 LTIP
award, the relative TSR metric will be measured based on
performance compared to the FTSE 250 index as a whole
(excluding financial services and investment trusts).

I hope you find this report clear and informative. I will be available
at the 2024 AGM to respond to any questions that shareholders
may have with respect to the work of the Committee.

Gary Bullard
Chairman, Remuneration Committee
5 March 2024

CORPORATE GOVERNANCEAt a glance

Performance snapshot

Annual Incentive performance

Long-Term Incentive performance

Measure

Performance
opportunity (%)

CEO

CFO

Achievement
(% of max)

Adjusted operating profit 50.00
30.00
Revenue
6.67
Services and solutions
6.67
ESG
6.67
Hyperscalers
–
Cash flow

50.00
30.00
6.67
6.67
–
6.67

–
–
50.0
100.0
82.0
100.0

Measure

Performance (%)

Achievement
(% of max)

Earnings per share1
Relative Total
Shareholder Return2

50.00

–

Notes
1. Data shown relates to the EPS element of the LTIP award which

will vest in May 2024, based on performance to 31 December 2023.

2. Data shown relates to the TSR element of the LTIP award which

vested in May 2023.

Alignment of Executive remuneration with Group strategy

Performance measure

Annual
Incentive

LTIP Reason for selection

Adjusted operating profit

A key performance indicator showing overall performance of the Group

Revenue

A key performance indicator showing how successful Spirent has been
in expanding its markets and growing its customer base

Strategic and operational
priorities

A focus on specific factors aligned with Spirent’s short and medium-term
strategic objectives that promote long-term performance

Adjusted EPS

Relative TSR

Incentive timelines

A key measure of underlying profitability

A key measure of Spirent’s return to shareholders through the cycle

Annual Incentive

Performance period

Deferral/retention period

Long-Term Incentive

Years

Total CEO remuneration £000

Total CFO remuneration £000

3,000

2,500

2,000

1,500

1,000

500

2,208.4

1,416.8

£000

Salary

Benefits

Retirement benefits

Annual Incentive

Long-Term Incentive

2022

2023

3,000

2,500

2,000

1,500

1,000

500

1,110.6

835.7

2022

2023

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCE

Report on Directors’ remuneration continued

Annual remuneration report

Single figure of total Executive Directors’ remuneration 2023 (audited)
The tables below set out the single figure of remuneration received by the Executive Directors during 2023. Details of
performance under the Annual Incentive and Long-Term Incentive Plans are set out on pages 86 to 87 and 89 respectively.

Salary/fees2
Benefits3
Retirement benefits4

Fixed remuneration

Annual Incentive5
Long-Term Incentive6

Variable remuneration

Total7

Paula Bell
£000

Eric Updyke1
£000

2023

403.6
15.0
56.5

475.1

84.1
276.5

360.6

835.7

2022

384.4
16.9
76.9

478.2

325.1
307.3

632.4

2023

727.3
15.7
43.5

786.5

168.7
461.6

630.3

1,110.6

1,416.8

2022

635.8
25.4
25.2

686.4

582.4
939.6

1,522.0

2,208.4

Notes
1. 2023 data for Eric Updyke, who is US based and paid in US Dollars, has been converted using an exchange rate of £1.244:£1 (2022 $1.236:£1).
2. Salary/fees: cash paid in respect of the year.
3. Benefits: taxable value of all benefits in respect of the year which comprise private healthcare, permanent health insurance, life insurance and car allowance.
4. Retirement benefits: cash value in lieu of pension for Paula Bell; Company contributions to 401(k) plan and to Deferred Compensation Plan for Eric Updyke.
5. Annual Incentive: cash incentive payable in respect of performance during 2023, one-third of the value of which will be deferred into shares.
6. Long-Term Incentive: value of elements of LTIP awards vesting based on performance during 2023.
7. The total single figure of remuneration for 2022 for each Executive Director has been restated to reflect the actual Long-Term Incentive figure using the share

price at the date of vesting of 174.55 pence.

Annual Incentive (audited)
During 2023, incentives were available to Executive Directors on an annual basis, with the following maximum total Annual
Incentive available:

Paula Bell
Eric Updyke

2023
base salary
£000

403.6
727.3

On-target total
incentive available

Maximum total
incentive available

Per cent of
base salary

75.0
90.0

£000

302.7
637.7

Per cent of
base salary

125.0
150.0

£000

504.5
1,091.0

The maximum Annual Incentive which could be earned was determined by reference to growth targets in the Company’s
adjusted operating profit and revenue, representing 50 per cent and 30 per cent of the incentive respectively, with performance
against an agreed set of strategic and operational priorities linked to improving Spirent’s performance representing the
remaining 20 per cent of the incentive.

Adjusted operating profit element (50 per cent of Annual Incentive)

Entry point (20 per cent)
On target (60 per cent)
Maximum (100 per cent)

Achievement

Target
$ million

Achievement
$ million

109.2
115.2
121.2

–
45.2
–

0 per cent

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCERevenue (30 per cent of Annual Incentive)

Entry point (20 per cent)
On target (60 per cent)
Maximum (100 per cent)

Achievement

Target
$ million

Achievement
$ million

565.0
595.0
607.0

–
474.3
–

0 per cent

Strategic and operational priorities (20 per cent of Annual Incentive)
Eric Updyke and Paula Bell were each set priorities at the start of 2023, with performance of each target to be equally weighted.

Services and Solutions (CEO: Eric Updyke; CFO: Paula Bell)
Objective: Driving Managed Solutions Growth.

Managed Solutions growth is a key element of our strategy, providing greater confidence over future revenue projections and helping
to mitigate the impacts of technical cyclicality. Given the significant progress in terms of (i) growth of non-telco Managed Service
bookings and (ii) Managed Solutions as a percentage of overall revenue, the Committee felt a 50% achievement appropriate.

Achievement

ESG (CEO: Eric Updyke; CFO: Paula Bell)
Objective: Submission of Spirent’s implementation plan to SBTi.

Preparation of full implementation plan to SBTi.

Achievement

Cash Flow (CFO: Paula Bell)
Objective: To maintain strong cash flow conversion in line with the agreed budget.

Achievement

50.0 per cent

Status

Achievement

Achieved

100 per cent

Strong conversion of operating profit into free cash flow allows Spirent to fund growth opportunities, both organic and inorganic,
in addition to making returns to shareholders through dividends. Targets were set by the Committee at 65 per cent at entry,
69 per cent at target and 74 per cent at stretch. The free cash flow conversion also excludes exceptional items (i.e. acquisitions,
dividends, share buyback, additional pension funding).

Achievement

Hyperscalers (CEO: Eric Updyke)
Objective: Demonstrate sustainable, profitable growth with Hyperscaler customers.

Free cash flow
%

Achievement

83.0 100 per cent

Cloud strategy is an important focus area to drive sustainable, profitable growth. One measure of our progress in this area is
bookings growth within the Hyperscaler segment (e.g. Facebook, Apple, Google, Amazon, Microsoft, Equinix, Oracle). Growth
targets for bookings with this group of customers were set by the Committee at $40.5 million at entry, $43.0 million at target and
$45.0 million at stretch.

Achievement

Bookings
$ million

Achievement

44.1 82.0 per cent

Discretion
Following assessment of performance against the targets that have been set, the Committee agreed that no discretion would be
exercised with regard to the outcomes for the 2023 Annual Incentive.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Annual Incentive (audited) continued
Summary of Annual Incentive target outcomes

CFO
Paula Bell

CEO
Eric Updyke

Per cent of total
incentive

Achievement as per
cent of maximum
opportunity

Adjusted operating profit
Revenue
Strategic and operational priorities

• Services and solutions

• ESG

• Cash flow

• Hyperscalers

Total

50.0
30.0
20.0
–
–
–
–

100.0

–
–
16.7
50.0
100.0
100.0
–

16.7

2023

2022

Per cent of
maximum
Annual
Incentive
opportunity

Per cent of
annual base
salary

16.7
15.5

20.9
23.2

Per cent of
maximum
Annual
Incentive
opportunity

67.7
61.0

Per cent of
annual base
salary

84.6
91.5

£000

84.1
168.7

Paula Bell
Eric Updyke

–
–
15.5
50.0
100.0
–
82.0

15.5

£000

325.1
582.4

Deferred Bonus Plan (audited)
The Remuneration Policy approved by shareholders at the 2019 AGM introduced the deferral of one-third of the incentive
achieved under the Annual Incentive into shares, to be retained for a period of three years. This applies to Executive Directors
employed by the Group at the date of the payment of the 2023 Annual Incentive.

The deferral element of the 2023 Annual Incentive will be applied as follows:

Paula Bell
Eric Updyke

Total value of Annual
Incentive achieved
£000

Value of Annual
Incentive payable as
cash
£000

Value of Annual
Incentive deferred into
shares
£000

84.1
168.7

56.1
112.5

28.0
56.2

Vesting date for
deferred shares

March 2027
March 2027

Total retirement entitlements (audited)
During 2023, Paula Bell received a taxable cash allowance in lieu of pension of 14 per cent of base salary; the allowance paid
was £56,509 (2022 20 per cent of base salary, £76,884).

Eric Updyke is eligible to participate in the Spirent Communications, Inc 401(k) programme with a 4 per cent Company
match of his own contributions, subject to any applicable IRS cap. Mr Updyke enrolled in the programme on 1 January 2020,
receiving Company contributions for 2023 of £10,390 (2022 £9,871). Mr Updyke is also eligible to participate in the US Deferred
Compensation Plan, a scheme which allows individuals to elect to defer compensation from the Company until a later date.
A 4 per cent Company match was applied to compensation deferred in 2023, with Mr Updyke receiving £33,061 (2022 £15,310).

Long-Term Incentive Plan outcomes (audited)
In line with previous years, the operation of the LTIP is such that the EPS and absolute TSR performance measures run over
different performance periods.

EPS

Absolute TSR

The performance period for EPS performance conditions
starts at the beginning of the financial year in which the
award is granted and ends three financial years later.

The performance period for Absolute TSR performance conditions
starts shortly before the date of grant and ends three years later.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEThe LTIP value reported in the Single Total Figure of Remuneration on page 86 relates to measures where the performance
period completed during the relevant year. Consequently, the EPS and Absolute TSR elements disclosed in the Single Total Figure
of Remuneration relate to different LTIP awards. This is set out in further detail below.

Award

2020 LTIP

2021 LTIP

Performance metrics

EPS
(2022 Single Figure)

Absolute TSR
(2023 Single Figure)

EPS
(2023 Single Figure)

Absolute TSR
(2024 Single Figure)

Weighting
per cent

Threshold

Maximum

Actual

Achievement
per cent

50.00

15.5 cents

18.82

18.86

100.00

50.00

17.00%

42.00%

(2.1%)

75.00

16.99 cents

20.62 cents

7.55

–

25.00

20.00%

48.00%

Performance period not
yet complete

2023 LTIP Single figure reconciliation

Absolute TSR
(2020 LTIP
Award)

EPS 1
(2021 LTIP
Award)

2023 Single
Figure

Paula Bell

Eric Updyke

Shares awarded
Achievement
Shares vesting
Value of vested shares2
£000
Increase in value due to share price appreciation £000

per cent

Shares awarded
Achievement
Shares vesting
Value of vested shares2
£000
Increase in value due to share price appreciation £000

per cent

91.134
–
–
–

–

181,238
–
–
–
–

129,590
–
–
–

–

218,176
–
–
–
–

–
–
–
–

–

–
–
–
–
–

Notes
1. The level of vesting for the EPS element of the 2021 award is based on the audited EPS figure published in this Annual Report 2023; the estimate value is based on

the three-month average price of a Spirent Ordinary Share to 31 December 2023 of 107 pence.

2. TSR value of vested shares is calculated using the share price on the date of vesting.

External appointments (audited)
From 1 September 2018, and with the approval of the Company’s Board, Paula Bell was appointed to a non-executive director
role with Keller Group plc; she became chairman of the audit committee of Keller Group plc on 1 January 2019. Fees in respect of
this directorship are paid directly to and retained by Ms Bell.

On appointment in 2019 the Board agreed that it was acceptable for Eric Updyke to continue with his non-executive role with
Symend, Inc. Fees in respect of this directorship are paid directly to and retained by Mr Updyke.

Payments to past Directors (audited)
No payments were made to past Directors during the year under review.

Payments for loss of office (audited)
There were no payments for loss of office during the year under review.

Payments of advances, credits or guarantees (audited)
There were no payments of advances, credits or guarantees to Directors during the year under review.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Executive Directors’ interests in share awards (audited)
The table below sets out the Executive Directors’ interests in share awards. Details of the Executive Director shareholding
requirements and achievements against these are set out on page 95.

Paula Bell3

Eric Updyke3

At 1 January 2023
Granted at 178.74 pence (face value LTIP £706,348; DBP £108,374)
Dividend equivalents
Vested/released
Lapsed
At 31 December 2023

At 1 January 2023
Granted at 178.74 pence (face value LTIP £1,489,748; DBP £197,531)
Dividend equivalents
Vested/released
Lapsed
At 31 December 2023

Notes
1. Awards under the LTIP will only vest to the extent that relevant performance conditions are met.
2. No performance conditions apply to DBP awards.
3. Face value equals number of awards at the price granted.

Unvested
LTIP awards 1

Unvested
DBP awards 2

468,822
395,182
–
91,134
91,134
864,014

1,298,841
833,472
–
181,238
181,239
2,132,313

181,249
60,632
4,736
59,227
–
187,390

308,810
110,513
6,701
83,783
–
342,241

Share incentive interests awarded during the year (audited)
In March 2023 the Committee approved awards to Ms Bell and Mr Updyke, as shown in the table above, using an average
closing share price for the five days prior to the award date, as follows:

• Restricted Stock Units under the Deferred Bonus Plan representing one-third of the value of the Annual Incentive outcome
based on performance during 2023. These awards will vest on 15 March 2026, with no further performance conditions to
be satisfied.

• Performance Shares under the Long-Term Incentive Plan equivalent to 175 per cent and 200 per cent of base salary

respectively. The metrics and weightings for the 2023 LTIP award to Executive Directors were changed from those used in
previous years, in response to feedback from shareholders.

50 per cent of the award:
Earnings per share
The EPS performance period starts at the beginning of the financial year in which the award is made, in this case on 1 January 2023,
and ends after three years, in this case on 31 December 2025. The adjusted EPS figure reported for the financial period to
31 December 2022, which forms the baseline for this performance target, was 18.86 cents.

Target EPS (adjusted)

Below 21.21 cents

21.21 cents

Proportion of Performance Shares vesting (per cent)

Above 21.21 cents and below 25.79 cents

On a straight-line basis between 25 and 100

25.79 cents and higher

100

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCE40 per cent of the award:
Relative TSR against the FTSE 250 index (excluding financial services and investment trusts)
When determining Relative TSR growth for the Company, share prices are averaged over 90-day periods immediately prior to,
and at the end of, the performance period commencing 14 days prior to the date of award and ending three years later.

Relative TSR1 - total growth

Below Median growth

Median growth

Proportion of Performance Shares vesting (%)

Above Median but below Upper Quartile growth

On a straight-line basis between 25 and 100

Upper Quartile growth or higher

100

Note
1. Growth includes re-invested dividends.

10 per cent of the award:
ESG
In 2023 produce an optimisation plan of Spirent’s facilities and lab footprint in order to achieve longer-term carbon reduction
goals. Implement that plan and achieve the identified carbon reduction targets, such reductions to be externally assured.

Awards made to Executive Directors under the Spirent Long-Term Incentive Plan in 2023 are subject to a post-vesting holding
period of an additional two years.

Dilution (audited)
Overall shareholder dilution resulting from the Company’s discretionary share incentive plans (on a rolling ten-year basis) has
decreased slightly by 0.8 per cent when comparing the positions at 31 December 2023 (0.5 per cent) and 31 December 2022
(1.3 per cent). The overall number of share incentives outstanding has increased to 11.1 million at 31 December 2023 (2022 8.4 million).

Table of CEO remuneration1

Year

2023
2022
2021
2020
2019
2019
2018
2017
2016
2015
2014

CEO

Eric Updyke
Eric Updyke
Eric Updyke
Eric Updyke
Eric Updyke2
Eric Hutchinson3
Eric Hutchinson
Eric Hutchinson
Eric Hutchinson
Eric Hutchinson
Eric Hutchinson

CEO single figure of
total remuneration
£000

Annual bonus
payout against
maximum
opportunity
per cent

Long-Term Incentive
vesting rates against
maximum
opportunity
per cent

1,416.8
2,878.1
2,536.2
1,867.6
968.8
1,548.6
1,533.4
1,292.6
632.6
497.1
521.6

12.1
61.0
100.0
83.2
85.1
85.1
80.0
86.8
22.6
–
–

–
100
86
100
–
89
63
–
–
–
–

Notes
1. Data for Mr Updyke’s earnings are presented in Sterling based on an average exchange rate for 2023 of $1.2705:£1. Prior year data in this table has been
recalculated from US Dollars to be presented in Sterling at the following average exchange rates: 2022 $1.2360:£1; 2021 $1.3745:£1; 2020 $1.284:£1; 2019
$1.2779:£1; 2014 $1.65:£1; 2013 $1.56:£1. During the years 2018 to 2015, Mr Hutchinson’s salary was paid in Sterling, so no currency calculation is required.

2. Eric Updyke took up the position of CEO on 1 April 2019.
3. Earnings disclosed are to 30 June 2019, when Eric Hutchinson retired from the Spirent Group.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

CEO pay ratio
For the purposes of this year’s disclosure, the gender pay gap data from our 5 April 2023 snapshot has been used to identify
the three appropriate employees for comparison with the CEO (Option B). Further detail on the methodology is set out below.

The table below compares the 2023 single figure of remuneration for the individual who fulfilled the role of CEO during the
period with that of the Group employees who are paid at the 25th percentile (lower quartile), 50th percentile (median) and 75th
percentile (upper quartile) of its UK employee population.

2023

2022

2021

2020

20191

25th
percentile
pay ratio

Median
pay ratio

75th
percentile
pay ratio

36:1

65:1

54:1

50:1

72:0

23:1

44:1

38:1

32:1

53:1

13:1

28:1

22:1

18:1

24:1

Method

Option B

Note
1. The data provided for 2019 is the aggregate 2019 single figure of remuneration for the two individuals who fulfilled the role of CEO during the period which

includes a three-month period where both individuals were receiving remuneration and Annual Incentive payments to both individuals.

The remuneration figures for all employees were determined at 31 December 2023.

Under Option B, the latest available gender pay gap data is used to identify the best equivalent for three Group employees in
the UK whose hourly rates of pay are at the 25th, 50th and 75th percentiles for the Group and their total pay and benefits figure
for 2023 is then calculated. The identified employees are considered to be reasonably representative since the structure of their
remuneration arrangements is in line with that of the majority of the UK workforce. The table below sets out the salary and total
pay and benefits for the three identified quartile point employees:

Salary (£)

Total pay and benefits (£)

25th
percentile
(P25)

£36,000

£39,581

Median
(P50)

75th
percentile
(P75)

£57,919

£91,464

£61,815

£105,818

Each employee’s pay and benefits were calculated using each employee’s remuneration, consistent with the CEO remuneration,
on a full-time equivalent basis. No adjustments were made and no components of pay have been omitted.

Base salaries of all employees, including our Executive Directors, are set with reference to a range of factors including market
practice, experience and performance in role. In reviewing the ratios the Committee also noted that the CEO’s remuneration
package is weighted more heavily towards variable remuneration (including the Annual Incentive and Long-Term Incentive Plan)
than the wider workforce due to the nature of the role. This means the ratio is likely to fluctuate depending on the performance
of the business and associated outcomes of incentive plans in each year.

The Committee notes that the 2019 ratio data covered a period during which there were two individuals in the role of CEO, one
of whom (Eric Hutchinson) received a significant vesting of an LTIP award during the period; although the 2020, 2021 and 2022
data includes the vesting of the tranches of Eric Updyke’s buy-out award of restricted stock, this award was at a lower quantum.

The Committee also notes that the CEO pay ratio has increased over the prior year. This is as a result of the vesting of the third
and final tranche of Mr Updyke’s buy-out award of restricted stock falling during the same period as the vesting of his first
annual LTIP award of performance shares.

The Committee continues to believe the median pay ratio is consistent with the pay, reward and progression policies for our UK
employees. The salary and total pay and benefits levels for the CEO and median representative employee are competitively
positioned within the relevant markets and reflect the operation of our remuneration structures. These are effective in
appropriately incentivising staff, while having regard to the Company’s risk framework and risk appetite and to rewarding
the approach as well as the outcome of performance.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEPercentage change in remuneration of the Directors and Average Employee
The table below shows the movement in salary, benefits and Annual Incentive for each of the Directors between the current
and prior years compared to the remuneration of the Average Employee1:

Executive Directors

Non-executive Directors2

Average
Group
Employee 1

Eric
Updyke 3

Paula
Bell

Sir Bill
Thomas

Maggie
Buggie 3

Gary
Bullard

Wendy
Koh

Edgar
Masri

Jonathan
Silver

Base salary
2022–2023
2021–2022
2020–2021
2019–2020
2018–2019
Benefits4
2022–2023
2021–2022
2020–2021
2019–2020
2018–2019
Annual Incentive5
2022–2023
2021–2022
2020–2021
2019–2020
2018–2019

(3.3)
0.2
4.4
4.1
4.8

0.6
(0.7)
10.3
7.1
(6.6)

(67.6)
(26.2)
14.8
6.2
12.3

15.0
3.0
3.0
3.0
n/a

17.0
4.2
46.7
38.2
n/a

(78.0)
(37.2)
25.8
0.7
n/a

4.75
3.0
3.0
3.5
3.0

(22.9)
2.7
2.4
2.9
2.7

(41.3)
(30.3)
27.1
(3.4)
36.3

4.75
21.2
3.0
3.0
9.4

4.75
n/a
–
–
–

4.75
2.6
5.6
2.6
2.5

4.75
3.1
3.0
2.9
5.7

4.75
2.6
4.1
2.4
2.5

–
–
–
–
–

Notes
1. Average Group employee data is based on the employee remuneration costs and average number of employees set out in note 8 to the consolidated financial

statements with costs for the CEO, CFO and Non-executive Directors removed.

2. Non-executive Directors do not receive benefits or pension payments and are not eligible for variable remuneration.
3. Where the incumbent did not serve for the full year, the calculation has not been made as it is not representative. Eric Updyke joined the Board in April 2019;

Maggie Buggie joined the Board in April 2021.

4. Benefits include employer retirement benefit contributions and Company match payments, car allowance, health insurance and life assurance.
5. Total Annual Incentive includes all Annual Incentive payments and commission.

Relative importance of the spend on pay
The following table shows the total expenditure on pay for all of the Company’s employees compared to distributions to
shareholders by way of dividend. In order to provide context for these figures, adjusted operating profit is also shown.

Employee remuneration costs1
Distributions to shareholders2
Adjusted operating profit3

2023
$ million

255.9
46.5
45.2

2022
$ million

267.7
39.9
129.5

Per cent
change

(4.4)
16.5
(65.1)

Notes
1. Remuneration, social security costs, pension and other related costs and expense of share-based payment (see note 8 to the consolidated financial statements).
2. Dividends declared and paid in the year (see note 12 to the consolidated financial statements).
3. Before acquired intangible assets, share-based payment and other adjusting items amounting to $26.8 million in total (2022 $16.8 million).

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCE
Report on Directors’ remuneration continued

Total Shareholder Return (TSR) performance
The graph below shows the TSR performance for the last ten financial years of Spirent Communications plc against the FTSE
250 Index and the FTSE TechMARK 100 Index, excluding those companies which were also constituents of the FTSE 100 Index
at the commencement of the period. These indices have been selected as the most relevant comparators for Spirent across
the time period reflected in the graph below due to Spirent’s business operations in the technology space and the Company’s
market capitalisation and size.

Ten-year TSR performance – Spirent vs FTSE TechMARK100
and FTSE 250

400

300

200

100

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

Dec 18

Dec 19

Dec 20

Dec 21

Dec 22

Dec 23

Spirent

FTSE 250

FTSE TechMARK 1001

Note
1. As of 1 January 2014, excluding FTSE 100 companies.

The middle market price of an Ordinary Share at the close of business on the first and last days the London Stock Exchange was
open for trading in 2023, was 265.4 pence and 123.3 pence, respectively, and during that period ranged between a high of 283.6
pence and a low of 90.1 pence.

Non-executive Director fees (audited)
Details of individual appointments are as follows:

Director

Maggie Buggie
Gary Bullard
Wendy Koh
Edgar Masri
Jonathan Silver
Sir Bill Thomas

First appointed as
a Director

Current appointment
due to expire

29 April 2021
1 December 2016
11 January 2018
11 January 2018
25 June 2015
1 December 2016

2025 AGM
2026 AGM
2024 AGM
2024 AGM
2025 AGM
2026 AGM

Single figure of total Non-executive Directors’ remuneration 2023 (audited)

Maggie Buggie
£000

Gary Bullard
£000

Wendy Koh
£000

Edgar Masri
£000

Jonathan Silver
£000

Sir Bill Thomas
£000

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Salary/fees
Benefits1
Retirement benefits1

Total

58.9
–
–

58.9

56.3
–
–

56.3

69.9
–
–

69.9

67.3
–
–

67.3

58.9
–
–

58.9

56.3
–
–

56.3

58.9
–
–

58.9

56.3
–
–

56.3

70.9
–
–

70.9

68.3
–
–

68.3

235.7 225.0
–
–

–
–

235.7 225.0

Notes
1. Non-executive Directors do not receive benefits or pension payments and are not eligible for variable remuneration.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEStatement of Directors’ shareholdings and share interests (audited)
The beneficial interests of the Directors and their connected persons in the shares of the Company are set out below:

Executive Directors
Paula Bell2
Eric Updyke

Non-executive Directors
Maggie Buggie
Gary Bullard
Wendy Koh
Edgar Masri
Jonathan Silver
Sir Bill Thomas

At 31 December 2022
or date of
appointment
Ordinary Shares 1

At 31 December 2023
Ordinary Shares 1

At 5 March 2024
Ordinary Shares 1

509,525
642,477

–
78,393
–
20,000
70,000
67,442

593,453
933,928

20,458
135,215
–
20,000
100,000
94,873

593,881
933,928

20,458
135,215
–
20,000
100,000
94,873

Notes
1. Directors’ beneficial interests do not form part of the remuneration provided by the Company.
2. Since 31 December 2023, Paula Bell has acquired 214 “Partnership” Ordinary Shares and received 214 “Matching” Shares under the UK Employee Share Purchase

Plan at a price of 122.2 pence per share (204 shares) and 111.7 pence per share (224 shares), respectively.

Shareholding guidelines for Executive Directors (audited)
The Committee believes that to further align their interests with those of shareholders, Executive Directors should have a
significant shareholding in the Company. Under the 2021 (and proposed 2024) Remuneration Policy, the Committee requires
Executive Directors to build a holding of shares equivalent in value to 200 per cent of base salary.

Under the 2021 Remuneration Policy, the current Executive Directors will not be required to hold on to beneficially owned
shares after the end of their employment with the Group. However, any new Executive Directors joining the Company would be
required to retain the lower of the respective in-role shareholding guideline and the accrual shareholding immediately prior to
departure for a period of two years.

The chart below sets out the minimum shareholding requirements and the actual shareholdings for the individuals. The
percentages are a function of base salary, shareholdings and share incentives at 31 December 2023.

Executive Director shareholdings as a percentage of 2023 base salary1

Paula Bell

181

Eric Updyke

158

265%

247%

100

150

200
Percentage

250

300

350

400

Beneficially owned shares (31 December 2023)

After tax value of Deferred Bonus award

After tax value of LTIP Performance Share award subject to holding period only

Note
1. For the purpose of this table, the interests have been valued using the closing share price on the last dealing day in December 2023 of 123.3 pence

per share. Details of outstanding share incentive awards is set out on page 90.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Statement of implementation of Remuneration Policy in 2024 (unaudited)
Information on how the Company intends to implement the Executive Directors’ Remuneration Policy in 2024 is set out below.

Base salary

Paula Bell
Eric Updyke1

2024

2023

£403,638
£727,300

£403,639
£727,300

Per cent
change

–
–

Note
1. The figures shown represent the annual base salaries for Eric Updyke at an exchange rate of $1.244:£1.

Benefits
• Life insurance cover of four times annual base salary

• Permanent health insurance

• Private healthcare cover for executive and family

• Car allowance

Retirement benefits
In line with the wider workforce where the Director provides services, Eric Updyke is eligible to participate in the Spirent
Communications, Inc 401(k) programme with a 4 per cent Company match of his own contributions, subject to any applicable
IRS cap. Mr Updyke is also eligible to participate in the US Deferred Compensation Plan, which has a 4 per cent Company
match of the participant’s contributions which are not made to the participant’s 401(k) account due to restrictions imposed
by the IRS.

Paula Bell will receive a taxable cash sum in lieu of pension at a rate of 14 per cent of base salary.

Annual Incentive
The Committee has set targets for the year focused on adjusted operating profit, revenue and strategic and operational
priorities. Although the target detail is considered commercially sensitive, the weightings for the year ended 31 December 2024
are as follows:

Adjusted operating profit
Revenue
Strategic and operational priorities

On-target and maximum Annual Incentive payments are as follows:

Paula Bell
Eric Updyke

50.0 per cent
30.0 per cent
20.0 per cent

On-target
performance
per cent of
base salary

Maximum
performance
per cent of
base salary

75
90

125
150

One-third of any incentive achieved through the Annual Incentive will be deferred into shares for an additional period of three
years. Details of these targets and their achievement will be disclosed in the Directors’ Annual Remuneration Report 2024.

Award under Spirent Long-Term Incentive Plan
It is anticipated that the following award will be made under the LTIP in 2024 in the form of Performance Shares:

Paula Bell
Eric Updyke1

Note
1. The figure shown represents the annual base salary for Eric Updyke at an exchange rate of $1.2705:£1.

Per cent of
base salary

Anticipated
value of award

175
200

£706,367
£1,417,142

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEThe metrics and weightings for the 2024 LTIP award to Executive Directors are:

50 per cent of the award:
Earnings per share
The EPS performance period starts at the beginning of the financial year in which the award is made, in this case on 1 January 2024,
and ends after three years, in this case on 31 December 2026. The adjusted EPS figure reported for the financial period to
31 December 2023, which forms the baseline for this performance target is 7.55 cents.

Target EPS (adjusted)

Proportion of Performance Shares vesting (per cent)

Below 7.55 cents
7.55 cents
Above 7.55 cents and below 10.32 cents
10.32 cents and higher

0
25
On a straight-line basis between 25 and 100
100

40 per cent of the award:
Relative TSR against the FTSE 250 index (excluding financial services and investment trusts)
When determining Relative TSR growth for the Company, share prices will be averaged over 90-day periods immediately
prior to, and at the end of, the performance period, which will commence 14 days prior to the date of award and will end
three years later.

Relative TSR1 – total growth

Below Median growth
Median growth
Above Median but below Upper Quartile growth
Upper Quartile growth or higher

Proportion of Performance Shares vesting (%)

0
25
On a straight-line basis between 25 and 100
100

Note
1. Growth includes re-invested dividends.
10 per cent of the award:
ESG
Achievement over a three-year period of the aggregate carbon emissions reduction targets necessary to meet the Science
Based Target Initiative to limit global warming to 1.5°c.

Awards made to Executive Directors under the Spirent Long-Term Incentive Plan in 2024 are subject to a post-vesting holding
period of an additional two years.

Non-executive Director fees (audited)
During 2023 the Board reviewed the level of fees to be paid to Non-executive Directors from 1 January 2024, also taking into
account the wider employee base, to ensure alignment. To avoid any conflict of interest, the matter was considered by the
Chairman and Executive Directors in the absence of the Non-executive Directors affected.

Following consideration, no increase was made. It was also agreed that the additional fees paid to Committee Chairmen and
the Senior Independent Non-executive Director would not be increased in 2024.

Non-executive Directors
Audit Committee Chairman
Remuneration Committee Chairman
Senior Independent Non-executive Director1

2024

£58,948
£12,000
£11,000
£10,000

2023

£58,948
£12,000
£11,000
£10,000

Per cent
change

–
–
–
–

Note
1. The current Senior Independent Non-executive Director has chosen to continue to waive this additional fee during the period under review and for 2024.

During 2023 the Remuneration Committee reviewed the level of fees to be paid to the Non-executive Chairman from 1 January 2024.
To avoid any conflict of interest, the matter was considered by the Committee in the absence of the individual affected.

Following consideration, no increase was made.

Non-executive Chairman

2024

2023

£235,687

Per cent
change

–

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Share incentive interests vesting during 2024 (audited)
Deferred Bonus Plan: Restricted Stock (March 2024)
Both Ms Bell and Mr Updyke have awards of Restricted Stock under the DBP which are due to vest on 11 March 2024.

These awards are the result of the deferral of one-third of the value of the Annual Incentive achieved based on performance
in 2020. As such, no further performance conditions are applicable to the awards prior to vesting.

Long-Term Incentive Plan: Performance Shares (March 2024)
Both Ms Bell and Mr Updyke have awards of Performance Shares under the LTIP which are due to vest on 16 March 2024,
subject to an EPS performance condition and an Absolute TSR performance condition.

The EPS condition has not passed the growth threshold required and will lapse in full.

The Absolute TSR condition will be tested after the conclusion of the performance period. Current estimates, based on the
growth in market price of a Spirent Ordinary Share between the beginning of the performance period and the date of this
report, suggest it is unlikely that there will be any vesting under this element of the award.

Full details of the vesting of these awards will be disclosed in the Directors’ Annual remuneration report 2024.

No new shares were issued during the year, with all exercises of share incentives being satisfied by the transfer of shares held by
the Company’s Employee Share Ownership Trust (ESOT). At the date of this report, the ESOT holds 6.1 million Ordinary Shares for
the purpose of satisfying the exercises of current and future awards by employees and former employees of the Group.

Illustrations of the application of Remuneration Policy in 2024
A significant proportion of remuneration is linked to performance, particularly at maximum performance levels. The charts
below show how much the Executive Directors could earn under Spirent’s Remuneration Policy under different performance
scenarios in the 2024 financial year. The following assumptions have been made:

Variable remuneration

Minimum

Target

Maximum

Fixed remuneration

Annual Incentive

Long-Term Incentive

Base salary1, benefits2, pension3

–

Base salary1, benefits2, pension3 On target4

Threshold vest (25 per cent)6

Base salary1, benefits2, pension3 Maximum5

Full vest (100 per cent)6

Maximum + 50 per cent
share price growth

Base salary1, benefits2, pension3 Maximum5

Full vest (100 per cent)6 + 50 per cent
growth in share price from date of grant

Notes
1. Base salary effective 1 January 2024.
2. Benefits as received during 2023 financial year.
3. Cash contributions to the Company’s 401(k) plan and Deferred Compensation Plan during 2023 financial year for CEO and cash sum in lieu of pension equal to

20 per cent of base salary received during 2023 financial year for CFO.

4. Annual Incentive on-target payout of 90 per cent of base salary for CEO and 75 per cent of base salary for CFO.
5. Annual Incentive maximum payout of 150 per cent of base salary for CEO and 125 per cent of base salary for CFO.
6. Long-Term Incentive on-target payout of 25 per cent of award and maximum payout of 100 per cent of award.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCECEO

Minimum
performance

On-target

100%

43.58%

36.27%

20.15%

£786,500

£1,804,720

Maximum performance

23.60%

32.74%

43.65%

£3,332,050

Maximum + share
price growth

19.38%

26.87%

53.75%

£4,059,350

Fixed remuneration

Annual Incentive

Long-Term Incentive

CFO

Minimum performance

100%

On-target

49.78%

31.72%

18.50%

£475,148

£954,470

Maximum performance

28.18%

29.92%

41.89%

£1,686,065

Maximum + share
price growth

23.30%

24.74%

51.96%

£2,039,250

Fixed remuneration

Annual Incentive

Long-Term Incentive

Remuneration Committee
Members
During the year and at the date of this report, Committee members were:

• Gary Bullard (Committee Chairman);

• Maggie Buggie;

• Wendy Koh;

• Edgar Masri; and

• Jonathan Silver.

Responsibilities
The Remuneration Committee is responsible to the Board for determining:

• Remuneration Policy for the Executive Directors and Chairman, taking into account remuneration trends across the Company;

• specific terms and conditions of employment of each individual Executive Director;

• overall policy for remuneration for the Executive Directors’ direct reports;

• design and monitoring of the operation of any Company share incentive plans;

• setting stretching incentive targets to encourage enhanced performance;

• an approach that rewards fairly and responsibly contribution to the Company’s long-term success; and

• other provisions of the Executive Directors’ service agreements, ensuring that contractual terms on termination and payments

made are fair to the individual and the Company and that failure is not rewarded and loss is mitigated.

The Committee’s remit is set out in detail in its terms of reference, which are reviewed regularly and were approved by the Board
in December 2023.

The Committee’s terms of reference are available on the Company’s website at corporate.spirent.com.

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Remuneration Committee continued
Composition of the Committee
At the date of this Report, the Remuneration Committee comprises five Independent Non-executive Directors, one of whom
acts as Committee Chairman. The Company Secretary serves as Secretary to the Committee. All members are considered
independent within the meaning of the 2018 UK Corporate Governance Code.

Advisers to the Committee
During the period under review the Committee consulted with the Company’s Chairman, CEO, CFO and Company Secretary
& General Counsel but not on matters relating to their own remuneration.

Following a formal tender Aon was appointed by the Committee in August 2018 to undertake a market review of executive
remuneration practices and assist with the design and introduction of an updated Remuneration Policy that was put to shareholders at the
2019 Annual General Meeting. In July 2020, following a restructure at Aon, the lead adviser to the Committee transferred to work
at PwC. The Committee has retained PwC in this role because it values the robust data and advice provided and the continuity
of provision from the advisers involved. The Committee remains satisfied that PwC is independent, thoughtful and challenging.
PwC is a member of the Remuneration Consultants Group and complies with its voluntary Code of Conduct in respect of the
provision of remuneration consulting services, details of which can be found at www.remunerationconsultantsgroup.com.

The fees paid to PwC to carry out work for the Remuneration Committee during the period under review totalled £80,000 (2022 £144,000).
Fees are based on a fixed retainer for certain services and time and materials otherwise. During the year, PwC provided other tax
and advisory services to the Company. PwC did not have any other connection with the Directors of the Company.

Kepler Associates Limited, which was acquired in June 2015 by Mercer Limited, was appointed by the Committee some years
ago to provide the results of TSR testing to determine the vesting of share incentives. The Committee has retained Mercer
Limited in this role because it values the robust data provided and continuity of advice from the consultants involved. The
Committee remains satisfied that Mercer Limited is independent, thoughtful and challenging. Mercer Limited is a member of the
Remuneration Consultants Group and complies with its voluntary Code of Conduct in respect of the provision of remuneration
consulting services, details of which can be found at www.remunerationconsultantsgroup.com, and has no other connection to
the Company. During the year Mercer did not provide any other services to the Company and did not have any other connection
with the Directors of the Company.

The fees paid to Mercer Limited to carry out work for the Remuneration Committee during the period under review totalled
£2,700 (2022 £4,800) and were based on time and materials.

Statement of shareholder voting
At the 2023 AGM on 4 May 2023, the results of shareholder voting on remuneration matters were as follows:

Advisory vote regarding the Report on Directors’ remuneration for the year to 31 December 2022:

Votes for1

340,189,272

Per cent

69.78

Votes against

Per cent

Votes cast

Votes withheld2

147,308,519

30.22

487,497,791

4,093,705

As announced immediately following this AGM, ‘‘We are disappointed with the result. The Committee felt that after 3½ years of
strong delivery by our CEO, that we needed to address a significant gap in his fixed pay from similarly sized companies in the UK
market and accordingly awarded him a 15 per cent pay increase. We consulted with our top 25 shareholders on our proposals,
which represents approximately 70 per cent of the share register. Of those shareholders who responded, we held meetings
with and received support from the majority for our proposals. Those that disagreed did not dispute the performance or the
significant beneficial changes made to the Company during the CEO’s tenure but asked us to consider phasing any increase
over a number of years. The Committee noted that input but decided to implement the increase wholly in 2023 as it wished to
align pay to the market in the near term, given the performance over a number of years. As described earlier, the Committee
has consulted further with shareholders as it prepared to update to its Directors’ Remuneration Policy, which will be brought to
the Company’s 2024 AGM.

The most recent binding vote for the Company’s Remuneration Policy was also approved by shareholders at the 2021 AGM
and effective from 29 April 2021:

Votes for1

Per cent

Votes against

Per cent

Votes cast

Votes withheld2

480,377,721

96.40

17,920,170

3.60

498,297,891

58,844

Notes
1. The “For” vote includes those giving the Company Chairman discretion.
2. A vote withheld is not a vote in law and is not counted in the calculation of the votes “For” and “Against” the resolution.

Votes “For” and “Against” are expressed as a percentage of total votes cast.

By Order of the Board

Gary Bullard
Chairman, Remuneration Committee
5 March 2024

100

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEDirectors’ Remuneration Policy (unaudited)
The Committee’s Policy is to set remuneration levels which ensure that the Executive Directors are fairly and responsibly rewarded
in return for high levels of performance. The Remuneration Policy aims to promote value creation through transparent alignment
with the agreed corporate strategy, supporting performance and encouraging the underlying sustainable financial health of the
business while promoting sound risk management for the benefit of all stakeholders. The Committee believes that the aims of the
Policy are achieved by ensuring that a significant proportion of executive remuneration is tied to the achievement of the agreed
corporate strategy and long-term value creation. Whilst due consideration is given to wider employees as part of the Policy review,
there is no formal employee consultation, although conflicts of interest are avoided by extensive shareholder consultation.

The Company’s current Remuneration Policy was subject to a binding vote at the 2021 AGM, receiving 96.40 per cent of all votes
cast in favour. The Policy proposed for approval at the AGM in 2024, was subject to an extensive shareholder consultation, as
earlier explained and is primarily intended to introduce a hybrid LTIP approach.

Considerations of UK Corporate Governance Code principles
When determining the Remuneration Policy, the Committee was mindful of its obligations under Provision 40 of the Corporate
Governance Code in order to ensure that the Policy and other remuneration practices were clear, simple, predictable,
proportional and aligned to the culture of the Company and accounted for reputational and other risks linked to excessive
reward. Set out below are examples of how the Committee addressed these factors:

Clarity
Remuneration arrangements should be transparent and promote
effective engagement with shareholders and the workforce.

Simplicity
Remuneration structures should avoid complexity and their
rationale and operation should be easy to understand.

Risk
Remuneration arrangements should ensure reputational and
other risks from excessive rewards, and behavioural risks that
can arise from target-based incentive plans, are identified
and mitigated.

Predictability
The range of possible values of rewards to individual Directors
and any other limits or discretions should be identified and
explained at the time of approving the Policy.

Proportionality
The link between individual awards, the delivery of strategy and
the long-term performance of the Company should be clear.
Outcomes should not reward poor performance.

The Committee consulted with its shareholders on the proposed changes
within the Policy and received positive feedback.

The Committee believes that the remuneration arrangements are transparent
and align to market and best practice.

The Committee is not proposing any significant structural changes to the
incentive plans. Spirent operates two incentive plans, which it believes are
easy to communicate and for stakeholders to understand and the structure
of which is aligned to market practice. The performance measures provide
a clear link to business performance and business strategy.

The Committee is mindful of mitigating risks in relation to excessive reward
through the application of discretion, as well as through malus and clawback
provisions in respect of incentive awards.

The range of possible rewards for Executive Directors is considered
on page 99.

The Committee has the ability to apply discretion in relation to the variable
pay elements of the awards, for new joiners and for leavers, which were
revisited as part of the review of the Remuneration Policy.

The Committee strongly believes that the awards implemented
ensure continued delivery of the short and long-term goals and the
business strategy.

The Committee also has discretion to adjust incentive outcomes to ensure
that they reflect the Company’s performance over the relevant period.

Alignment to culture
Incentive schemes should drive behaviours consistent with
Company purpose, values and strategy.

The Committee believes that the incentive schemes detailed in the
Remuneration Policy are consistent with Company purpose, values
and strategy.

Spirent Communications plc Annual Report 2023

101

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Policy table
This section of the Report describes the key components of each element of the remuneration arrangements for the Executive Directors.

Component and link to strategy Operation

Maximum opportunity

Framework to assess performance

Fixed remuneration
Base salary

To provide fixed remuneration
for each role which reflects the
size and scope of the Executive
Directors’ responsibilities, their
individual skills and experience,
and the market in which they
provide services.

Benefits
To provide market levels of benefits
on a cost-effective basis.

Not applicable.

While there is no defined
maximum salary, any increase
in salary will ordinarily be (in
percentage terms) in line with
those of the wider workforce,
having regard to the increases
in the country in which the
individual provides services.

Increases beyond those
granted to the wider workforce
(in percentage terms) may
be awarded in certain
circumstances, for example
where there is a change in
responsibility, progression in the
role, experience or a significant
increase in the scale of the
role and/or size, value and/or
complexity of the Group.

Details of current salary levels
are set out in the Annual
Remuneration Report.

The overall value of benefits
will depend on the individual’s
circumstances and therefore
there is no formal maximum.

Participation in all-employee
share plans will be in line with
relevant statutory limits.

It is intended that the maximum
value of benefits offered will
remain broadly in line with
market practice in the country
in which the Executive Director
provides services.

Base salaries are normally
reviewed annually.

Set at levels to recruit and retain
the high-calibre talent needed
to deliver the Group’s strategy
without paying more than is
considered necessary.

Salaries are typically set after
considering various factors
including the salary levels in
companies of a similar size and
complexity, the responsibilities
of each individual role, internal
relativities, progression within
the role, individual performance
and an individual’s experience
and with regard to market salary
levels in the country in which the
executive provides services. Our
overall policy, having had due
regard to the factors noted, is
normally to target salaries at the
median market level.

May include private health cover
for the Executive Director and
their family, life insurance cover,
permanent health insurance and
a car allowance.

Executive Directors may
participate in any all-employee
share plans which may be
operated by the Company on the
same terms as other employees.

Relocation support and any
associated costs or benefits may
also be provided if considered by
the Committee to be appropriate
and reasonable to meet the
requirements of the business.

Other benefits may be offered
from time to time, for example to
align with local market practice in
the country in which the Executive
Director provides services.
Reasonable business-related
expenses may be reimbursed
(including tax thereon, if deemed
to be a taxable benefit).

102

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEComponent and link to strategy Operation

Maximum opportunity

Framework to assess performance

Retirement benefits
To provide cost-effective and
competitive post-retirement
benefits.

Variable remuneration
Annual Incentive

To reward and incentivise the
achievement of annual financial and
strategic goals which are selected
to align with the strategy of the
business and support enhancement
of shareholder value.

Defined contribution scheme or
cash allowance in lieu of Company
pension contributions or a
combination of both.

Other post-retirement benefits
may be offered from time to time
broadly in line with local market
practice in the country in which the
Executive Director is employed.

Not applicable.

The maximum Company
contribution is set at 14 per cent
of base salary (combined cash
supplement and/or defined
contribution plan).

For Executive Directors, the
retirement benefits are set in line
with the general rates applicable
to employees in the country in
which the Executive Director
is employed.

Pension arrangements for
current Executive Directors
are set out in the Annual
Remuneration Report.

Maximum opportunity is capped
at 150 per cent of base salary.

The Annual Incentive starts
accruing from threshold levels of
performance, which results in 20
per cent of the maximum payout.

Current maximum potential
for each Executive Director
is set out in the Annual
Remuneration Report.

Annual incentives may be based on
a mix of financial, individual and
business objectives with at least
50 per cent of the weighting being
given to financial metrics.

The payment of any bonus is at
the absolute discretion of the
Committee and the Committee may
exercise its discretion to override the
formulaic outcome.

Two-thirds of any bonus earned
is payable in cash with the
remaining one-third normally
deferred into shares.

The deferred bonus shares
ordinarily vest after three years.
Dividend equivalents may be paid
on vested shares in respect of
dividends arising over the period
between the grant date and the
vesting date.

Both the cash and deferred share
elements of the annual bonus
are subject to clawback and
malus provisions.

Spirent Communications plc Annual Report 2023

103

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Policy table continued

Component and link to strategy Operation

Maximum opportunity

Framework to assess performance

Hybrid Long-Term Incentive

To incentivise executives to
achieve the Company’s long-term
strategy and enhance sustainable
shareholder value.

Awards may be granted annually
as one or a combination of
Performance Share Awards (PSAs)
and Restricted Share Awards
(RSAs) in the form of conditional
shares or nil-cost options.

Executive Directors may be
granted annual LTIP awards over
a target number of conditional
shares or nil-cost options with
a value up to 200 per cent
of salary.

Awards will ordinarily vest, subject
to any performance conditions or
underpin, on the third anniversary
of grant and will ordinarily be
subject to an additional two-year
holding period post-vesting,
during which time awarded shares
may not ordinarily be sold (other
than to settle tax liabilities incurred
by the vesting of the award).

Dividend equivalents may be paid
on vested shares in respect of
dividends arising over the period
between the grant date and the
vesting date (or, where an award
is structured as a nil-cost option
and subject to a holding period, to
the expiry of the holding period or
the date of exercise (if earlier)).

The maximum number of
conditional shares or nil-
cost options that may vest
under an RSA is equal to the
target number.

The maximum number of
conditional shares or nil-cost
options that may vest under a
PSA is equal to two times the
target number.

The mix of the PSA and RSA
will be determined by the
Remuneration Committee
each year. The Remuneration
Committee will normally
consult with shareholders if it
intends to change the mix for
Executive Directors.

Malus and clawback provisions
will apply to all awards made
under the Spirent Long-Term
Incentive Plan.

No more than 25 per cent of
the relevant part of a PSA will
vest for achieving threshold
performance, increasing to full
vesting for the achievement of
maximum performance. Details
of proposed award levels
will be set out in the Annual
Remuneration Report.

Award levels, performance
conditions and underpins are
reviewed before each award cycle
to ensure they remain appropriate.

PSAs are currently subject to
challenging Earnings Per Share and
Total Shareholder Return and ESG
targets. However, different measures
may be applied for future award
cycles as appropriate to reflect the
business strategy.

RSAs will be subject to an underpin.

The majority of performance
conditions and underpins will be
weighted towards financial metrics.
A full description of the performance
conditions applicable to any PSAs
and the underpins applying to any
RSAs will be set out in the Annual
Remuneration Report.

The Remuneration Committee
has the discretion to override the
formulaic out-turn of PSAs and RSAs
if appropriate to do so to take into
account the underlying financial
and operational performance of
the Company.

Notes to the Policy table
Performance conditions applicable to the Annual Incentive
The Annual Incentive is designed to drive and reward excellent short-term financial and operational performance. The
Committee reviews the Annual Incentive plan measures each year in order to ensure that they are aligned with the Group’s
strategy. The Committee may alter the choice and weighting of the metrics for future Annual Incentive cycles to reflect the
changing needs of the business. The Committee also retains the discretion to retrospectively amend the measures, weightings,
targets and/or method of assessment for the in-year Annual Incentive to take into account changes in the business strategy,
significant acquisitions or disposals, changes in accounting treatment or other exceptional events to ensure that the scheme is
able to fulfil its original purpose. The payment of any Annual Incentive is at the sole discretion of the Committee.

The choice of measures may change for future Annual Incentives but is currently based on:

• adjusted operating profit – a key driver of shareholder return and a key measure of business success;

• revenue – reflecting Spirent’s strategic priority of delivering top-line growth; and

• other strategic and operational priorities – these account for a minority of the Annual Incentive and ensure a rounded

assessment of performance.

Performance conditions applicable to awards under the Spirent Long-Term Incentive Plan (LTIP)
Performance Share Awards (PSA)
Hybrid Long-Term Incentive awards will be granted in accordance with the rules of the LTIP and the discretions contained
therein. The Committee reviews the appropriateness of performance parameters for each award under PSAs and will set
stretching performance conditions in light of the Company’s current and expected performance over the performance cycle.

The performance conditions for PSA awards to Executive Directors are (ordinarily) measured over a period of three years and
are set using a sliding scale of targets and no more than 25 per cent of the award (under each measure) will vest for achieving
the threshold performance hurdle. The choice of measures may change for future award cycles, but is currently based on:

• Relative Total Shareholder Return – generates a strong alignment of interest between executives and shareholders;

104

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCE• Adjusted Earnings per Share – this provides an assessment of the profitability of the revenues delivered and aligns with the
interests of shareholders. Challenging targets for earnings per share are set based on internal and external forecasts; and

• ESG - ensures that Executives are aligned with Spirent’s broader sustainability commitments.

The Committee would consult with shareholders in advance of a significant change in the choice or weighting of the
performance measures to be applied under the PSA grants for future award cycles. Under the rules of the LTIP, the Committee
has the discretion to amend or substitute the performance conditions for in-flight awards in exceptional circumstances,
providing the new targets are no less challenging than originally envisaged.

Restricted Share Awards (RSA)
Restricted Share Awards would be subject to an underpin which will be assessed by the Remuneration Committee. Should a
grant be made under the RSA, details would be disclosed in the relevant Directors’ Remuneration Report.

Malus and clawback
The rules of the LTIP and the Company’s Annual Incentive (including any element deferred into shares) include provisions for
malus and clawback to apply if the Committee concludes that:

• the relevant individual has committed misconduct;

• there has been a restatement of any member of the Group’s financial results, due to inaccurate or misleading data;

• the extent to which an award was granted or has vested was based on inaccuracy or error;

• the Group (or a business unit within the Group) suffered a material financial loss as a result of circumstances that could

reasonably have been risk managed;

• the Company has suffered an instance of corporate failure resulting in the appointment of a liquidator or administrator;

• a material failure of risk management and/or regulatory non-compliance resulting in damage to the Company’s business or

reputation; or

• any other circumstances that the Board considers to have a similar nature or effect.

Clawback may be applied for up to two years following cash payment of an Annual Incentive and vesting under the LTIP, and
malus up to three years following the granting of awards under the Company’s deferred bonus arrangements and unvested
LTIP awards.

Shareholding requirements
The Executive Directors are required to build and maintain a shareholding in the Company are expected to retain shares vesting
under the deferred annual bonus and LTIP (net of tax) until such time as the guideline shareholding has been achieved. The
current such requirement is 200 per cent of salary.

New Executive Directors are required to maintain a post-cessation share ownership requirement to hold the lower of the
respective in-role shareholding guideline and the actual shareholding immediately prior to departure for a period of two years.

The Company’s policy in respect of vested and unvested share awards post-cessation of employment is set out below in the
section on Exit Payment Policy.

Discretions retained by the Committee in operating the LTIP and other variable pay schemes
The Committee operates the Group’s various incentive plans according to their respective rules and (where applicable) in
accordance with relevant legislation and HMRC guidance. In order to ensure efficient administration of these plans, certain
operational discretions are reserved to the Committee. These include:

• determining who may participate in the plans;

• determining the timing of grants of awards and/or payments under the plans;

• determining the quantum of any awards and/or payments (within the limits set out in the Policy table above);

• in exceptional circumstances, determining that a share-based award (or any dividend equivalent) shall be settled (in full or in

part) in cash;

• determining any performance measures, targets and underpins applicable to an award (in accordance with the statements

made in the Policy table above);

• where a participant ceases to be employed by the Company, determining whether “good leaver” status shall apply;

• determining the extent of vesting of an award based on assessment of any performance conditions or underpins, including
discretion as to the basis on which performance is to be measured if an award vests in advance of the normal timetable (on
cessation of employment as a “good leaver” or on the occurrence of corporate events);

• whether, and to what extent, pro-ration shall apply in the event of cessation of employment as a “good leaver” or on the

occurrence of corporate events;

• whether malus and/or clawback shall be applied to any award and, if so, the extent to which they shall apply; and

• making appropriate adjustments to awards on account of certain events, such as major changes in the Company’s

capital structure.

Spirent Communications plc Annual Report 2023

105

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Approach to recruitment remuneration
In the event that the Company recruits a new Executive Director (either from within the organisation or externally), when
determining the appropriate remuneration arrangements, the Committee will take into consideration all relevant factors,
(including but not limited to quantum, the type of remuneration being offered, the jurisdiction from which the candidate was
recruited and in which they will provide services to the Company) to ensure that arrangements are in the best interests of both
shareholders and the Company without paying more than is necessary to recruit an executive of the required calibre.

Element

Base salary

Recruitment Policy

The Committee will take into consideration a number of factors, including internal relativities,
external market forces, skills and current level of pay.

Salary may (but need not necessarily) be set below the normal market rate, with a series
of planned increases implemented over the following few years to bring it to the desired
positioning, subject to individual performance.

Benefits

Benefits provision would be in line with normal Policy.

The Committee may agree that the Company will meet appropriate relocation costs.

Retirement benefits

In line with normal Policy.

Annual Incentive

Eligible to take part in the Annual Incentive, with a maximum bonus of up to 150 per cent of
salary in line with Policy.

Depending on the timing of the appointment, the Committee may deem it appropriate to set
Annual Incentive performance metrics that are different from those that apply to the current
Executive Directors for the first performance year in which the appointment falls.

Hybrid Long-Term Incentive

A normal award of conditional shares or nil cost options with a target value up to 200 per cent
of salary, in line with Policy.

Buyout awards

In exceptional circumstances, the Committee may offer additional cash or share incentive
awards (using Listing Rule 9.4.2, if necessary) to compensate an individual for remuneration
forfeited on leaving a previous employer.

The awards would not normally exceed what is felt to be a fair estimate of the remuneration
forfeited and would reflect (as far as possible) the nature and time horizons attached to that
remuneration and the impact of any performance conditions. The Company would normally
aim to replace any forfeited cash awards with shares.

Shareholders will be informed of any such payments at the time of appointment.

For an internal appointment, any remuneration terms awarded in respect of the previous role may either continue on its original
terms or be adjusted to reflect the new appointment.

When recruiting Non-executive Directors, the remuneration arrangements offered would normally be in line with those paid
to existing Non-executive Directors, details of which are set out in the Annual Remuneration Report.

Service contracts
Executive Directors
In normal circumstances, it is the Company’s Policy that service contracts for Executive Directors have no fixed term and are
capable of termination on no more than 12 months’ notice from either the Company or the Executive Director. It is intended that
this Policy would also apply to new appointments of Executive Directors.

Eric Updyke currently has a service agreement with Spirent Communications, Inc, and, being a US resident, his contract is in line
with US employment practice and is governed by the laws of the state of New Jersey. Mr Updyke’s service agreement, dated
1 April 2019, may be terminated on 12 months’ notice from the Company and six months’ notice from Mr Updyke.

Paula Bell currently has a service agreement with Spirent Communications plc, and, being a UK resident, her contract is in line
with UK employment practice and is governed by the laws of England and Wales. Ms Bell’s service agreement, dated 12 April 2016,
may be terminated on 12 months’ notice from the Company and six months’ notice from Ms Bell.

The Company recognises that its Executive Directors may, from time to time, be invited to become non-executive directors of
other companies and that such appointments can broaden their knowledge and experience, to the benefit of the Company.
Details of any such appointments are set out in the Annual Remuneration Report.

The service agreements of Executive Directors are available for inspection at the Company’s registered office on request
and will be available for inspection at all General Meetings of the Company.

106

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEExit Payment Policy
The Committee is committed to ensuring that it does not pay more than is necessary when Executive Directors leave Spirent and
its Policy on exit payments is and will continue to be in line with market practice in the country in which the Executive Director
provides services. The current Exit Payment Policy is:

• service contracts contain provisions for the removal of the Executive Director without compensation for not performing their

duties to the standard required by the Board or material misconduct;

• payment in lieu of notice may be paid under service contracts if the relevant notice period is not given to the Executive Director
or if, having received notice from the Executive Director, the employer does not wish him/her to serve it. Any payment in lieu of
notice shall ordinarily be paid in monthly instalments, in respect of annual base salary and pension contributions only;

• unless provided for in the service contract, the Company would seek to apply practical mitigation measures to any payment
of compensation on termination, for example by reducing payments to reflect payments received in respect of alternative
employment, taking into account all relevant circumstances;

• service contracts do not contain provision for additional compensation on termination following a change of control (as

detailed in the Change of Control provisions set out in the Directors’ Report);

• service contracts do not contain provision for liquidated damages of any kind; and

• service contracts contain appropriate provisions to protect the legitimate interests of the Company with respect to preventing

any terminated Executive Director from working in a business which competes against the Company.

Element

Salary, benefits
and pension

Annual Incentive

Deferred Share
Bonus Plan

Long-Term
Incentive Plan

Termination Policy
Payment will be made up to the termination date in line with relevant contractual notice periods and will
not exceed contractual entitlements.

Unless otherwise provided in the service contract to be consistent with market practice in the country
in which the Executive Director provides services, Executive Directors are not entitled to accrued cash
incentives payable following termination unless the individual is determined by the Committee to be
a good leaver (defined as an individual leaving employment due to redundancy, ill health, injury or
disability, retirement, death, the individual’s employing company ceasing to be under the control of the
Group, or a transfer of the undertaking in which the individual works (“Good Leaver”)).

Awards will ordinarily continue to vest on the normal vesting date, unless the Committee determines that
early vesting should apply. The Committee reserves the discretion to scale the awards down (including to
nil) in the event of misconduct by the individual or to reflect individual performance.

Unvested awards will generally lapse at the time of exit.

For individuals determined by the Committee to be a Good Leaver (see below), the Committee will
ordinarily assess any performance conditions at the end of the applicable performance period and
unvested awards will ordinarily vest on the normal timetable.

Exceptionally, and always in the case of death, the Committee may assess any performance conditions
and underpins at the point of cessation by testing the performance conditions and underpins up to (or
as close as reasonably practicable to) the date of cessation. Awards will then vest following such early
assessment of performance.

Except in the case of death, any shares which vest would normally be pro-rated to reflect the proportion
of the vesting period actually served by the individual.

For the purposes of the LTIP, a Good Leaver is any individual who leaves due to death, ill health, injury,
disability, agreed retirement, redundancy, a transfer of the business for which the individual works
out of the Group or for any other reason at the Committee’s discretion (except where the individual is
summarily dismissed).

Any post-vesting holding period would normally continue to apply to a leaver’s vested and
unvested awards.

Legacy
arrangements:
Employee Incentive
Plan (EIP)

Unvested awards generally lapse at the time of exit. For individuals determined by the Committee to be
a Good Leaver, performance conditions are assessed by the Committee at the point of exit by testing
the performance conditions up to the date of exit for TSR performance and to the end of the most recent
financial period for EPS performance. Vesting is then pro-rated for the proportion of the performance
period actually served and the individual has 12 months following the date of termination of employment
in which to exercise them.

Spirent Communications plc Annual Report 2023

107

CORPORATE GOVERNANCEReport on Directors’ remuneration continued

Service contracts continued
Exit Payment Policy continued
For all leavers, the Committee may also determine to make a payment in reimbursement of a reasonable level of outplacement
and legal fees in connection with a settlement agreement. The Company may pay any statutory entitlements, to which an
Executive Director is entitled, or settle or compromise any claims made in connection with the termination of employment or
appointment of an Executive Director where the Committee considers such claims to have a reasonable prospect of success
and that it is in the best interests of the Company to do so. Where appropriate, private health cover may continue for a suitable
period post-cessation of employment.

The Committee has now introduced a formal Policy in respect of post-cessation shareholdings for new Executive Directors.
Following the approval of this Policy and in respect of the incentive awards granted to newly appointed Executive Directors
thereafter, the following will ordinarily apply:

• unvested shares under the Deferred Bonus Plan will continue to vest on the normal vesting date (i.e. up to four years

post-cessation);

• unvested shares under the LTIP will, subject to the participant being a Good Leaver, continue to vest on the normal vesting

date and be subject to a post-vesting holding period;

• be subject to a post-vesting holding period;

• vested shares under the LTIP will remain subject to the holding period; and

• other beneficially owned shares may be sold as long as the individual continues to maintain a shareholding at least equal to

the minimum shareholding guidelines which applied during their employment.

Current Executive Directors will also be subject to this Policy, with the exception of its application to other beneficially owned
shares, over which there will be no sale restrictions.

The above will ensure that the Executive Directors continue to have an interest in the Company after having left employment,
promoting a culture of sustainable long-term performance. Furthermore, additional safeguards are in place through the malus
and clawback provisions which can continue to be invoked irrespective of employment status.

In the event of change in control of the Company, in accordance with rules of the respective plans, any outstanding share
awards will ordinarily vest on the date of such an event. For awards under the LTIP, vesting will be subject to an assessment of
achievement against any applicable performance conditions and, unless the Board determines otherwise, a reduction to reflect
the curtailed vesting period.

Non-executive Directors Policy
Our policy is to set fees that are competitive with companies of an equivalent size and complexity. Fees are reviewed annually,
with no Non-executive Director voting on their own remuneration. All Non-executive Directors have a letter of appointment with
the Company for a period of not more than three years, subject to the Company’s Articles of Association. However, since 2011
and in accordance with the Code, all Directors who are not stepping down from the Board automatically stand for re-election
at each AGM.

The letters of appointment of Non-executive Directors are available for inspection on request and will be available for inspection
at all General Meetings of the Company. An example of a letter of appointment for a Non-executive Director is available on the
Company’s website at corporate.spirent.com. Details of the remuneration for Non-executive Directors are set out in the Annual
report on remuneration.

108

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEConsideration of employee remuneration arrangements elsewhere in the Group
When setting the Policy for Directors’ remuneration, the Committee has regard to the pay and employment conditions
elsewhere within the Group, particularly in the jurisdictions in which the Executive Directors provide services. The Committee is
kept informed on a regular basis of salary increases for the general employee population and takes these into account when
determining salary increases for Executive Directors and the executive management team.

Where relevant, the Committee seeks to align the Remuneration Policy for Executive Directors with that for other senior
managers. Selected employees are able to share in the success of the Group through participation in the Management
Incentive Plan.

Executive Directors, other members of the executive management team and key employees are also eligible for participation
in the Long-Term Incentive Plan.

The Committee is aware of the 2018 UK Corporate Governance Code and its requirements for increasing engagement with
stakeholders including employees and details of the workforce engagement programme can be found in the Stakeholder
Engagement section of this Annual Report.

Consideration of the views of shareholders in setting Remuneration Policy
The Committee is mindful of the views of shareholders in determining appropriate levels of remuneration and in ensuring
that shareholder and Director interests are aligned. The Committee is committed to an ongoing dialogue with shareholders
and seeks shareholder views when any significant changes are proposed to remuneration arrangements. Over the past few
years, the Committee consulted with major shareholders and shareholder representatives, including over the development of
this policy.

Legacy matters
For the avoidance of doubt, in approving this Remuneration Policy, authority is given to the Company to make payments and
honour any commitments entered into with current or former Directors (such as the payment of pension or the unwinding
of legacy share schemes) where the terms were agreed either prior to 24 April 2014 (the effective date of the first Directors’
Remuneration Policy) or at a time when a previous Remuneration Policy was in force, or at a time when the relevant individual
was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual
becoming a Director. Details of any payments will be set out in the Annual Remuneration Report as they arise.

Dilution
The Committee is strongly committed to continuing to manage shareholder dilution in a responsible manner. Details of the
Company’s dilution are set out in the Annual Remuneration Report.

Spirent Communications plc Annual Report 2023

109

CORPORATE GOVERNANCEDirectors’ report

The Directors’ Report for the year ended 31 December 2023 comprises pages 110 to 113 of this Annual Report, together with the
sections of the Annual Report incorporated by reference. The Corporate Governance Report sections set out on pages 62 to
114 is incorporated by reference into this Directors’ Report and, accordingly, should be read as part of this Directors’ Report. As
permitted by legislation, some of the matters required to be included in the Directors’ Report have instead been included in the
Strategic Report on pages 1 to 61, as the Board considers them to be of strategic importance.

Specifically, these are:

• the Strategic Report on pages 1 to 61, which provides detailed information relating to the Group, its business model

and strategy, operation of its businesses, future developments and the results and financial position for the year ended
31 December 2023;

• future business developments (throughout the Strategic Report);

• details of the Group’s policy on addressing the principal risks and uncertainties facing the Group, which are set out in the

Strategic Report on pages 55 to 60;

• information on the Group’s greenhouse gas (GHG) emissions for the year ended 31 December 2023, along with our report

on the Task Force on Climate-related Financial Disclosures (TCFD) on pages 35 to 37;

• how we have engaged with our workforce and stakeholders on pages 24 to 27;

• business relationships (throughout the Strategic Report); and

• the Section 172 Statement on pages 24 to 27.

The Strategic Report and the Directors’ Report together form the Management Report for the purposes of the Disclosure
Guidance and Transparency Rules (DTR) 4.1.8R.

Disclosures required under Listing Rule 9.8.4R
The information required to be disclosed in accordance with Listing Rule 9.8.4R of the Financial Conduct Authority’s Listing Rules
can be located in the following pages of this Annual Report:

Listing Rule

9.8.4R(1-3)(5-14)(A)(B)
9.8.4R(4)

Detail

Page reference

Not applicable
Long-Term Incentive Plans 83 to 109

n/a

Research and development
The Company has chosen, in accordance with the Companies Act 2006 Section 414C(II), to include the disclosure of research and
development in the Strategic Report.

Results and dividends
An interim dividend of 2.76 cents was paid on 15 September 2023. The Directors are not recommending a final dividend.

Directors
Biographies of the Directors currently serving on the Board are set out in the Board of Directors section.

As set out in the Notice of Meeting, all Directors will retire at the 2024 AGM and submit themselves for election or re-election by
shareholders. All Directors have been subject to a formal and rigorous performance evaluation during the period under review,
further details of which can be found in the Directors’ statement on corporate governance.

The powers of Directors are described in the Company’s Articles of Association, which can be found on the Company’s website
at corporate.spirent.com.

Dates of appointment under the Executive Directors’ service contracts and Non-executive Directors’ letters of appointment are
set out in the Report on Directors’ remuneration, along with the interests of the Directors in the shares of the Company.

The Board has a documented process in place in response to conflicts, details of which are set out in the Directors’ statement on
corporate governance.

Insurance and indemnities
In accordance with its Articles of Association, the Company has granted a qualifying third party indemnity, to the extent
permitted by law, to each Director. The Company also maintains Directors’ and officers’ liability insurance.

These provisions are qualifying third party indemnity provisions as defined in Section 234 of the Companies Act 2006. Neither
the Company’s indemnity nor the insurance provides cover in the event that a Director is proven to have acted dishonestly
or fraudulently.

110

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEStakeholder engagement
Information on how the Directors have had regard to the need to foster the Company’s business relationships with suppliers,
customers and other stakeholders, and the effect of that regard, is contained in the Stakeholder engagement section.

Employees
The average number of employees within the Group is shown in note 8 to the Group’s consolidated financial statements. At
Spirent, we know that having a diverse and inclusive workforce is essential if we are to deliver on our mission to be the global
leader and trusted partner for innovative technology test and assurance solutions. Diverse and inclusive teams are critical to fuel
our innovation and genuinely connect with the communities in which we live and work. We embrace a culture where difference
is valued and openness, mutual respect, collaboration and fairness are fundamental. Spirent does not tolerate discrimination
or offensive behaviour of any kind. We are committed to creating workplaces that genuinely reflect the diversity of the world we
serve and provide an environment where everyone feels empowered to bring their full, authentic self to work.

We strive to enable:

• workforce representation that reflects the talent market;

• equitable reward and advancement; and

• a culture of trust, fairness and respect.

We all need to do more and are committed to doing so and so have completed a detailed review of our diversity and inclusion
practices to inform and set clear priorities and objectives. You will find more information on the actions we are taking in our
Sustainability Report 2023, available at corporate.spirent.com.

Change of control provisions
The Company does not have agreements with any Director or employee that would provide compensation for loss of office
or employment resulting from a takeover, except that certain provisions of the Company’s share incentive plans may cause
outstanding unvested options and awards granted to individuals under such plans to vest on a takeover as follows:

Share incentive plan

Change of control

2005 Employee Incentive Plan1
Spirent Long-Term Incentive Plan
Spirent Deferred Bonus Plan

Yes
Yes
Yes

Effect on vesting provisions
in the rules

Performance condition

n/a
Pro-rated
Full vesting

n/a
Still applies
n/a

Note
1. All outstanding awards granted under the 2005 Employee Incentive Plan have now completed their performance condition performance periods and have

either lapsed or have fully or partially vested.

The Company is not aware of any significant agreements to which it is party that take effect, alter or terminate upon a change
of control of the Company following a takeover.

Share capital
The Company has a single class of share which is divided into Ordinary Shares of 3 & 1/3 pence each. Each Ordinary Share
carries one vote and all of the Ordinary Shares rank pari passu. There are no special control rights relating to any of the
Ordinary Shares. At the date of this report, 578,646,363 Ordinary Shares of 3 & 1/3 pence each had been issued which are fully
paid up and are listed on the London Stock Exchange. The Company also operates a Level 1 American Depositary Receipt
(ADR) programme with each ADR representing four Ordinary Shares. The ADRs trade on the US over-the-counter market and
BNY Mellon is the authorised depositary bank for the programme. Further details on share capital are set out in note 29 to the
consolidated financial statements and note 17 to the parent Company financial statements. The rights, including those relating
to voting, obligations and any restrictions on transfer relating to the Company’s Ordinary Shares, as well as the powers of the
Company’s Directors, are set out in the Company’s Articles of Association, a copy of which can be found on our website at
corporate.spirent.com or can be obtained from Companies House or by writing to the Company Secretary.

The Company’s Articles of Association may only be amended by a special resolution at a general meeting of shareholders. The
most recent changes to the Articles of Association were approved at the 2021 AGM, on 28 April 2021.

The Company has established two employee benefit trusts in connection with the operation of the Company’s share incentive
plans: the Spirent Employee Share Ownership Trust (ESOT) and the Spirent Sharesave Trust (SST). The trustees of both trusts have
waived their right to receive dividends on any Ordinary Shares held by them except for a nominal amount of 1 pence other than
for those Ordinary Shares held in the ESOT which are the beneficial property of an employee/shareholder.

For further details on the employee benefit trusts see “Investment in own Ordinary Shares” in note 29 to the consolidated
financial statements and note 17 to the parent Company financial statements. The Trustees of both trusts do not vote their
Ordinary Shares, except for those Ordinary Shares held in the ESOT that are the beneficial property of an employee/
shareholder, which the trustees will vote in accordance with the instructions received from the beneficial owner.

Spirent Communications plc Annual Report 2023

111

CORPORATE GOVERNANCEDirectors’ report continued

Restrictions on share transfers
There are no restrictions on the transfer of Ordinary Shares in the capital of the Company other than certain restrictions which
may from time to time be imposed by law, for example insider trading law or as required under the Company’s Remuneration
Policy for Executive Directors. In accordance with the Market Abuse Regulation, certain employees are required to seek the
approval of the Company prior to dealing in its securities.

The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities
or on voting rights. The Company is also not aware of any contract of significance between itself or any subsidiary undertaking
and a controlling shareholder.

Powers for issue of new shares
During the year to 31 December 2023 and to the date of this Report, no new Ordinary Shares have been allotted as a result of
the exercise of options and rights pursuant to the Company’s share incentive plans.

At each AGM the Directors seek authority to allot shares for cash and to disapply pre-emption rights within normally
prescribed limits. Accordingly, at the 2024 AGM authority will be sought to allot new Ordinary Shares up to a nominal value of
approximately 33.3 per cent of the Company’s issued share capital.

Return of capital
On 3 April 2023, the Company announced a share buyback programme of up to £56 million. This programme was completed
on 24 August 2023, following the purchase and cancellation of 33,095,525 Ordinary Shares for the maximum, as authorised.

The Company will seek renewal of the authority to repurchase up to 9.99 per cent of its issued Ordinary Shares, within certain
limits, as permitted by the Company’s Articles of Association, such authority typically remaining valid for a maximum of 15
months following each AGM.

Substantial shareholdings
In accordance with Listing Rule 9.8.6(2), the Company has been notified of the following significant interests in its Ordinary
Shares, pursuant to Disclosure Guidance and Transparency Rule 5, including interests notified up to the date of this report, with
the percentage of voting rights being calculated at the time each relevant disclosure was made:

Aviva plc
Ameriprise Financial, Inc
Standard Life Investments Ltd
Brandes Investment Partners LP (various clients)
AXA Investment Managers SA
Prudential plc
Aberforth Partners
Neptune Investment Management Limited
Artemis Investment Management Limited
Martin Currie Investment Management Limited aka Franklin Templeton
Fund Management Limited
Schroders plc
Teleios Capital Partners LLC
PrimeStone Capital LLP
Sun Life Assurance Company of Canada (UK) Ltd
Kames Capital (fka Global AEGON Asset Management Group)
Norges Bank

Total holding

59,880,567
57,321,456
32,370,026
30,537,440
30,515,747
30,472,411
30,368,910
29,775,214
29,195,146

28,952,823
26,986,598
24,639,977
26,434,581
23,382,347
18,507,514
18,068,435

Per cent of Company’s
total voting rights

10.35%
9.91%
5.59%
5.28%
5.27%
5.27%
5.25%
5.15%
5.05%

5.00%
4.66%
4.26%
4.57%
4.04%
3.20%
3.12%

112

Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEPolitical donations
In accordance with the Group’s Business Ethics Policy, no
political donations were made during the year (2022 nil).

Going concern
After making appropriate enquiries and taking into account
the matters set out in the Principal risks and uncertainties
section of this Annual Report, the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern
basis when preparing the financial statements.

Viability Statement
In accordance with provision 31 of the 2018 UK Corporate
Governance Code, the Directors have assessed the viability
of the Group and concluded whether they have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
period of assessment.

The Board has concluded that the most appropriate period
for this assessment should be three years, which is consistent
with the period used in other forward-looking areas of the
financial statements.

This period was selected for the following reasons:

• the Group’s strategic planning cycle covers a three-

year period;

• the Board reviews a three-year financial corporate plan;

• it reflects the period over which the principal risks would be

realised; and

• when considering a major investment in product

development, three years is considered by the Board to
be a reasonable time horizon in which the product should
achieve meaningful sales.

The Board’s assessment has been made with reference to the
Group’s current financial position and prospects, the Group’s
long-term strategy, the Board’s risk appetite and the Group’s
principal risks and uncertainties as set out within that section
of this Annual Report.

The plans and cash flow projections used as the basis for
the assessment were the three-year strategic plan. They
were drawn up on the basis that the Group ends 2023 with a
cash balance of $107.9 million and maintains a cash balance
sufficient to fund normal operations, and that there will be
no material changes to the business structure throughout the
review period.

The Board has reviewed plausible and severe stress
tests based on the occurrence of a combination of the
principal risks to which the Group is exposed, considering
the potential impact of these risks on the business model,
future performance, solvency and liquidity over the period.
The analysis also included a reverse stress test scenario to
illustrate the revenue reduction in the 12 months following
approval of the financial statements that would lead to the
Group ceasing to be a going concern. Further detail on the
scenarios modelled and the principal risks considered is
disclosed within the Principal risks and uncertainties section.

In each of the scenarios over the three year period, the
Group was able to continue operating and generating free
cash flow. The reverse stress test required such an extreme
reduction in revenue that the likelihood of occurrence is
considered to be remote and therefore does not represent
a realistic threat to the viability of the Group. In reaching this
conclusion the Directors considered the three-year plan, the
uncertainties arising from the macroeconomic backdrop and
inflationary pressures, the magnitude of the revenue reduction
and the ability of the Group to take realistic and successful
mitigating actions, which are not factored into the reverse
stress test scenario.

Based on this assessment and the expected successful
impact of mitigating actions, the Directors have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
three-year period.

Disclosure of information to auditor
Each of the Directors of the Company at the date of this
Report confirms that:

• so far as the Director is aware, there is no information
needed by the Company’s auditor in connection with
preparing its report of which the Company’s auditor is
unaware; and

• he/she has taken all the steps that he/she ought to have

taken as a Director in order to make himself/herself aware
of any information needed by the Company’s auditor in
connection with preparing its report and to establish that
the Company’s auditor is aware of that information.

Independent External Auditor
As described in more detail in the Audit Committee report, an
audit tender process was completed during 2020, following
which, at the AGM in April 2021, shareholders approved the
appointment of Deloitte as auditor.

Having carried out a review of auditor effectiveness, the
Audit Committee has recommended to the Board the
re-appointment of Deloitte LLP, who have also indicated
their willingness to continue as auditor. Accordingly, this
re-appointment will be proposed at the 2024 AGM, with the
Audit Committee responsible for determining the audit fee on
behalf of the Board.

Annual General Meeting (AGM)
The Company’s 2024 AGM will be held at the offices of UBS at
5 Broadgate, London EC2M 2QS in May 2024.

By Order of the Board

Angus Iveson
Company Secretary
5 March 2024

Spirent Communications plc
Company number 470893

Spirent Communications plc Annual Report 2023

113

CORPORATE GOVERNANCEDirectors’ responsibilities statement

The Directors are responsible for preparing the Annual Report,
the Report on Directors’ remuneration, the consolidated
financial statements of the Group and the financial statements
of the parent Company in accordance with applicable United
Kingdom law and regulations.

Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the consolidated financial statements of
the Group in accordance with the United Kingdom adopted
International Accounting Standards. The Directors have
elected to prepare the parent Company financial statements
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards
and applicable law) including FRS 101 “Reduced Disclosure
Framework”. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period.

The consolidated financial statements of the Group are
required by law and International Accounting Standards
to present fairly for each financial period the financial
position and performance of the Group; the Companies
Act 2006 provides, in relation to such financial statements,
that references in the relevant part of that Act to financial
statements giving a true and fair view are references to their
achieving a fair presentation.

Under the Financial Conduct Authority’s Disclosure Guidance
and Transparency Rules, consolidated financial statements
are required to be prepared in accordance with UK adopted
International Accounting Standards.

In preparing each of the consolidated financial statements
of the Group and parent Company financial statements, the
Directors are required to:

• select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and
Errors and apply them consistently;

• make judgements and estimates that are reasonable

• provide additional disclosures when compliance with the

specific requirements in International Accounting Standards,
and in respect of the parent Company financial statements,
FRS101, is insufficient to enable users to understand
the impact of particular transactions, other events and
conditions on the Group and parent Company financial
position and financial performance; and

• make an assessment of the Company’s ability to continue

as a going concern.

The Directors confirm that they have complied with the above
requirements in preparing the financial statements.

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s and Group’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and the parent Company and enable them to ensure
that parent Company and Group financial statements comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.

Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, a Directors’
report, a Directors’ remuneration report and a Statement on
corporate governance that comply with the law and those
regulations. They are also responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website at corporate.spirent.com.

Legislation in the UK governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.

This Annual Report complies with the Disclosure Guidance and
Transparency Rules (DTR) of the Financial Conduct Authority in
respect of the requirement to produce an annual financial report.

The Annual Report and consolidated financial statements are
the responsibility of, and have been approved by, the Directors.

and prudent;

Each of the Directors confirms that, to the best of their knowledge:

• in respect of the consolidated financial statements of the

• the consolidated financial statements of the Group

Group, state whether international accounting standards in
conformity with the requirements of the Companies Act 2006
and UK adopted International Accounting Standards have
been followed, subject to any material departures disclosed
and explained in the consolidated financial statements;

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;

• in respect of the parent Company financial statements,
state whether applicable UK Accounting Standards,
including FRS 101, have been followed, subject to any
material departures disclosed and explained in the
parent Company financial statements;

• prepare the financial statements on a going concern basis
unless it is inappropriate to presume the Group and the
parent Company will continue in operational business
for the foreseeable future;

• properly select and apply accounting policies;

• present information, including accounting policies, in

a manner that provides relevant, reliable, comparable
and understandable information;

• 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

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Spirent Communications plc Annual Report 2023

CORPORATE GOVERNANCEFINANCIAL STATEMENTS

Independent auditor’s report to the members
of Spirent Communications plc

Report on the audit of the financial statements

1. Opinion

In our opinion:

• the financial statements of Spirent Communications plc (the parent Company) and its subsidiaries (the Group) give a
true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2023 and of the
Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with United Kingdom adopted international

accounting standards;

• the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally

Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

• the consolidated income statement;

• the consolidated statement of comprehensive income;

• the consolidated and parent Company balance sheets;

• the consolidated and parent Company statements of changes in equity;

• the consolidated cash flow statement; and

• the related notes 1 to 34 and 1 to 17 of the parent Company financial statements.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law
and United Kingdom adopted international accounting standards. The financial reporting framework that has been applied in
the preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.

We are independent of the Group and the parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial Reporting Council’s (the FRC’s) Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The
non-audit services provided to the Group and parent Company for the year are disclosed in note 4 to the financial statements.
We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the
parent Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Spirent Communications plc Annual Report 2023

115

FINANCIAL STATEMENTSIndependent auditor’s report to the members
of Spirent Communications plc continued

3. Summary of our audit approach

Key audit matters

The key audit matters that we identified in the current year were:

Appropriateness of revenue recognition; and
Classification of adjusting items (newly identified).
Within this report, key audit matters are identified as follows:

Newly identified
Increased level of risk

Materiality

The materiality that we used for the Group financial statements was $3.4 million which was determined
based on a number of metrics used by investors and other readers of the financial statements. We have
historically used profit before tax as the sole benchmark for determining materiality. However, given the
instability of this metric due to the challenging trading environment and high level of one-off adjusting
items in the current year, we have reassessed this to be a blended materiality considering other
benchmarks. These included adjusted profit before tax, profit before tax, net assets, and revenue.

Scoping

We selected six components to perform a full scope audit. We also requested component auditors to audit
specific account balances and transactions at a further four reporting units.

The components, which were either full or specified account balances scope in the current year, contribute
93 per cent of revenue, 87 per cent of profit before tax and 92 per cent of net assets.

Significant changes
in our approach

We have identified the classification of adjusting items as a new fraud risk and key audit matter in the
current year due to the significance of the strategic evaluation presented as adjusting items.

The appropriateness of revenue recognition key audit matter is consistent with last year, but we have
identified an increased level of risk due to the profit warnings in the period which potentially could lead to
increased incentive to management to misappropriate revenue.

4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.

Our evaluation of the Directors’ assessment of the Group’s and parent Company’s ability to continue to adopt the going concern
basis of accounting included:

• obtaining an understanding management’s process in performing the going concern assessment;

• evaluating the cash-flow forecasts and the scenario analysis prepared by management and evaluating the Group’s ability to
support itself without accessing external funding, noting that the Group is not exposed to interest rate volatility as there is no
external debt financing;

• evaluating the Directors’ assessment of the Group’s ability to continue as a going concern, including challenging the

underlying data and key assumptions used to make the assessment, and evaluating the Directors’ plans for future actions. This
was done through detailed assessment of the operating and non-operating cash flows for reasonableness and consistency
with the underlying forecasts and plans for individual businesses;

• assessing management’s sensitivity analysis to cash flows including the impact of macro-economic conditions on the business,

the recent downturn in the markets in which Spirent operates and assessing whether updates to management’s forecasts
were in line with the trading updates issued to the market;

• performing inquiries of management regarding the assumptions used in the going concern models;

• assessing the mathematical accuracy of the forecasts produced and the historical accuracy of managements forecasts;

• evaluating analyst reports, industry data and other external financial information to determine if it provided corroborative or

contradictory evidence in relation to Management’s assumptions; and

• evaluating the Group’s disclosures on going concern against the requirements of IAS 1.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and parent Company’s ability to continue as a going
concern for a period of at least 12 months from when the financial statements are authorised for issue.

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Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTS4. Conclusions relating to going concern continued
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.

5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

5.1. Appropriateness of revenue recognition

Key audit matter
description

The Group has recognised revenue of $474.3 million in 2023 (2022 $607.5 million).

The Group’s principal activity is the sale of hardware, software, support and services for the testing and
assurance of networks. In general, the performance obligations align with the types of products sold with
hardware and software recognised immediately, support recognised over the life of the support contract
and services recognised over the period in which the sale is performed or on a milestone basis. The group
also experiences significant seasonality, predominantly due to the timing of the budgetary cycles of the
group’s principal customers and markets.

Given the nature of the Group’s products and services there is judgement involved in the allocation of
revenue between the different performance obligations which impacts the timing of revenue recognition
and specifically there is a risk associated with cut-off given the significant seasonality, with sales peaking at
each quarter end, most notably in December.

The timing of revenue recognition can also be complicated by management’s use of distributors or
intermediary selling agents in jurisdictions where they have no physical presence or are otherwise required
to use an intermediary third party. This extends the cut-off risk due to the necessity of assessing whether
the fulfilment of the Group’s performance obligations is determinant on delivery by the intermediary to the
end customer.

The transaction price in the contract is allocated across these performance obligations based on the
standalone selling prices identified by management. This identification of standalone selling prices involves
judgement and has a direct impact on the timing and amount of revenue recognised.

Where sales are only partially delivered, management judgement is required to be exercised in the
application of IFRS 15 as to whether the delivered elements qualify for recognition prior to all contractual
deliverables being shipped.

We assessed revenue recognition, in particular cut-off risk, as a potential risk of fraud as revenue is one of
the KPIs for both external communications and management incentives. The identification of the
appropriateness of revenue recognition key audit matter is consistent with last year, but we have identified
risk due to the profit warnings in the period which could potentially lead to an increased incentive for
management to inappropriately record revenue.

Refer to page 77 (Audit Committee Report) and Notes 2 (Accounting Policies) and 3 (Operating Segments).

Spirent Communications plc Annual Report 2023

117

FINANCIAL STATEMENTSIndependent auditor’s report to the members
of Spirent Communications plc continued

5. Key audit matters continued
5.1. Appropriateness of revenue recognition continued

How the scope of our
audit responded to
the key audit matter

Testing of relevant controls
We tested relevant controls within management’s revenue recognition process.

We tested relevant controls including those over key IT systems and tools used in the revenue recognition process
and financial reporting. This included both the applications and infrastructure supporting these systems.

Evaluating key judgements in the revenue recognition process
In order to test the timing of revenue recognition, including for partial shipments, we tested all material
orders placed around the period end and a sample of the other orders to assess whether the activity
required for revenue recognition had occurred within the period under audit. This included:

• confirming shipping terms, value and address match between the quote, purchase order and

subsequent invoice;

• obtaining an agreement where revenue has been transacted with a distributor and assessing whether
there is any right to return of the goods or whether the sale is reliant upon a further onward sale by
the distributor;

• assessing any complexity in subsequent invoicing and whether this is indicative of a separate

arrangement or agreement outside of the normal contractual agreements of the Group;

• obtaining direct confirmation from the counterparty that no other agreements exist outside of the

contracts that have been provided;

• assessing whether any outstanding or unpaid debt is indicative of a revenue transaction not occurring

and evaluating whether there is an indication of material credit notes being raised post year-end;

• re-calculation of revenue based on orders listing and deferred revenue based upon the global data set

and available deferral rules;

• assessing whether the discount is consistent across all performance obligations and lines in the order;

• testing the price list, including the underlying evidence supporting the relative pricing of multi-element

contracts;

• consideration of whether the arrangements included any implementation required for the customer to

obtain benefit from the hardware or software provided and whether the delivery of the implementation
was impactful to the timing of revenue recognition; and

• performed inquiries with Spirent management as to whether any new arrangements existed whereby

Spirent are re-selling or selling through products manufactured by a third party. For any new
arrangements we considered whether the products being delivered were sold as complimentary to
Spirent’s existing offerings and whether Spirent acted as a principal in such arrangements.

Specifically to address the risk of inappropriate revenue recognition due to cut-off, we have done the
following procedures:

• obtaining shipping records for physical items and evaluating whether the dates of shipment and receipt

supported recognition of revenue in the appropriate period;

• reviewing customer acceptance correspondence for completed service activities to support revenue

recognition;

• considering the nature of the items delivered on partially completed orders and assessing whether the
performance obligations were sufficiently distinct to have independent value without the full order
having been delivered;

• obtaining third party purchase orders to evidence Incoterms and reviewing third party shipping records
and customer confirmations to assess whether Spirent’s obligations have been fulfilled at the point of
recognising revenue; and

• reviewing the shipping terms to third party agreements and obtaining third party shipping records to

assess whether the shipping terms have been fulfilled.

Key observations

Based on the work performed we concluded that the revenue recognition is appropriate.

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Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTS5. Key audit matters continued
5.2. Classification of adjusting items

Key audit matter
description

In addition to the reported results, the Group continues to present adjusted profit measures which are
before the impact of adjusting items. Judgements made by management regarding the classification of
adjusting costs and income therefore have a significant impact on the presentation of the Group’s results.

In total, adjustments of $26.8 million have been made to the reported profit before tax of $22.9 million to
derive adjusted profit before tax of $49.7 million. Adjusting items included:

How the scope of our
audit responded to
the key audit matter

• Strategic evaluation ($13.5 million);

• Acquisition related transactions ($0.7 million);

• Acquired intangibles asset amortisation ($5.0 million); and

• Share-based payment ($7.6 million).

We identified a key audit matter in respect of the classification of items recorded as adjusting. While the key
measure used by management to monitor performance is adjusted operating profit, adjusted profit before
tax is also a key measure used in communication with shareholders. Judgement is exercised by
management in determining whether the classification of such items is in accordance with guidance issued
by the FRC and ESMA. There is a risk that costs or income may be classified as adjusting which are
underlying or recurring items, and therefore distort the reported adjusted profit, whether due to
manipulation or error. Consistency in the identification and presentation of the adjusted costs or income is
important for the comparability of year-on-year reporting.

Explanations of each adjustment are set out in note 5 to the Group financial statements, and also in note 2
to the Group financial statements in relation to the critical judgements involved in determining adjusting
items. Refer also to page 80 of the Audit Committee report.

We obtained an understanding of the relevant controls over the classification of adjusting items in the
financial statements.

We evaluated the appropriateness of the inclusion of items, both individually and in aggregate, within
adjusted results, completing the following procedures:

• assessed the consistency of items included year-on-year, the content and application of management’s
accounting policy, challenging the nature of these items by reference to FRC and ESMA guidance, and
challenging in particular the inclusion of those items that recur annually;

• tested a sample of adjusting items by agreeing to source documentation and evaluating their nature in

order to assess whether they are disclosed in accordance with the Group’s accounting policy, and also to
assess consistency of adjusting items between periods in the Group financial statements;

• agreed the amounts recorded through to underlying financial records and other audit support to test

that the amounts disclosed were complete and accurate;

• focused our challenge on certain categories such as strategic evaluation and acquisition costs within

adjusting items where we assessed that increased level of judgement had been applied by
management, and there was increased risk for fraud or error;

• for any impairment of right-of-use assets relating to leases we challenged whether the areas vacated
represented separate lease components that are reasonable to be individually isolated and impaired
distinct from the remainder of the lease;

• considered the impact of adjusting items on Directors’ remuneration targets to determine if any

increased fraud risk factor existed based on actual results for the period; and

• assessed whether the disclosures within the Group financial statements provided sufficient detail for the
reader to understand the nature of these items and how adjusted results reconcile to statutory results.

Key observations

The value of adjusting items results in a material difference between the statutory and adjusted results.
Whilst we note that the majority of adjusting items recur from period to period, their classification and
presentation is consistent with the Group’s policy and that they are appropriately disclosed.

Spirent Communications plc Annual Report 2023

119

FINANCIAL STATEMENTSIndependent auditor’s report to the members
of Spirent Communications plc continued

6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements

Parent Company financial statements

Materiality

$3.4 million (2022 $5.9 million)

$1.2 million (2022 $2.6 million)

We considered the materiality for parent Company
on the same basis as the Group however capped at
50 per cent of Group materiality to address the risk
of aggregation when combined with other
businesses (2022 50 per cent).

The parent Company includes both the UK trading
entities of the group and the head office. The
value of the standalone parent Company financial
statement to users is in relation to the assets and
equity of the business and as such net assets has
been used as the principal benchmark.

However, as the parent Company is also a trading
entity it was also considered that this was an
appropriate level relative to the revenue
generation, assets and profitability of the entity.

Basis for determining
materiality

We considered the following metrics:

• Adjusted Profit Before Tax

• Profit Before Tax

Rationale for the
benchmark applied

• Net Assets

• Revenue

We have historically used 5 per cent of profit before
tax as the sole benchmark for determining
materiality. However, given the instability of this
metric due to the challenging trading environment
and high level of one-off adjusting items in the
current year, we have reassessed this to be a
blended materiality considering other benchmarks.
In doing so we have selected metrics which are
considered key performance indicators by
management and users of the financial
statements, and that provide a more consistent
indicator of the overall level of trading activity
within the business.

Materiality for the current year represents:

• 0.7 per cent of Revenue (2022 1.0 per cent)

• 6.8 per cent of Adjusted Profit Before Tax

(2022 4.5 per cent)

• 14.7 per cent of Profit Before Tax

(2022 5.1 per cent)

• 1.0 per cent of Net Assets (2022 1.3 per cent)

Amortisation of acquired intangible assets,
share-based payment and other adjusting items
are recorded in arriving at profit before tax. We
have considered adjusting items through our key
audit matter above.

We performed our audit of in scope components
(see section 7) based upon a materiality range of
$1.2 million-$1.7 million depending on the size
and contribution of the respective component.

6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.

Group financial statements

Parent Company financial statements

Performance
materiality

70 per cent of Group materiality
(2022 70 per cent)

70 per cent of parent Company materiality
(2022 70 per cent)

Basis and rationale
for determining
performance
materiality

In determining performance materiality, we have considered the quality of the control environment
and corrected and uncorrected misstatements identified in previous audits.

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Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTS6. Our application of materiality continued
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $168,250
(2022 $295,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.

7. An overview of the scope of our audit
7.1. Identification and scoping of components
We performed our scoping of the Group audit on the basis of our understanding of the Group and its environment, including
group-wide controls, and assessing the audit risks. This exercise has considered the relative size of each reporting unit’s
contribution to revenue, profit before tax, net assets and adjusted profit before tax as well as other components we consider to
be significant in relation to their potential risk.

The Group has three major accounting hubs located in the UK, US and Hong Kong where the local finance teams are
responsible for the recording and reporting of the Group’s financial performance. The UK-based finance team are responsible
for the Europe, Middle East and Africa region and the Hong Kong team are responsible for the Asia Pacific region. The relative
size of these geographies is set out in note 3 (Operating Segments).

This resulted in six full-scope audits being performed for the principal trading entities in the UK, Asia Pacific and the US as well as
for the Group’s Federal business, also based in the US.

Additionally, our audit planning identified four components, located in the UK, US and China where we consider there to be a
reasonable possibility of material misstatement in specific balances within the financial statements. The relevant component
teams have performed audit work over these specific balances.

These components, which were either full or specified account balances scope in the current year, contribute 93 per cent (2022
94 per cent) of revenue, 87 per cent (2022 87 per cent) of profit before tax and 92 per cent (2022 94 per cent) of net assets.

The Group engagement team performed all audit work in respect of the consolidation, share-based payments, goodwill impairment,
UK defined benefit pension schemes and all audit work over the parent Company entity including the group’s UK trading activities.

In addition, the group engagement team reviewed the performance of all components not identified as in full scope or
specified account balance scope to ensure that there were no indications of additional risks of material misstatement within
the residual balances.

As each of the components maintains separate financial records, we have engaged component auditors from the Deloitte
member firms in the US and Hong Kong to perform procedures under our direction and supervision.

Revenue

Profit
before tax

Net assets

Full audit scope

93%

Full audit scope

68%

Full audit scope

Specified audit procedures

Review at Group level

Specified audit procedures

19%

Specified audit procedures

Review at Group level

13%

Review at Group level

81%

11%

Spirent Communications plc Annual Report 2023

121

FINANCIAL STATEMENTSIndependent auditor’s report to the members
of Spirent Communications plc continued

7. An overview of the scope of our audit continued

7.2. Our consideration of the control environment
We tested general IT controls over IT systems that were key to the Group’s revenue recognition process. These included
principally the global instances of the Group’s ERP, the system that contains the Group’s general ledger, but also extended to
certain tools the Group uses as complementary to those systems. We also tested relevant controls over the supporting
infrastructure of those systems including databases and operating systems.

We performed detailed walkthroughs of all relevant processes and obtained an understanding of relevant controls over revenue,
adjusting items and financial reporting cycles which addressed a significant risk of material misstatement. We have also
obtained an understanding of controls for further relevant account balances, including inventory.

In the current year, management have implemented additional controls over revenue and continue to formalise their processes.
During the course of our audit, we tested and were able to place reliance on a number of relevant revenue controls.

Where control deficiencies and improvements were identified in relation to IT systems, segregation of duties and balance sheet
reconciliations, these are reported to management and the Audit and Risk Committee as appropriate. The Group continues to
invest time in responding to, and addressing, our observations.

7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its financial
statements. Our risk assessment procedures included an understanding of management’s process for identifying and
considering climate-related risks and assessing whether the risks were consistent with our understanding of the entity.

The Group continues to focus on its assessment of the potential impacts of environmental, social and governance (ESG) related
risks, including climate change, as outlined on page 35. The risks identified by management include the potential for energy
costs increases in the short term and in the medium term, the potential for physical site damage, increased insurance costs and
capital expenditure and the potential for supplier disruption.

As a part of our audit, we have:

• Obtained an understanding of management’s climate-related risk assessment and evaluated the key assumptions;

• Held discussions with management to understand their governance process, the process of identifying climate-related risks,

the determination of mitigating actions and the impact on the Group’s financial statements;

• Read the disclosures in the Strategic report to whether they are materially consistent with the financial statements and our

knowledge obtained in the audit; and

• We have also evaluated the appropriateness of disclosures included in the financial statements.

Management has developed two climate change scenarios and determined that there is no material impact arising from
climate change on the judgements and estimates made in the financial statements, as disclosed on page 36 and in note 2.

7.4. Working with other auditors
In order to direct and supervise the component auditors we held regular formal video calls with all teams to ensure that we
gained a common understanding of the entity. We issued detailed referral instructions to the component auditors, reviewed and
supervised their work through visits to the component auditors during the planning and performance stages of our audit,
alongside frequent remote communication. We performed site visits for both the US and Hong Kong components. We also
attended key client briefings on both regional and segment performance.

8. Other information
The other information comprises the information included in the Annual Report, other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

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Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTS9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent Company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.

10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below.

11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with
laws and regulations, we considered the following:

• the nature of the industry and sector, control environment and business performance including the design of the Group’s

remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;

• results of our enquiries of management, internal audit and the Audit Committee about their own identification and assessment

of the risks of irregularities including those that are specific to the Group’s sectors;

• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:

– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-

compliance;

– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and

• the matters discussed among the audit engagement team, including significant component audit teams, and relevant internal
specialists, including tax, valuations, pensions and IT specialists regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.

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123

FINANCIAL STATEMENTSIndependent auditor’s report to the members
of Spirent Communications plc continued

11. Extent to which the audit was considered capable of detecting irregularities, including fraud continued
11.1. Identifying and assessing potential risks related to irregularities continued
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud
and identified the greatest potential for fraud in the following area: appropriateness of revenue recognition and classification of
adjusting items. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to
the risk of management override.

We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of
those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this context included the Companies Act 2006, the relevant tax
compliance regulations in the jurisdictions in which the Group operates, the Listing Rules and pensions legislation.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements
but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included,
in particular, considering the effect of the USA’s restrictions on trading with China and the necessity of licenses for various of the
Group’s products.

11.2. Audit response to risks identified
As a result of performing the above, we identified the appropriateness of revenue recognition and classification of adjusting
items as a key audit matters related to the potential risk of fraud. The key audit matters section of our report explains the matter
in more detail and also describes the specific procedures we performed in response to those key audit matters.

In addition to the above, our procedures to respond to risks identified included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of

relevant laws and regulations described as having a direct effect on the financial statements;

• enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential

litigation and claims;

• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material

misstatement due to fraud;

• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing

correspondence with HMRC;

• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and

other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias;
and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and significant component audit teams and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.

124

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTSReport on other legal and regulatory requirements

12. Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic report and the Directors’ report for the financial year for which the financial

statements are prepared is consistent with the financial statements; and

• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and the parent Company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ report.

13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance
Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained
during the audit:

• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and

any material uncertainties identified set out on page 113;

• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the

period is appropriate set out on page 113;

• the Directors’ statement on fair, balanced and understandable set out on page 114;

• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page

55;

• the section of the Annual Report that describes the review of effectiveness of risk management and internal control

systems set out on pages 80 and 81; and

• the section describing the work of the Audit Committee set out on page 78.

14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been

received from branches not visited by us; or

• the parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Spirent Communications plc Annual Report 2023

125

FINANCIAL STATEMENTSIndependent auditor’s report to the members
of Spirent Communications plc continued

14. Matters on which we are required to report by exception continued
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration
have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting
records and returns.

We have nothing to report in respect of these matters.

15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 28 April 2021 to audit
the financial statements for the year ending 31 December 2021 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and re-appointments of the firm is three years, covering the years ending 31 December
2021 to 31 December 2023.

15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with
ISAs (UK).

16. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR)4.1.15R – DTR 4.1.18R,
these financial statements form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism
of the UK FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the
Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.

Jane Makrakis FCA
For and on behalf of Deloitte LLP
Statutory Auditor
London
5 March 2024

126

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTSConsolidated income statement
Year to 31 December 2023

Revenue
Cost of sales

Gross profit
Product development
Selling and marketing
Administration

Operating profit

Adjusting items:
Acquired intangible asset amortisation
Share-based payment
Other adjusting items

Finance income
Finance costs

Profit before tax
Tax (charge)/credit

Profit for the year attributable to
owners of the parent Company

Earnings per share (cents)
Basic
Diluted

Year ended 31 December 2023

Year ended 31 December 2022

Notes

Adjusted
$ million

Adjusting
items 1
$ million

Reported
$ million

Adjusted
$ million

Adjusting
items 1
$ million

Reported
$ million

31
5

6
7

4
10

474.3
(130.7)

343.6
(102.4)
(133.9)
(62.1)

45.2

–
–
–

–

5.4
(0.9)

49.7
(5.4)

–
–

–
–
–
(26.8)

(26.8)

(5.0)
(7.6)
(14.2)

(26.8)

–
–

(26.8)
7.7

474.3
(130.7)

343.6
(102.4)
(133.9)
(88.9)

18.4

(5.0)
(7.6)
(14.2)

(26.8)

5.4
(0.9)

22.9
2.3

607.5
(170.4)

437.1
(111.3)
(138.9)
(57.4)

129.5

–
–
–

–

–
–

–
–
–
(16.8)

(16.8)

(4.7)
(8.5)
(3.6)

607.5
(170.4)

437.1
(111.3)
(138.9)
(74.2)

112.7

(4.7)
(8.5)
(3.6)

(16.8)

2.9
(1.0)

131.4
(16.9)

–
–

(16.8)
2.2

2.9
(1.0)

114.6
(14.7)

44.3

(19.1)

25.2

114.5

(14.6)

99.9

7.55
7.50

4.30
4.26

18.86
18.75

16.46
16.36

Note
1.

Adjusting items comprise amortisation of acquired intangible assets, share-based payment, other adjusting items, tax on adjusting items and any over/under
provision in respect of prior year tax.

The performance of the Group is assessed using a variety of non-GAAP alternative performance measures which are presented
to provide additional financial information that is regularly reviewed by management. Adjusting items are identified and excluded
by virtue of their size, nature or incidence as they do not reflect management’s evaluation of the underlying trading performance
of the Group. The alternative performance measures are presented on pages 196 and 197. The reported GAAP measures give
the complete measure of financial performance.

The notes on pages 132 to 171 and pages 192 and 193 form part of these financial statements.

Spirent Communications plc Annual Report 2023

127

FINANCIAL STATEMENTSConsolidated statement of comprehensive income
Year to 31 December 2023

Notes

2023
$ million

2022
$ million

25.2

99.9

2.8

(8.2)

(4.1)
(0.1)
(0.6)

(4.8)

(2.0)

23.2

(29.0)
9.4
–

(19.6)

(27.8)

72.1

Profit for the year attributable to owners of the parent Company

Other comprehensive income/(loss)
Items that may subsequently be reclassified to profit or loss:
– Exchange differences on retranslation of foreign operations

Items that will not subsequently be reclassified to profit or loss:
– Re-measurement of the net defined benefit pension asset
– Income tax effect of re-measurement of the net defined benefit pension asset
– Re-measurement of the deferred compensation liability

9
10
9

Other comprehensive loss

Total comprehensive income for the year attributable to owners of the parent Company

The notes on pages 132 to 171 and pages 192 and 193 form part of these financial statements.

128

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTSConsolidated balance sheet
At 31 December 2023

Assets
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Assets recognised from costs to obtain a contract
Defined benefit pension plan surplus
Deferred tax asset

Current assets
Inventories
Trade and other receivables
Assets recognised from costs to obtain a contract
Current tax asset
Cash and cash equivalents

Total assets

Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Other financial liabilities
Current tax liability
Provisions

Non-current liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Defined benefit pension plan deficit
Provisions

Total liabilities

Net assets

Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Other reserves
Translation reserve
Retained earnings

Total equity attributable to owners of the parent Company

The notes on pages 132 to 171 and pages 192 and 193 form part of these financial statements.

Signed on behalf of the Board

Paula Bell
Director
5 March 2024

Notes

2023
$ million

2022
$ million

13
14
15
19
20
9
26

18
19
20

22
24
25
22

22
24
25
9
27

206.6
15.8
17.2
5.0
0.3
8.4
43.2

296.5

43.5
133.7
1.0
1.0
108.1

287.3

583.8

(65.9)
(66.6)
(10.7)
–
(0.8)
(5.0)

202.0
20.6
19.5
6.7
0.5
9.7
32.8

291.8

39.8
160.8
0.9
2.4
209.6

413.5

705.3

(94.8)
(75.5)
(7.1)
(0.1)
(7.2)
(5.7)

(149.0)

(190.4)

(0.2)
(33.7)
(10.7)
(11.4)
(3.0)

(59.0)

(0.2)
(22.7)
(15.0)
(9.1)
(2.7)

(49.7)

(208.0)

(240.1)

375.8

465.2

24.6
25.7
18.2
17.5
5.5
284.3

375.8

24.7
24.4
16.0
20.9
2.6
376.6

465.2

Spirent Communications plc Annual Report 2023

129

FINANCIAL STATEMENTSConsolidated statement of changes in equity

Attributable to the equity holders of the parent Company
$ million

Notes

Share
capital

27.5

Share
premium
account

Capital
redemption
reserve

Other
reserves

Translation
reserve

Retained
earnings

27.2

17.8

13.5

10.8

350.7

At 1 January 2022

Profit for the year
Other comprehensive income1

Total comprehensive (loss)/income

Share-based payment
Tax charge on share incentives
Equity dividends
Employee Share Ownership Trust
Exchange adjustment

31
10
12
29

–
–

–

–
–
–
–
(2.8)

–
–

–

–
–
–
–
(2.8)

–
–

–

–
–
–
–
(1.8)

–
–

–

–
–
–
–
7.4

At 1 January 2023

24.7

24.4

16.0

20.9

Profit for the year
Other comprehensive income/(loss)2

Total comprehensive income

Share-based payment
Tax charge on share incentives
Equity dividends
Share repurchase
Exchange adjustment

31
10
12
29

–
–

–

–
–
–
(1.4)
1.3

–
–

–

–
–
–
–
1.3

–
–

–

–
–
–
1.4
0.8

–
–

–

–
–
–
–
(3.4)

At 31 December 2023

24.6

25.7

18.2

17.5

Total
equity

447.5

99.9
(27.8)

72.1

8.5
(0.1)
(39.9)
(22.9)
–

99.9
(19.6)

80.3

8.5
(0.1)
(39.9)
(22.9)
–

376.6

465.2

25.2
(4.8)

20.4

6.8
(1.7)
(46.5)
(71.6)
0.3

25.2
(2.0)

23.2

6.8
(1.7)
(46.5)
(71.6)
0.4

284.3

375.8

–
(8.2)

(8.2)

–
–
–
–
–

2.6

–
2.8

2.8

–
–
–
–
0.1

5.5

Notes
1. The amount included in other comprehensive income/(loss) for 2022 of $19.6 million represents re-measurement losses on the net defined benefit pension asset
of $29.0 million, net of a tax credit of $9.4 million. The amount included in the translation reserve of $8.2 million represents other comprehensive losses related
to the translation of foreign operations.

2. The amount included in other comprehensive income/(loss) for 2023 of $4.8 million represents re-measurement losses on the net defined benefit pension asset

of $4.1 million, a tax charge of $0.1 million and remeasurement losses on the deferred compensation liability of $0.6 million. The amount included in the
translation reserve of $2.8 million represents other comprehensive gain related to the translation of foreign operations.

The notes on pages 132 to 171 and pages 192 and 193 form part of these financial statements.

130

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTSConsolidated cash flow statement
Year to 31 December 2023

Cash flows from operating activities
Cash flow from operations
Tax paid

Net cash inflow from operating activities

Cash flows from investing activities
Interest received
Purchase of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Lease payments received from finance leases
Acquisition of business

Net cash used in investing activities

Cash flows from financing activities
Lease liability principal repayments
Lease liability interest paid
Dividend paid
Share purchase into Employee Share Ownership Trust
Share repurchase

Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes

Cash and cash equivalents at the end of the year

The notes on pages 132 to 171 and pages 192 and 193 form part of these financial statements.

Notes

15
33

25
25
12
29
29

2023
$ million

2022
$ million

45.8
(13.9)

31.9

5.4
(6.5)
0.4
0.6
(7.8)

(7.9)

(7.9)
(0.9)
(46.5)
–
(71.6)

(126.9)

(102.9)
209.6
1.4

108.1

140.6
(22.8)

117.8

1.5
(8.4)
0.2
0.6
–

(6.1)

(8.6)
(1.0)
(39.9)
(22.9)
–

(72.4)

39.3
174.8
(4.5)

209.6

Spirent Communications plc Annual Report 2023

131

FINANCIAL STATEMENTSNotes to the consolidated financial statements

1. Corporate information
The Group’s consolidated financial statements for the year ended 31 December 2023 were authorised for issue by the Board
of Directors on 5 March 2024. Spirent Communications plc is a public limited company incorporated and domiciled in England
and Wales (registration number 470893). The registered address of the Company is Origin One, 108 High Street, Crawley,
West Sussex RH10 1BD, United Kingdom.

The Company’s Ordinary Shares are traded on the London Stock Exchange.

The Group financial statements have been prepared in accordance with International Accounting Standards (IFRS) in conformity
with the requirements of the Companies Act 2006 and United Kingdom adopted International Accounting Standards.

The Company has elected to prepare the Company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101) and the
Companies Act 2006. These are presented on pages 172 and 173 and the accounting policies in respect of the Company are set
out on pages 174 to 191.

2. Significant accounting policies
Accounting convention
The consolidated financial statements are prepared on a historical cost basis apart from certain financial instruments that have
been measured at fair value and the United Kingdom defined benefit pension plan obligations which have been measured
using the projected unit credit method.

Going concern basis of accounting
In adopting the going concern basis for preparing the consolidated financial statements, the Directors have considered the
Group’s principal risks and uncertainties as set out on pages 55 to 60.

The Directors have also considered sensitivities in respect of potential downside scenarios, including stress testing the latest cash
flow projections that cover a period of 12 months from the date of approval of these consolidated financial statements. In these
scenarios, the Group has more than sufficient headroom in its available resources.

At 31 December 2023, the Group had cash balances of $108.1 million and external debt only in relation to its lease liabilities.

The Directors have reviewed the detailed financial projections for the period ending 31 December 2024, as well as the business
plan and cash flows for the three months ending 31 March 2025. The Directors have also considered the period to the end of
2026 which forms part of the Group’s longer-term viability assessment. In addition, they have considered the principal risks faced
by the Group, the sensitivity analysis as described in the Viability Statement on page 113 and the Group’s significant financial
headroom and are satisfied that the Group has adequate financial resources to continue in operational existence for the
foreseeable future, a period of at least 12 months from the date of approval of this report. Accordingly, the going concern basis
of accounting continues to be used in the preparation of the consolidated financial statements.

New accounting standards
There have been no applicable new standards, amendments to standards and interpretations effective from 1 January 2023
that have been applied by the Group which have resulted in a significant impact on its consolidated results or financial position.

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to
31 December each year. The financial statements of subsidiaries are prepared for the same reporting year as the parent
Company, using consistent accounting policies. A full list of subsidiary undertakings is provided on pages 192 and 193.

Subsidiary undertakings are entities that are directly or indirectly controlled by the Group. The Group controls an entity when it is
exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity.

Results of subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated
from the date on which control is transferred out of the Group.

The separable net assets, including intangible assets of newly acquired subsidiaries, are incorporated into the consolidated
financial statements based on their fair values at the effective date of control.

132

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTS2. Significant accounting policies continued
Basis of consolidation continued
The Group includes a subsidiary that is operated under the management of a Proxy Board. Details of the Proxy Board arrangements
and the powers of the proxy holders and Spirent’s management are set out in the Corporate Governance section of this Annual
Report on page 72. The Directors consider that the Group meets the requirements of IFRS 10 “Consolidated Financial Statements”
in respect of control over the entity in question as Spirent maintains the following:

• rights to appoint, reassign or remove members of key management and the ability to appoint proxy holders and change

directors every five years;

• rights to direct the investee to enter into, or veto any changes to, transactions; and

• decision making rights and rights to direct activities including the ability to change products, territories and customers

and the ability to terminate product selling (with notice).

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations and goodwill
A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. Business
combinations are accounted for using the acquisition method.

At acquisition date, the identifiable assets acquired and liabilities assumed, including intangible assets, are measured at their
fair values. The cost of an acquisition is measured as the aggregate of the consideration transferred and the amount of any
non-controlling interest in the acquiree. Non-controlling interests are measured at the proportionate share of the acquiree’s
identifiable net assets.

Contingent consideration resulting from business combinations is valued at fair value at the acquisition date as part of the business
combination. When the contingent consideration meets the definition of a financial liability, it is subsequently re-measured to fair
value at each reporting date, with changes in fair value recognised in profit or loss. The determination of fair value is based on
discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and
the discount rate.

Acquisition related costs are expensed and included in other adjusting items.

Goodwill arising on the acquisition of subsidiaries, representing the excess of cost over the net fair value of the net assets
acquired, is capitalised as an intangible asset. Goodwill is carried at cost less any accumulated impairment losses.

Goodwill is subject to an annual review for impairment. For the purpose of impairment testing, goodwill is allocated to the
related cash-generating units being the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Cash-generating units are grouped and assessed in
combination where this is consistent with how the chief operating decision maker reviews business performance and at a level
no larger than an operating segment. Where the recoverable amount of the cash-generating unit is less than its carrying
amount, including goodwill, an impairment loss is recognised in the income statement.

Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Separately identifiable
intangible assets such as patent fees, licence fees, trademarks and customer lists and relationships are capitalised on the balance
sheet only when the value can be measured reliably, or the intangible asset is purchased as part of the acquisition of a business.
Such intangible assets are amortised over their useful economic lives on a straight-line basis. The carrying value of intangible
assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Acquired intangible assets, being customer lists, current technology, databases, brand names and a non-compete covenant,
are amortised on a straight-line basis over their estimated useful lives and the charge is included within adjusting items in the
income statement. Licences are amortised over their useful lives or term, and are expensed within cost of sales or selling costs.

The estimated useful lives of intangible assets and the amortisation expiry dates are as follows:

Customer lists
Current technology
Brand names
Licences

Useful life

2 to 7 years
5 to 7 years
3 years
3 to 5 years

Spirent Communications plc Annual Report 2023

133

FINANCIAL STATEMENTS2. Significant accounting policies continued
Product development
Research expenditure is charged to product development in the income statement in the year in which it is incurred. Intangible
assets arising on the Group’s various product development projects are recognised only if the recognition criteria of IAS 38
“Intangible Assets” are met.

Development costs are expensed as incurred until the technological feasibility of the product under development has been
established. Technological feasibility in Spirent’s circumstances occurs when there is an expectation that the proposed product
will be successfully implemented. After technological feasibility is established, costs are capitalised and amortised on a straight-
line basis over the estimated useful life.

Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment. Depreciation
is not provided on freehold land. Depreciation is provided to write-off the cost, less estimated residual value, of all other assets
over their estimated useful lives on a straight-line basis at rates which take into account commercial conditions at their location.
Usual asset lives are as follows:

Freehold buildings
Plant and machinery
Fixtures, fittings and equipment:
- Building installations
- Fittings and equipment
- Motor vehicles
- Business systems software

50 years
3 to 8 years

20 years or lease period if lower
3 to 8 years
3 to 5 years
4 years

Business systems software is capitalised as property, plant and equipment as the software is an integral part of the related hardware.

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable.

Impairment of assets
Intangible assets with finite useful lives, property, plant and equipment and right-of-use assets are tested for impairment at each
reporting date where there is an indication that an asset may be impaired. Goodwill and intangible assets with an indefinite useful
life are assessed at least annually. When an impairment test is performed, the recoverable amount is assessed by reference to the
higher of the net present value of the expected cash flows (value in use) of the relevant cash-generating unit or asset and the fair
value less cost of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount. Impairment losses are recognised in the income statement in those expense categories consistent
with the function of the impaired asset.

Where an impairment loss has been recognised against an asset, it may be reversed in future periods where there has been
a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised,
but only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, had no impairment loss been recognised in prior years. Such a reversal is recognised in the
income statement. This does not apply for goodwill, for which an impairment loss must not be reversed in any circumstances.

Leases
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of a contract. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is
the lessee at the commencement date of the lease (i.e. the date the underlying asset is available for use), except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Group recognises
the lease payments as an operating expense within the income statement on a straight-line basis over the period of the lease.

At the commencement date of the lease, the lease liability is initially measured at the present value of lease payments to be
made over the lease term, discounted using the rate implicit in the lease. If this rate cannot be readily determined, the Group
uses its incremental borrowing rate. Under the modified retrospective transition method, lease liabilities are required to be
discounted using the incremental borrowing rate at date of transition. The Group has set the discount rate based upon the local
base rate with an additional premium to reflect various factors such as credit risk. This approach enables an appropriate rate to
be set for each lease depending on geographic location and lease classification.

134

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS2. Significant accounting policies continued
Leases continued
The Group as a lessee continued
The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or rate, and amounts expected to be paid under residual value guarantees.
The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group
and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which
the event or condition that triggers the payment occurs.

The lease liability is presented as a separate line in the consolidated balance sheet.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method), and by reducing the carrying amount to reflect the lease payments made. It is re-measured when
there is a change in future lease payments arising from a change in an index or rate, if the Group changes its assessment of
whether it will exercise a purchase, extension or termination option or if there is a modification. Interest on the lease liability is
presented within finance costs in the income statement.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the corresponding lease liability,
adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is
located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier
of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The right-of-use assets are presented as a separate line in the consolidated balance sheet.

Lease payments for short-term leases, lease payments for low-value assets and variable lease payments not included in the
measurement of the lease liability are classified as cash flows from operating activities within the consolidated cash flow
statement. The Group has classified the principal and interest portions of lease payments within financing activities.

The Group as a lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and
rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an
operating lease.

The Group subleases certain of its buildings where the subleases are classified as finance leases. In these instances, the Group
derecognises the right-of-use asset on the head lease at the sublease commencement date and continues to account for the
original lease liability in accordance with the lessee accounting model. The Group, as a sublessor, recognises a net investment in
the sublease within trade and other receivables in the balance sheet and evaluates it for impairment. The net investment in the
sublease is subsequently measured by increasing the carrying amount to reflect interest (using the effective interest method),
and by reducing the carrying amount to reflect sublease income received. Interest on the net investment in the sublease is
presented within finance income in the income statement.

Cash flows from the principal and interest of the finance lease receivables received are classified as investing activities within
the consolidated cash flow statement.

Inventories
Inventories are stated at the lower of cost and estimated net realisable value, after provisions for obsolescence. Cost includes
all costs incurred in bringing each product to its present location and condition, being the full manufacturing cost on a first-in,
first-out basis, including all attributable overheads based on a normal level of activity.

Provisions
Provisions are recorded when the Group has a present, legal or constructive obligation as a result of a past event, for which it is
probable that the Group will be required to settle by an outflow of resources and for which a reliable estimate of the amount of
the obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

Where the effect of the time value of money is material, the amount of the provision shall be the present value of the expenditures
expected to be required to settle the obligation.

Spirent Communications plc Annual Report 2023

135

FINANCIAL STATEMENTS2. Significant accounting policies continued
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only on the occurrence or non-occurrence of
uncertain future events outside the Group’s control, or present obligations that are not recognised because it is not probable
that a settlement will be required or the value of such a payment cannot be reliably measured. The Group does not recognise
contingent liabilities but discloses them.

Foreign currencies
The consolidated financial statements are presented in US Dollars, which is the Group’s presentation currency.

Transactions in foreign currencies are initially recorded at the rates ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated at the rates ruling at the balance sheet date. All exchange
differences are taken to the consolidated income statement. Non-monetary assets and liabilities denominated in foreign
currencies are measured in terms of historical costs using the exchange rate at the date of the initial transaction.

The functional currencies of the Group’s operations are principally US Dollar, Pound Sterling or Euro. On consolidation, the assets
and liabilities of the Group’s foreign operations are translated into the Group’s presentation currency at exchange rates ruling
at the balance sheet date. The results of foreign operations are translated into US Dollars using average rates for the period.
The exchange differences arising on retranslation are classified as a separate component of equity, the translation reserve.
Such translation differences are recognised as part of the profit or loss on disposal should an operation be disposed of.

Financial instruments
Financial assets and liabilities are recognised on the Group’s balance sheet when it becomes a party to the contractual
provisions of the instrument.

Trade receivables
Trade receivables are non-interest bearing and are stated at original invoiced amount less an appropriate allowance for expected
credit losses. At each reporting date, the Group measures the loss allowance at an amount equal to the lifetime expected credit losses.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. Therefore, the Group does not track changes in credit risk, but instead recognises a loss
allowance based on lifetime expected credit losses at each reporting date. To measure the expected credit losses, the Group
has established a provision matrix that is based on shared credit risk characteristics and the days past due based on the
expected loss rates.

The provision matrix is initially based on payment profiles of trade receivables over a period of 12 months before 31 December of
the prior year and the corresponding historical credit losses experienced within this period. At every reporting date the historical
observed default rates are updated. The Group also considers the impact of regional macroeconomic factors on the likelihood
of future losses.

Trade receivables are written off when there is no reasonable expectation of recovery.

A default on a trade receivable occurs when the debtor fails to make contractual payments when they fall due.

Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits which have an
original maturity of three months or less. For the purposes of the consolidated cash flow statement, cash and cash equivalents
consist of cash and cash equivalents as defined above. There are no bank overdrafts.

Trade payables
Trade payables are non-interest bearing and are stated at the original invoiced amount.

Equity instruments
Equity instruments are recorded at the proceeds received, net of direct issue costs. Spirent Communications plc Ordinary Shares
held by the Group are classified in equity as treasury shares and are recognised at cost and included as a deduction from
retained earnings. Consideration received for the sale of such treasury shares is also recognised in equity.

Derivative financial instruments
The Group uses forward foreign currency exchange contracts to manage exposures arising on receipts and payments in foreign
currencies relating to firm commitments.

Forward foreign currency exchange contracts are initially recognised at fair value on the date on which the contract is entered
into and are subsequently re-measured to fair value at each reported balance sheet date. The fair value of forward foreign
currency exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity
profiles. The Group has not adopted the hedge accounting rules. Consequently all gains and losses arising from changes in fair
value are taken to the income statement.

136

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS2. Significant accounting policies continued
Retirement benefits
The Group operates two funded defined benefit pension plans which are in the United Kingdom; all other pension plans are
defined contribution in nature. For the defined contribution plans, the amount charged to the income statement is the employer’s
contributions paid or payable during the year.

For defined benefit pension plans, full actuarial valuations are carried out every three years using the projected unit credit method
and updates are performed at each balance sheet date. Re-measurement, comprising actuarial gains and losses, the effect of
changes to the asset ceiling (if relevant) and the return on plan assets (excluding interest), is reflected immediately in the balance
sheet surplus with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement
recognised in other comprehensive income will not be reclassified to profit or loss. Past service cost is recognised in profit or loss
in the period of plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the
net defined benefit pension asset, taking account of any changes in the net defined benefit pension asset during the period as a
result of contribution and benefit payments. Where a refund of a surplus is expected, any applicable taxes that are not income in
nature are netted off. Defined benefit pension costs are categorised as:

• service cost (including current service cost, past service cost and gains and losses on curtailments or settlements);

• net interest expense or income; and

• re-measurement.

The Group presents the first two components of defined benefit pension costs in profit or loss.

The Group also operates a deferred compensation plan in the United States. The plan has elements of a defined benefit pension
retirement obligation and therefore is required to be valued in accordance with IAS 19 “Employee Benefits”. For the deferred
compensation plan, the gains or losses on the deemed investments that are attributed to the deferral account over time are
charged or credited to the income statement whereas the re-measurement, comprising actuarial gains or losses, is reflected
immediately in the balance sheet liability with a charge or credit in other comprehensive income in the period in which it occurs.
Re-measurement recognised in other comprehensive income will not be reclassified to profit or loss.

Revenue
Revenue represents the transfer of promised products or services to customers in an amount that reflects the consideration
to which the Group expects to be entitled in exchange for those products or services.

Revenue from product sales of hardware and perpetual software licences is recognised at the point in time when the customer
has obtained control of the products sold. This is usually when the products have been delivered in accordance with the contractual
terms. In some instances it is not until acceptance has occurred that control of the asset is transferred to the customer. Terms of
acceptance are dependent upon the specific contractual arrangement agreed with the customer. If it can be objectively
determined that control has been transferred to the customer in accordance with the agreed contract specifications, customer
acceptance is a formality that would not affect the determination of when the customer has obtained control of the products.
However, if it cannot be objectively determined that the products delivered are in accordance with the agreed-upon contract
specifications, revenue would not be recognised until customer acceptance has been granted.

For sales of software licences, the Group determines whether the licence is capable of being distinct and is separately
identifiable from other promises in the context of the contract. Revenue from software subscription licences that provide the
customer with a right to access the Group’s intellectual property throughout the subscription period is recognised over time,
throughout the subscription period. Revenue from perpetual software licences that provide the customer with a right to use the
Group’s intellectual property for an indefinite period of time is recognised at the point in time when the customer can first use
and benefit from the software.

For the sale of services, revenue is generally recognised over time with reference to when or as the performance obligations are
satisfied by transferring the service to the customer. Revenue from support and maintenance service contracts and software
subscription sales is recognised over the period of performance on a straight-line basis.

Revenue from professional services is generally recognised as work progresses in accordance with agreed-upon contractual
terms, based on a measure of progress towards complete satisfaction of the performance obligation. Progress is measured
using either an output method (e.g. completion of a day, or for fixed price contracts revenue is recognised based on performance
completed or contractual milestones reached) or an input method (e.g. actual cost of services provided as a proportion of total
cost of services expected to be provided under the contract). Where applicable, the Group elects to use the practical expedient
where revenue can be recognised in the amount to which the Group has a right to invoice, only if the Group has a right to
consideration from a customer in an amount that corresponds directly with the value to the customer of the Group’s performance
completed to date. Where the Group’s professional services contracts contain terms of acceptance, revenue would not be
recognised until customer acceptance had been obtained. Where the professional service has a pre-determined or fixed output
deliverable, revenue is recognised at a point in time once the performance obligation has been satisfied and the customer has
received the agreed deliverable.

Spirent Communications plc Annual Report 2023

137

FINANCIAL STATEMENTS2. Significant accounting policies continued
Revenue continued
The Group accounts for multi-component orders as multiple performance obligations if the following criteria are met:

the good or service is capable of being distinct, that is, they are individually readily available and regularly sold separately
to customers; and

the promise to transfer the good or service is distinct in the context of the contract, that is, they do not require significant
integration, customisation or modification with other goods or services in the contract and are not highly interrelated or
interdependent of other goods or services in the contract.

For multi-component orders where the elements are accounted for as multiple performance obligations, the transaction price
and discount, if any, are allocated proportionally to all performance obligations in the contract. If either of the two criteria above
are not met, and where various components in the contract are combined, bundled or pre-assembled into one or more product
or equipment units to form a distinct good or service, they will be accounted for as a single performance obligation.

Virtually all of the Group’s revenue is derived from the sale of its own products and services. In the instances where the Group is
a reseller of third party products and services, it accounts for these transactions as a principal as it controls the product or service
before it is transferred to the customer and therefore recognises revenue on a gross basis.

Cost of sales
The Group’s cost of sales related to the sale of its products includes materials, payments to third party contract manufacturers,
royalties and salaries and other expenses related to its manufacturing and supply operations personnel. Cost of sales related to
the provision of services includes salaries and other expenses associated with technical support services and the cost of
extended maintenance services.

Costs to obtain a contract
The incremental costs of obtaining a contract with a customer are capitalised as an asset if the Group expects to recover them.
The Group incurs costs such as sales commissions when it enters into a new contract. Such costs are presented in the consolidated
balance sheet as assets recognised from costs to obtain a contract where the related revenue is recognised over time, usually in
relation to support and subscription agreements. These assets are amortised on a systematic basis consistent with how the related
revenue is recognised. The amortisation is recognised in selling and marketing costs within the income statement.

The Group applies the practical expedient in paragraph 94 of IFRS 15 and recognises incremental costs of obtaining a contract as an
expense when incurred if the amortisation period of the asset that the Group would otherwise have recognised is one year or less.

Management is required to determine the recoverability of assets recognised from costs to obtain a contract. At each reporting
date, the Group determines whether or not the assets are impaired by comparing the carrying amount of the asset to the
remaining amount of consideration that the Group expects to receive less the costs that relate to providing services under the
relevant contract. No assets were impaired as at 31 December 2023 or 31 December 2022.

Deferred income
Deferred income is only recognised on non-cancellable contracts that provide unconditional rights to payment from the customer
for products and services that the Group has not yet completed providing or that it will provide in the near future.

Revenue from product sales of hardware and perpetual software licences is recognised at the point in time when the customer
has obtained control of the products sold. In the instances where the customer has been invoiced and revenue from hardware
or perpetual software licences is unable to be recognised, revenue would not be recognised until control has passed, resulting
in deferred income.

Support services and software subscription agreements are generally billed at commencement of the support or subscription
contract, while revenue is recognised over the period of the support or subscription agreement, resulting in deferred income.

The Group occasionally receives advance payments from customers on account, before products or services are delivered and
revenue is recognised, resulting in liabilities.

Deferred income and payments received on account are reported on the consolidated balance sheet within contract liabilities
on a contract-by-contract basis at the end of each reporting period.

Government grants
A government grant is recognised in the balance sheet initially within trade and other payables when there is reasonable assurance that
it will be received and that the Group will comply with the conditions attached to it. Grants that compensate the Group for expenses
incurred are recognised as other operating income on a systematic basis in the same periods in which expenses are incurred.

Employee benefits
When an employee has rendered services to the Group during an accounting period, short-term benefits expected to be paid
in exchange for those services are recognised in the same accounting period.

138

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS2. Significant accounting policies continued
Share-based payment
The Group operates various equity-settled and cash-settled share-based compensation plans and accounts for these awards
in accordance with IFRS 2 “Share-based Payment”.

For equity-settled awards, the fair value is recognised in the income statement on a straight-line basis over the vesting period
together with a corresponding change in equity. The fair value is measured using the Black-Scholes model by reference to the
share price, and taking into account the terms and conditions of the award, excluding non-market vesting conditions, at the
date the awards were granted. The charge is reassessed at each balance sheet date to reflect the expected and actual levels
of vesting, due to achievement or otherwise of non-market conditions. Awards where vesting is conditional upon satisfying
a market condition or non-vesting condition are treated as vesting irrespective of whether the market or non-vesting condition
has been satisfied.

Cash-settled awards are measured at fair value at the balance sheet date. The Group recognises a liability within trade and
other payables at the balance sheet date based on these fair values, taking into account the estimated number of options that
will actually vest and the relative completion of the vesting period. Changes in the value of this liability are recognised in the
income statement for the year.

With effect from 1 January 2019, one-third of the Annual Incentives of the Executive Directors is deferred into shares for a period
of three years. This amount is an equity-settled share-based payment transaction within the scope of IFRS 2 and the related
expense is charged to the income statement in the same year as the measurement period. This amount has been charged to
administration expenses in the income statement and forms part of adjusted operating profit as it reflects part of the underlying
trading performance of the Group.

The Group has an employee share trust for the granting of certain share incentives to employees. Shares in the Group held
by the employee share trust are treated as treasury shares and presented in the balance sheet as a deduction from equity.

Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items in other comprehensive income or equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustments to tax payable for previous years.

Deferred tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, with the following exceptions:

• where the temporary difference arises from the initial recognition of goodwill (taxable temporary differences only) or of an

asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

A deferred tax asset is recognised only to the extent that it is probable that taxable profits will be available against which the
deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related
asset is realised or the liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Dividends paid
The interim dividend is included in the financial statements in the period in which it is paid, and any final or other dividend is
included in the period in which they are approved.

Adjusting items
Adjusting items are disclosed separately in the income statement where it is necessary to do so due to their nature or amount
and to provide further understanding of the Group’s financial performance. The adjusted measures are also used to partly
determine the employees variable element of remuneration of senior management throughout the Group and are also aligned
with performance measures used by certain external stakeholders. Adjusting items comprise amortisation of acquired intangible
assets, share-based payment, other adjusting items, the tax effect of these items and any over/under provision of tax in the
prior year.

The Group excludes share-based payment from adjusted operating profit (except for share-based payment relating to the
Executive Directors’ deferred bonus plan, see share-based payment policy), as the expense can fluctuate based on the size,
nature and timing of awards granted, the Group’s share price and the subjective assumptions used in the calculation.
Management consider the financial results of the business before the deduction of share-based payment for their operational
decision making. Additionally, management believes the exclusion of share-based payment and amortisation of acquired
intangible assets also allows for more meaningful comparisons of operating results with peer companies, many of which also
exclude the expense from underlying results.

Spirent Communications plc Annual Report 2023

139

FINANCIAL STATEMENTS2. Significant accounting policies continued
Adjusting items continued
Certain items are classified as other adjusting items due to their nature, amount or infrequency, such as restructuring. Such
presentation is relevant to further understanding of the Group’s financial statements. These items are not part of the Group’s
normal ongoing operations. Costs directly associated with the integration of a business acquisition are included within other
adjusting items to the extent they are in accordance with the above definition.

Direct transaction costs and fees of potential or actual acquisitions are charged to the income statement in the period in which
they are incurred. Such items are presented separately as other adjusting items and, due to their nature and infrequency, are
excluded from the underlying trading performance of the Group.

Adjusting items are disclosed within administration expenses in the consolidated income statement as they are reviewed,
managed and controlled centrally by the Group. The Group considers these costs to be functionally aligned to, and have
therefore been presented alongside, corporate costs within administration expenses. This presentation is relevant to an
understanding of the Group’s financial performance.

Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires the Group to make estimates and assumptions that affect items reported.
Such estimates and assumptions are based on management’s best knowledge of current facts, circumstances and future events.
Actual results may differ, possibly significantly, from those estimates. The areas requiring a high degree of judgement or where
assumptions and estimates are significant to the consolidated financial statements are discussed below.

Judgements
Revenue recognition
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. Where there are
no observable prices, the Group generally determines the standalone selling prices of individual elements based on standalone
internal list prices which are then subject to discount.

To determine the appropriate revenue recognition for contracts containing multiple elements or complex solutions that include
both products and services, we evaluate whether the contract should be accounted for as a single or multiple performance
obligation. This evaluation requires significant judgement and impacts the amount of revenue allocated to each performance
obligation, which can affect the amount of revenue recognised and deferred income on the balance sheet.

The factors the Group considers when making this judgement are as follows:

• whether the elements of a multi-component order have a unique part number as evidenced in our product lifecycle

management process;

• whether the elements of a multi-component order have a standalone selling price as evidenced in our internal price list;

• whether the elements of a multi-component order are regularly sold separately to a range of customers, based on

historical information;

• whether the customer can benefit from the elements of a multi-component order on their own or with resources that are

readily available to the customer, based on technical input from our product managers;

• whether the elements of a multi-component order require significant integration, modification or customisation with other elements

of the multi-component contract, based on historical information and technical input from our product managers; and

• whether the elements of a multi-component order are significantly affected by one or more of the other elements of the
multi-component contract and whether there is a significant two-way dependency, based on technical input from our
product managers.

For professional services revenue recognised over time, a single method of measuring progress is selected and used for each
performance obligation. The selection of the method to measure progress towards completion requires judgement and is based
on the nature of the services to be provided. The selected method is applied consistently to similar contracts in similar
circumstances. This judgement impacts revenue recognised over time and the amount of deferred income on the balance sheet.

Adjusting items
Judgements are required as to whether items are disclosed as adjusting, with consideration given to both quantitative and
qualitative factors. Further information about the determination of adjusting items is included in significant accounting policy
(Note 2).

140

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS2. Significant accounting policies continued
Critical accounting judgements and key sources of estimation uncertainty continued
Judgements continued
Defined benefit pension plans
For the Staff Plan defined benefit pension scheme, the Group recognises a net pension scheme surplus as it is expected the
liabilities will be settled over time until the last beneficiary dies and the residual surplus in the scheme can be refunded to the
Group as sponsor.

The scheme Trustees only have the ability to augment benefits when the scheme is in a wind up, and it is expected they would
seek the support of the Company in any case. As the scheme cannot enter wind up without the support of the Company and the
intention today is not to enter into wind up until the death of the final beneficiary, this is not seen as a condition to the Group
receiving a refund. As the refund would attract withholding tax of 35 per cent the surplus has been reduced by this amount.

These assumptions require judgement and affect the amount of scheme surplus recognised and whether to recognise a surplus at all.

Estimates
There are no critical accounting estimates.

Consideration of climate change
In preparing the financial statements, the Directors have considered the impact of climate change, particularly in the context
of the risks identified in the TCFD disclosures on pages 35 to 37. There has been no material impact identified on the financial
reporting judgements and estimates. In particular, the Directors considered the impact of climate change in respect of the
following areas:

• going concern and viability of the Group over the next three years;

• cash flow forecasts used in the impairment assessments of non-current assets including goodwill and other intangible assets;

and

• carrying amount and useful economic lives of property, plant and equipment.

Whilst there is currently no material medium term financial impact expected from climate change, the Directors will assess
climate-related risks at each reporting date against judgements and estimates made in preparation of the Group’s
financial statements.

Applicable new standards and interpretations not applied
The IASB and IFRIC have issued the following standards and interpretations with an effective date for the Group after the date
of these financial statements:

International Accounting Standards (IAS/IFRS)

IAS 1

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

IFRS 16

Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

IAS 1

Non-current Liabilities with Covenants (Amendment to IAS 1)

IAS 28/IFRS 10 Sale or Contribution of Assets between Investor and its Associate, or Joint

Venture (Amendments to IAS 28/IFRS 10)

IAS 7/IFRS 7

Supplier Finance Arrangements (Amendments to IAS 7/IFRS 7)

Effective for annual periods
beginning on or after

1 January 2024

1 January 2026

1 January 2024

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the
Group’s financial statements in the period of initial application.

Spirent Communications plc Annual Report 2023

141

FINANCIAL STATEMENTS3. Operating segments
The Group’s organisational structure is based on differences in the products and services offered by each segment and
information regularly reviewed by the Group’s Chief Executive Officer, its chief operating decision maker, is presented on this
basis. The Group’s operating segments follow this structure.

The Group’s reportable operating segments are Lifecycle Service Assurance and Networks & Security. The Group evaluates
adjusted operating profit before acquired intangible asset amortisation, share-based payment and other adjusting items.
Finance income and finance costs are not allocated to the reportable segments. Corporate is not an operating segment and
costs are separately reported and not allocated to the reportable segments. Information on segment assets and segment
liabilities is not regularly provided to the Group’s Chief Executive Officer and is therefore not disclosed below. There is no
aggregation of operating segments.

The Group disaggregates revenue from contracts with customers by nature of products and services and primary geographical
markets as this best depicts how the nature, amount, timing and uncertainty of the Group’s revenue and cash flows are affected
by economic factors.

2023
$ million

Lifecycle
Service
Assurance

Notes

Networks &

Security Corporate

Total

86.7
112.4

199.1

133.1
49.3
16.7

199.1

203.6
71.6

275.2

135.0
104.6
35.6

275.2

–
–

–

–
–
–

–

16.9
(6.1)

10.8

39.0
(7.3)

31.7

(10.7)
(0.8)

(11.5)

52.0
0.1
4.4
3.2

50.4
–
6.0
3.4

–
–
0.1
0.3

290.3
184.0

474.3

268.1
153.9
52.3

474.3

45.2
(14.2)

31.0

(5.0)
(7.6)

18.4
5.4
(0.9)

22.9

102.4
0.1
10.5
6.9

6
7

14
15

Revenue
Nature of products and services
Sale of hardware and software
Maintenance and support services

Primary geographical markets
Americas
Asia Pacific
Europe, Middle East and Africa

Inter-segment revenue is eliminated.
Profit before tax
Adjusted operating profit
Other adjusting items

Total reportable segment profit
Unallocated amounts:
– Acquired intangible asset amortisation
– Share-based payment

Operating profit
Finance income
Finance costs

Profit before tax

Other information
Product development
Intangible asset amortisation – other
Depreciation of property, plant and equipment
Depreciation of right-of-use assets

142

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS3. Operating segments continued

Revenue
Nature of products and services
Sale of hardware and software
Maintenance and support services

Primary geographical markets
Americas
Asia Pacific
Europe, Middle East and Africa

Inter-segment revenue is eliminated.
Profit before tax
Adjusted operating profit
Other adjusting items

Total reportable segment profit
Unallocated amounts:
– Acquired intangible asset amortisation
– Share-based payment

Operating profit
Finance income
Finance costs

Profit before tax

Other information
Product development
Intangible asset amortisation – other
Depreciation of property, plant and equipment
Depreciation of right-of-use assets

2022
$ million

Lifecycle
Service
Assurance

Notes

Networks &

Security Corporate

Total

146.0
118.5

264.5

179.7
61.8
23.0

264.5

276.1
66.9

343.0

156.6
144.0
42.4

343.0

–
–

–

–
–
–

–

51.0
(0.9)

50.1

86.8
(2.1)

84.7

(8.3)
(0.6)

(8.9)

56.6
0.6
4.7
3.4

54.7
–
6.2
3.6

–
–
0.1
0.3

422.1
185.4

607.5

336.3
205.8
65.4

607.5

129.5
(3.6)

125.9

(4.7)
(8.5)

112.7
2.9
(1.0)

114.6

111.3
0.6
11.0
7.3

6
7

14
15

All of the Group’s revenue arose from contracts with customers.

Generally, revenue from the sale of hardware and software is recognised at a point in time and revenue from maintenance
and support services is recognised over time.

Europe, Middle East and Africa includes United Kingdom revenue of $9.1 million (2022 $14.1 million).

Americas includes United States revenue of $250.4 million (2022 $317.3 million).

Asia Pacific includes China revenue of $76.3 million (2022 $110.9 million).

Revenues are attributed to regions and countries based on customer location.

No one customer accounted for 10 per cent or more of total Group revenue in 2023 or 2022.

Spirent Communications plc Annual Report 2023

143

FINANCIAL STATEMENTS3. Operating segments continued

Non-current assets1
Americas
Asia Pacific
Europe, Middle East and Africa

2023
$ million

2022
$ million

225.1
6.8
7.4

239.3

229.2
5.0
7.9

242.1

Note
1. Non-current assets excludes trade and other receivables, assets recognised from costs to obtain a contract, defined benefit pension plan surplus and deferred

tax asset.

Europe, Middle East and Africa includes United Kingdom non-current assets of $4.6 million (2022 $4.6 million).

Americas includes United States non-current assets of $211.3 million (2022 $215.7 million).

4. Profit before tax
The following items have been charged/(credited) in arriving at profit before tax:

Employee benefit costs
Costs of inventories recognised as an expense
Write-down/(up) of inventories to net realisable value
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of assets recognised from costs to obtain a contract
Expenses relating to short-term leases and leases of low-value assets
Product development costs
Net foreign exchange loss/(gain)

Notes

2023
$ million

2022
$ million

18
13
14
15
20
25

255.9
65.9
2.9
5.1
10.5
6.9
0.5
0.6
102.4
0.9

267.7
102.0
(0.2)
5.3
11.0
7.3
1.1
0.7
111.3
(0.2)

Services provided to all of the operations of the Group by the auditor, Deloitte LLP, and its associates are analysed below.

Audit services
Parent Company
Subsidiaries

Non-audit fees
Interim review

Total fees

2023
$ million

2022
$ million

1.0
0.7

1.7

0.1

1.8

0.8
0.6

1.4

0.1

1.5

A description of the work of the Audit Committee is set out in the Audit Committee Report on pages 77 to 82 and includes an
explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by the auditor.

5. Other adjusting items

Restructuring

Acquisition related transactions

2023
$ million

2022
$ million

13.5

0.7

14.2

2.8

0.8

3.6

144

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS5. Other adjusting items continued
Restructuring

R&D engineering plan
Finance transformation
Organisational restructure
Facilities downsize

2023
$ million

2022
$ million

0.7
1.1
8.8
2.9

13.5

1.5
–
1.3
–

2.8

The initiatives, with a restructuring cost of $13.5 million have driven cost savings of $14 million during 2023 and are expected to
deliver further savings of circa $17 million for 2024 which will more than mitigate cost inflation. The overall payback of the
change initiatives is expected to be less than two years.

We embarked on a strategic evaluation of our operating model taking into account the need to serve our customers with solutions
involving a combination of our portfolio offerings and the need to drive cost efficiency during a challenging trading environment.

In order to embed standardised global finance processes, we moved certain accounting activities from North America to the UK
incurring $1.1 million of costs including $0.5 million consultancy.

We reduced headcount by 8 per cent and incurred $8.3 million of costs mainly relating to severance and exit costs of people,
and at the end of 2023, incurred an additional $0.5 million of restructure costs in relation to the organisation change to merge
the High-Speed Ethernet businesses into the Lifecycle Service assurance segment to better serve our customers’ requirements
for portfolio solutions.

Our facilities and office sites were reviewed and we exited and downsized three of our North American facilities which gave rise
to a non-cash $2.9 million impairment of assets, therefore reducing the cost of our office space going forward.

Acquisition related transactions
On 8 September 2023, the Group completed the asset purchase of a small Test Lab Automation business carve-out from
NetScout® Inc. Direct acquisition transaction costs of $0.4 million and integration costs of $0.3 million were incurred during 2023.

Prior year acquisition costs reflect the Group acquisition of octoScope in 2021 which relate to direct acquisition costs of $0.6 million,
acquisition related performance credit adjustment of $0.1 million and integration costs of $0.3 million.

The tax effect of other adjusting items is a credit of $2.5 million (2022 $0.9 million). There will be a total net cash outflow of
$11.3 million in respect of other adjusting items charged in 2023, $10.3 million of which was in 2023 (2022 $3.6 million outflow
with $1.7 million paid in 2022). The cash outflow in 2023 in respect of other adjusting items charged in 2022 was $1.9 million
(2022 $0.9 million).

The total cash outflow in respect of other adjusting items is reported within cash flows from operating activities in the
consolidated cash flow statement.

6. Finance income

Bank interest receivable
Net defined benefit pension plan interest

7. Finance costs

Lease liability interest

Note

2023
$ million

2022
$ million

4.8
0.6

5.4

2.1
0.8

2.9

Notes

2023
$ million

2022
$ million

0.9

1.0

Spirent Communications plc Annual Report 2023

145

FINANCIAL STATEMENTS8. Employees
The average number of people employed by the Group during the year was:

Assembly
Product development
Selling and marketing
Administration

Employee benefit costs, including Executive Directors, were:

Remuneration
Social security costs
Pension and other related costs
Expense of share–based payment

2023
Number

2022
Number

388
500
513
220

393
499
536
220

1,621

1,648

Note

2023
$ million

2022
$ million

219.3
18.7
10.2
7.7

255.9

230.4
19.0
9.4
8.9

267.7

Please refer to the Report on Directors’ Remuneration on pages 83 to 109 and note 34 for disclosures relating to the emoluments,
share incentives and pensions of the Directors.

9. Pensions
Defined benefit plans
i) Characteristics and risks associated with the Plans
The Group sponsors two funded defined benefit pension plans in the United Kingdom: the Spirent Communications plc Staff
Pension & Life Assurance Plan (“Staff Plan”) and the Spirent Communications plc Retirement Cash & Life Assurance Plan (“Cash
Plan”). These plans are funded and have full UK HM Revenue & Customs (“HMRC”) tax exempt approval. Both schemes are
administered by a Trustee board which is comprised of representatives from the employer, member nominated Trustees and
an independent Trustee. The Trustee board operates in accordance with the Trust Deed and Rules of each Plan and acts in the
interests of all of its members.

• The Staff Plan is the Group’s most significant plan, and it provides its members with retirement benefits based on their final

salary and length of service. The Staff Plan is closed to new entrants.

• The Cash Plan Is complicated with multiple cohorts that allows members to benefit from a lump sum on retirement, a defined

benefit contribution with a defined benefit underpin or pension. The Cash Plan is now closed to new entrants.

There is also a UK unfunded plan, which consists of a contractual obligation for the Group to top up certain former employees’
benefits whose salaries exceeded the statutory earnings cap.

As with the vast majority of similar arrangements in the United Kingdom, the Group ultimately underwrites the risks relating to
the defined benefit plans. These risks include investment risks and demographic risks, such as the chance of members living
longer than expected.

The cash plan holds a significant proportion of their assets in equity. Strong future equity returns would be expected to reduce
the Group’s future cash contributions (and vice versa).

The latest triennial actuarial valuations dated 31 March 2021 indicated a combined funding deficit of £11.5 million, calculated on
a technical provisions basis using more prudent assumptions than the accounting valuation, particularly in relation to the discount
rate inflation and demographic. A deficit reduction plan was agreed with the trustees which required the Company to pay
monthly contributions of £449,609, whilst a funding deficit remains, increasing in line with CPI each year. In September 2022,
this deficit funding plan was suspended whilst the Group and trustees worked together to consider the feasibility of purchasing
a bulk annuity insurance policy.

146

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS9. Pensions continued
Defined benefit plans continued
i) Characteristics and risks associated with the Plans continued
In October 2022, the Trustees, with the Company’s support, purchased a bulk annuity insurance policy from specialist UK insurer
Pension Insurance Corporation (PIC), in respect of the largest plan, the Staff Plan. The premium was met from the plan’s assets
and sufficient assets remain to meet the plan’s ongoing costs. This pension buy-in secures an insurance asset from PIC that
matches the remaining pension liabilities of the Staff Plan, such that the Company no longer bears any investment, inflation,
longevity or other demographic risks. In 2022, an asset remeasurement loss of $7.4 million has been recorded in other
comprehensive income as the premium paid was greater than the IAS 19 accounting value of the corresponding liabilities.
Following the purchase of the bulk annuity insurance policy, the Group does not expect to make any further cash contributions
to this plan. Cash contributions to the plan in 2023 were nil (2022 $1.1 million (£0.9 million)).

At 31 December 2023, a reserve of $3.0 million (£2.4 million) (2022 $3.6 million (£3.0 million)) is included within the accounting
liabilities in respect of equalising historic GMP benefits. The trustees are currently in the process of updating member benefits
with equalised GMPs and incorporating this within the bulk annuity insurance policy purchased in October 2022. The cost to
equalise these benefits could be higher or lower than reserved with the difference being charged to other comprehensive
income as an experience gain/loss.

The Group also operates an unfunded deferred compensation plan for employees in the United States. The plan enables
participating employees to defer a portion of their salary and invest it in deemed investments, which are used to measure
the gains or losses that are attributed to the deferral account over time. The plan has elements of a defined benefit pension
retirement obligation and therefore is required to be valued in accordance with IAS 19.

ii) Amounts in the financial statements
The assets and liabilities on the balance sheet are as follows:

Schemes in net asset position
UK defined benefit pension plan – Staff Plan
Withholding tax payable

Schemes in net liability position
UK defined benefit pension plan – Cash Plan
UK unfunded plan
US deferred compensation plan

Net pension plan (deficit)/surplus on the balance sheet

2023
$ million

2022
$ million

12.9
(4.5)

8.4

(1.7)
(0.5)
(9.2)

(11.4)

(3.0)

14.9
(5.2)

9.7

(1.7)
(0.5)
(6.9)

(9.1)

0.6

Spirent Communications plc Annual Report 2023

147

FINANCIAL STATEMENTS9. Pensions continued
Defined benefit plans continued
ii) Amounts in the financial statements continued
a) The assets and liabilities in each plan

Staff Plan
Unquoted:
- Insured annuities
- Cash and other
Insurance policy with PIC

Fair value of plan assets
Present value of defined benefit pension plan obligations

Surplus in the plan

Withholding tax payable

Surplus in the plan on the balance sheet

Cash Plan
Quoted:
– Equities
- Government bonds
Unquoted:
– Cash and other

Fair value of plan assets
Present value of defined benefit pension plan obligations

Deficit in the plan

Total net surplus recognised
Unfunded plan
Present value of unfunded obligations

Deferred compensation plan
Present value of deferred compensation obligations

Net pension plan (deficit)/surplus on the balance sheet

2023
$ million

2022
$ million

1.5
17.8
167.9

187.2
(174.3)

12.9

(4.5)

8.4

6.0
1.9

1.9

9.8
(11.5)

(1.7)

6.7

1.6
17.7
162.0

181.3
(166.4)

14.9

(5.2)

9.7

5.0
2.0

1.7

8.7
(10.4)

(1.7)

8.0

(0.5)

(9.2)

(3.0)

(6.9)

0.6

The plans are prohibited from investing in Spirent’s own financial instruments.

The fair values of the quoted equity and debt instruments are determined based on quoted market prices in active markets
whereas the fair values of the other assets are not. Unquoted investments are included at values provided by the fund managers
and are generally valued using recent market data and external sources, with a hierarchy that follows the principles of IFRS 13
‘Fair Value Measurement’.

The Group has determined that it has an unconditional right to refund of surplus assets if the schemes are run off until the last
member dies, on which basis IFRIC 14 does not cause any change in the balance sheet disclosures before tax.

For the purposes of the following disclosures the Staff Plan and Cash Plan have been combined as the Cash Plan is immaterial
to these financial statements.

148

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS9. Pensions continued
Defined benefit plans continued
ii) Amounts in the financial statements continued
b) Analysis of the amounts credited to the income statement

Current service cost

Amount charged to operating costs
Net interest on the net defined benefit pension surplus

Net credit to the income statement

c) Analysis of amount recognised directly in the statement of comprehensive income

Re-measurement loss on plans’ assets
Costs of managing plan assets paid by Company
Actuarial loss arising from experience
Actuarial gain arising from the demographic assumptions
Actuarial (loss)/gain arising from changes in financial assumptions
Withholding tax payable

Re-measurement of the net defined benefit pension surplus

d) Movements in the present value of funded defined benefit obligations

At 1 January
Current service cost
Interest cost
Benefit payments
Actuarial loss arising from experience
Actuarial gain arising from the demographic assumptions
Actuarial loss/(gain) arising from changes in financial assumptions
Exchange adjustment

Present value of funded defined benefit pension plans’ obligations

e) Movements in the fair value of plans’ assets

At 1 January
Interest income on plans’ assets
Employer contributions
Benefit payments
Re-measurement loss on plans’ assets
Exchange adjustment

Fair value of plans’ assets

Withholding tax payable

Fair value of plans’ assets less irrecoverable element of pension plan surplus

2023
$ million

2022
$ million

–

–
(0.6)

(0.6)

0.1

0.1
(0.8)

(0.7)

2023
$ million

2022
$ million

(0.3)
(1.4)
(1.7)
3.2
(4.6)
0.7

(4.1)

(104.8)
(0.9)
(5.5)
1.1
86.3
(5.2)

(29.0)

2023
$ million

2022
$ million

176.8
–
8.6
(11.9)
1.7
(3.2)
4.6
9.2

185.8

292.5
0.1
4.5
(10.5)
5.5
(1.1)
(86.3)
(27.9)

176.8

2023
$ million

2022
$ million

190.0
9.3
–
(11.9)
(0.3)
9.9

197.0

(4.5)

192.5

330.3
5.3
1.1
(10.5)
(104.8)
(31.4)

190.0

(5.2)

184.8

In 2022, the $104.8 million loss on remeasurement of plan assets represents a $95.9 million reduction in asset values prior to
the buy-in (the assets were invested to match the liability risk profile which also reduced significantly as interest rates rose), a
$7.4 million loss due to the premium on buy-in exceeding the IAS 19 liability measure, a $2.5 million loss as the asset returns on
the Cash Plan were lower than assumed under IAS 19 offset by a $1.0 million gain as the Staff Plan asset returns exceeded those
assumed under IAS 19.

Spirent Communications plc Annual Report 2023

149

FINANCIAL STATEMENTS9. Pensions continued
Defined benefit plans continued
ii) Amounts in the financial statements continued
f) The key financial assumptions
The assumptions used for both plans using a weighted average were as follows:

Inflation – RPI
Inflation – CPI (pre-2030)
Inflation – CPI (post-2030)
Rate of increase in pensionable salaries
Rate of increase for pensions in payment pre-2001 service
Rate of increase for pensions in payment 2001 to 5 April 2005 service
Rate of increase for pensions post-5 April 2005 service
Rate of increase in deferred pensions
Rate used to discount plan liabilities

2023
%

3.1
RPI less 1.0% pa
RPI less 0.1% pa
CPI
3.6
3.0
2.1
CPI
4.5

2022
%

3.3
RPI less 1.0% pa
RPI less 0.1% pa
CPI
3.7
3.1
2.1
CPI
4.8

The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions
are such that a member currently aged 65 (2022 aged 65) will live on average for a further 21.7 years (2022 22.0 years) if they
are male and for a further 24.2 years (2022 24.5 years) if they are female. For a member who retires in 2043 (2022 in 2042) at
age 65 (2022 age 65), the assumptions are that they will live on average for a further 23.2 years (2022 23.6 years) after retirement
if they are male and for a further 25.8 years (2022 26.2 years) after retirement if they are female.

iii) Amount, timing and uncertainty of future cash flows
The approximate impact to the past service liabilities of changing these main assumptions is as follows:

• Reducing the discount rate by 0.1 per cent per annum would increase past service liabilities by $1.9 million (2022 $2.0 million).

• Increasing RPI inflation by 0.1 per cent would increase the plans’ liabilities by $0.6 million (2022 $0.7 million).

• Increasing the life expectancy of a member by one year (by modifying the standard mortality tables using an appropriate

scaling factor) would increase past service liabilities by $9.3 million (2022 $8.5 million).

The accounting valuation of the funded UK defined benefit pension plans as at 31 December 2023 gave rise to a net surplus of
$11.2 million. As a result of the Staff Plan full buy-in in 2022, IAS19 assets largely equal IAS19 liabilities so any impact arising from
changes to the valuation assumptions will relate mainly to the smaller Cash Plan.

There will also be an impact on the future service cost but given the small active population in these plans this is likely to be
insignificant. The sensitivity analysis may not be representative of the actual change as the changes in assumptions may not
occur in isolation.

The liability has the following duration and maturity:

Weighted average duration of the defined benefit obligation (years)
Maturity analysis of benefit payments (non-discounted amounts) ($ million)
Maturity ≤ 1 year
Maturity > 1 ≤ 5 years
Maturity > 5 ≤ 10 years
Maturity > 10 ≤ 20 years
Maturity > 20 ≤ 30 years
Maturity > 30 years

2023

11.0
46.2
57.7
98.4
64.7
39.6

2022

10.3
43.3
55.7
98.5
67.8
45.3

Deferred compensation plan
At 31 December 2023, the deferred compensation plan deficit amounted to $9.2 million (2022 $6.9 million).

During the year, $0.6 million was charged to the income statement (2022 $0.3 million credited) and there was a re-measurement
loss of $0.6 million recognised directly in the statement of other comprehensive income (2022 nil). The key financial assumptions
include a discount rate used to discount plan liabilities of 3.2 per cent (2022 5.2 per cent) and an expected investment yield of 5.0
per cent (2022 9.5 per cent). There is no material impact in 2023 or 2022 of changing each of the key assumptions by 0.1 per cent,
in isolation.

150

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS9. Pensions continued
Defined contribution plans
United Kingdom
The Group contributes towards defined contribution pension plans for employees in the United Kingdom. Employer contributions
into these plans for 2023 were $2.2 million (2022 $1.4 million).

United States
The Group maintains a defined contribution pension plan for employees of its United States subsidiaries. This plan, also known
as a 401(k) Plan, allows employees to defer a percentage of their salary for retirement. In aggregate, the Group’s contributions
to the US plan totalled $5.0 million for 2023 (2022 $5.2 million). There were no defined benefit plans in the United States in 2023
or 2022.

Other jurisdictions
Outside the United Kingdom and the United States, employees are provided with pension arrangements determined in
accordance with approved local practice and regulations. These arrangements are defined contribution plans. Total employer
contributions for 2023 in respect of these plans amounted to $1.9 million (2022 $1.7 million).

Total employer contributions to defined contribution plans were $9.1 million (2022 $8.3 million).

Directors’ pension arrangements
The pension arrangements of the Executive Directors are described in detail in the Report on Directors’ Remuneration on
pages 83 to 109.

10. Tax

Tax charge in the income statement
Current income tax
UK tax
Foreign tax
Amounts underprovided in prior years

Total current income tax charge

Deferred tax
Recognition of deferred tax assets
Reversal of temporary differences
Adjustments in respect of prior years

Total deferred tax credit

Tax (credit)/charge in the income statement

2023
$ million

2022
$ million

3.9
6.4
(0.8)

9.5

(0.2)
(10.8)
(0.8)

(11.8)

(2.3)

2.5
23.9
1.7

28.1

(1.0)
(12.4)
–

(13.4)

14.7

The tax credit for the year ended 31 December 2023 was $2.3 million (2022 $14.7 million tax charge). This was after a prior year
tax credit of $0.8 million and a tax credit on the adjusting items of $6.1 million (2022 prior year charge of $1.7 million and tax
credit on adjusting items of $3.9 million). Excluding the prior year and tax charge on adjusting items, the effective tax rate was
10.8 per cent (2022 12.9 per cent).

Tax relating to items (credited)/charged to other comprehensive income or equity:

Deferred tax on share incentives
Current tax on share incentives

Tax charge on share incentives
Deferred tax charge/(credit) on defined benefit pension plan
Deferred tax credit on deferred compensation plan

2023
$ million

2022
$ million

1.7
–

1.7
0.1
(0.1)

0.7
(0.6)

0.1
(9.4)
–

Spirent Communications plc Annual Report 2023

151

FINANCIAL STATEMENTS10. Tax continued
Reconciliation of the total tax charge
The tax charge in the income statement for the year is lower than the standard rate of corporation tax in the UK of 23.5 per cent
(2022 19.0 per cent). The differences are reconciled below:

Accounting profit before tax

Accounting profit multiplied by the UK standard rate of corporation tax of 23.5 per cent
Differences in overseas rates
Non-taxable income (offshore income in Hong Kong entity)
Net state tax credits generated in current year
Utilisation of temporary differences not previously recognised
US Research and Experimental tax credit
Withholding tax
Hong Kong income tax credit
Permanent differences
Tax underprovided in prior years

Total tax credit reported in the income statement

Accounting profit before tax

Accounting profit multiplied by the UK standard rate of corporation tax of 19.0 per cent
Differences in overseas rates
Non-taxable income
Recognition of temporary differences previously not recognised for deferred tax
Utilisation of temporary differences not previously recognised
UK and US Research and Experimental tax credit
Withholding tax
Hong Kong income tax credit
Permanent differences
Tax overprovided in prior years

Total tax charge reported in the income statement

Year ended 31 December 2023

Adjusted
$ million

Adjusting
$ million

Reported
$ million

49.7

11.7
0.5
(0.9)
(0.2)
(0.6)
(2.3)
0.4
–
(3.2)
–

5.4

(26.8)

22.9

(6.3)
–
–
–
–
–
(1.0)
–
0.2
(0.6)

(7.7)

5.4
0.5
(0.9)
(0.2)
(0.6)
(2.3)
(0.6)
–
(3.0)
(0.6)

(2.3)

Year ended 31 December 2022

Adjusted
$ million

Adjusting
$ million

Reported
$ million

131.4

(16.8)

114.6

25.0
3.5
(0.8)
(1.8)
(1.0)
(2.9)
0.8
(0.7)
(5.2)
–

16.9

(3.2)
(0.4)
–
–
–
–
–
–
(0.3)
1.7

(2.2)

21.8
3.1
(0.8)
(1.8)
(1.0)
(2.9)
0.8
(0.7)
(5.5)
1.7

14.7

The Group’s tax rate is sensitive to the geographic mix of profits and reflects a combination of higher statutory tax rates in
certain jurisdictions, and other regions with significantly lower statutory tax rates. Regional statutory tax rates range from a
high of 35 per cent to a low of 10 per cent. The UK Patent Box deduction benefit of $3.2 million (2022 $2.4 million), US Foreign-Derived
intangible income deduction of $0.8 million (2022 $3.6 million), and Research and Experimental credits of $2.3 million
(2022 $2.9 million) bring down the rate but items such as state taxes and withholding tax increase the tax rate.

152

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS11. Earnings per share
Basic
Earnings per share is calculated by dividing the profit for the year attributable to owners of the parent Company by the weighted
average number of Ordinary Shares outstanding during the year.

Diluted
Diluted earnings per share is calculated by dividing the profit for the year attributable to owners of the parent Company by the
weighted average number of Ordinary Shares outstanding during the year plus the weighted average number of Ordinary Shares
that would be issued on the conversion of all dilutive potential Ordinary Shares into Ordinary Shares.

Profit for the year attributable to owners of the parent Company

Weighted average number of Ordinary Shares in issue – basic
Dilutive potential of employee share incentives

Weighted average number of Ordinary Shares in issue – diluted

Earnings per share
Basic
Diluted

2023
$ million

2022
$ million

25.2

99.9

Number
million

586.7
4.1

590.8

607.0
3.7

610.7

Cents

4.30
4.26

16.46
16.36

Adjusted
The Group is disclosing adjusted earnings per share attributable to owners of the parent Company in order to provide a
measure to enable period-on-period comparisons to be made of its performance. The following items are excluded from
adjusted earnings:

• acquired intangible asset amortisation;

• share-based payment;

• other adjusting items;

• tax effect on the above items; and

• prior year tax (adjustments made to provisions in respect of prior years).

A reconciliation is provided below:

Profit for the year attributable to owners of the parent Company
Acquired intangible asset amortisation
Share-based payment
Other adjusting items
Tax effect on the above items
Prior year tax (credit)/charge

Adjusted basic

Adjusted diluted

2023

2022

Notes

$ million EPS (cents)

$ million

EPS (cents)

31
5
10
10

25.2
5.0
7.6
14.2
(6.1)
(1.6)

44.3

99.9
4.7
8.5
3.6
(3.9)
1.7

114.5

4.30

7.55

7.50

16.46

18.86

18.75

There were no Ordinary Share transactions that occurred after 31 December that would have significantly changed the number
of Ordinary Shares or potential Ordinary Shares outstanding at the period end if those transactions had occurred before the
end of the reporting period in either year.

During the year, the Company repurchased and cancelled 33.1 million shares.

Spirent Communications plc Annual Report 2023

153

FINANCIAL STATEMENTS12. Dividends paid

Declared and paid in the year
Equity dividend on Ordinary Shares
Final dividend 2022 of 4.94 cents (4.12 pence) per Ordinary Share (2021 4.37 cents (3.34 pence))
Interim dividend 2023 of 2.76 cents (2.14 pence) per Ordinary Share (2022 2.63 cents (2.16 pence))

Dividends are determined in US Dollars and paid in Pound Sterling.

2023
$ million

2022
$ million

31.1
15.4

46.5

25.0
14.9

39.9

13. Intangible assets

Cost, net of accumulated
amortisation and
impairment losses
At 1 January 2022
Amortisation for the year
Exchange adjustment

At 1 January 2023
Additions in the year
Amortisation for the year
Exchange adjustment

At 31 December 2023

At 31 December 2022
Cost (gross carrying amount)
Amortisation and accumulated
impairment losses

Net carrying amount

At 31 December 2023
Cost (gross carrying amount)
Amortisation and accumulated
impairment losses

Net carrying amount

Note

Goodwill

Customer
lists

Current
technology

Brand
names

Other

Licences

Total

$ million

184.0
–
(0.9)

183.1
3.9
–
0.3

187.3

5.8
(1.1)
–

4.7
2.0
(1.3)
–

5.4

17.5
(3.5)
–

14.0
2.3
(3.7)
0.1

12.7

620.3

23.7

56.9

(437.2)

183.1

(19.0)

4.7

(42.9)

14.0

0.2
(0.1)
–

0.1
–
–
(0.1)

–

2.6

(2.5)

0.1

–
–
–

–
1.2
–
–

1.2

3.6

(3.6)

–

625.1

25.7

59.2

2.6

4.8

(437.8)

187.3

(20.3)

5.4

(46.5)

12.7

(2.6)

–

(3.6)

1.2

0.7
(0.6)
–

0.1
–
(0.1)
–

–

208.2
(5.3)
(0.9)

202.0
9.4
(5.1)
0.3

206.6

9.1

716.2

(9.0)

0.1

(514.2)

202.0

–

717.4

(510.8)

206.6

Goodwill is allocated at acquisition to the cash-generating units (CGUs) that are expected to benefit from that business combination.

The Group identifies CGUs at the lowest level at which cash flows are largely independent of other cash flows.

Goodwill has been allocated to two CGUs, which align with the reportable operating segments, as follows:

Lifecycle Service Assurance
Networks & Security

2023
$ million

2022
$ million

114.3
73.0

187.3

110.3
72.8

183.1

154

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS13. Intangible assets continued
Annual impairment test
The Group has an annual impairment testing date of 30 November. The key assumptions used in the value in use calculations were:

• revenue growth rates;

• gross margin;

• operating expenses;

• discount rate; and

• growth rate used to extrapolate cash flows beyond the five-year period covered by management’s projections.

The cash flows are derived from the most recent financial budgets for the next financial year, as approved by management,
and the Group’s three-year strategic plan.

Cash flows in years four and five are extrapolated based on long range plans. Cash flows in subsequent years have been
extrapolated using a steady 2.5 per cent for all CGUs (2022 2.5 per cent for all CGUs), which management estimates to be the
approximate average long-term growth rate for the industries in which these units operate. Fundamentally, this long-term
growth is based on a proxy for global long-term inflation taking into consideration more developed and developing markets.
The growth rates used in the value in use calculations are set at the same level for each CGU as both CGUs operate within
similar markets which share the same growth drivers and characteristics.

The discount rates incorporate the specific risks relating to each CGU.

The discount rate applied to the cash flows is based on the weighted average cost of capital of comparable companies by
taking the risk free rate for 30-year government bonds and making an adjustment to reflect the increased risk of investing in
equities. In making this adjustment, the inputs required are the equity market risk premium, beta, and the risk adjustment applied
to reflect the systematic risk of Spirent and the specific CGUs, taking into account factors such as size and the territories in which
each CGU operates.

The cash flows have been discounted using the following pre-tax discount rates:

Lifecycle Service Assurance
Networks & Security

2023
%

13.1
12.7

2022
%

13.5
12.6

For Spirent the key factor in relation to the cash flow forecasts is the ability to forecast revenue. All CGUs operate in the data
technology market and generate a high gross profit (gross margin); consequently changes in revenue can have a significant
impact on the operating profit and cash flows. Revenue growth rates used in the projections are based on management’s
estimate of growth in the markets served and take into account historical levels of growth, expected future developments in
products and technology, industry forecasts and macro-economic conditions in the territories in which the CGUs operate. Gross
margin and operating expenses are based on historical values adjusted for the effect of revenue growth, changes in product
mix, expectations of investment and cost reduction actions committed prior to the impairment testing date.

Management expects revenue growth in the forecast period at Lifecycle Service Assurance from the continued build out and
deployment of a leading active assurance platform for 5G and next-generation service assurance, as well as the automation
of critical test activities and leverage of existing product offerings. The shift to the Cloud, particularly in relation to mobile edge
computing and private 5G, as well as 5G/WiFi convergence opportunities are expected to drive growth. O-RAN platform
adoption provides opportunities for the creation of end-to-end next-generation RAN testing, reducing our dependency on core
emulation as it will enable access to a broader customer base. The individual business units in Lifecycle Service Assurance are
expected to work together to deliver the three-year plan to meet changes in customer needs and the competitive landscape.

Within Networks & Security, Cloud and IP is expected to benefit from the emergence of artificial intelligence technology to drive
growth in high-speed Ethernet, and this together with growth in network virtualisation, is expected to drive earnings. Further
growth in Networks & Security is expected at Positioning driven by the emergence of other sensors together with existing GNSS
momentum and business from the low earth orbit satellite and automotive markets.

The recoverable amount of each CGU was calculated on a value in use basis and was in excess of its carrying value.
Consequently, no impairment has been recognised.

Sensitivity to changes in key assumptions
The Directors believe that no reasonable possible change in any of the key assumptions used, in isolation, would cause the value
in use of the Lifecycle Service Assurance or Networks & Security CGUs to fall below the carrying value.

Spirent Communications plc Annual Report 2023

155

FINANCIAL STATEMENTS13. Intangible assets continued
Other intangible assets
There was no impairment charge in respect of the other intangible assets in either 2023 or 2022.

Within Networks & Security, Cloud and IP is expected to maintain its leadership position in high-speed Ethernet, and this together
with optimised 400G volumes (and introduction of 800G), growth in network virtualisation and emerging technologies, is
expected to drive earnings. Further growth in Networks & Security is expected at Positioning driven by the emergence of other
sensors. Management expects that the security business will benefit in the longer term from the move to a subscription-based
model together with expansion in the cloud-native security market. Cybersecurity is expected to benefit from synergies with
Positioning and continued expansion in complementary solutions with Cloud and IP.

The recoverable amount of each CGU was calculated on a value in use basis and was in excess of its carrying value. Consequently,
no impairment has been recognised.

Other intangible assets
There was no impairment charge in respect of the other intangible assets in either 2023 or 2022.

14. Property, plant and equipment

Cost, net of accumulated depreciation and
accumulated impairment
At 1 January 2022
Additions
Disposals
Depreciation charge for the year
Exchange adjustment

At 1 January 2023
Additions
Disposals
Impairment1
Inter-class transfers
Depreciation charge for the year

At 31 December 2023

At 31 December 2022
Cost
Accumulated depreciation and accumulated impairment

Net carrying amount

At 31 December 2023
Cost
Accumulated depreciation and accumulated impairment

Net carrying amount

Note
1.

Impairment of $0.4 million is included in adjusting items (see note 5).

$ million

Land and
buildings

Plant and
machinery

Note

Fixtures,
fittings and
equipment

5.7
0.1
–
(1.9)
(0.1)

3.8
–
(0.1)
–
–
(1.6)

2.1

22.8
(19.0)

3.8

22.8
(20.7)

2.1

13.0
6.6
(0.2)
(6.9)
(0.1)

12.4
5.3
(0.1)
(0.3)
0.1
(7.0)

10.4

85.6
(73.2)

12.4

87.0
(76.6)

10.4

5.0
1.7
–
(2.2)
(0.1)

4.4
1.2
(0.2)
(0.1)
(0.1)
(1.9)

3.3

39.6
(35.2)

4.4

40.0
(36.7)

3.3

Total

23.7
8.4
(0.2)
(11.0)
(0.3)

20.6
6.5
(0.4)
(0.4)
–
(10.5)

15.8

148.0
(127.4)

20.6

149.8
(134.0)

15.8

156

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS15. Leases
Right-of-use assets (Group as a lessee)

Cost, net of accumulated depreciation and accumulated impairment
At 1 January 2022
Additions
Re-measurement
Depreciation charge for the year
Exchange adjustment

At 1 January 2023
Additions
Re-measurement
Impairment1
Depreciation charge for the year
Exchange adjustment

At 31 December 2023

At 31 December 2022
Cost
Accumulated depreciation and accumulated impairment

Net carrying amount

At 31 December 2023
Cost
Accumulated depreciation and accumulated impairment

Net carrying amount

Note
1.

Impairment of $2.5 million is included in adjusting items (see note 5).

The related lease liabilities are disclosed in note 25.

$ million

Land and
buildings

Motor
vehicles

Note

25.8
0.3
1.0
(7.2)
(0.6)

19.3
4.9
2.1
(2.5)
(6.7)
(0.1)

17.0

65.6
(46.3)

19.3

66.7
(49.7)

17.0

0.2
0.1
–
(0.1)
–

0.2
0.2
–
–
(0.2)
–

0.2

0.6
(0.4)

0.2

0.8
(0.6)

0.2

Total

26.0
0.4
1.0
(7.3)
(0.6)

19.5
5.1
2.1
(2.5)
(6.9)
(0.1)

17.2

66.2
(46.7)

19.5

67.5
(50.3)

17.2

Finance lease receivables (Group as a lessor)
The Group subleases an office building that it leased in 2015. The Group has classified the sublease as a finance lease, because
the sublease transfers substantially all of the risks and rewards incidental to ownership of the head lease to the sub lessee.

The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received
after the reporting date.

Maturity analysis – contractual undiscounted cash flows
Less than one year
One to two years
Two to three years

Total undiscounted lease payments receivable
Unearned finance income

Net investment in the lease

During the year, $0.6 million (2022 $0.6 million) was received in respect of finance leases.

The net investment in the lease has been included within trade and other receivables (note 19), as follows:

Current
Non-current

2023
$ million

2022
$ million

0.3
–
–

0.3
–

0.3

0.6
0.2
–

0.8
–

0.8

2023
$ million

2022
$ million

0.3
–

0.3

0.6
0.2

0.8

Spirent Communications plc Annual Report 2023

157

FINANCIAL STATEMENTS16. Capital commitments
The Group had capital commitments in relation to property, plant and equipment of $0.1 million at 31 December 2023
(31 December 2022 $0.4 million).

17. Subsidiaries
A list of subsidiaries, including the name, country of incorporation and proportion of ownership interest, is given on pages 192
and 193 of these financial statements.

18. Inventories

Raw materials
Work in progress
Finished goods

2023
$ million

2022
$ million

29.2
2.5
11.8

43.5

24.9
2.2
12.7

39.8

An expense of $2.9 million (2022 $0.2 million release) has been charged (2022 credited) to the income statement in the year for
inventory write-downs. There were no reversals of prior period inventory write-downs (2022 nil).

No inventories are carried at fair value less costs to sell (2022 nil). The Directors consider there is no material difference between
the net book value of inventories and their replacement cost.

Inventories also include $1.4 million from the acquisition of NetScout’s® Test Lab Automation business.

19. Trade and other receivables

Non-current
Other receivables
Prepayments

Current
Trade receivables
Other receivables
Prepayments

2023
$ million

2022
$ million

4.6
0.4

5.0

113.3
7.5
12.9

133.7

138.7

4.3
2.4

6.7

142.4
5.4
13.0

160.8

167.5

The trade receivables are stated net of an allowance for expected credit losses. The movement in the allowance was as follows:

At 1 January
Charge for the year
Released in the year

At 31 December

2023
$ million

2022
$ million

1.4
1.1
(0.5)

2.0

0.7
1.1
(0.4)

1.4

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

The balance of the non-current other receivables balance that relates to the net investment in the lease is nil for 2023
(2022 $0.2 million) (note 15). All of the non-current other receivables balance relates to corporate-owned life insurance.

The Group has no significant concentration of credit risk attributable to its trade receivables as the exposure is spread over
a large number of customers.

158

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS20. Assets recognised from costs to obtain a contract

Non-current
Current

2023
$ million

2022
$ million

0.3
1.0

1.3

0.5
0.9

1.4

These assets relate to capitalised incremental costs to obtain a contract, being sales commissions, arising on contracts with
customers of over one year in length.

During the year, amortisation of $0.5 million was charged to the income statement (2022 $1.1 million).

No assets were impaired or derecognised during the current year or prior year.

21. Cash and cash equivalents

Cash at bank and in hand
Short-term bank deposits

2023
$ million

2022
$ million

103.6
4.5

108.1

103.8
105.8

209.6

Cash at bank and in hand earns interest at floating interest rates.

Short-term bank deposits are made for varying periods of between one day and three months depending on the cash requirements
of the Group and earn interest at the short-term deposit rates appropriate for the term of the deposit and currency.

At the end of 2023, the currency split of cash and cash equivalents was US Dollar 47 per cent (2022 83 per cent), Pound Sterling
34 per cent (2022 7 per cent) and other currencies 19 per cent (2022 10 per cent).

For the purposes of the cash flow statement, cash and cash equivalents comprise the above amounts.

22. Trade and other payables

Current
Trade payables
Other taxes and social security costs
Other payables
Accruals
Government grants

Non-current
Other payables

Note

2023
$ million

2022
$ million

19.3
3.2
0.1
42.2
1.1

65.9

0.2

66.1

33.6
5.3
0.3
54.4
1.2

94.8

0.2

95.0

Trade payables are non-interest bearing and are normally settled on 30 to 60-day terms. Other payables are non-interest bearing.

The Directors consider that the carrying amount of trade payables and other payables approximates their fair value.

Other financial liabilities – current

Other financial liabilities

Other financial liabilities comprises forward foreign currency exchange contracts.

2023
$ million

2022
$ million

–

0.1

Spirent Communications plc Annual Report 2023

159

FINANCIAL STATEMENTS23. Government grants
The following government grants are included within trade and other payables:

At 1 January
Received during the year
Released to the income statement
Exchange adjustment

At 31 December

2023
$ million

2022
$ million

1.2
0.1
(0.3)
0.1

1.1

1.4
0.1
(0.2)
(0.1)

1.2

All government grants are expected to be recognised in the next 12 months.

Government grants have been received to accelerate and support research and development in the vulnerability of global
navigation satellite systems and other high technology projects.

24. Contract balances
The following table provides information about receivables and contract liabilities from contracts with customers. The Group
does not have any contract assets.

Trade receivables

Contract liabilities
Current
Payments received on account
Deferred income

Non-current
Deferred income

Total contract liabilities

Revenue recognised in the period from amounts included in contract liabilities at the
beginning of the period

Note

2023
$ million

2022
$ million

113.3

142.4

7.4
59.2

66.6

33.7

100.3

6.2
69.3

75.5

22.7

98.2

75.5

72.1

There was no revenue recognised in 2023 or 2022 from performance obligations satisfied in previous periods.

The timing of revenue recognition, invoicing and cash collections results in trade receivables, deferred income and advance
customer payments received on account on the balance sheet.

The Group receives payments from customers based on a billing schedule, as established in the contract. Trade receivables are
recognised when the right to consideration becomes unconditional. Contract liabilities are recognised as revenue as (or when)
the Group performs under the contract.

The Group also recognises incremental costs incurred to obtain a contract as an asset if it expects to recover those costs.
Such costs are presented in the balance sheet as assets recognised from costs to obtain a contract and disclosed in note 20.

Expected realisation of remaining performance obligations at year end
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.

160

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS24. Contract balances continued
Expected realisation of remaining performance obligations at year end continued
For contracts that exceed one year, deferred income that relates to unsatisfied or partially satisfied performance obligations
at year end is expected to be recognised as revenue in the future as follows:

Within one year
Greater than one year

2023
$ million

2022
$ million

13.3
33.7

47.0

28.6
22.7

51.3

The above information represents the revenue the Group will recognise when it satisfies the remaining performance obligations
in the contracts. The amounts presented do not include orders for which neither party has performed.

Revenue from the sale of hardware and software generally arises from contracts less than one year in length. Consequently,
the above amounts predominantly relate to the sale of maintenance and support services.

Virtually all of the revenue will be recognised within three years.

The Group provides standard warranties on its products and services. The nature of these warranties is considered to provide
customers with assurance that the related product or service will function as intended in accordance with the agreed
specification, and does not contain or imply any additional service obligation to the customer. Warranty obligations are
estimated and recognised as liabilities based on the probable outflow of resources.

25. Lease liabilities
Total lease liabilities included in the balance sheet at 31 December:

At 1 January 2022
Additions
Re-measurement
Repayments
Interest
Exchange adjustment

At 1 January 2023
Additions
Re-measurement
Repayments
Interest
Exchange adjustment

At 31 December 2023

Current
Non-current

$ million

Land and
buildings

Motor
vehicles

Note

29.6
0.3
1.0
(9.5)
1.0
(0.5)

21.9
4.8
2.1
(8.6)
0.9
–

21.1

0.2
0.1
–
(0.1)
–
–

0.2
0.2
–
(0.2)
–
0.1

0.3

Total

29.8
0.4
1.0
(9.6)
1.0
(0.5)

22.1
5.0
2.1
(8.8)
0.9
0.1

21.4

2023
$ million

2022
$ million

10.7
10.7

21.4

7.1
15.0

22.1

$0.3 million (2022 $0.8 million) of the lease liability included in the balance sheet relates to a building the Group subleases;
see note 15 for further details.

Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years

Total undiscounted lease liabilities at 31 December

2023
$ million

2022
$ million

10.8
9.3
1.7

21.8

7.7
12.6
3.5

23.8

Spirent Communications plc Annual Report 2023

161

FINANCIAL STATEMENTS25. Lease liabilities continued

Amounts recognised in the income statement
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding leases of short-term
low-value assets

Amounts recognised in the cash flow statement
Lease liability principal repayment
Lease liability interest paid

Note

2023
$ million

2022
$ million

0.9
0.3

0.3

7.9
0.9

1.0
0.3

0.4

8.6
1.0

Cash payments of $0.6 million (2022 $0.7 million) relating to short-term leases and leases of low-value assets are classified
within cash flows from operating activities in the consolidated cash flow statement.

Extension options
Some leases of buildings contain extension options exercisable by the Group before the end of the non-cancellable contract
period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The
extension options held are exercisable only by the Group and not the lessors. The Group assesses at lease commencement
whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to
exercise the options if there is a significant event or significant change in circumstances within its control.

2023
$ million

2022
$ million

Lease liabilities
recognised
(discounted)

Potential future lease
payments not included
in lease liabilities
(discounted)

Lease liabilities
recognised
(discounted)

Potential future lease
payments not included
in lease liabilities
(discounted)

Buildings

4.2

23.3

4.6

23.3

26. Deferred tax
The movements in the deferred tax assets/(liabilities) are as follows:

Temporary
differences

Notes

Tax
losses

Tax
credits

UK pension
plans

$ million

At 1 January 2022
Charged/(credited) in the year
Deferred tax on defined benefit pension plan
Deferred tax on share incentives recognised in equity
Exchange adjustment

At 1 January 2023
Charged in the year
Deferred tax on defined benefit pension plan
Deferred tax on deferred compensation plan
Deferred tax on share incentives recognised in equity
Exchange adjustment

10
10
10

10
10
10
10

At 31 December 2023

Amounts on the balance sheet:
At 31 December 2022
Deferred tax asset
Deferred tax liability

At 31 December 2023
Deferred tax asset
Deferred tax liability

162

Spirent Communications plc Annual Report 2023

12.2
13.1
–
(0.7)
(0.8)

23.8
11.4
–
0.1
(1.7)
0.3

33.9

23.8
–

23.8

33.9
–

33.9

3.6
(0.8)
–
–
–

2.8
0.3
–
–
–
(0.1)

3.0

2.8
–

2.8

3.0
–

3.0

4.2
1.5
–
–
–

5.7
0.1
–
–
–
–

5.8

5.7
–

5.7

5.8
–

5.8

(9.4)
(0.4)
9.4
–
0.9

0.5
–
(0.1)
–
–
0.1

0.5

0.5
–

0.5

0.5
–

0.5

Total

10.6
13.4
9.4
(0.7)
0.1

32.8
11.8
(0.1)
0.1
(1.7)
0.3

43.2

32.8
–

32.8

43.2
–

43.2

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS26. Deferred tax continued
A net deferred tax asset of $43.2 million has been recognised at 31 December 2023 (2022 $32.8 million). $37.3 million is in the
United States (2022 $27.6 million), $1.8 million is in France (2022 $1.7 million), $3.0 million is in the rest of the world (2022 $2.4 million),
and $1.1 million is in the United Kingdom (2022 $1.1 million).

The deferred tax asset includes $2.1 million (2022 $3.3 million) in respect of the tax deduction which may be available on
the future exercise of share incentives, $4.6 million (2022 $5.4 million) in respect of the future tax deduction on provisions,
$5.6 million (2022 $7.5 million) in respect of the future tax deduction on the deferral of compensation and $16.2 million
(2022 $5.6 million) in amortisation. These amounts are presented within temporary differences.

The Group has non-trading tax losses arising in the United Kingdom of $27.6 million (2022 $27.7 million), which are available for
offset against suitable future non-trading taxable profits. The Group also has trading losses arising in the United Kingdom of
$0.7 million (2022 $0.8 million) and in Hong Kong of $3.7 million (2022 nil). Additionally, there are short-term timing differences
in the United Kingdom of $2.7 million (2022 $2.5 million), and the rest of the world of $6.9 million (2022 $7.1 million), Scientific
Research and Experimental qualifying expenditure in Canada of $5.4 million (2022 $5.2 million) and tax credits in the rest of the
world of $1.1 million (2022 $1.4 million). A deferred tax asset has not been recognised in respect of these items as their future
recovery is not probable.

The Group has capital losses carried forward of $1,048.4 million (2022 $996.4 million) for which no deferred tax asset has been
recognised on the balance sheet. This change is due to foreign exchange movements. These capital losses have no expiry date.

The temporary difference associated with investments in the Group’s subsidiaries for which a deferred tax liability has not been
recognised in the periods presented are $203.6 million in aggregate (2022 $251.6 million). The Group does not expect a
significant amount of the undistributed profits, subject to withholding tax, to be distributed in the foreseeable future, but has
recognised a deferred tax liability of $0.2 million (2022 $0.4 million) on the expected distribution of $3.3 million (2022 $5.8 million)
of earnings from its China, Korea and Taiwan subsidiaries.

Changes in tax rates
The Group’s future tax charge, and the effective tax rate, could be affected by several factors including tax reform in countries
around the world and the geographical mix of profits.

Following the enactment of the United Kingdom Finance Bill 2021, the main corporation tax rate has increased to 25 per cent
effective 1 April 2023. As such, the United Kingdom temporary differences have been recognised at the rate at which the
temporary differences are expected to unwind.

27. Provisions

At 1 January 2022
Charged in the year
Released in the year
Utilised in the year
Exchange difference

At 1 January 2023
Charged in the year
Utilised in the year
Exchange difference

At 31 December 2023

Note
1.

Included with adjusting items (note 5).

$ million

Lease
provisions

Restructuring
provisions

Other
provisions

3.5
–
–
–
(0.1)

3.4
0.2
(0.1)
–

3.5

0.2
1.4
–
(0.3)
–

1.3
1.6 1
(1.9)
–

1.0

4.2
0.1
(0.2)
(0.3)
(0.1)

3.7
–
(0.3)
0.1

3.5

Total

7.9
1.5
(0.2)
(0.6)
(0.2)

8.4
1.8
(2.3)
0.1

8.0

Spirent Communications plc Annual Report 2023

163

FINANCIAL STATEMENTS27. Provisions continued

Current
Non-current

2023
$ million

2022
$ million

5.0
3.0

8.0

5.7
2.7

8.4

The lease provisions are for the continuing obligations under leases in respect of property dilapidation and reinstatement provisions.
Where material, lease obligations are discounted. The Group expects these provisions to be utilised over one to eight years.

The restructuring provisions are largely for employee separation costs in relation to the strategic restructuring initiatives (note 5).

Other provisions comprise environmental provisions related to property disposed of, provisions relating to legal claims and a
provision relating to a Notice of Recovery received from French Customs, discussed below. The Group expects these provisions
to be utilised in less than one year.

In 2018, the Group made a provision for $8.9 million following the receipt of a Notice of Recovery from the Direction Générale
des Douanes et Droits Indirects (French Customs) in relation to the valuation and classification of duty on certain imports into
France. This dispute commenced with enquiries in 2011. During the period in question, Spirent adopted a duty tariff based on
World Customs Organization guidelines which conflicted with European Union regulation. In 2019, the Group paid $6.5 million
in relation to this claim, of which $2.3 million was later recovered. The import regulations changed on 1 January 2017 and no
liability exists after that date. Spirent has provided for the liability up until the date of the change, which encompasses the
period covered by the Notice of Recovery.

28. Financial instruments and financial risk management
The main purpose of the Group’s financial instruments, other than trade and receivables, trade and other payables, contractual
provisions and lease liabilities, is to fund the Group’s liquidity requirements.

The Group’s financial assets and liabilities are as follows:

Measurement category under IFRS 9

Notes

2023
$ million

2022
$ million

Non-current trade and other receivables1
Cash and cash equivalents
Current trade and other receivables

Financial assets at amortised cost
Financial assets at amortised cost
Financial assets at amortised cost

Financial assets

Non-current other payables
Financial liabilities at amortised cost
Current trade payables, other payables and accruals Financial liabilities at amortised cost
Current other financial liabilities2
Lease liabilities, current and non-current
Contractual provisions

Derivatives designated at FVTPL
Financial liabilities at amortised cost
Financial liabilities at amortised cost

Financial liabilities

19
21
19

22
22
22
25
27

4.6
108.1
120.8

233.5

0.2
61.6
–
21.4
3.5

86.7

4.3
209.6
147.8

361.7

0.2
88.3
0.1
22.1
3.4

114.1

Notes
1.
2. Relates to forward foreign currency exchange contracts.

Includes $3.6 million (2022 $3.4 million) in relation to corporate owned life insurance that is designated as financial assets at fair value through profit or loss.

The Group enters into derivative transactions, forward foreign currency exchange contracts, for the management of the Group’s
foreign currency exposures when deemed appropriate.

The key objective of the Group’s treasury department is to manage the financial risks of the business and to ensure that sufficient
liquidity is available to the Group. All treasury activity operates within a formal control framework. The Board has approved
treasury policies and guidelines and periodically reviews treasury activities. Additionally, it is the Group’s policy that speculative
treasury transactions are expressly forbidden.

164

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS28. Financial instruments and financial risk management continued
a) Market risk
The main types of market risk that affect the Group are interest rate risk and exchange rate risk.

Interest rate risk
The Group has external debt in relation to its lease liabilities (note 25) but has limited exposure to interest rate risk as the
incremental borrowing rate used to discount these lease liabilities is fixed at the lease commencement date. The Group’s excess
funds are principally held in the United Kingdom and the United States and invested in on-demand or short-term bank deposits.
It therefore has some exposure to interest rate risk arising on changes in Pound Sterling and US Dollar interest rates.

Cash and cash equivalents and forward foreign currency exchange contracts are the Group’s financial instruments which are
exposed to interest rate risk.

Short-term bank deposits and forward foreign currency exchange contracts mature within three months. The financial
instruments bear the following interest rates:

2023

2022

Floating rate
Cash at bank

Fixed rate
Fixed deposits

Effective
interest rate
%

Note

Effective
interest rate
%

$ million

103.6

$ million

103.8

0.80

4.5

4.23

105.8

All cash at bank and fixed deposits are held with reputable financial institutions around the world. The minimum credit rating of
material cash held with these institutions are “A”.

Interest rates on financial instruments classified as fixed rate are fixed until the maturity of the instrument. All fixed rate deposits
mature within three months after which date they will be exposed to floating rates of interest. Interest rates on cash at bank are
not fixed and are based on prevailing rates subject to market conditions.

Interest receivable for the year (note 6) was $4.8 million (2022 $2.1 million) and is under the effective interest method.

The other financial instruments of the Group that are not included in the above table are non-interest bearing and are therefore
not subject to interest rate risk.

A movement of 25 basis points in interest rates based on level of investment at 31 December would increase or reduce interest
income and equity by $0.1 million (2022 $0.4 million).

Exchange rate risk
Currency exposures arise from trading transactions undertaken by the Group in foreign currencies and on the translation of the
operating results and net assets of overseas subsidiaries.

The Group has the majority of its operations in the United States and presents its consolidated financial statements in US Dollars.
The parent Company’s functional currency is Pound Sterling and its share capital is denominated in Pound Sterling; the Group
also has operations in Europe and Asia and therefore its results and assets and liabilities are affected on translation by movements
in exchange rates in relation to the US Dollar. The Group does not enter into instruments to hedge the translation exposure of the
operating results or net assets of its overseas subsidiaries since these are considered accounting and not cash exposures.

The Group undertakes transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters using forward foreign currency exchange contracts.

The main exposures arise in relation to the retranslation of foreign operations to US Dollar, on non-local currency denominated
transactions and on non-local currency denominated cash balances. These exposures predominantly arise on Sterling, Euro and
Chinese Yuan transactions and balances. A 10 per cent appreciation or depreciation of these currencies against the US Dollar
would decrease or increase profit before tax based on the activity in the period and balances at the reporting date as follows:
Sterling $4.4 million, Euro $nil and Chinese Yuan $1.9 million (2022 Sterling $0.6 million, Euro $0.1 million and Chinese Yuan
$1.0 million). A 10 per cent currency fluctuation represents management’s assessment of the reasonably possible change in
foreign exchange rates.

b) Credit risk
Investment counterparties are subject to pre-approval by the Board with pre-approved limits set for each bank to avoid any
concentrations of credit risk.

The maximum credit exposure at the balance sheet date under financial instruments in relation to cash and bank deposits is
equal to the carrying value of $108.1 million (2022 $209.6 million).

Trade receivables, which generally have 30 to 90 day terms, are carried at original invoice amount less an allowance for
expected credit losses. Trade receivable exposures are managed in the business units where they arise.

Spirent Communications plc Annual Report 2023

165

FINANCIAL STATEMENTS28. Financial instruments and financial risk management continued
b) Credit risk continued
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. Therefore, the Group does not track changes in credit risk, but instead recognises a loss
allowance based on lifetime expected credit loss at each reporting date. To measure the expected credit losses, the Group has
established a provision matrix that is based on shared credit risk characteristics and the days past due based on the expected
loss rates.

The provision matrix is initially based on payment profiles of trade receivables over a period of 12 months before 31 December 2022
and the corresponding historical credit losses experienced within this period. At every reporting date the historical observed
default rates are updated. The Group also considers the impact of regional macroeconomic factors.

The Group has no significant concentration of credit risk attributable to its trade receivables as the exposure is spread
over a large number of customers with no one customer accounting for more than 7 per cent of total Group trade receivables.
The maximum credit exposure at the balance sheet date in relation to trade receivables is equal to the carrying value of
$113.2 million (2022 $142.4 million).

The composition of trade receivables at 31 December is as follows:

Not past due
Past due:
– Less than 30 days overdue
– 30 to 60 days
– Over 60 days

Trade receivables

2023

2022

Gross
trade
receivables
$ million

Provision
$ million

Net trade
receivables
$ million

Gross
trade
receivables
$ million

Provision
$ million

Net trade
receivables
$ million

95.7

–

95.7

125.5

(0.3)

125.2

9.3
3.0
7.3

115.3

(0.2)
–
(1.8)

(2.0)

9.1
3.0
5.5

13.8
1.9
2.6

113.3

143.8

(0.1)
–
(1.0)

(1.4)

13.7
1.9
1.6

142.4

The Group closely monitors amounts due from customers and performs activities such as credit checks and reviews of payment
history and has put in place appropriate credit approval limits. Based on these procedures, management assessed the quality of
those receivables that are past due but not impaired as low risk.

The receivables’ provision is based on expected credit losses. The movement on the provision during the year is given in note 19.
For all other financial assets, the maximum exposure to credit risk is represented by the carrying amount.

c) Liquidity risk
The Group’s objective is to ensure that there are sufficient sources of funding to meet projected requirements. Its operations are
financed through cash and cash equivalents held centrally and cash generated from operations.

At 31 December 2023, the Group had cash and cash equivalents of $108.1 million (2022 $209.6 million), all available on demand.

During 2023, the Group generated $27.1 million of cash from operating activities (2022 $117.8 million) and considers that, with
current cash resources, debt only in relation to its lease liabilities and positive cash flow from its operating activities, it has
adequate resources available to it to remain in operational existence for the foreseeable future.

The Group has entered into forward foreign currency exchange contracts at 31 December, all of which mature within three months.
The gross settlement amounts of these contracts are as follows:

Sale of US Dollars against Pound Sterling

2023
$ million

2022
$ million

3.1

4.7

The Group has external debt in relation to its lease liabilities (note 25) but is otherwise debt free and does not have loans
payable. Financial liabilities are trade and other payables, the majority of which are due to be settled within one year, and
contractual provisions (note 27).

The Group does not have any other material financial contractual commitments.

d) Fair value of financial instruments
The carrying value of all financial assets and liabilities is a reasonable approximation of fair value.

Derivative financial instruments are stated at fair value although the amounts at 31 December 2023 and 2022 were immaterial.

Corporate owned life insurance is stated at fair value and is at Level 1 in the fair value hierarchy as the valuation of the linked
investments is based on quoted prices in active markets.

166

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS28. Financial instruments and financial risk management continued
e) Capital management
The primary objective of the Group’s capital management is to support its business and maximise shareholder value. The
Group’s capital is its total shareholders’ funds.

The Group manages its capital structure and intends to maintain a cash positive balance sheet over the medium to long term.
This should allow the Group to maintain a strong capital position in the face of business risks, trading fluctuations and working
capital demands.

Spirent’s policy on the payment of dividends to shareholders is to maintain a progressive dividend policy. To the extent the Group
has excess cash, it will consider returning such cash to shareholders.

29. Equity
a) Issued share capital
Issued and fully paid Ordinary Shares of 31/3 pence each:

At 1 January 2022
Exchange adjustment

At 1 January 2023
Share repurchase/share buyback
Exchange adjustment

At 31 December 2023

Number of
Ordinary
Shares 1
million

611.7

611.7
(33.1)

578.6

$ million

27.5
(2.8)

24.7
(1.4)
1.3

24.6

Note
1.

Includes shares held in the Employee Share Ownership Trust and Spirent Sharesave Trust.

b) Equity and reserves
The nature and purpose of each reserve within equity is as follows:

• Share premium account: this reserve records the consideration premium for shares issued at a value that exceeds their

nominal value.

• Capital redemption reserve: this reserve arises in relation to share capital cancellation.

• Other reserves: share capital, share premium account and capital redemption reserve are translated into US Dollars at
the rates of exchange at the balance sheet date and the resulting exchange differences are included in other reserves.

• Translation reserve: this reserve is used to record exchange differences arising from the translation of the financial statements

of foreign subsidiaries.

Investment in own Ordinary Shares
During the year, no shares were purchased and placed into the Employee Share Ownership Trust (2022 7.1 million shares
purchased and placed at a cost of $22.9 million). 2.7 million shares were transferred from the Employee Share Ownership
Trust in the year to satisfy options exercised under the Spirent employee share plans (2022 2.7 million shares transferred).

At 31 December 2023, the Employee Share Ownership Trust held 6.3 million Ordinary Shares (2022 8.9 million Ordinary Shares)
to satisfy awards under various share incentive plans. At 31 December 2023, the Spirent Sharesave Trust held 0.5 million Ordinary
Shares (2022 0.5 million Ordinary Shares) to satisfy awards made to United Kingdom based employees under an all-employee
share scheme. The market value of own Ordinary Shares held in trust, being in total 6.8 million Ordinary Shares (2022 9.4 million
Ordinary Shares), at 31 December 2023 was $9.8 million (2022 $29.6 million).

Both the Employee Share Ownership Trust and the Spirent Sharesave Trust are an extension of the parent Company.

Share Buyback Programme
On 3 April 2023, the Company commenced a Share Buyback Programme of $71.6 million (£56.0 million) which was successfully
completed on 24 August 2023. These 33.1 million shares, representing circa 5.4 per cent of the Company’s issued share capital,
have been cancelled.

Spirent Communications plc Annual Report 2023

167

FINANCIAL STATEMENTS30. Employee share plans
Movements in share incentives over a two-year period ending on 31 December 2023 are shown below:

Incentives outstanding at 1 January 2022
Exercised
Granted
Forfeited

Incentives outstanding at 31 December 2022
Exercised
Granted
Forfeited

Incentives outstanding at 31 December 2023

Incentives exercisable
At 31 December 2022

At 31 December 2023

2005 Employee
Incentive Plan 1

Spirent Long-Term
Incentive Plan 2

Number
of share
incentives
million

Weighted
average
exercise
price
pence

Number
of share
incentives
million

Weighted
average
exercise
price
pence

0.3
–
–
–

0.3

89
89
–
–

7.2
(2.6)
4.0
(0.4)

8.2
(2.7)
6.2
(0.9)

10.8

–

10.8

–
–
–
–

–

Notes
1. Figures for the 2005 Employee Incentive Plan include share options, stock appreciation rights and Performance Shares in aggregate. No exercise price is

payable on the vesting of a Performance Share.

2. Figures for the Spirent Long-Term Incentive Plan include restricted stock and Performance Shares in aggregate. No exercise price is payable on the vesting

of a Performance Share.

The weighted average share price at exercise date was 171 pence (2022 233 pence).

The following information relates to outstanding share incentives at 31 December 2023:

2023

2022

Weighted
average
exercise
price
pence

Number of
share
incentives
outstanding
million

Weighted
average
remaining
contractual
life
years

Weighted
average
exercise
price
pence

Number of
share
incentives
outstanding
million

Weighted
average
remaining
contractual
life
years

Exercise
period (as at
31 December)

Exercise
price
pence

23.03.18
23.03.25

15.03.24–
15.12.26

–

0.3

10.8

11.1

1.2

1.0

–

0.3

8.2

8.5

2.2

1.1

Share plan

2005 Employee
Incentive Plan

Spirent Long-Term
Incentive Plan

Discretionary plans
Spirent Long-Term Incentive Plan (LTIP)
Under the LTIP, awards of shares are granted to Executive Directors and certain employees. The release of these shares is
generally conditional upon continued employment and, for more senior individuals, some awards are conditional on the
achievement of certain performance targets measured over a three-year period.

Further information on the performance conditions for LTIP share incentives is set out in the Report on Directors’ Remuneration.

2005 Employee Incentive Plan (EIP)
The EIP closed for new awards following the 2016 AGM and was replaced by the Spirent Long-Term Incentive Plan. Awards
granted under the EIP expire on the tenth anniversary of their grant unless they have previously lapsed or been exercised.

168

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS30. Employee share plans continued
All-employee plans
UK Employee Share Purchase Plan (UK ESPP)
The UK ESPP is an all-employee HMRC approved share plan open to employees based in the UK. Employees can elect to invest
up to £125 each month (£1,500 per year), deducted from their gross salary, which is used to purchase shares at market value as
“partnership” shares. The Company offers participants “matching” shares, which are subject to forfeiture for three years, on the
basis of one free matching share for each partnership share purchased.

UK Sharesave Plan (Sharesave)
The Sharesave is an all-employee HMRC approved share plan open to employees based in the UK. Employees can elect to
invest up to £250 each month, deducted from their post-tax salary, which is then held in a savings account for three years. At the
conclusion of the savings period, the employee can opt to receive the accumulated funds as cash or use them to buy Spirent
shares at a discounted option price that is 15 per cent below the three-day average of Spirent’s mid-market share price
immediately before the invitation date.

US Employee Stock Purchase Plan (US ESPP)
The US ESPP is available to all employees based in the US. Employees can elect to save up to $8,000 per year, deducted from
their post-tax salary, for a 12-month period. The savings are then used to purchase shares at an effective 15 per cent discount to
the prevailing market share price at the end of the savings period (the discount being funded by the Company).

Global All-Employee Share Purchase Plan (GAESPP)
The GAESPP is available to employees in countries other than the UK and US, on a share-settled or cash-settled basis, depending on
local regulations. Employees can elect to save funds, deducted from their post-tax salary, for a 12-month period. In the share-settled
model, these savings are then used to purchase shares at an effective 15 per cent discount to the prevailing market share price at the
end of the savings period (the discount being funded by the Company); in the cash-settled model, these savings are then returned to
the participant, along with an additional cash enhancement equal to a 15 per cent discount to the prevailing market share price at the
end of the savings period, had the funds been used to purchase Spirent shares (the enhancement being funded by the Company).

Employees participating in the GAESPP during the period under review included those based in Canada, France, Germany,
China, Hong Kong, India, Spain, Japan and South Korea.

31. Share-based payment

Charged to adjusting items
Spirent Long-Term Incentive Plan¹
Spirent All-Employee Share Purchase Plans (ESPP)2

Charged to administration expenses
Executive deferred bonus plan

2023
$ million

2022
$ million

7.2
0.4

7.6

0.1

7.7

8.2
0.3

8.5

0.4

8.9

Notes
1. 2023 includes $0.2 million (2022 $0.3 million) relating to cash-settled schemes.
2. 2023 includes $0.2 million (2022 $0.1 million) relating to cash-settled schemes.

All schemes are primarily equity-settled with elements cash settled pursuant to local legislation.

In 2023, $0.1 million (2022 $0.4 million) being one-third of the Executive Directors’ Annual Incentive has been deferred into shares
for an additional period of three years. This amount has been charged to administration expenses in the income statement and
is included within adjusted operating profit as it reflects part of the underlying trading performance of the Group.

Spirent Communications plc Annual Report 2023

169

FINANCIAL STATEMENTS31. Share-based payment continued
6.2 million share incentives were granted during 2023 (2022 4.0 million). The fair value of share incentives has been estimated as
at the date of grant using the Black-Scholes binomial model. The following table gives the assumptions made in arriving at the
share-based payment charge and the fair value:

Weighted average share price (pence)
Weighted average exercise price (pence)
Weighted average fair value (pence)
Expected volatility (%)
Option life (years):
– Performance Shares
– Options and SARs
Risk free rate (%)
Dividend yield (%)

2023

2022

178.7
0.0
171.7
31.3-40.3

1.0-3.0
10.0
3.30-5.15
2.0

241.0
0.0
229.0
30.7–37.7

1.0–3.0
10.0
1.33–3.11
2.5

The expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous two
years which management considers to be the period which is likely to be most representative of future volatility. The risk free rate
is calculated by reference to UK government bonds.

32. Reconciliation of profit before tax to cash generated from operations

Profit before tax
Adjustments for:

Finance income
Finance costs
Intangible asset amortisation
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Impairment of property, plant and equipment
Impairment of right-of-use assets
Share-based payment
Changes in working capital:

Increase in inventories
Decrease in receivables
(Decrease)/increase in payables
(Decrease)/increase in contract liabilities

(Decrease)/increase in provisions
Defined benefit pension plan employer contributions net of plan administration
expenses paid by the plan
Deferred compensation plan
Non-cash movements

Cash flow from operations

2023
$ million

2022
$ million

22.9

114.6

(5.4)
0.9
5.1
10.5
6.9
0.4
2.5
7.7

(2.0)
27.7
(29.9)
(0.7)
(0.4)

(1.7)
1.9
(0.6)

45.8

(2.9)
1.0
5.3
11.0
7.3
-
-
8.9

(14.4)
3.2
8.1
0.2
0.7

(2.0)
0.2
(0.6)

140.6

33. Business combinations
On 8 September 2023, the Group completed the asset purchase of a small Test Lab Automation business carve-out from
NetScout® Inc. for a final cash consideration of $7.8 million. The transaction was funded by surplus cash in the Group. The
business carve-out from NetScout® acquired by Spirent is a US-based technology business that develops and manufactures
Layer-1 switches and control software.

170

Spirent Communications plc Annual Report 2023

Notes to the consolidated financial statements continuedFINANCIAL STATEMENTS33. Business combinations continued

Intangible assets
Property, plant and equipment
Inventories
Contract liabilities

Total identifiable net assets
Goodwill on acquisition

Total consideration

Satisfied by
Cash consideration

Cash flows
Cash consideration

2023
$ million

Fair value
adjustment

Book value

Fair value

–
0.2
1.4
(2.0)

(0.4)

4.3
–
–
–

4.3

4.3
0.2
1.4
(2.0)

3.9
3.9

7.8

The fair values of the identifiable net assets acquired are set out in the table above. The fair value adjustments arose in relation
to the recognition of acquired intangible assets. The intangible assets acquired represent current technology and customer
relationships. These intangible assets have been assigned a useful life of six years. The goodwill arising of $3.9 million consists
largely of the synergies and commercial opportunities expected from the combination, together with intangible assets not
qualifying for separate recognition, such as workforce in place. Direct acquisition related costs of $0.4 million and $0.3 million of
integration costs have been expensed to other adjusting items within the income statement in 2023 (note 5). From the date of
acquisition to 31 December 2023, NetScout® acquired business contributed $4.1 million of revenue and $2.1 million of profit before
tax to the results of the Group before charging $0.4 million of direct acquisition related costs, $0.3 million of integration costs and
$0.2 million of acquired intangible asset amortisation.

There were no business combinations in 2022.

34. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.

Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each
of the categories specified in IAS 24 “Related Party Disclosures”:

Short-term employee benefits
Share-based payment

2023
$000

2,639.1
850.6

3,489.7

2022
$000

3,346.8
2,545.2

5,892.0

No Director received compensation for loss of office (2022 nil).

There were gains of $591,335 (2022 $2,621,747) on the exercise of options by key management personnel in 2023.

For further details refer to the Report on Directors’ Remuneration on pages 83 to 109.

Spirent Communications plc Annual Report 2023

171

FINANCIAL STATEMENTSParent Company balance sheet
At 31 December 2023

Fixed assets
Intangible assets
Tangible assets
Right-of-use assets
Investments

Current assets
Stocks
Debtors: amounts falling due within one year
Debtors: amounts falling due after more than one year
Cash at bank and in hand

Notes

2023
£ million

2022
£ million

4
5
6
7

8
9
9

3.2
1.2
1.3
491.1

496.8

8.5
30.0
7.5
30.3

76.3

3.3
1.3
1.6
451.5

457.7

8.4
28.3
8.8
13.4

58.9

Creditors: amounts falling due within one year

(124.3)

(127.6)

Net current liabilities

Total assets less current liabilities
Creditors: amounts falling due after more than one year
Defined benefit pension plan deficit
Deferred tax liability

Net assets

Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account

Shareholders’ funds – equity

11
3
15

(48.0)

448.8
(3.2)
(1.7)
–

443.9

19.3
20.2
14.2
390.2

443.9

(68.7)

389.0
(3.0)
(1.8)
–

384.2

20.4
20.2
13.1
330.5

384.2

The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own
profit and loss account. In 2023, the profit for the year amounted to £150.8 million (2022 £73.4 million).

The notes on pages 174 to 191 form part of these financial statements.

Signed on behalf of the Board

Paula Bell
Director
5 March 2024

172

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTSParent Company statement of changes in equity

Attributable to the equity holders
of the parent Company

£ million

At 1 January 2022

Profit for the year
Other comprehensive losses1

Total comprehensive income

Share-based payment
Tax charge on share incentives
Employee Share Ownership Trust
Equity dividends

At 1 January 2023

Profit for the year
Other comprehensive losses2

Total comprehensive income

Share-based payment
Tax charge on share incentives
Share repurchase
Equity dividends

At 31 December 2023

Called up
share
capital

Share
premium
account

Capital
redemption
reserve

Profit
and loss
account

Notes

20.4

20.2

13.1

318.6

–
–

–

–
–
–
–

–
–

–

–
–
–
–

–
–

–

–
–
–
–

20.4

20.2

13.1

–
–

–

–
–
(1.1)
–

19.3

–
–

–

–
–
–
–

–
–

–

–
–
1.1
–

73.4
(15.9)

57.5

7.2
(0.1)
(19.3)
(33.4)

330.5

150.8
(3.2)

147.6

6.0
–
(56.7)
(37.2)

17
16

Total
equity

372.3

73.4
(15.9)

57.5

7.2
(0.1)
(19.3)
(33.4)

384.2

150.8
(3.2)

147.6

6.0
–
(56.7)
(37.2)

20.2

14.2

390.2

443.9

Notes
1. The amount included in other comprehensive losses for 2022 of £15.9 million represents re-measurement losses on the net defined benefit pension asset

of £23.5 million, net of a tax credit of £7.6 million.

2. The amount included in other comprehensive losses for 2023 of £3.2 million represents re-measurement losses on the net defined benefit pension asset

of £3.2 million, net of a tax credit of nil.

The notes on pages 174 to 191 form part of these financial statements.

Spirent Communications plc Annual Report 2023

173

FINANCIAL STATEMENTSNotes to the parent Company financial statements

1. Significant accounting policies
Corporate information
Spirent Communications plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales
(registration number 470893). The registered address of the Company is Origin One, 108 High Street, Crawley, West Sussex
RH10 1BD, United Kingdom.

Basis of accounting
The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 “Reduced Disclosure
Framework” (FRS 101) and the Companies Act 2006.

In preparing these financial statements, the Company has set out below the FRS 101 disclosure exemptions that have been taken
in respect of the following disclosures:

• a cash flow statement and related notes;

• comparative period reconciliations for share capital, tangible assets and intangible assets;

• disclosures in respect of transactions with wholly owned subsidiaries;

• disclosures in respect of capital management;

• the effects of new but not yet effective IFRS; and

• disclosures in respect of the compensation of key management personnel.

As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under
FRS 101 available in respect of the following disclosures:

• IFRS 2 “Share-based Payment” in respect of Group-settled share-based payments;

• certain disclosures required by IAS 36 “Impairment of Assets” in respect of the impairment of goodwill and indefinite life

intangible assets; and

• the disclosures required by IFRS 7 “Financial Instruments Disclosures” and IFRS 13 “Fair Value Measurement” regarding

financial instrument disclosures have not been provided apart from those which are relevant for the financial instruments
which are held at fair value.

As the Company is included in the consolidated financial statements, made up to 31 December each year, it is not required to
present a separate profit and loss account as provided by Section 408 of the Companies Act 2006. Information on fees for
non-audit services in respect of the parent Company accounts have not been disclosed as the Company prepares Group
accounts which disclose information on fees for non-audit services on a consolidated basis.

Accounting convention
The financial statements are prepared on a historical cost basis apart from certain financial instruments that have been measured
at fair value, and the defined benefit pension asset/liability which has been measured using the projected unit credit method.

Going concern basis of accounting
In adopting the going concern basis for preparing the financial statements, the Directors have considered the Company’s principal
risks and uncertainties as set out on pages 55 to 60.

The Directors have also considered sensitivities in respect of potential downside scenarios, including stress testing the latest cash
flow projections that cover a period of 12 months from the date of approval of these financial statements. In these scenarios, the
Company has more than sufficient headroom in its available resources.

The Directors have reviewed the detailed financial projections for the period ending 31 December 2024, as well as the business
plan and cash flows for the three months ending 31 March 2025. The Directors have also considered the period to the end of
2026 which forms part of the Company’s longer-term viability assessment. In addition, they have considered the principal risks
faced by the Company, the sensitivity analysis and the Company’s significant financial headroom and are satisfied that the
Company has adequate financial resources to continue in operational existence for the foreseeable future, a period of at least
12 months from the date of approval of this report. Accordingly, the going concern basis of accounting continues to be used in
the preparation of the financial statements.

New accounting standards
There have been no applicable new standards, amendments to standards and interpretations effective from 1 January 2023
that have been applied by the Company which have resulted in a significant impact on its results or financial position.

174

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTS1. Significant accounting policies continued
Business combinations and goodwill
A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. Business
combinations are accounted for using the acquisition method.

Goodwill arising on the acquisition of a business, representing the excess of cost over the net fair value of the net assets acquired,
is capitalised as an intangible asset. Goodwill is carried at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to the related cash-generating units monitored by management.
Where the recoverable amount of the cash-generating unit is less than its carrying amount, including goodwill, an impairment
loss is recognised in the profit and loss account.

The UK Companies Act requires goodwill to be reduced by provisions for amortisation on a systematic basis over a period
chosen by the Directors, its useful economic life. However, under IFRS 3 “Business Combinations” goodwill is not amortised.
Consequently the Company does not amortise goodwill, but reviews it for impairment on an annual basis or whenever there
are indicators of impairment. The Company is therefore invoking a “true and fair view override” to overcome the prohibition
on the non-amortisation of goodwill in the Companies Act.

Had the Company amortised goodwill a period of 20 years would have been chosen as the useful life for goodwill. There would
have been an impact of £0.1 million (2022 £0.1 million) to profit in the year had goodwill been amortised.

Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Separately identifiable
intangible assets such as current technology are capitalised on the balance sheet only when the value can be measured reliably,
or the intangible asset is purchased as part of the acquisition of a business. Such intangible assets are amortised over their
useful economic lives on a straight-line basis. The carrying value of intangible assets is reviewed for impairment if events or
changes in circumstances indicate the carrying value may not be recoverable. Acquired intangible assets, being current
technology, are amortised on a straight-line basis over their estimated useful lives and the charge is included within the
profit and loss account.

The estimated useful life of the current technology intangible asset is five years and the expiry date is 2024.

Product development
Research expenditure is recorded as a product development cost in the year in which it is incurred. Intangible assets arising on
the Company’s various product development projects are recognised only if the recognition criteria of IAS 38 “Intangible Assets”
are met.

Tangible assets
Tangible assets are stated at cost less accumulated depreciation and accumulated impairment. Depreciation is not provided on
freehold land. Depreciation is provided to write-off the cost less estimated residual value of all other assets, over their estimated
useful lives, on a straight-line basis at rates which take into account commercial conditions at their location. Usual asset lives are
as follows:

Freehold buildings
Plant and machinery
Fixtures, fittings and equipment:
– Building installations
– Fittings and equipment
– Motor vehicles
– Business systems software

50 years
3 to 8 years

20 years or lease period if lower
3 to 8 years
3 to 5 years
4 years

Business systems software is capitalised as tangible assets as the software is an integral part of the related hardware.

The carrying values of tangible assets are reviewed for impairment if events or changes in circumstances indicate that
the carrying value may not be recoverable.

Spirent Communications plc Annual Report 2023

175

FINANCIAL STATEMENTS1. Significant accounting policies continued
Impairment of assets
Intangible assets with finite useful lives and tangible assets and right-of-use assets are tested for impairment at each reporting
date where there is an indication that an asset may be impaired. Goodwill with an indefinite useful life is assessed at least annually.
When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value
of the expected cash flows (value in use) of the relevant cash-generating unit or asset and the fair value less cost of disposal. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount
of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses are recognised in the profit and loss account in those expense categories consistent with the function of the
impaired asset.

Where an impairment loss has been recognised against an asset, it may be reversed in future periods where there has been a
change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised, but
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, had no impairment loss been recognised in prior years. Such a reversal is recognised in the
profit and loss account. This does not apply for goodwill, for which an impairment loss must not be reversed in any circumstances.

Investments
Investments in subsidiaries are stated at cost and reviewed for impairment if there are indications that the carrying value may
not be recoverable.

Leases
The Company assesses whether a contract is or contains a lease, at inception of a contract. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it
is the lessee at the commencement date of the lease (i.e. the date the underlying asset is available for use), except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Company
recognises the lease payments within the profit and loss account on a straight-line basis over the period of the lease.

At the commencement date of the lease, the lease liability is initially measured at the present value of lease payments to be
made over the lease term, discounted using the rate implicit in the lease. If this rate cannot be readily determined, the Company
uses its incremental borrowing rate. Under the modified retrospective transition method, which is the method the Company
adopted on transition to IFRS 16 “Leases” on 1 January 2019, lease liabilities are required to be discounted using the incremental
borrowing rate at date of transition. The Company has set the discount rate based upon the local base rate with an additional
premium to reflect various factors such as credit risk.

The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or rate, and amounts expected to be paid under residual value guarantees.
The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company
and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period on which
the event or condition that triggers the payment occurs.

The lease liability is presented within creditors in the balance sheet.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method), and by reducing the carrying amount to reflect the lease payments made. It is re-measured when
there is a change in future lease payments arising from a change in an index or rate, or if the Company changes its assessment
of whether it will exercise a purchase, extension or termination option.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the corresponding lease liability, adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use assets are presented as a separate line in the balance sheet.

Stocks
Stocks are valued at the lower of cost and estimated net realisable value, after provisions for obsolescence. Cost includes all
costs in bringing each product to its present location and condition, being the full manufacturing cost on a first-in, first-out basis,
including all attributable overheads based on a normal level of activity.

176

Spirent Communications plc Annual Report 2023

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS1. Significant accounting policies continued
Provisions
Provisions are recorded when the Company has a present legal or constructive obligation as a result of a past event, for which
it is probable that it will be required to settle by an outflow of resources and for which a reliable estimate of the amount of the
obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

Where the effect of the time value of money is material, the amount of the provision shall be the present value of the
expenditures expected to be required to settle the obligation.

Foreign currencies
The financial statements are presented in Pound Sterling, which is the Company’s functional and presentation currency.

Financial instruments
Financial assets and liabilities are recognised on the Company’s balance sheet when it becomes a party to the contractual
provisions of the instrument.

Trade debtors
Trade debtors are non-interest bearing and are stated at original invoiced amount less an appropriate allowance for expected credit
losses. At each reporting date, the Company measures the loss allowance at an amount equal to the lifetime expected credit losses.

The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade debtors. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime expected credit losses at each reporting date. To measure the expected credit losses, the Company has established
a provision matrix that is based on shared credit risk characteristics and the days past due based on the expected loss rates.

The provision matrix is initially based on payment profiles of trade debtors over a period of 12 months before 31 December of
the prior year and the corresponding historical credit losses experienced within this period. At every reporting date the historical
observed default rates are updated. The Company also considers the impact of regional macroeconomic factors on the
likelihood of future losses.

Trade debtors are written off when there is no reasonable expectation of recovery.

A default on a trade debtor occurs when the debtor fails to make contractual payments when they fall due.

Cash at bank and in hand
Cash at bank and in hand in the balance sheet comprises cash at bank and in hand and short-term deposits which have
an original maturity of three months or less. There are no bank overdrafts.

Trade creditors
Trade creditors are non-interest bearing and are stated at the original invoiced amount.

Loans and borrowings
Loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, loans and
borrowings are stated at amortised cost using the effective interest method, and in respect of financial assets, less any impairment losses.

Impairment losses are based on lifetime expected credit losses.

Equity instruments
Equity instruments are recorded at the proceeds received, net of direct issue costs. Spirent Communications plc Ordinary Shares
held by the Company are classified in equity as treasury shares and are recognised at cost and included as a deduction from
the profit and loss account reserve. Consideration received for the sale of such treasury shares is also recognised in equity.

Derivative financial instruments
The Company uses forward foreign currency exchange contracts to manage exposures arising on receipts and payments in
foreign currencies relating to firm commitments.

Forward foreign currency exchange contracts are initially recognised at fair value on the date on which the contract is entered
into, and are subsequently re-measured to fair value at each reported balance sheet date. The fair value of forward foreign
currency exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity
profiles. The Company has not adopted the hedge accounting rules. Consequently all gains and losses arising from changes
in fair value are taken to the profit and loss account.

Spirent Communications plc Annual Report 2023

177

FINANCIAL STATEMENTS1. Significant accounting policies continued
Pensions
The Company operates two funded defined benefit pension plans. All other pension plans are defined contribution in nature
where the amount charged to the profit and loss account is the employer’s contributions paid or payable during the year.

For defined benefit pension plans, full actuarial valuations are carried out every three years using the projected unit credit
method, and updates are performed at each balance sheet date. Re-measurement, comprising actuarial gains and losses,
the effect of changes to the asset ceiling (if relevant) and the return on plan assets (excluding interest), is reflected immediately
in the balance sheet surplus with a charge or credit recognised in other comprehensive income in the period in which they occur.
Re-measurement recognised in other comprehensive income will not be reclassified to profit or loss. Past service cost is recognised
in profit or loss in the period of plan amendment. Net interest is calculated by applying the discount rate at the beginning of the
period to the net defined benefit pension asset, taking account of any changes in the net defined benefit pension asset during
the period as a result of contribution and benefit payments. Where a refund of a surplus is expected, any applicable taxes that
are not income in nature are netted off. Defined benefit pension costs are categorised as:

• service cost (including current service cost, past service cost and gains and losses on curtailments or settlements);

• net interest expense or income; and

• re-measurement.

The Company presents the first two components of defined benefit pension costs in profit or loss.

Revenue
Revenue represents the transfer of promised products or services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those products or services.

Revenue from product sales of hardware and perpetual software licences is recognised at the point in time when the customer
has obtained control of the products sold. This is usually when the products have been delivered in accordance with the
contractual terms. In some instances it is not until acceptance has occurred that control of the asset is transferred to the
customer. Terms of acceptance are dependent upon the specific contractual arrangement agreed with the customer. If it can be
objectively determined that control has been transferred to the customer in accordance with the agreed contract specifications,
customer acceptance is a formality that would not affect the determination of when the customer has obtained control of the
products. However, if it cannot be objectively determined that the products delivered are in accordance with the agreed-upon
contract specifications, revenue would not be recognised until customer acceptance has been granted.

For sales of software licences, the Company determines whether the licence is capable of being distinct and is separately
identifiable from other promises in the context of the contract. Revenue from software subscription licences that provide the
customer with a right to access the Company’s intellectual property throughout the subscription period is recognised over time,
throughout the subscription period. Revenue from perpetual software licences that provide the customer with a right to use the
Company’s intellectual property for an indefinite period of time is recognised at the point in time when the customer can first use
and benefit from the software.

For the sale of services, revenue is generally recognised over time with reference to when or as the performance obligations
are satisfied by transferring the service to the customer. Revenue from support and maintenance service contracts and software
subscription sales is recognised over the period of performance on a straight-line basis.

Revenue from professional services is generally recognised as work progresses in accordance with agreed-upon contractual
terms, based on a measure of progress towards complete satisfaction of the performance obligation. Progress is measured
using either an output method (e.g. completion of a day, or for fixed price contracts revenue is recognised based on performance
completed or contractual milestones reached) or an input method (e.g. actual cost of services provided as a proportion of total
cost of services expected to be provided under the contract). Where applicable, the Company elects to use the practical expedient
where revenue can be recognised in the amount to which the Company has a right to invoice, only if the Company has a right to
consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance
completed to date. Where the Company’s professional services contracts contain terms of acceptance, revenue would not be
recognised until customer acceptance had been obtained. Where the professional service has a pre-determined or fixed output
deliverable, revenue is recognised at a point in time once the performance obligation has been satisfied and the customer has
received the agreed deliverable.

The Company accounts for multi-component orders as multiple performance obligations if the following criteria are met:

the good or service is capable of being distinct, that is, they are individually readily available and regularly sold separately
to customers; and

178

Spirent Communications plc Annual Report 2023

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS1. Significant accounting policies continued
Revenue continued
For multi-component orders where the elements are accounted for as multiple performance obligations, the transaction price
and discount, if any, are allocated proportionally to all performance obligations in the contract. If either of the two criteria above
are not met, and where various components in the contract are combined, bundled or pre-assembled into one or more product
or equipment units to form a distinct good or service, they will be accounted for as a single performance obligation.

Cost of sales
The Company’s cost of sales related to the sale of its products includes materials, payments to third party contract manufacturers,
royalties and salaries and other expenses related to its manufacturing and supply operations personnel. Cost of sales related to
the provision of services includes salaries and other expenses associated with technical support services and the cost of
extended maintenance services.

Costs to obtain a contract
The incremental costs of obtaining a contract with a customer are capitalised as an asset if the Company expects to recover
them. The Company incurs costs such as sales commissions when it enters into a new contract. Such costs are presented within
debtors in the balance sheet as assets recognised from costs to obtain a contract where the related revenue is recognised over
time, usually in relation to support and subscription agreements. These assets are amortised on a systematic basis consistent
with how the related revenue is recognised.

The Company applies the practical expedient in paragraph 94 of IFRS 15 and recognises incremental costs of obtaining a
contract as an expense when incurred if the amortisation period of the asset that the Company would otherwise have
recognised is one year or less.

Management is required to determine the recoverability of assets recognised from costs to obtain a contract. At each reporting
date, the Company determines whether or not the assets are impaired by comparing the carrying amount of the asset to the
remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the
relevant contract. No assets were impaired as at 31 December 2023 or 31 December 2022.

Deferred income
Deferred income is only recognised on non-cancellable contracts that provide unconditional rights to payment from the customer
for products and services that the Company has not yet completed providing or that it will provide in the near future.

The Company occasionally receives advance payments from customers on account, before products or services are delivered
and revenue is recognised, resulting in liabilities. Deferred income and payments received on account are reported as contract
liabilities within creditors on the balance sheet on a contract-by-contract basis at the end of each reporting period.

Government grants
A government grant is recognised in the balance sheet initially within creditors when there is reasonable assurance that it will be
received and that the Company will comply with the conditions attached to it. Grants that compensate the Company for expenses
incurred are recognised as other operating income on a systematic basis in the same periods in which expenses are incurred.

Employee benefits
When an employee has rendered service to the Company during an accounting period, short-term benefits expected to be paid
in exchange for that service are recognised in the same accounting period.

Share-based payment
The Company operates various equity-settled share-based compensation plans and accounts for these awards in accordance
with IFRS 2 “Share-based Payment”.

The fair value of these awards is recognised in the profit and loss account (or as an addition to the cost of investment in the
subsidiary in which the relevant employees work) on a straight-line basis over the vesting period together with a corresponding
change in equity. The fair value is measured using the Black-Scholes model by reference to the share price, and taking into
account the terms and conditions of the award, excluding non-market vesting conditions, at the date the awards were granted.
The charge is reassessed at each balance sheet date to reflect the expected and actual levels of vesting, due to achievement or
otherwise of non-market conditions. Awards where vesting is conditional upon satisfying a market condition or non-vesting
condition are treated as vesting irrespective of whether the market or non-vesting condition has been satisfied.

The Company has an employee share trust for the granting of certain share incentives to employees. Shares in the Company
held by the employee share trust are treated as treasury shares and presented in the balance sheet as a deduction from equity.

Awards are capitalised as an investment, where a subsidiary is receiving the employee service and a corresponding adjustment
to equity in the parent Company.

Spirent Communications plc Annual Report 2023

179

FINANCIAL STATEMENTS1. Significant accounting policies continued
Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit and loss
account except to the extent that it relates to items in other comprehensive income or equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustments to tax payable for previous years.

Deferred tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, with the following exceptions:

• where the temporary difference arises from the initial recognition of goodwill (taxable temporary differences only) or of an

asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Dividends paid
The interim dividend is included in the financial statements in the period in which it is paid, and the final dividend and special
dividend in the period in which it is approved by the shareholders at an Annual General Meeting.

Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements requires the Company to make estimates and assumptions that affect items reported.
Such estimates and assumptions are based on management’s best knowledge of current facts, circumstances and future events.
Actual results may differ, possibly significantly, from those estimates. The areas requiring a high degree of judgement are
revenue recognition and defined benefit pension plans (see Group Accounting Policies). There are no critical accounting
estimates. Please refer to note 2 of Notes to the consolidated financial statements on pages 132 to 141 for detailed disclosures.

2. Employees
Please refer to the Report on Directors’ Remuneration on pages 83 to 109 and note 34 of Notes to the consolidated financial
statements on page 171 for disclosures relating to the emoluments, share incentives and Long-Term Incentive interests and
pensions of the Directors.

The average number of people employed by the Company during the year was:

2023
Number

2022
Number

47
79
70
43

50
72
71
38

239

231

2023
£ million

2022
£ million

21.9
2.6
2.6
0.6

27.7

21.0
2.7
2.0
1.5

27.2

Assembly
Product development
Selling and marketing
Administration

Employee benefit costs were:

Remuneration
Social security costs
Pension and other related costs
Expense of share-based payment

180

Spirent Communications plc Annual Report 2023

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS3. Pensions
Defined benefit plans
i) Characteristics and risks associated with the Plans
The Company sponsors two funded defined benefit pension plans in the United Kingdom: the Spirent Communications plc
Staff Pension & Life Assurance Plan (“Staff Plan”) and the Spirent Communications plc Retirement Cash & Life Assurance Plan
(“Cash Plan”). These plans are funded and have full UK HM Revenue & Customs (“HMRC”) tax-exempt approval. Both schemes
are administered by a Trustee board which is comprised of representatives from the employer, member nominated Trustees and
an independent Trustee. The Trustee board operates in accordance with the Trust Deed and Rules of each Plan and acts in the
interests of all of its members.

• The Staff Plan is the Company’s most significant plan, and it provides its members with retirement benefits based on their final

salary and length of service. The Staff Plan is closed to new entrants.

• The Cash Plan is complicated with multiple cohorts that allows members to benefit from a lump sum on retirement, a defined

benefit contribution with a defined benefit underpin or pension. The Cash Plan is closed to new entrants.

There is also a UK unfunded plan, which consists of a contractual obligation for the Company to top up certain former
employees’ benefits whose salaries exceeded the statutory earnings cap.

As with the vast majority of similar arrangements in the United Kingdom, the Company ultimately underwrites the risks relating
to the defined benefit plans. These risks include investment risks and demographic risks, such as the chance of members living
longer than expected.

The Cash Plan holds a significant proportion of its assets in equity. Strong future equity returns would be expected to reduce the
Company’s future cash contributions (and vice versa).

The latest triennial actuarial valuations dated 31 March 2021 indicated a combined funding deficit of £11.5 million, calculated on
a technical provisions basis using more prudent assumptions than the accounting valuation, particularly in relation to the
discount rate inflation and demographic. A deficit reduction plan was agreed with the trustees which required the Company to
pay monthly contributions of £449,609, whilst a funding deficit remains, increasing in line with CPI each year. In September 2022,
this deficit funding plan was suspended whilst the Company and trustees worked together to consider the feasibility of
purchasing a bulk annuity insurance policy.

In October 2022, the Trustees, with the Company’s support, purchased a bulk annuity insurance policy from specialist UK insurer
Pension Insurance Corporation (PIC), in respect of the largest plan, the Staff Plan. The premium was met from the plan’s assets
and sufficient assets remain to meet the plan’s ongoing costs. This pension buy-in secures an insurance asset from PIC that
matches the remaining pension liabilities of the Staff Plan, such that the Company no longer bears any investment, inflation,
longevity or other demographic risks. An asset remeasurement loss of £6.0 million has been recorded in other comprehensive
income as the premium paid was greater than the IAS 19 accounting value of the corresponding liabilities. Following the purchase
of the bulk annuity insurance policy, the Company does not expect to make any further cash contributions to this plan. Cash
contributions to the plan in 2023 amounted to nil (2022 £0.9 million).

At 31 December 2023, a reserve of $3.0 million (£2.4 million) is included within the accounting liabilities in respect of equalising
historic GMP benefits. The trustees are currently in the process of updating member benefits with equalised GMPs and
incorporating this within the bulk annuity insurance policy purchased in October 2022. The cost to equalise these benefits could
be higher or lower than reserved with the difference being charged to other comprehensive income as an experience gain/loss.

ii) Amounts in the financial statements
The assets and liabilities on the balance sheet are as follows:

Schemes in net asset position
UK defined benefit pension plan – Staff Plan
UK defined benefit pension plan – Cash Plan

Withholding tax payable

Schemes in net liability position
UK defined benefit plan – Cash Plan
UK unfunded plan

Net pension plan surplus on the balance sheet

2023
£ million

2022
£ million

10.1
–

10.1

(3.5)

6.6

(1.3)
(0.4)

(1.7)

4.9

12.3
–

12.3

(4.3)

8.0

(1.4)
(0.4)

(1.8)

6.2

Spirent Communications plc Annual Report 2023

181

FINANCIAL STATEMENTS3. Pensions continued
Defined benefit plans continued
ii) Amounts in the financial statements continued
a) The assets and liabilities in each plan

Staff Plan
Unquoted
– Insured annuities
– Cash and other
Insurance policy with PIC

Fair value of plan assets
Present value of defined benefit pension plan obligations

Surplus in the plan

Withholding tax payable

Surplus in the plan on the balance sheet

Cash Plan
Quoted:
– Equities
– Government bonds
Unquoted:
– Cash and other

Fair value of plan assets
Present value of defined benefit pension plan obligations

Deficit in the plan

Total net surplus recognised
Unfunded plan
Present value of unfunded obligations

Net pension plan surplus on the balance sheet

2023
£ million

2022
£ million

1.2
14.0
131.8

147.0
(136.9)

10.1

(3.5)

6.6

1.3
14.6
133.9

149.8
(137.5)

12.3

(4.3)

8.0

4.7
1.5

1.5

7.7
(9.0)

(1.3)

5.3

(0.4)

4.9

4.1
1.7

1.4

7.2
(8.6)

(1.4)

6.6

(0.4)

6.2

These funds have a wide investment remit and as such the investments of the funds may or may not be listed on recognised
exchanges and markets and will be without restriction as to geographical, industrial or sectoral exposure. These funds may take
both long and short positions and may utilise a broad range of derivatives. The funds’ investments may include sub-investment
grade securities, corporate debt securities, gilts, sale and repurchase agreements, loans, and emerging markets debt and currencies.

The plans are prohibited from investing in Spirent’s own financial instruments.

The Company has determined that it has an unconditional right to refund of surplus assets if the schemes are run off until the last
member dies, on which basis IFRIC 14 does not cause any change in the balance sheet disclosures before tax.

For the purposes of the following disclosures, the Staff Plan and Cash Plan have been combined as the Cash Plan is immaterial
to these financial statements.

b) Analysis of the amounts charged/(credited) to the profit and loss account

Current service cost

Amount charged to operating costs
Net interest on the net defined benefit pension surplus

Net credit to the profit and loss account

182

Spirent Communications plc Annual Report 2023

2023
£ million

2022
£ million

–

–
(0.5)

(0.5)

0.1

0.1
(0.6)

(0.5)

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS3. Pensions continued
Defined benefit plans continued
ii) Amounts in the financial statements continued
c) Analysis of the amount recognised directly in the statement of comprehensive income

Re-measurement of the net defined benefit pension surplus

d) Movements in the present value of funded defined benefit obligations

Present value of funded defined benefit pension plans’ obligations

e) Movements in the fair value of plans’ assets

At 1 January
Interest income on plans’ assets
Employer contributions
Benefit payments
Re-measurement loss on plans’ assets

Fair value of plans’ assets

Withholding tax payable

Fair value of plans’ assets less irrecoverable element of pension plan surplus

f) The key financial assumptions
The assumptions used for both plans using a weighted average were as follows:

2023
£ million

2022
£ million

(0.2)
(1.4)
(1.3)
2.5
(3.6)
0.8

(3.2)

(84.7)
(0.7)
(4.4)
1.0
69.6
(4.3)

(23.5)

2023
£ million

2022
£ million

146.1
–
6.8
(9.4)
1.3
(2.5)
3.6

145.9

217.0
0.1
3.7
(8.5)
4.4
(1.0)
(69.6)

146.1

2023
£ million
157.0
7.3
–
(9.4)
(0.2)

154.7

(3.5)

151.2

2022
£ million
245.0
4.3
0.9
(8.5)
(84.7)

157.0

(4.3)

152.7

2023
%
3.1
RPI less 1.0% pa
RPI less 0.1% pa
CPI
3.6
3.0
2.1
CPI
4.5

2022
%
3.3
RPI less 1.0% pa
RPI less 0.1% pa
CPI
3.7
3.1
2.1
CPI
4.8

The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions
are such that a member currently aged 65 (2022 aged 65) will live on average for a further 21.7 years (2022 22.0 years) if they
are a male and for a further 24.2 years (2022 24.5 years) if they are female. For a member who retires in 2043 (2022 in 2042)
at age 65 (2022 aged 65) the assumptions are that they will live on average for a further 23.2 years (2022 23.6 years) after
retirement if they are male and for a further 25.8 years (2022 26.2 years) after retirement if they are female.

Spirent Communications plc Annual Report 2023

183

FINANCIAL STATEMENTS3. Pensions continued
Defined benefit plans continued
iii) Amount, timing and uncertainty of future cash flows
The approximate impact to past service liabilities of these changes to the main assumptions, which are considered reasonably
possible, is as follows:

• Reducing the discount rate by 0.1 per cent per annum would increase past service liabilities by £1.5 million (2022 £1.6 million).

• Increasing RPI inflation by 0.1 per cent would increase the plans’ liabilities by £0.5 million (2022 £0.6 million).

• Increasing the life expectancy of a member by one year (by modifying the standard mortality tables using an appropriate

scaling factor) would increase past service liabilities by £7.3 million (2022 £6.9 million).

The accounting valuation of the funded UK defined pension plans as at 31 December 2023 gave rise to a net surplus of £8.8 million
(2022 £10.9 million). Future changes to the valuation assumptions noted above may cause material impacts to the pension
liability calculations, for example, the discount rate experienced a change of 3.0 per cent between 2023 and 2024.

The liability has the following duration and maturity.

Weighted average duration of the defined benefit obligation (years)
Maturity analysis of benefit payments (non-discounted amounts) (£ million)
Maturity ≤ 1 year
Maturity > 1 ≤ 5 years
Maturity > 5 ≤ 10 years
Maturity > 10 ≤ 20 years
Maturity > 20 ≤ 30 years
Maturity > 30 years

2023
11

8.6
36.3
45.3
77.3
50.8
31.1

Defined contribution plans
The Company contributes to defined contribution pension plans for employees. Employer contributions for 2023 were
£1.8 million (2022 £1.2 million).

4. Intangible assets

Cost
1 January and 31 December 2023

Accumulated amortisation and impairment losses
At 1 January 2023
Amortisation for the year

At 31 December 2023

Net book value at 31 December 2022

Net book value at 31 December 2023

£ million

Current
technology

Goodwill

7.5

4.4
–

4.4

3.1

0.8

0.6
0.1

0.7

0.2

0.1

2022
11

8.5
35.7
46.0
81.4
56.0
37.5

Total

8.3

5.0
0.1

5.1

3.3

3.2

The carrying value of goodwill has been tested by reference to the value in use of the Networks & Security CGU as identified in
the consolidated financial statements; please refer to note 13 of Notes to the consolidated financial statements on pages 154 to 156
for detailed disclosures. No impairment of goodwill was required.

The goodwill arose on the acquisition of the Positioning business and on the acquisition of Integrated Navigation Systems
Limited in 2019, both within the Networks & Security CGU.

184

Spirent Communications plc Annual Report 2023

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS5. Tangible assets

Cost

At 1 January 2023
Additions
Disposals

At 31 December 2023

Accumulated depreciation and impairment

At 1 January 2023
Depreciation charge for the year
Disposals

At 31 December 2023
Net book value at 31 December 2022

Net book value at 31 December 2023

6. Right-of-use assets
The Company leases office buildings.

Cost, net of accumulated depreciation and accumulated impairment
At 1 January 2022
Additions
Depreciation charge for the year

At 1 January 2023
Additions
Depreciation charge for the year

At 31 December 2023

At 31 December 2022
Cost
Accumulated depreciation and accumulated impairment

Net carrying amount

At 31 December 2023
Cost
Accumulated depreciation and accumulated impairment

Net carrying amount

The related lease liabilities are disclosed in note 14.

£ million

Freehold
land and
buildings

Plant and
machinery

Fixtures,
fittings and
equipment

0.7

–
–

0.7

0.3

0.1
–

0.4
0.4

0.3

4.9

0.1
(0.3)

4.7

4.0

0.2
(0.3)

3.9
0.9

0.8

1.4

0.2
(0.1)

1.5

1.4

0.1
(0.1)

1.4
–

0.1

Total

7.0

0.3
(0.4)

6.9

5.7

0.4
(0.4)

5.7
1.3

1.2

Land and
buildings
£ million

1.8
0.1
(0.3)

1.6
–
(0.3)

1.3

2.6
(1.0)

1.6

2.5
(1.2)

1.3

Spirent Communications plc Annual Report 2023

185

FINANCIAL STATEMENTS7. Investments

Cost
At 1 January 2023
Additions
Share-based payment

At 31 December 2023

Amounts provided
At 1 January 2023 and 31 December 2023

Net book value at 31 December 2022

Net book value at 31 December 2023

£ million

Shares in
subsidiaries

Loans to
subsidiaries

1,195.2
34.1
5.5

1,234.8

743.7

451.5

491.1

2.9
–
–

2.9

–

Total

1,198.1
34.1
5.5

1,237.7

746.6

451.5

491.1

The recoverability of the carrying value of investments in subsidiaries has been assessed by reference to value in use.

During the year, capital contributions of £34.1 million were paid to subsidiaries (2022 £13.8 million). Additionally, capital
contributions were made to subsidiaries in relation to share-based payment of £5.5 million (2022 £5.7 million).

8. Stocks

Work in progress
Finished goods

2023
£ million

2022
£ million

1.9
6.6

8.5

1.6
6.8

8.4

There were no stock write-downs recognised in the period (2022 nil) and there were no reversals of prior period stock
write-downs (2022 nil).

No stock is carried at fair value less costs to sell (2022 nil).

9. Debtors

Due within one year
Trade debtors
Owed by subsidiaries
Other debtors
Prepayments
Current tax asset
Assets recognised from costs to obtain a contract

Due after one year
Defined benefit pension plan surplus
Deferred tax asset

Note

3
15

2023
£ million

2022
£ million

9.0
17.4
0.5
1.5
1.5
0.1

30.0

6.6
0.9

7.5

12.1
12.8
0.4
1.4
1.5
0.1

28.3

8.0
0.8

8.8

The Directors consider that the carrying amount of trade debtors, amounts owed by subsidiaries and other debtors
approximates their fair value.

The Company has no significant concentration of credit risk attributable to its trade debtors as the exposure is spread over
a large number of customers.

Assets recognised from costs to obtain a contract relate to capitalised incremental costs to obtain a contract, being sales
commissions arising on contracts with customers of more than one year in length. No assets were impaired or derecognised
during the current year or prior year.

186

Spirent Communications plc Annual Report 2023

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS10. Creditors: amounts falling due within one year

Trade creditors
Owed to subsidiaries
Accruals
Contract liabilities
Government grants
Lease liabilities
Other taxes and social security costs

Notes

2023
£ million

2022
£ million

12
13
14

3.0
112.5
3.6
5.2
–
–
–

124.3

3.2
113.7
4.6
5.6
0.2
0.2
0.1

127.6

Trade creditors are non-interest bearing and are normally settled on 30 to 60-day terms. Other creditors are non-interest bearing.

The Directors consider that the carrying amount of trade creditors and amounts owed to subsidiaries approximates their fair value.

11. Creditors: amounts falling due after more than one year

Contract liabilities
Lease liabilities

Notes

12
14

2023
£ million

2022
£ million

1.9
1.3

3.2

1.6
1.4

3.0

12. Contract balances
The following table provides information about trade debtors and contract liabilities from contracts with customers.
The Company does not have any contract assets.

Trade debtors

Contract liabilities
Current
Payments received on account
Deferred income

Non-current
Deferred income

Total contract liabilities

Revenue recognised in the period from amounts included in contract liabilities at the
beginning of the period

Notes

2023
£ million

2022
£ million

9.0

12.1

–
5.2

5.2

1.9

7.1

5.6

0.7
4.9

5.6

1.6

7.2

3.9

There was no revenue recognised in 2023 or 2022 from performance obligations satisfied in previous periods.

The timing of revenue recognition, invoicing and cash collections results in trade debtors, payments received on account and deferred
income on the balance sheet.

The Company receives payments from customers based on a billing schedule, as established in the contract. Trade debtors are
recognised when the right to consideration becomes unconditional. Contract liabilities are recognised as revenue as (or when)
the Company performs under the contract.

The Company also recognises incremental costs incurred to obtain a contract as an asset if it expects to recover those costs.
Such costs are presented within debtors in the balance sheet as assets recognised from costs to obtain a contract and disclosed
in note 9.

Spirent Communications plc Annual Report 2023

187

FINANCIAL STATEMENTS12. Contract balances continued
Expected realisation of remaining performance obligations at year end
The Company applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.

For contracts that exceed one year, deferred income that relates to unsatisfied or partially satisfied performance obligations
at year end is expected to be recognised as revenue in the future as follows:

Within 1 year
Greater than 1 year

2023
£ million

2022
£ million

1.8
1.9

3.7

1.6
1.6

3.2

The above information represents the revenue the Company will recognise when it satisfies the remaining performance
obligations in the contracts. The amounts presented do not include orders for which neither party has performed.

Virtually all of the revenue will be recognised within three years.

The Company provides standard warranties on its products and services. The nature of these warranties is considered to
provide customers with assurance that the related product or service will function as intended in accordance with the agreed
specification, and does not contain or imply any additional service obligation to the customer. Warranty obligations are
estimated and recognised as liabilities based on the probable outflow of resources.

13. Government grants
The following government grants are included within creditors:

At 1 January
Received during the year
Released to the profit and loss account

At 31 December

2023
£ million

2022
£ million

0.2
–
(0.2)

–

0.3
–
(0.1)

0.2

All government grants are expected to be recognised in the next 12 months.

Government grants have been received to accelerate and support research and development in the vulnerability of global
navigation satellite systems and other high technology projects.

14. Lease liabilities
Total lease liabilities included in the balance sheet at 31 December:

At 1 January 2022
Additions
Repayments
Interest

At 1 January 2023
Additions
Repayments
Interest

At 31 December 2023

Current
Non-current

188

Spirent Communications plc Annual Report 2023

Buildings
£ million

1.7
0.1
(0.3)
0.1

1.6
–
(0.5)
0.2

1.3

Notes

10
11

2023
£ million

2022
£ million

–
1.3

1.3

0.2
1.4

1.6

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS14. Lease liabilities continued

Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years

Total undiscounted lease liabilities at 31 December

2023
£ million

2022
£ million

0.1
1.1
0.3

1.5

0.3
1.0
0.5

1.8

In 2023, the total cash outflow for leases was £0.3 million (2022 £0.3 million).

Buildings

15. Deferred tax
The movements in the deferred tax asset/(liabilities) are as follows:

2023

2022

Lease liabilities
recognised
(discounted)
£ million

1.0

£ million

Temporary
differences

Notes

Tax
losses

UK pension
plans

At 1 January 2022
Charged in the year
Deferred tax on defined benefit pension plan

At 1 January 2023
Charged in the year
Deferred tax on defined benefit pension plan

At 31 December 2023

0.2
0.1
–

0.3
–
–

0.3

0.4
(0.3)
–

0.1
0.1
–

0.2

(6.9)
(0.3)
7.6

0.4
–
–

0.4

Total

(6.3)
(0.5)
7.6

0.8
0.1
–

0.9

In 2023 and 2022, the deferred tax liability and asset have been offset on the balance sheet as they related to income taxes
raised by the same authority on the same taxable entity.

The Company has tax losses of £22.2 million (2022 £22.9 million) and short-term timing differences of £0.3 million (2022 £0.3 million)
that are available for offset against suitable future taxable profits.

A deferred tax asset has not been recognised in respect of these losses as their future recovery is uncertain as the losses are
non-trading losses that can only be offset by future non-trading profits. These losses can be carried forward indefinitely.

The Company also has capital losses carried forward of £823.3 million (2022 £823.3 million) for which no deferred tax asset has
been recognised on the balance sheet. These capital losses have no expiry date.

Spirent Communications plc Annual Report 2023

189

FINANCIAL STATEMENTS16. Dividends

Declared and paid in the year
Equity dividend on Ordinary Shares
Final dividend 2022 of 4.12 pence per Ordinary Share (2021 3.34 pence)
Interim dividend 2023 of 2.14 pence per Ordinary Share (2022 2.16 pence)

Dividends are determined in US Dollars and paid in Pound Sterling.

17. Capital and reserves
Changes during the year in the issued Ordinary Share capital were as follows:

2023
£ million

2022
£ million

24.8
12.4

37.2

20.3
13.1

33.4

Number of
Ordinary

Shares 1
million

£ million

Issued and fully paid Ordinary Shares of 3 1/3 pence each at 1 January 2023 and 31 December 2023

578.6

19.3

Note
1.

Includes shares held in the Employee Share Ownership Trust and Spirent Sharesave Trust.

Please refer to note 29 of the Notes to the consolidated financial statements on page 167 for disclosures relating to the nature
and purpose of each reserve within equity.

Investment in own Ordinary Shares
During the year, no shares were purchased and placed into the Employee Share Ownership Trust (2022 7.1 million shares
purchased and placed at a cost of £19.3 million). 2.7 million shares were transferred from the Employee Share Ownership Trust
in the year to satisfy options exercised under the Spirent employee share plans (2022 2.7 million shares transferred).

At 31 December 2023, the Employee Share Ownership Trust held 6.3 million Ordinary Shares (2022 8.9 million Ordinary Shares)
to satisfy awards under various share incentive plans. At 31 December 2023, the Spirent Sharesave Trust held 0.5 million Ordinary
Shares (2022 0.5 million Ordinary Shares) to satisfy awards made to United Kingdom-based employees under an all-employee
share scheme. The market value of own Ordinary Shares held in trust, being in total 6.8 million Ordinary Shares (2022 9.4 million
Ordinary Shares), at 31 December 2023 was £8.3 million (2022 £24.5 million).

Both the Employee Share Ownership Trust and the Spirent Sharesave Trust are an extension of the Company.

Share Buyback Programme
On 3 April 2023, the Company commenced a Share Buyback Programme of £56.0 million which was successfully completed
on 24 August 2023. These 33.1 million shares, representing circa 5.4 per cent of the Company’s issued share capital, have
been cancelled.

190

Spirent Communications plc Annual Report 2023

Notes to the parent Company financial statements continuedFINANCIAL STATEMENTS17. Capital and reserves continued
Employee share plans
The Company operates a number of employee share incentive plans which are described in note 30 of Notes to the
consolidated financial statements.

The share incentives over Ordinary Shares under these plans that have been granted and remain outstanding at 31 December 2023,
held by employees of the Company, are as follows:

2023

2022

Weighted
average
exercise
price
pence

Number
of share
incentives
outstanding
million

Weighted
average
remaining
contractual
life
years

Weighted
average
exercise
price
pence

Number
of share
incentives
outstanding
million

Weighted
average
remaining
contractual
life
years

Exercise period
(as at 31 December)

Exercise
price
pence

05.03.24–
15.09.26

–

1.8

1.5

–

1.7

Share plan

Spirent Long-Term
Incentive Plan1

Note
1. Figures for the Spirent Long-Term Incentive Plan include restricted stock and Performance Shares in aggregate. No exercise price is payable on the vesting

of a Performance Share.

The weighted average share price at exercise date was 167 pence (2022 227 pence).

Spirent Communications plc Annual Report 2023

191

FINANCIAL STATEMENTSFull list of subsidiary undertakings

A full list of subsidiaries of Spirent Communications plc at 31 December 2023 is set out below. The country of incorporation and
the effective percentage of equity owned (if less than 100 per cent) is also detailed below. Unless otherwise noted, the share
capital comprises Ordinary Shares which are indirectly held by Spirent Communications plc.

Company name

Registered in

Registered office address

Notes

Spirent Communications of Ottawa
Limited

Canada

Spirent Communications Technology
(Beijing) Limited

China

Bowthorpe Limited

England

Cambridge Analytical Group Limited

England

Earlynow Limited

Inclex No 3 Limited

Inclex No 5 Limited

Inclex No 6 Limited

Inclex No 7 Limited

PG International Limited

Shipbrick Limited

Spirent Capital Limited

Spirent Financial Limited

Spirent Holdings Limited

England

Spirent Investment Limited

England

Spirent Limited

England

Spirent Sharesave Trust Limited

England

Spirent Systems Limited

England

100 King Street West, 41st Floor,
1 First Canadian Place,
Toronto, Ontario M5X 1B2

Suite 1302, Shining Tower,
No 35 Xue Yuan Road,
Haidian District, Beijing 100083

Origin One, 108 High Street,
Crawley, West Sussex RH10 1BD

Held directly

Origin One, 108 High Street,
Crawley, West Sussex RH10 1BD

54.55 per cent held directly,
45.45 per cent held indirectly

Origin One, 108 High Street,
Crawley, West Sussex RH10 1BD

Held directly

100 per cent “A” shares held
indirectly, 100 per cent “B”
shares held directly

Held directly

Spirent Communications SAS

France

Spirent Communications GmbH

Germany

Spirent (Overseas) Limited

Guernsey

Spirent Communications (Asia) Limited

Hong Kong

Gaia, 9 Parc Ariane, Boulevard des
Chenes, 78280 Guyancourt

Konrad-Zuse Platz 10, House H,
3rd Floor, 81829 Munich

Suite 6, Provident House, Havilland
Street, St Peter Port GY1 2QE

Suites 1603-05, 16th Floor,
625 King’s Road, North Point

192

Spirent Communications plc Annual Report 2023

FINANCIAL STATEMENTSCompany name

Registered in

Registered office address

Notes

Spirent Communications (India)
Pvt Limited

India

Spirent Communications Japan KK

Japan

2nd Flr Umiya Business Bay Tower,
1 Cessna Business Park,
Marathahalli-Sarjapur Ring Road,
Kadubeesanahalli, Bangalore
560103 Karnataka

4th Floor Kyodotsushin Kaikan,
2-2-5, Toranomon, Minato-ku,
Tokyo 105-0001

Spirent Communications
Singapore Pte Limited

Singapore

101 Thomson Road, #30-01 United
Square, Singapore 307591

Spirent Communications Korea Inc

South Korea

Spirent Communications Taiwan Limited Taiwan

(Seocho-dong, Boutique Monaco)
R/M 1609, 397 Seochodaero,
Seocho-gu, Seoul 06616

10F, No 66, Sec 1, Neihu Road,
Neihu District, Taipei City 11493

Netcom Systems Holdings Corporation

Spirent Communications Inc

Spirent Federal Systems Inc

Spirent Holdings Corporation

US (Delaware) 1209 Orange Street, Wilmington,
Delaware 19801

Spirent Communications Hawaii LLC

US (Hawaii)

1209 Orange Street, Wilmington,
Delaware 19801

Spirent Communications plc Annual Report 2023

193

FINANCIAL STATEMENTSFinancial history

Summary income statement
Revenue
Cost of sales

Gross profit
Product development
Selling and marketing
Administration
Adjusting items

Operating profit
Net finance income/(costs)
Gain on divestment

Profit before tax
Tax credit/(charge)

Profit for the year

Summary balance sheet
Intangible assets
Property, plant and equipment
Right-of-use assets
Working capital (excluding cash and deferred tax)

Operating assets
Net funds including long-term cash
Lease liabilities
Provisions
Deferred tax
Defined benefit pension plan (deficit)/surplus

Net assets

Total equity

Summary cash flows
Cash flow from operating activities
Interest received
Net capital expenditure
Net lease payments
Acquisition related other adjusting items and one-off
contributions to UK pension scheme

Free cash flow
Acquisitions, disposals and investment in associate
Share purchase into Employee Share Ownership Trust
Share buyback
Dividend paid
Acquisition related other adjusting items and one-off
contributions to UK pension scheme

Net (decrease)/increase in cash and cash equivalents

194

Spirent Communications plc Annual Report 2023

$ million

2023

2022

2021

2020

2019

474.3
(130.7)

343.6
(102.4)
(133.9)
(62.1)
(26.8)

18.4
4.5
–

22.9
2.3

25.2

206.6
15.8
17.2
17.3

256.9
108.1
(21.4)
(8.0)
43.2
(3.0)

375.8

31.9
5.4
(6.1)
(8.2)

0.7

23.7
(7.8)
–
(71.6)
(46.5)

(0.7)

(102.9)

607.5
(170.4)

437.1
(111.3)
(138.9)
(57.4)
(16.8)

112.7
1.9
–

114.6
(14.7)

99.9

202.0
20.6
19.5
10.6

252.7
209.6
(22.1)
(8.4)
32.8
0.6

465.2

117.8
1.5
(8.2)
(9.0)

1.7

103.8
–
(22.9)
–
(39.9)

(1.7)

39.3

576.0
(151.3)

424.7
(113.3)
(140.7)
(52.2)
(14.3)

104.2
(0.6)
–

103.6
(14.4)

89.2

208.2
23.7
26.0
11.4

269.3
174.8
(29.8)
(7.9)
10.6
30.5

447.5

102.9
0.4
(9.8)
(9.5)

7.9

91.9
(51.3)
(15.1)
–
(84.1)

(7.9)

(66.5)

522.4
(139.0)

383.4
(103.1)
(123.4)
(53.4)
(7.8)

95.7
0.1
–

95.8
(11.4)

84.4

159.9
25.8
23.3
2.3

211.3
241.2
(28.2)
(9.8)
21.7
6.6

442.8

121.2
1.5
(9.0)
(11.1)

–

102.6
–
(11.9)
–
(33.6)

–

57.1

503.6
(135.0)

368.6
(96.5)
(129.2)
(50.0)
(4.3)

88.6
1.0
–

89.6
(11.6)

78.0

160.3
29.5
26.0
16.0

231.8
183.2
(33.0)
(8.2)
22.4
6.1

402.3

119.3
2.6
(11.9)
(9.9)

–

100.1
(1.9)
(8.6)
–
(28.6)

–

61.0

OTHER INFORMATIONOther information
Expenditure on property, plant and equipment
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Product development

Share information
Earnings per share (cents)
Basic
Diluted
Adjusted basic1,2
Dividend per Ordinary Share (cents)
Special dividend per Ordinary Share (cents)
Fully paid Ordinary Shares in issue at year end (number, million)

Segmental analysis
Revenue
Lifecycle Service Assurance
Networks & Security

Adjusted operating profit1
Lifecycle Service Assurance
Networks & Security
Corporate – non-segmental

Adjusted operating profit1
Acquired intangible asset amortisation
Share-based payment
Other adjusting items

Operating profit

Geographical information
Revenue by geographical market
Americas
Asia Pacific
Europe, Middle East and Africa

$ million

2023

2022

2021

2020

2019

6.5
10.5
6.9
102.4

4.30
4.26
7.55
2.76
–
578.6

199.1
275.2

474.3

16.9
39.0
(10.7)

45.2
(5.0)
(7.6)
(14.2)

18.4

268.1
153.9
52.3

474.3

8.4
11.0
7.3
111.3

16.46
16.36
18.86
7.57
–
611.7

264.5
343.0

607.5

51.0
86.8
(8.3)

129.5
(4.7)
(8.5)
(3.6)

112.7

336.3
205.8
65.4

607.5

10.2
12.4
7.9
113.3

14.67
14.54
16.59
6.76
–
611.7

261.6
314.4

576.0

63.1
63.5
(8.1)

118.5
(4.2)
(5.6)
(4.5)

104.2

324.6
185.1
66.3

576.0

9.5
12.2
8.4
103.1

13.84
13.71
14.68
6.04
7.50
611.7

219.3
303.1

522.4

50.7
62.0
(9.2)

103.5
(0.5)
(4.2)
(3.1)

95.7

276.2
189.2
57.0

522.4

10.9
14.7
7.5
96.5

12.79
12.63
13.40
5.39
–
611.7

190.6
313.0

503.6

28.7
72.8
(8.6)

92.9
(1.2)
(3.5)
0.4

88.6

266.1
187.8
49.7

503.6

Notes
1. Before acquired intangible asset amortisation, share-based payment and other adjusting items.
2. Before gain on divestment, items in note 1, tax effect of items in note 1 and over/under provisions in respect of prior year tax.

Spirent Communications plc Annual Report 2023

195

OTHER INFORMATIONAlternative performance measures

The performance of the Group is assessed using a variety of alternative performance measures (APMs) which are presented
to provide users with additional financial information that is regularly reviewed by management. The APMs presented are not
defined under IFRS and therefore may not be directly comparable with similarly identified measures used by other companies.

In management’s view, the APMs reflect the underlying performance of the Group and provide an alternative basis for evaluating
how the Group is managed and measured on a day-to-day basis. Such APMs are non-GAAP measures and should not be
viewed in isolation or as an alternative to the equivalent GAAP measure.

The APMs and key performance indicators are aligned to the Group’s strategy and collectively are used to measure the
performance of the Group and form the basis of the metrics for Director and management remuneration. The Group’s key
performance indicators are presented within the Strategic Report of its 2023 Annual Report.

Order intake
Order intake represents commitments from customers to purchase goods and/or services from Spirent that will ultimately
result in recognised revenue. Where there can reasonably be changes to the scope or duration of an order, the Group exercises
judgement on the amount of the order that is booked.

Order intake is a measure of operating performance used by management to assess whether future activity levels are increasing
or slowing and therefore how effective we have been in the execution of our strategy. Order intake is a key performance
indicator used to measure Group, operating segment and regional performance for internal reporting purposes.

Orderbook
Orderbook comprises the value of all unsatisfied orders from customers and provides an indication of the amount of revenue
that has been secured and will be recognised in future periods. Orderbook represents the transaction price allocated to wholly
and partially unsatisfied performance obligations, including amounts held in contract liabilities at the period end. There is no
comparable IFRS measure.

Book to bill
Book to bill is the ratio of orders booked to revenue recognised in the year and is a measure of the visibility of future revenues
at current levels of activity. Book to bill is a key performance indicator used to measure Group and operating segment
performance for internal reporting purposes.

Adjusted operating profit
Adjusted operating profit is reported operating profit excluding amortisation of acquired intangible assets, share-based
payment and other adjusting items including restructuring. Management uses adjusted operating profit, in conjunction with
other GAAP and non-GAAP financial measures, to evaluate the overall operating performance of the Group as well as each
of the operating segments and believes that this measure is relevant to understanding the Group’s financial performance, as
specific items (adjusting items) are identified and excluded by virtue of their size, nature or incidence, as they are not considered
part of the Group’s normal ongoing operations and therefore can lead to period-on-period fluctuations that can make it difficult
to assess financial performance.

Specifically, items are excluded from adjusted operating profit if they are acquisition related in nature, including acquired
intangible asset amortisation which is dependent on being able to identify intangible assets and assessing their useful economic
lives, or if their exclusion allows for more meaningful comparisons with peer companies such as share-based payment which
can fluctuate from period to period. The exclusion of adjusting items from adjusted operating profit is consistent from period
to period.

Adjusted operating profit is also used in setting Director and management remuneration targets and in discussions with the
investment analyst community.

Adjusted operating margin
Adjusted operating margin is adjusted operating profit as a percentage of revenue. It is a measure of the Group’s overall
profitability and how successful we are in executing on our overall strategy, and demonstrates our ability to improve margin
through efficient operations and cost management, whilst being mindful of the need to invest for the future.

Effective tax rate
Effective tax rate is the adjusted tax charge, before tax on adjusting items, expressed as a percentage of adjusted profit before
tax. The adjusted tax charge is the reported tax charge excluding the tax effect on adjusting items and adjustments made to
provisions in respect of prior year tax.

196

Spirent Communications plc Annual Report 2023

OTHER INFORMATIONAdjusted basic earnings per share
Adjusted basic earnings per share (EPS) is adjusted earnings attributable to owners of the parent Company divided by the
weighted average number of Ordinary Shares outstanding during the year. Adjusted earnings is reported profit before tax
excluding amortisation of acquired intangible assets, share-based payment, other adjusting items, tax on adjusting items and
over/under provisions in respect of prior year tax.

Adjusted basic EPS is a measure of how successful we are in executing on our strategy and ultimately delivering increased value
for shareholders. Adjusted basic EPS is also used in setting Director and management remuneration targets and in discussions
with the investment analyst community. The Group sets out the calculation of adjusted basic EPS in note 11 of Notes to the
consolidated financial statements.

Product development spend as a percentage of revenue
Product development as a percentage of revenue in the year. It is a measure of how much the Group is investing to support
further organic growth initiatives in line with the strategic objectives, whilst driving improved productivity and effectiveness.

Free cash flow
Free cash flow is cash flow generated from operations, less tax and net capital expenditure, lease liability principal repayments
and lease liability interest paid, add interest received and lease payments received from finance leases, excluding acquisition
related other adjusting items and one-off employer contributions to the UK pension scheme.

Free cash flow is a measure of the quality of the Group’s earnings and reflects the ability to convert profits into cash and
ultimately to generate funds for future investment. It gives us financial strength and flexibility and the ability to pay sustainable
dividends to our shareholders. Free cash flow is an important indicator of overall operating performance as it reflects the cash
generated from operations after capital expenditure, financing and tax which are significant ongoing cash flows associated with
investing in the business and financing operations.

Free cash flow excludes corporate level cash flows that are independent of ongoing trading operations such as dividends,
acquisitions and disposals and share repurchases and therefore is not a measure of the funds that are available for distribution
to shareholders.

A reconciliation of cash generated from operations, the closest equivalent GAAP measure, to free cash flow is provided within the
Financial Review on page 53.

Free cash flow conversion
Free cash flow conversion is the ratio of free cash flow to adjusted earnings, presented as a percentage.

Free cash flow conversion is a measure used in conjunction with free cash flow to assess the Group’s ability to convert profit into
cash and ultimately to generate funds for future investment.

Spirent Communications plc Annual Report 2023

197

OTHER INFORMATIONShareholder information

Financial calendar 2024
5 March 2024
May
30 June
August
31 December 2024
February/March 2025

Full year results and dividend announcement
Annual General Meeting
Half year end
Half year results and dividend announcement
Financial year end
2024 full year results and dividend announcement

Ordinary Shares and American Depositary Receipts
The Company’s Ordinary Shares are traded on the London Stock Exchange (ticker: SPT). The Company operates a Level 1
American Depositary Receipt (ADR) programme with each ADR representing four Ordinary Shares. The ADRs trade on the
US over-the-counter market (symbol: SPMYY; CUSIP: 84856M209). BNY Mellon is the authorised depositary bank for the
Company’s ADR programme.

The ADRs are quoted on the OTC Pink electronic quotation service which can be found at www.otcmarkets.com/corporate-services.

Annual General Meeting
The Company’s 2024 Annual General Meeting (2024 AGM) will be held at the offices of UBS at 5 Broadgate, London EC2M 2QS
in May 2024.

Company’s registrar
Enquiries concerning shareholdings, change of address or other particulars should be directed in the first instance to the Company’s
registrar, Equiniti, on +44 (0)371 384 2126 (please use the country code when calling from outside the UK). When you call, please
quote your 11 digit Shareholder Reference number. Lines are open from 8.30am to 5.30pm (UK time) Monday to Friday, excluding
public holidays in England and Wales. You can also contact us by using the Relay UK website at www.relayuk.bt.com.

Equiniti also provides a range of online shareholder information services at www.shareview.co.uk, where shareholders can check
their holdings and find practical help on transferring shares or updating their details.

Dividends
Shareholders are able to choose to receive their dividends direct to their bank account, reinvested in Ordinary Shares through
the Company’s Dividend Reinvestment Plan (see below), paid by cheque or paid in foreign currencies. To change how you
receive your dividends please contact the Company’s registrar, Equiniti, on +44 (0)371 384 2126 (please use the country code
when calling from outside of the UK) or log on to www.shareview.co.uk.

Dividend Reinvestment Plan
The Company has a Dividend Reinvestment Plan (DRIP) delivered by Equiniti Financial Services Limited. The DRIP allows eligible
shareholders to use their cash dividend to buy additional shares in the Company, so increasing their shareholding. If you would
like additional information, please contact the Company’s registrar, Equiniti, on +44 (0)371 384 2268 (please use the country code
when calling from outside of the UK) or log on to www.shareview.co.uk.

Shareholder security
Shareholders are advised to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free reports about
the Company.

Details of any share dealing facilities that the Company endorses will be included in the Company’s mailings or on our website.

More detailed information can be found at www.fca.org.uk/consumers.

198

Spirent Communications plc Annual Report 2023

OTHER INFORMATIONGlossary

4G (Fourth Generation)

5G Core/5G Core Network

5G (Fifth Generation)

6G (Sixth Generation)

Artificial Intelligence (AI)

Automotive Ethernet

Cloud

Fourth generation of mobile communications that delivers data rates of tens to
hundreds of megabits per second.

The heart of a standalone 5G network, providing data and control plane operations.
The 5G core aggregates data traffic, communicates with devices, delivers essential
network services and provides extra layers of security, among many other functions.

Fifth generation of cellular technology, engineered to greatly increase the speed and
responsiveness of wireless networks, capable of multiple gigabit per second data rates
and very low latency.

The future standard for wireless communications technologies supporting cellular data
networks. As the planned successor to 5G, it is expected to be capable of much higher
data speeds and to support new business models.

The simulation of human intelligence processes by machines, especially computer systems.
Specific applications of AI include expert systems, natural language processing, speech
recognition and machine vision.

A form of Ethernet network with a physical layer adapted to automotive use cases, capable
of meeting automotive electromagnetic compatibility and immunity requirements.

A variety of computing concepts that involve a large number of computers connected
through a real-time communication network such as the internet. Often used in
reference to network-based services served up by virtual hardware, simulated by
software running on one or more physical machines.

Communications Service Provider (CSP) An umbrella term for a company that offers communications and information-related

services. This can include telephone companies, internet providers, or satellite cable
companies, as well as media entities.

Continuous Integration/Continuous
Delivery (CI/CD)

A culture, operating principles, and set of practices that application development teams
use to deliver software code changes more frequently and reliably.

Data Centre

Doppler

Edge/Edge Computing

Ethernet

Fixed Wireless Access (FWA)

Global Navigation Satellite System
(GNSS)

Hyperscaler

Internet of Things (IoT)

Internet Protocol (IP)

Low Earth Orbit (LEO)

Machine Learning (ML)

A centralised location where computing resources critical to an organisation are
maintained in a highly controlled environment.

A change in the frequency with which waves (as of sound or light) from a given source
reach an observer when the source and the observer are in motion with respect to
each other so that the frequency increases or decreases according to the speed at
which the distance is decreasing or increasing.

A network architecture concept that enables cloud computing capabilities and an IT
service environment at the edge of the cellular network and, more generally, at the
edge of any network.

A family of networking technologies originally developed for local area networks, which
migrated to metro area networks and eventually became the dominant standard in
wireline networks worldwide.

A method of providing wireless connectivity through radio links between two fixed
points that enables “last mile” wireless broadband access to homes or businesses
without the need to lay fibre or cable.

The standard generic term for satellite navigation systems that provide autonomous
geospatial positioning with global coverage. GNSS allows users’ receivers to determine
their location to within a few metres by employing a triangulation technique that uses
information from multiple satellites.

The operator of data centres that offer scalable cloud computing services. Examples
include Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform.

A network of physical objects or “things” embedded with electronics, software, sensors
and connectivity to enable data exchange with the manufacturer, the operator and/or
other connected devices. Each thing is uniquely identifiable through its embedded
computing system but is able to interoperate within existing internet infrastructure.

The primary network protocol used on the internet and on other network devices to
facilitate and control the flow of data.

An orbit that is relatively close to Earth’s surface, generally at an altitude of less than
2,000 kilometres (1,200 miles).

A branch of artificial intelligence (AI) and computer science which focuses on the use of
data and algorithms to imitate the way that humans learn, gradually improving its
accuracy.

Spirent Communications plc Annual Report 2023

199

OTHER INFORMATIONGlossary continued

Multi-Access Edge Computing (MEC) MEC moves the computing of traffic and services from a centralised cloud to the edge

of the network and closer to the customer. Instead of sending all data to a cloud for
processing, the network edge analyses, processes, and stores the data.

Network Equipment Manufacturers
(NEMs)

Developers and suppliers of products and services to communication service providers
such as fixed or mobile operators, as well as to enterprise customers.

Non-Standalone (NSA) 5G

Non-Terrestrial Networks (NTN)

Open Radio Access Network
(Open RAN/O-RAN)

Open RAN Radio Unit (RU) and
Distributed Unit (DU)

Over-the-Air Testing

Positioning, Navigation and Timing
(PNT)

Secure Access Service Edge (SASE)

Standalone (SA) 5G

System-on-Chip (SoC)

Test-as-a-Service (TaaS)

Virtualisation

Wi-Fi 6/Wi-Fi 6E/Wi-Fi 7

Zero Trust (ZT)/Zero Trust Framework
(ZTF)

An architecture used in initial 5G network rollouts to provide customers with higher data
transfer speeds by pairing a 5G Radio Access Network (RAN) with an existing 4G
Evolved Packet Core (EPC).

Networks that provide connectivity through spaceborne vehicles (satellite), airborne
platforms, including airships and balloons, or UAS (unmanned aircraft system)
platforms, including drones.

The concept of interoperability of open hardware, software and interfaces for cellular
wireless access networks.

Two of the main building blocks of a disaggregated Open RAN environment. The RU is
where the radio frequency signals are transmitted, received, amplified, and digitised.
The DU sends the digitalised radio signal into the network.

A testing method used to test the performance and reliability of a wireless device in the
real world. The device under test can be tested out in the real-world or placed inside a
test chamber where real-world environments are simulated and is subject to a variety
of test conditions.

“Positioning” is the ability to determine the geographic location of a person, object or
signal. “Navigation” is the ability to calculate a route to a desired position from a
current position. “Timing” is essential to synchronisation of modern networks, providing
the only frame of reference between all devices.

A security framework for enabling secure and rapid cloud adoption, and for helping to
ensure that both users and devices have secure cloud access to applications, data and
services anywhere, any time.

Use of 5G cells for both signalling and information transfer. It includes new 5G packet
core architecture instead of relying on the 4G evolved packet core. SA deployment
is expected to have lower cost and better efficiency, and to assist development of new
use cases.

A system on a chip or system-on-chip is an integrated circuit that integrates most or all
components of a computer or other electronic system.

The outsourcing of testing activities to a third party that focuses on simulating real-world
testing environments as specified in the client requirements.

Technologies designed to provide a layer of abstraction from the physical
characteristics of computing resources to simplify the way in which other systems,
applications or end-users interact with those resources.

Wi-Fi 6 is the latest generation and standard for wireless internet, providing lower latency
and more efficient data transfer compared with earlier generations. Wi-Fi 6E extends the
capabilities of Wi-Fi 6 into the 6 GHz band in certain countries. Wi-Fi 7 is the next
generation of Wi-Fi standards, currently in development.

An architectural approach and goal for network security that assumes that every
transaction, entity, and identity is untrusted until trust is established and maintained over
time, in contrast with the legacy view that a network is secure unless security systems
identify a breach.

200

Spirent Communications plc Annual Report 2023

OTHER INFORMATIONContact details

Registered office
Spirent Communications plc
Origin One
108 High Street
Crawley
West Sussex RH10 1BD
United Kingdom
Tel: +44 (0)1293 767676
Email: investor.relations@spirent.com
Website: corporate.spirent.com
Registered in England No: 470893

Auditor
Deloitte LLP
1 New Street Square
London EC4A 3HQ
United Kingdom
Tel: +44 (0)20 7936 3000
Website: www.deloitte.com

Registrar
Equiniti Limited
Aspect House
Spencer Road Lancing
West Sussex BN99 6DA
United Kingdom
Tel: 0371 384 2126 (UK)
Tel: +44 (0)121 415 7047 (overseas)
Text phone (for shareholders with hearing difficulties):
0371 384 2255 (UK)
+44 (0)121 415 7028 (overseas)
Website: www.shareview.co.uk

ADR depositary
BNY Mellon Corporation
PO Box 30170
College Station
TX 77842-3170
USA
Tel: +1 888 269 2377 (toll free US)
Tel: +1 (201) 680 6825 (outside US)
Email: shrrelations@cpushareownerservices.com
Website: www.computershare-na.com/bnym_adr

Brokers (joint)
Jefferies International
100 Bishopsgate London
EC2N 4JL
United Kingdom
Tel: +44 (0)20 7029 8000
Website: www.jefferies.com

UBS Limited
5 Broadgate
London EC2M 2QS
United Kingdom
Tel: +44 (0)20 7567 8000
Website: www.ubs.com

Financial adviser
NM Rothschild & Sons Limited
New Court
St Swithin’s Lane
London EC4N 8AL
United Kingdom
Tel: +44 (0)20 7280 5000
Website: www.rothschildandco.com

Financial PR adviser
Dentons Global Advisors
One Fleet Place
London
EC4M 7RA
United Kingdom
Tel: +44 (0)20 7664 5095
Website: www.dentonsglobaladvisors.com

Cautionary statement regarding forward-looking statements
This Annual Report 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 Annual Report, whether as a result of new
information, future events or otherwise.

Spirent Communications plc’s commitment to environmental issues is reflected
in this Annual Report, which has been printed on Magno Satin, an FSC® certified
material. This document was printed by Park Communications using its environmental
print technology, which minimises the impact of printing on the environment.
Vegetable-based inks have been used and 99% of dry waste is diverted
from landfill. The printer is a CarbonNeutral® company.
Both the printer and the paper mill are registered to ISO 14001.

CBP023623

Spirent Communications plc
Origin One
108 High Street
Crawley
West Sussex RH10 1BD
United Kingdom

Tel: +44 (0)1293 767676

Email: investor.relations@spirent.com

Website: corporate.spirent.com

Registered in England No: 470893

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.

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