Spirent plc Annual Report 2004
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Spirent plc  Annual Report 2004 Contents
1 Our business at a glance
2 Chairman’s letter
3 Chief Executive’s letter
4 Operating and ﬁnancial review
11 Board of directors
12 Corporate social responsibility statement
14 Report of the directors
15 Statement of directors’ responsibilities in respect of the accounts
16 Directors’ statement on corporate governance
19 Report on directors’ remuneration
27 Independent auditors’ report to the members of Spirent plc
28 Consolidated proﬁt and loss account
29 Consolidated statement of total recognised gains and losses, and
Reconciliation of movements in shareholders’ funds
30 Consolidated balance sheet
31 Consolidated cash ﬂow statement, and
Reconciliation of net cash ﬂow to movement in net debt
32 Company balance sheet
33 Notes to the accounts
68 Principal divisions, subsidiaries and associates
69 Financial history
72 Shareholder information
Spirent plc is a public limited company registered in England. Its Ordinary shares
are traded on the London Stock Exchange and, in the form of American Depositary
Shares, on the New York Stock Exchange.
This report is the Annual Report of Spirent plc for the year to 31 December 2004
and complies with UK regulations. The Annual Report is available on Spirent’s
website at www.spirent.com
A separate Annual Report on Form 20-F is being prepared to meet US regulations
and will be ﬁled with the US Securities and Exchange Commission by 30 June 2005.
Highlights
£ million 2004 2003 Change %
Turnover 475.0 466.2 2
Operating proﬁt
1
42.8 36.0 19
Proﬁt before taxation and amortisation
2
37.4 30.0 25
Proﬁt before taxation 24.0 0.3 >100
Earnings per share
3
(pence) 2.99 2.31 29
Notes
1 Before goodwill amortisation and operating exceptional items.
2 Before exceptional items.
3Earnings per share is based on headline earnings as set out in note 12 to the Accounts.
Spirent is a leading communications technology company focused on delivering innovative systems and
services to meet the needs of customers worldwide. Communications
Spirent Communications is a global provider of performance analysis
and service assurance solutions that enable the development and
deployment of next-generation networking technologies.
The Performance Analysis division develops testing solutions 
for a broad range of communications technologies critical to the
development of equipment and deployment of next-generation
networks. Our systems test wireline and wireless equipment,
including core and metro terabit routers, broadband access devices,
local area network switches and routers, 3G wireless handsets,
Internet telephony and web applications and security. Our systems
enable customers to emulate large-scale networks, introduce
impairments and stress test equipment to ensure maximum
performance and conformance to industry standards. We also provide
a range of professional support services to assist customers with their
testing needs.
The Service Assurance division provides network monitoring and
management systems for telecoms service providers to assure 
the quality of their high bandwidth services. Our systems enable 
the efﬁcient delivery of leased line, DSL and IP services. The division
provides operations support systems software, remote test probes,
network test access systems and support and maintenance services.
Network Products
We are a developer and manufacturer of innovative solutions for
fastening, identiﬁcation, protection and connectivity in electrical 
and communications networks marketed under the global brand
HellermannTyton.
HellermannTyton designs and manufactures a broad range of 
high-grade nylon ties, clips, channels and ﬁxings for fastening 
cables and wires in a broad range of applications. We also produce
products with value added identiﬁcation and security features.
Our heatshrink insulation, convoluted tubing and cable covering
products provide insulation and physical protection for wires 
and cables. We are a market leader in systems for the automated
application of cable ﬁxings and identiﬁcation printing and 
application systems.
We also produce a range of products used in the installation of 
local area and wide area communications networks such as raceways,
ducting, racks, patch panels and modular jacks.
Systems
Our Systems group comprises PG Drives Technology, a leading
supplier of sophisticated electronic control systems for specialist
electrical vehicles in the mobility and industrial markets.
PG Drives Technology develops power control systems for use in 
a variety of specialist electrically powered vehicles. These include
medical vehicles such as powered wheelchairs and mobility scooters 
as well as small industrial vehicles such as ﬂoor cleaning vehicles 
and aerial access platforms. Our systems allow the user to control
the direction and speed of the vehicle as well as controlling other
aspects of the vehicle’s functions, including seating or platform
position, lights, turn indicators and vehicle diagnostics.
Spirent plc Annual Report 2004 1
Our business at a glance Dear Shareholder
2004 was a year of considerable progress across a broad front for Spirent. The return to growth of the
Performance Analysis division of Spirent Communications is an important milestone and is a result of our
long term strategy of focusing on next-generation telecoms technologies. The Service Assurance division
still faces challenges as it undergoes a reinvigoration of its activities and we have taken actions to position
it for future growth. Our Network Products group had another good year while the Systems group’s results
reﬂect the difﬁcult nature of its market at present. In addition, having restructured the balance sheet and
met certain ﬁnancial requirements in relation to our borrowing terms, we have restored strategic ﬂexibility
to the Company.
I am delighted that Anders Gustafsson joined us as Chief Executive after the retirement of Nicholas Brookes.
His exceptional skill set is ideally suited to the challenges ahead as we work to grow our communications
activities. We have been fortunate in adding as a non-executive director Kurt Hellström who brings great
strengths in the critical telecoms area. I believe we now have a Board that is well aligned with our strategic
priorities. I am immensely grateful to My Chung, who resigned from the Board during the year, and to
Richard Moley, who is retiring from the Board at the 2005 Annual General Meeting, for their dedicated
service to the Company.
We are fully compliant with the requirements under the UK Combined Code on Corporate Governance and
considerable efforts have been expended in respect of compliance with the applicable provisions of the US
Sarbanes-Oxley Act and in keeping the Company in line with good practice in corporate governance and
social responsibility issues. We continue to give a high priority to maintaining high standards in these areas.
The achievements of 2004 have made your Company stronger and well poised to make further progress.
Yours faithfully
John Weston CBE
Chairman
2 Spirent plc Annual Report 2004
Chairman’s letter Spirent plc Annual Report 2004 3
Chief Executive’s letter
Dear Shareholder
I am pleased to be reporting an overall improvement in the performance of your Company in 2004 
as a result of our investment in and focus on growth markets.
Overall turnover increased by 9 per cent in constant currencies to £475.0 million, with strong results
reported by our Performance Analysis division which achieved a substantial rise in turnover, up 31 per cent 
in constant currencies. Our Service Assurance division had a difﬁcult year and we are working to
reinvigorate this business. Operating proﬁt for the Group as a whole was up materially by 28 per cent 
in constant currencies to £42.8 million. Earnings per share increased by 29 per cent to 2.99 pence.
Strong cash generation enabled us to reduce debt to £26.4 million at the year end from £57.5 million.
Spirent is well positioned to build on its strengths, including its leading position in next-generation
technologies, broad product portfolio, depth of expertise and our strong commitment to innovation and
product development. Going forward, we will continue to leverage our expertise across our Communications
group to deliver testing solutions for new and evolving telecoms technologies. We have sharpened our
focus on our customers’ needs and have established strong positions in virtually all next-generation
technologies that are critical to our customers’ migration to packet-based networks and services. I believe
the organisational changes and improvements we have implemented have laid a solid foundation from
which we can progress.
In my ﬁrst year as Chief Executive I am very excited about our accomplishments and our future. I would
like to acknowledge and applaud the hard work and dedication of our employees around the world who
make our successes possible and who are vital to our future growth.
As we look ahead, our strategy to focus on and grow our Communications group provides us with exciting
opportunities and challenges. I am conﬁdent we are on the right course to achieve our objectives.
Yours faithfully
Anders Gustafsson
Chief Executive Overview
Our performance in 2004 showed a marked improvement as 
a result of our investment in and focus on growth markets. In the
Communications group, our Performance Analysis division achieved 
a substantial improvement in its results, with turnover up 31 per cent
in constant currencies and operating proﬁt up materially from 
£4.4 million to £19.7 million due to increased customer spending on
next-generation technologies. Actions have been taken to reinvigorate
the Service Assurance division, but we are not anticipating a recovery
in its performance until the latter part of 2005. Results for the division
were affected by market pressures, with turnover down 10 per cent in
constant currencies and operating proﬁt at break-even. The Network
Products group delivered another strong performance, with turnover up
11 per cent and operating proﬁt up 27 per cent in constant currencies.
The movement in the US dollar exchange rate reduced reported
turnover by £32.8 million, operating proﬁt by £3.2 million and proﬁt
before taxation, amortisation and exceptional items by £2.5 million.
Product development spending in the Communications group was
£60.4 million, 24 per cent of turnover, to secure our position at the
forefront of telecoms technology. Strong cash generation reduced net
debt to £26.4 million at the end of 2004 compared with £57.5 million
at the end of 2003.
Operating review
Communications
Change %
Constant
£ million 2004 2003 Reported currency
Turnover
Performance Analysis 176.8 148.7 19 31
Service Assurance 74.7 91.7 (19) (10)
Communications group 251.5 240.4 5 15
Operating proﬁt
Performance Analysis 19.7 4.4 >100 >100
Service Assurance 0.2 9.4 (98) (95)
Communications group 19.9 13.8 44 63
Return on sales (%)
Performance Analysis 11.1 3.0
Service Assurance 0.3 10.3
Communications group 7.9 5.7
Our Communications group, Spirent Communications, is a leading
provider of test and monitoring solutions and systems for next-
generation telecoms equipment and services worldwide. In 2004 we
achieved an improvement in the overall results of our Communications
group due to a recovery in the Performance Analysis division, which
has beneﬁted from increased spending on next-generation technologies.
Results for the Service Assurance division were weak due to pressures
in its market and we are working to enhance our products to address
customers’ evolving needs. Turnover for the group was up by 15 per
cent on a constant currency basis compared with 2003. As a result 
of increased volumes, operating proﬁt increased to £19.9 million
representing a 63 per cent increase in constant currencies over the
prior year. Return on sales improved to 7.9 per cent compared with
5.7 per cent in 2003.
In order to be able to meet our customers’ needs and to secure 
our position at the forefront of telecoms technology we have
maintained our investment in product development, spending 
a total of £60.4 million, or 24 per cent of the Communications
group’s turnover, in the period (2003 £57.8 million and 24 per cent).
Total product development spending for the year was split as to
£43.2 million in the Performance Analysis division and £17.2 million
in the Service Assurance division (2003 £39.4 million and £18.4 million,
respectively). This investment continues to be directed at next-
generation technologies and at maintaining the competitiveness 
of our products in terms of price and functionality.
During the second half of 2004 we embarked on a number of initiatives
to improve the operational efﬁciency of the Communications group.
These initiatives include the further integration of important functions
such as IT, ﬁnance, human resources and group marketing and a
rationalisation of the supply chain. In addition, management reporting
lines have been simpliﬁed with certain of our smaller operations being
integrated into our broadband and wireless activities. These actions
will enable the group to make better use of shared resources and
drive synergies across our various telecoms activities. A substantial
headcount reduction and certain other actions have also been
undertaken in the Service Assurance division. In total these actions,
some of which were taken in 2005, are expected to deliver annualised
cost savings of approximately £4 million.
Our strategy for Spirent Communications continues to be to advance
next-generation technologies and services, to increase our presence
internationally and to extend our products into the enterprise sector.
We believe we have made progress in delivering this strategy during
4 Spirent plc Annual Report 2004
Operating and ﬁnancial review
Headline earnings per share as referred to in the text is based on headline earnings
as set out in note 12 to the Accounts.
Operating proﬁt, return on sales and headline earnings per share are used by 
the Group as key measures of operating performance and are stated before 
the effect of goodwill amortisation and exceptional items so that period on 
period comparisons are not distorted. Free cash ﬂow (cash ﬂow before disposals,
acquisitions, equity dividends and ﬁnancing) is also a key measure.
Operating proﬁt and return on sales in the text are stated before goodwill
amortisation and operating exceptional items. In constant currencies or on 
a constant currency basis means calculated at constant exchange rates. 2004 and, while challenges still remain for us in relation to the Service
Assurance division, we are conﬁdent we now have the corporate
structure and management with which to drive the group along its
future development path.
Performance Analysis
Our Performance Analysis division develops solutions for testing the
performance, functionality and conformance of telecoms equipment.
This is achieved by simulating voice, video and data trafﬁc and large-
scale networks and by creating real-world conditions in the laboratories
of network equipment manufacturers, telecoms service providers,
enterprises and government departments. By subjecting equipment
and networks to impairments and stresses customers are able to
ensure that the equipment or services they are about to launch or
deploy will withstand real-world conditions thereby reducing the
commercial risks inherent in developing or adopting new products.
While overall telecoms capital spending was up modestly in 2004 
our Performance Analysis division beneﬁted directly from increased
spending on next-generation and 3G wireless technologies by our
customers during the year. This trend, which began to emerge towards
the end of 2003, has largely been driven by the migration from legacy,
circuit-switched networks to Internet Protocol (IP) or packet-based
networks by telecoms service providers around the world. As a result
turnover in the Performance Analysis division grew by 31 per cent in
constant currencies in 2004. Operating proﬁt of £19.7 million was 
up materially over 2003 reﬂecting the operational gearing inherent 
in this business as volumes increase. Return on sales recovered to
11.1 per cent for the period compared with 3.0 per cent in 2003.
Our portfolio of leading-edge products, services and solutions is well
aligned with our customers’ needs and in 2004 we grew sales in constant
currencies in all of our product groups and across all customer sectors.
In particular, we saw good demand for our core broadband access,
metro Ethernet, gigabit Ethernet and IPv6 test systems, driven by the
move towards higher speeds of data transmission, increased scalability
and the proliferation of high bandwidth applications such as voice,
video and data, generally referred to as ‘triple play’. The momentum
in the voice-over-IP (VoIP) services sector was behind the increased
sales of our market-leading IP telephony test solutions during the
year. Continuing concerns in relation to the delivery of mission
critical processes over enterprise networks and websites resulted 
in strengthened demand for our web testing products both from
network equipment manufacturers and enterprise customers.
Our wireless handset test activities, which represent approximately
23 per cent of this division’s turnover, grew substantially in 2004 due
largely to increased demand for our industry-leading CDMA-2000
handset test systems. Demand has been driven by the deployment of
high speed 3G data services and the increased number of new mobile
devices in the market. There was good growth in sales of our systems
for testing advanced CDMA wireless services such as ‘push-to-talk’
and those utilising mobile IP, reﬂecting an increased focus on testing
the applications that run on mobile devices. We are now a market
leader in test solutions for mobile devices employing 1xEV-DO
technology, an advanced 3G CDMA technology that was ﬁrst used 
in Asia and is now undergoing deployment in the US and Europe.
During the year we also made initial sales of our wideband CDMA
handset testing solutions into strategic customers, including systems
incorporating our leading location-based testing capability using
Assisted GPS.
On a geographic basis we have seen increased turnover worldwide in
constant currencies with sales particularly strong in the US where a
large number of our major customers are located. Strong relationships
with important local customers have led to record sales in China in
2004. In addition, the move by some of the major global network
equipment manufacturers to establish quality assurance and research
and development facilities in India and China has contributed to 
sales in the Asia Paciﬁc region. We also delivered growth in our
European sales over 2003 due to the continued roll out of advanced
digital subscriber line (DSL) services in the region and good demand
for our VoIP, web applications and wireless handset testing systems.
The results for our Performance Analysis division demonstrate that
our strategy of providing solutions that enable customers to develop
and deploy next-generation equipment and services more efﬁciently
and economically has delivered growth. During 2005 we expect to
continue to beneﬁt from further customer spending on technologies
critical to the migration to packet-based networks.
Service Assurance
Our Service Assurance division provides systems that enable telecoms
service providers to test and assure broadband leased line, DSL and IP
services. Our products include operations support systems software,
remote test probes, network access systems and consulting and technical
services. We also supply portable systems for fault identiﬁcation 
and testing of copper telephone lines in the ﬁeld. Our systems help
service providers reduce their operational costs by automating and
Spirent plc Annual Report 2004 5 centralising their network testing and service assurance processes,
reducing the need for expensive physical intervention and facilitating
faster responses to customers’ problems.
The performance of our Service Assurance division in 2004 was
affected by market pressures with turnover for the division down 
10 per cent in constant currencies compared with 2003. Operating
proﬁt for 2004 was down substantially at £0.2 million compared with
£9.4 million in 2003, after incurring an operating loss of £2.0 million
in the second half of the year.
We continued to supply and support DSL and leased line monitoring
systems for major US service providers during the year. However,
sales of our leased line systems declined faster than anticipated in
the period as customers increasingly focused their capital spending
on advanced IP services. Service providers continue to seek to reduce
the cost of deploying DSL services and we have responded to this
trend by re-engineering certain elements of our offering to increase
the cost effectiveness of our DSL monitoring solutions. Our hardware
probes remained the largest contributor to sales in 2004 with
maintenance and support contracts representing just over a quarter
of this division’s sales in the year. We have had success in the IP
space with initial orders for SmartSight™, our recently launched 
IP monitoring and diagnostic system, and we have been encouraged
by the levels of customer interest in this range of solutions.We expect
to launch further enhancements to the SmartSight product range in
2005. Our ﬁeld test business saw signiﬁcant growth over 2003 driven
by the shipment of a major order of portable fault testers to a leading
European service provider.
The future growth of our Service Assurance division will come 
from the delivery of cost effective DSL monitoring solutions, success 
in the IP services sector and the broadening of our customer base
geographically. Consequently, over the last six months we have 
taken several steps to realign our resources and reduce operating
costs including changing the senior management, reducing employee
numbers by approximately 15 per cent and redirecting marketing 
and product development efforts. We have increased our marketing
efforts outside the US and, in particular, have adopted a direct sales
strategy in China which involves exiting our joint venture, Spirent DM,
and creating a direct sales force based in Beijing. We are currently
actively working with a number of non-US customers to help them
deﬁne their future strategy for DSL and IP service assurance.
The global telecoms sector is currently undergoing a migration 
from legacy networks towards IP-based networks and services. These
new networks and services will require sophisticated monitoring and
diagnostic systems to enable network operators to deliver the high
quality, reliable telecoms services their customers have come to
expect.We believe the actions we have taken in our Service Assurance
division will enable us to take advantage of this trend but we are not
anticipating a recovery in its performance until the latter part of 2005.
Network Products
Change %
Constant
£ million 2004 2003 Reported currency
Turnover 187.8 174.4 8 11
Operating proﬁt 20.4 16.7 22 27
Return on sales (%) 10.9 9.6
Our Network Products group produces innovative products and
solutions for the fastening, identiﬁcation, protection and connectivity
of wires and cables in electrical and communications networks in a
broad range of applications. The group operates under the global brand
HellermannTyton in 30 countries worldwide and has manufacturing
facilities in all the major geographic regions.
Our Network Products group delivered another strong performance
in 2004 with turnover of £187.8 million up 11 per cent in constant
currencies over the same period last year. Operating proﬁt of 
£20.4 million was ahead by 27 per cent in constant currencies over
2003. Return on sales improved to 10.9 per cent from 9.6 per cent
due to increased operational efﬁciencies. As anticipated, results for
the second half of 2004 were marginally below the ﬁrst half due to
the normal seasonality of this business. Capital expenditure was up
over 2003 as planned due to the expansion of capacity at our major
manufacturing sites and we plan to further increase capacity in 2005.
In Europe our sales beneﬁted from increased automotive production
and our ability to increase the number of products per platform on
new models. Sales in the US were up due to the general economic
recovery as well as our increased penetration of the automotive and
telecoms markets and successful new product introductions. Sales in
Japan through our associate company showed good growth and we
made progress in China due to the increasing OEM and automotive
production levels in the region.
6 Spirent plc Annual Report 2004
Operating and ﬁnancial review continued We were successful in growing sales to the automotive sector, which
represents the largest proportion of this group’s turnover, with increased
cabling in cars driving demand for our cable management and fastening
products. In addition, with the increasing trend among volume car
manufacturers to move production to emerging economies, our ability
to supply customers directly in these regions has helped increase
sales. Sales to the heavy vehicles market were good in all regions 
but particularly in the US where heavy truck manufacturers increased
their manufacturing volumes in the year. We increased sales in our
next largest market, the electrical wholesalers and catalogue houses,
although their end markets continue to be difﬁcult. We saw growth 
in sales of our connectivity systems but the communications market
remains very price competitive and we took actions during the year to
reduce the cost base. The RapidNet pre-terminated structured cabling
system launched last year has received increasing acceptance and 
we have secured several important installations in the enterprise 
and public sector markets. We also secured further deployments for
Autotools, our market-leading automated bundling systems, at major
automotive and white goods harness makers worldwide during the year.
Our strong customer focus, technical leadership and world class
operational excellence have enabled us to capitalise on our market-
leading positions in Europe, South America and the Asia Paciﬁc 
region during 2004 and we expect to continue to make further
progress in 2005.
Systems
Change %
Constant
£ million 2004 2003 Reported currency
Turnover 31.3 37.9 (17) (14)
Operating proﬁt 1.9 6.1 (69) (69)
Return on sales (%) 6.1 16.1
Figures in the above table relate to PG Drives Technology only. Divested businesses
contributed £4.4 million of turnover and £0.6 million of operating proﬁt in 2004
and £13.5 million of turnover and a £0.6 million operating loss in 2003.
After the sale of our last remaining aerospace business in August 2004,
the Systems group now comprises PG Drives Technology, a leading
supplier of power control systems for powered medical and small
industrial vehicles. The continued weakness of the US dollar has
adversely affected the trading performance of PG Drives Technology
with the transaction effect reducing operating proﬁt by approximately
£3 million. Turnover and operating proﬁt were down 14 per cent and
69 per cent, respectively, in constant currencies compared with 2003.
Return on sales reduced to 6.1 per cent compared with 16.1 per cent 
in 2003. We have had some success in reducing our exposure to 
the US dollar:sterling exchange rate by increasing the number of
components purchased in US dollars. We have also moved some of
our production to China to reduce the logistical costs of supporting
our activities in the Asia Paciﬁc region.
Continuing constraints in US government healthcare funding for
powered wheelchairs dampened demand for our wheelchair systems
during the year. Due to the competitiveness of our established 
VSI, S-Drive and TRIO+ products we were, however, successful in
increasing customer penetration in both the mobility and our new
industrial vehicles markets during the year. In 2005 we are planning
to launch several new products that will enable us to strengthen 
our position in both our addressed markets.
While results for this group are currently being affected by the weak
US dollar and reduced US government healthcare funding, longer
term prospects for our main mobility vehicle market remain positive,
as we anticipate that increasing afﬂuence and the desire for mobility
will increase the demand for powered medical vehicles.
Financial review
Results
Change %
Constant
£ million 2004 2003 Reported currency
Turnover 475.0 466.2 2 9
Operating proﬁt 42.8 36.0 19 28
Return on sales (%) 9.0 7.7
Reported turnover for 2004 of £475.0 million was up 2 per cent and
operating proﬁt of £42.8 million was up 19 per cent compared with
2003. In constant currencies turnover was up by 9 per cent and operating
proﬁt was up by 28 per cent compared with 2003. Return on sales for
the Group improved to 9.0 per cent from 7.7 per cent in 2003.
Reported results have been affected by the weakness of the US dollar
relative to sterling with an average US dollar:sterling exchange rate 
of $1.83: £1 in 2004 compared with $1.64: £1 in 2003. In 2004
currency translation reduced turnover by £32.8 million, operating
proﬁt by £3.2 million and proﬁt before taxation, amortisation and
exceptional items by £2.5 million.
Spirent plc Annual Report 2004 7 Turnover by source grew in constant currency terms in all geographic
regions during 2004. Turnover by market grew in constant currencies
in all regions except the Asia Paciﬁc region, where growth from the
Network Products group and Performance Analysis division was
offset by lower demand for our Systems group’s products. Operating
proﬁt by source in North America grew by 64 per cent in constant
currencies compared with 2003. Operating proﬁt also grew in the
Asia Paciﬁc region but reduced by 4 per cent in constant currencies 
in Europe due to the effect of the weak US dollar on trading.
Product development spending for the Group in 2004 was £67.3 million,
or 14 per cent of turnover (2003 £66.0 million and 14 per cent), the
large majority of which was invested in the Communications group.
A £0.7 million loss from interests in joint ventures in 2004 relates to
our share of the losses in our joint venture company in China, Spirent
DM. Income from interests in joint ventures reported in 2003 included
our share of proﬁts from WAGO which was divested in April 2003.
Net interest payable, excluding the exceptional interest expense,
reduced to £6.8 million in 2004 compared with £9.3 million in 2003
due principally to the continued reduction in net debt during 2003
and 2004.
Proﬁt before taxation, amortisation and exceptional items was 
£37.4 million compared with £30.0 million in 2003. Reported proﬁt
before taxation was £24.0 million compared with £0.3 million for 2003.
The effective rate of taxation for 2004 was 24.1 per cent compared
with 27.7 per cent for 2003 as a result of the utilisation of tax losses.
We anticipate that the effective tax rate for 2005 will be approximately
25 per cent.
Headline earnings per share of 2.99 pence increased by 29 per cent
over 2003. The weighted average number of shares outstanding at
the period end was 939.2 million (2003 929.3 million). After charging
goodwill amortisation and exceptional items, basic earnings per share
for 2004 was 1.70 pence (2003 loss 0.05 pence).
Net debt has reduced signiﬁcantly to £26.4 million at 31 December 2004
from £57.5 million at the end of 2003. The effect of translation has
reduced net debt by £5.4 million due principally to the weak US dollar.
Our borrowing covenant ratios at the year end were net interest
cover of 5.8 times (covenant ratio: greater than or equal to 2.5 times)
and net debt to EBITDA of 0.5 times (covenant ratio: less than or
equal to 2.25 times). Having met the ﬁnancial covenant requirements
under the terms of our borrowings, we will revert to semi-annual
covenant tests, with covenants of net interest cover of not less than
3.0 times and net debt to EBITDA of not more than 3.0 times, and
certain other restrictions within our borrowing terms will be relaxed.
We were granted an order of the High Court in November 2004
conﬁrming the cancellation of the share premium account and
capital redemption reserve in order to eliminate the deﬁcit in the
Company’s distributable reserves.
Exceptional items
Operating exceptional items of £2.9 million have been charged 
in 2004 which related to restructuring costs within our businesses
and the exit from our joint venture company, Spirent DM.
Total non-operating exceptional items in 2004 were a net loss of 
£0.9 million. In August 2004 the remaining aerospace maintenance,
repair and overhaul (MRO) business was divested for a net loss 
of £2.5 million after charging £4.9 million of goodwill previously
written off to reserves and now reinstated in accordance with
Financial Reporting Standard 10. Provisions on vacant property 
and accrued expenses related to prior year disposals of £1.6 million
have been released.
A make-whole amount of £0.5 million has been charged as an exceptional
interest expense in 2004. In 2003 we reported an exceptional interest
expense of £16.1 million in relation to the make-whole amount on 
the partial prepayment of our senior notes and related bank fees.
Financing
During 2004 we prepaid a total of $19.4 million (£10.6 million) of
our senior notes. Following this $124.8 million (£65.0 million) of
notes remained outstanding at 31 December 2004. Our £30 million
bank facility remained nil drawn at the end of 2004 at which point
we had cash at bank and in hand of £51.7 million. A new £30 million
bank facility was put in place in February 2005 and this facility has 
a 364-day term and a 12 month term-out option.
Further details of our treasury management and ﬁnancial instruments
can be found in note 29 to the Accounts.
Cash ﬂow
In 2004 we were cash generative in all our operating groups. Operating
cash ﬂow for 2004 was down by 12 per cent at £60.3 million compared
with £68.2 million in 2003 due largely to the pension payments
referred to below.
8 Spirent plc Annual Report 2004
Operating and ﬁnancial review continued Cash ﬂow before disposals, acquisitions and ﬁnancing, or free cash ﬂow,
for 2004 was £23.0 million compared with £38.2 million in 2003. Net
capital expenditure increased to £24.8 million as planned compared
with net £15.8 million in 2003. We expect capital investment to
increase to approximately £35 million in 2005 due to investments in
IT within our Communications group and the expansion of capacity
within the Network Products group.
Net cash payments of tax of £3.1 million were made in 2004 compared
with a net inﬂow of £8.9 million in 2003 when we had the beneﬁt of
a carry back of tax losses, principally in the US.
In 2004 we made our ﬁrst additional annual cash contribution of
£3.5 million to our deﬁned beneﬁt UK pension plans and we will
make a similar contribution to the schemes in the ﬁrst half of 2005.
We also settled the liability of £3.7 million due to Nicholas Brookes,
the former Chief Executive of the Company, on his retirement in
respect of his unfunded unapproved retirement beneﬁt (UURB).
Excluding the make-whole amounts, net interest payments of 
£7.2 million in 2004 were below the £9.5 million paid in 2003.
In 2004 we paid make-whole amounts of £2.3 million, including 
£1.8 million accrued in 2003, on the prepayment of senior notes
compared with £13.7 million paid in 2003.
Disposals and acquisitions
We divested our MRO aerospace business for net cash proceeds of
£2.5 million in August 2004. During the year we acquired the minority
shareholdings in two of our Network Products subsidiaries for a cash
consideration of £1.1 million.
Pension fund
At the end of 2004 the pension liability reduced to £27.0 million 
(31 December 2003 £35.2 million), net of deferred taxation of 
£11.1 million (2003 £13.0 million). The assets in the schemes have
increased during the year as a result of the performance of the equity
markets and the Company’s contribution of £3.5 million to the deﬁned
beneﬁt UK pension plans.The Company will make a further contribution
of £3.5 million to the deﬁned beneﬁt UK pension plans in the ﬁrst
half of 2005. The UURB liability of £3.7 million was settled in 2004.
Adoption of International Financial Reporting Standards
Spirent is required to comply with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) with effect
from 1 January 2005. For the Spirent Group the main areas on 
which we expect IFRS to make an impact will be the reporting and
treatment of goodwill and intangible assets, share-based payments,
financial instruments and proﬁt or loss on disposal of operations. The
adoption of IFRS will not affect our position under existing borrowing
covenants as they are calculated under UK GAAP as it existed at 
31 December 2002 nor will IFRS change the cash ﬂow, risk proﬁle 
or economics of the business going forward.
Spirent is expecting to report two years of comparative data in
accordance with the requirements for US listed companies and 
as a consequence the IFRS transition date for Spirent will be 
1 January 2003, being the start of the earliest period of the
comparative information required.
We discuss below the areas that will be affected by the adoption 
of IFRS compared with UK GAAP, based on IFRS expected to be in
force at 31 December 2005. These are subject to ongoing review and
endorsement by the EU and interpretive guidance by the International
Accounting Standards Board (IASB) and are therefore still subject 
to change. All information provided below is for illustrative purposes
only and is subject to further management review and external audit.
IFRS 3 ‘Business Combinations’ prohibits amortisation of goodwill and
requires that it be carried at cost with impairment reviews undertaken
annually or when indicators of impairment exist. The Spirent Group
did not make any major acquisitions in either the 2003 or 2004
accounting periods and we will apply IFRS 3 prospectively from the
transition date. Goodwill amortisation charged under UK GAAP for
2003 and 2004 was £9.7 million and £9.1 million, respectively, and
these charges will be reversed in the restatements under IFRS.
In accordance with IFRS 2 ‘Share-based Payment’ a charge will 
be recognised for the fair value of employee stock options granted.
The fair value will be calculated using a binomial model and will
include all options granted since 7 November 2002 which are not
vested at 1 January 2005 as allowed by the standard. The charge,
which does not affect cash ﬂow, will consequently build up over 
time. It is expected to be minimal for 2003 and in the region of 
£5 million for 2004.
Spirent plc Annual Report 2004 9 IAS 19 ‘Employee Beneﬁts’ permits a number of different approaches
for the accounting treatment of deﬁned beneﬁt pension plans. Spirent
expects to adopt the approach which is similar to the UK standard
Financial Reporting Standard (FRS) 17 ‘Retirement Beneﬁts’. Spirent
adopted FRS 17 for UK GAAP reporting in 2003.
Spirent will apply IAS 32 and 39 ‘Financial Instruments’ prospectively,
that is with effect from 1 January 2005, and hence no adjustments
for ﬁnancial instruments will be required in the proﬁt and loss
restatements for 2003 and 2004. The principles of IAS 39 require 
that ﬁnancial instruments be measured at fair value. Spirent uses
derivative ﬁnancial instruments to hedge its exposure to ﬂuctuations 
in interest and foreign exchange rates. In general the number and 
fair value adjustments of these transactions is relatively small and 
we would therefore not anticipate a signiﬁcant effect on our results
in respect of IAS 39 unless our activity in such instruments increases.
Goodwill written off to reserves and arising prior to 1 January 1998,
which is reinstated under UK GAAP, is not reinstated in the calculation
of the proﬁt or loss on disposal of subsidiaries under IFRS. Furthermore,
IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ requires the
cumulative exchange differences on foreign operations to be included
in the calculation of proﬁt or loss on disposal. These combined
requirements will increase the proﬁt reported on our disposals in 2003
by £5.0 million to £8.6 million and restate the loss reported in 2004
by £4.9 million to a proﬁt of £4.0 million.
There will be other less signiﬁcant differences between IFRS and UK
GAAP and some changes to the presentation of our ﬁnancial results
required as a result of the restatements under IFRS.
We expect the net effect of the above adjustments will be to
increase the reported level of earnings in respect of the 2003 and
2004 ﬁnancial years under IFRS compared with UK GAAP. This is
principally because the reversal of the goodwill amortisation charge
and the adjustment in respect of the proﬁt or loss on disposals (both
excluded for headline earnings calculations, in any event), will exceed
the share-based compensation charge arising under IFRS 2, the latter
being a non-cash item.
Restated ﬁgures for the 2004 interim and 2004 ﬁnal results will be
made available before the publication of the 2005 interim results.
Dividend
In November we completed the process required to eliminate the
deﬁcit in the Company’s distributable reserves. Although we are now
in a position to rebuild distributable reserves through retained proﬁts,
out of which dividends may be paid, no decision to resume dividend
payments has been taken by the Board.
The Board and senior management
In August 2004 Anders Gustafsson was appointed Chief Executive
after the retirement of Nicholas Brookes on 30 June 2004. After
joining the Group, Anders Gustafsson took over direct responsibility
for Spirent Communications. In September 2004 My Chung, Executive
Director of Spirent and President of Spirent Communications, resigned
from the Board and we would like to thank him for his contribution
to Spirent and wish him well for the future. In November William
Burns was appointed President of the Service Assurance division of
Spirent Communications.
In December we were delighted to announce the appointment of
Kurt Hellström as a non-executive director. He was formerly President
and Chief Executive Ofﬁcer of Ericsson and has exceptional experience
of the telecoms industry, particularly in wireless communications and
the Asia Paciﬁc market. Richard Moley will retire from the Board with
effect from the date of the 2005 Annual General Meeting and we would
like to thank him for his valuable contribution during his tenure as a
non-executive director.
Outlook
During 2005 we expect our Performance Analysis division to beneﬁt
from further customer spending on technologies critical to the
migration to packet-based networks. In our Service Assurance division
we have taken actions to cut costs and reinvigorate the business, but
we do not anticipate seeing a recovery in its performance until the
latter part of 2005. Our Network Products group is expected to
continue to make further progress in 2005.
As expected, we have had a satisfactory start to 2005 and looking
ahead we anticipate further progress as we pursue our strategy of
growing our communications business.
10 Spirent plc Annual Report 2004
Operating and ﬁnancial review continued Spirent plc Annual Report 2004 11
Board of directors
12 3
5
4
6 7
10
8
● Audit Committee
● Remuneration Committee
●● Nomination Committee
All the directors are considered
independent of the management of
the Company with the exception of
Anders Gustafsson, Eric Hutchinson
and Göran Ennerfelt.
9
Executive directors
1. Anders Gustafsson, Chief Executive (44) 
●● Anders Gustafsson was appointed Chief Executive in August 2004. Prior
to joining the Company he was the Senior Executive Vice President –
Global Business Operations of Tellabs, Inc.
2. Eric Hutchinson, Finance Director (49)
Eric Hutchinson was appointed Finance Director in 2000, having previously
been responsible for all ﬁnancial reporting and control within the Group.
He is also a non-executive director and Chairman of the audit committee
of Trifast plc.
Non-executive directors
3. John Weston CBE, Chairman (53) 
● ●● John Weston CBE was appointed non-executive Chairman in 2002 and 
is Chairman of the Nomination Committee. He was Chief Executive 
of BAE SYSTEMS plc from 1998 to 2002. He is also Chairman of Acra
Controls, Inbis plc and learndirect – the University for Industry.
4. James Wyness (67) 
● ● ●● James Wyness was appointed to the Board in 1979 and is the senior
independent non-executive director. He was previously Managing Partner
then Senior Partner of Linklaters. He is a non-executive director and was
previously Chairman of Saracens Limited.
5. Marcus Beresford CBE (62) 
● ● ●● Marcus Beresford CBE was appointed to the Board in 1999 and is
Chairman of the Remuneration Committee. He was previously Chief
Executive of GKN plc. He is also non-executive Chairman of Ricardo plc
and a non-executive director of Cobham plc.
6. Frederick D’Alessio (56) 
● ●● Frederick D’Alessio was appointed to the Board in January 2004. He was
previously President of Advanced Services at Verizon Communications Inc.
He is a general partner and founder of Capitol Management Partners and
sits on the boards of SS8 Networks, Inc., Aware, Inc., Hatteras Networks,
Inc. and Network Equipment Technologies, Inc.
7. Göran Ennerfelt (64) 
●● Göran Ennerfelt was appointed to the Board in 2000. He is President and
Chief Executive Ofﬁcer of Axel Johnson AB, a member of the Axel Johnson
Group. He is also Chairman of the Swedish Federation of Trade and Vice
Chairman of the Confederation of Swedish Enterprise, as well as a director
of Svenska Handelsbanken and the Swedish National Committee of the
International Chamber of Commerce.
8. Andrew Given (57) 
● ● ●● Andrew Given was appointed to the Board in 2003 and is Chairman of the
Audit Committee. He was formerly Deputy Chief Executive of Logica plc.
He is also the senior independent non-executive director and Chairman
of the audit committees of both VT Group plc and Spectris plc.
9. Kurt Hellström (61) 
● ●● Kurt Hellström was appointed to the Board in December 2004. He was
formerly President and Chief Executive Ofﬁcer of Ericsson. He is also a
member of the board of directors of Atlas Copco AB, Bharti Tele-Ventures
Limited, Kineto Wireless and Gemplus International S.A.
10. Richard Moley (65) 
● ●● Richard Moley was appointed to the Board in 2000. He was previously a
director and Senior Vice President of Cisco Systems, Inc. He is also a non-
executive director of Linear Technologies Corporation, Echelon Corporation,
Calient Systems Inc. and Polaris Networks, Inc. He will retire from the
Board with effect from the date of the 2005 Annual General Meeting.
Further biographical details 
of the directors can be found 
on the Company’s website at
www.spirent.com. The executive
directors are supported by a team
of senior management and their
biographies can also be found 
on the Company’s website. We recognise that our social, environmental and ethical conduct has 
an impact on our reputation. We therefore take our corporate social
responsibilities (CSR) seriously and are committed to advancing our
policies and systems across the Group to ensure we address and monitor
all aspects of CSR that are relevant to our business. These include good
ethical behaviour, concern for employee health and safety, care for the
environment and community involvement.
We strive to maintain a productive and open dialogue with all parties 
who may have an interest in our activities including shareholders,
customers, suppliers and employees. We have an established investor
relations programme, conduct regular customer satisfaction surveys,
monitor supplier performance and actively encourage feedback from 
our employees. We maintain our website as one of the main routes 
for providing information to interested parties and for contacting us.
The Board takes ultimate responsibility for CSR and is committed to
developing and implementing appropriate policies while adhering to 
a fundamental commitment to create and sustain long term value 
for shareholders. As a Group driven largely by technological innovation
our main assets are the talents and skills of the people we employ. The
Board does not believe that, to date, the activities of the Group present
any signiﬁcant environmental risks. We have established a committee 
to coordinate Group-wide CSR efforts that meets on a regular basis.
Ethics
Spirent expects that all of its business is conducted in compliance with
high ethical standards of business practice. We apply these standards to
all dealings with employees, customers, suppliers and other stakeholders.
The Group’s Ethics Policy, which has been approved by the Board, is
available on our website at www.spirent.com/ethics. Our Ethics Policy 
has been developed to ensure that the Group’s business is conducted 
in adherence with high ethical and legal principles and sets standards of
professionalism and integrity for all employees and operations worldwide.
The Ethics Policy also contains provisions for ‘whistleblowing’ whereby
employees may report, in conﬁdence, suspected wrongdoings.
Appropriate ethical behaviour is reviewed as part of the Group’s internal
control process.
Employees
The Group aims to attract, retain and motivate the highest calibre of
employees within the context of an operating structure that encourages
their development and initiative.
Employees are provided with a continuing learning and development
opportunity to fulﬁl their potential and this process is managed to 
align development with the Group’s strategic and business units’ goals
and objectives. Formal performance management processes are now
operating in the majority of the Group, linked to the vision and values 
of the organisation. These processes are reinforced with appropriate
remuneration and incentive systems.
The development of our performance management systems, including 
an online system in parts of the Group, will enable the Group to deliver
appropriate training programmes which, when coupled with links to the
education sector at undergraduate and postgraduate levels, reinforce 
our commitment to learning and development.
Management development and succession planning are processes which
are recognised as being critical to the future success of the business and
are managed accordingly. They are constantly re-evaluated particularly 
as the labour markets in which Spirent operates recover.
As the importance of human resources (HR) metrics to the strategic
planning process is recognised, we are implementing a global HR system
within our Communications group to help facilitate organisational
development, supported by the adoption of a ‘shared services’ model
across support functions.
Intellectual property and innovation are critical to Spirent’s future
success and appropriate career paths have been developed for technical
staff which operate in parallel with more traditional management career
paths. Initiatives such as our Engineering Fellowship Programme help to
facilitate this. We also believe that it is important to reward innovation
and the continuous development of the organisation and a number of
recognition programmes have been implemented across the Group.
The Group is committed to providing equality of opportunity to all existing
and prospective employees without unlawful or unfair discrimination. Full
support is given to the employment and advancement of disabled persons
and this is reinforced through the Group’s Ethics Policy.
Local business unit management is responsible for developing and
implementing arrangements for employee information, consultation,
communication and involvement which best meet their own particular
needs within the context of a Group cascade process.
Similarly, the importance of two-way communication is recognised
particularly as it relates to the business and its performance. A variety of
tools are utilised to achieve this including senior management brieﬁngs,
‘all-hands’ meetings, the regular distribution of an in-house magazine,
viewpoints, and increasing use of online communication.
Health and safety
The Chief Executive is the director appointed by the Board to have
responsibility for the health and safety and environmental performance
of the Group.
The Group Health and Safety Policy places responsibility for the
management of health and safety on the local business unit management,
who are supported by the Group internal control team and local external
advisers, where necessary.
Each business unit has a senior individual designated as being responsible
for ensuring the business unit conforms to local statutory health and safety
regulations as well as Group policy. All business units provide employees
with a written health and safety policy.
12 Spirent plc Annual Report 2004
Corporate social responsibility statement Spirent’s ‘Operational Excellence Programme’ which is further described
in the Directors’ statement on corporate governance on pages 16 to 18,
continues to further the corporate objective of continuous improvement
in the area of health and safety. An annual internal report on our health
and safety performance is collated from a questionnaire completed by 
all our business units. The highlights of this report in respect of 2004 are:
–we had 405 incidents that required on-site First Aid, an 11 per cent
reduction compared with 2003 and 17 per cent down on 2002;
–we saw a small increase in ill health/long term sickness levels with 
ﬁve cases reported compared with three in 2003 and four in 2002;
–we saw a reduction in accident frequency and severity; and
–we had two accidents that required short term hospitalisation
compared with one in 2003 and none in 2002.
The business units undertake annual independent external reviews of
health and safety performance and also have regular designated health
and safety awareness training, particularly at our manufacturing sites.
The Group’s health and safety performance and signiﬁcant risk exposures
are reviewed regularly by management, twice a year by the Audit
Committee and annually by the Board.
Environmental
Good environmental practice and the impact that our operations have 
on the environment are of great importance to Spirent. The main aim of
Spirent’s Environmental Policy is to comply with local, state and national
environmental legislation in all jurisdictions in which we operate and to
adopt responsible environmental practices.The full text of our Environmental
Policy is available on our website at www.spirent.com/environment.
Business units are required to comply with Group policy and local
statutory regulations and are encouraged to set their own environmental
targets. An annual environmental questionnaire is completed by each
business unit which highlights their environmental performance.
Our Network Products group’s manufacturing sites worldwide operate
ISO 14001 accredited environmental management systems. In addition,
various sales and distribution locations worldwide have achieved ISO
14001 accreditation and a number are working towards achieving this
accreditation.The Communications group’s businesses are also introducing
formal environmental management systems, with a number having already
achieved ISO 14001 accreditation.
The majority of Spirent Group manufacturing sites have ISO 9001
accreditation, and in the case of the Service Assurance division also 
TL-9000 accreditation.
Business units closely monitor energy consumption and where possible
have introduced energy efﬁcient measures, such as replacing existing
equipment with more energy efﬁcient machinery, installing light sensors
and ﬁtting temperature control devices.
A large proportion of our products are designed and manufactured 
to take account of the recycling and disposal of the product at the 
end of its life cycle. Our businesses are committed to meeting the ﬁrst 
phase of The Waste Electrical and Electronic Equipment Regulations 
(the WEEE Regulations) and are working towards full compliance with 
The Restriction of the Use of Certain Hazardous Substances in Electrical
and Electronic Equipment Regulations 2004 (the RoHS Regulations).
The environmental performance of the Group continues to improve with
business units meeting goals for reducing energy consumption, reducing
waste and greater recycling. There are also programmes in place aimed 
at reducing the amount of waste sent to landﬁll by increasing the volume
of recycling and also training and education initiatives to promote and
improve environmental performance.
The vacant site where historic activity had led to minor land contamination
is continuing to be remedied with full cooperation of the local statutory body.
Group performance and risk exposure reviews are undertaken in parallel
with those for health and safety as described above.
Community
Spirent recognises the importance of local communities to our businesses
and through our Charitable Donations Policy we strive to be a responsible
partner in the communities in which we operate. We encourage all our
businesses to support the particular needs of their communities by
contributing to local charities and community initiatives. Support takes the
form of employee time and skills, gifts in kind and cash donations. In 2004
Spirent made charitable donations of £63,000 (2003 £63,000). In response
to the tsunami disaster in South Asia the Company made a charitable
contribution of £50,000 in early 2005.
In 2004 we continued to support local education through a range of
initiatives including ‘career shadowing days’, ﬁeld trips for young people
and internships and work experience programmes for school and university
students. During the year we supported The Duke of Edinburgh’s Award
programme, sponsored the Best Electronic Engineering Student at the
annual Science, Engineering & Technology Student of the Year Awards 
and were actively involved in the Young Enterprise programme in the UK.
We aim to provide support in all regions in which we operate. For example,
in South Africa our employees have provided technical training for
disadvantaged students through an Institute of Electricians programme.
Our employees serve our communities by volunteering their time 
to various programmes including Habitat for Humanity and Junior
Achievement in the US.We continue to donate materials and equipment 
to local causes throughout the world. We encourage our employees 
to become involved in fund raising activities for local concerns and
community initiatives. Through activities such as ‘food drives’, collections
and sponsored events our businesses help organisations which provide
food, clothing and other assistance to disadvantaged children and
families around the world.
Spirent continues to support and encourage all our employees and
businesses to pursue new ways of contributing to their communities.
Spirent plc Annual Report 2004 13 The directors present their Report and the audited consolidated accounts
for the year to 31 December 2004.
Principal activities, business review and results
The principal activities, review and results for the year (inclusive of ﬁnancial
performance, likely future developments and prospects) are set out on
pages 1 to 10. Principal divisions, subsidiaries and associates are listed 
on page 68.
Dividends
No interim dividend was paid during the year (2003 nil) and the directors
do not recommend the payment of a ﬁnal dividend (2003 nil).
Research and development
Product development and innovation are considered key strategies to
maintain and improve the Group’s competitive position and therefore
continue to receive high priority. This commitment is highlighted by the
£67.3 million research and development spend during the year, equivalent
to 14 per cent of turnover (2003 £66.0 million and 14 per cent). The
Company will continue to commit resources as appropriate to research
and development.
Major transactions
In August 2004 the Company divested its aerospace maintenance, repair
and overhaul software business from within its Systems group for net
cash proceeds of £2.5 million. During 2004 the Company acquired the
minority shareholdings in two Network Products subsidiaries for a cash
consideration of £1.1 million. Further details of these transactions are 
set out in notes 32 and 33 to the Accounts.
Share capital
Changes in the Company’s share capital during the period are given in
note 31 to the Accounts.
Substantial shareholdings
At the date of this Report, the Company had been notiﬁed of the following
interests in 3 per cent or more of its issued share capital:
% held
Lexa BV 12.40
Barclays plc 12.04
Fidelity International Limited 6.99
Legal & General Group plc 3.13
Additional shareholder information, including a proﬁle of shareholdings,
appears on page 72.
Share listings
The primary listing for the Company’s Ordinary shares is on the London
Stock Exchange. The Company’s Ordinary shares are also traded on the
New York Stock Exchange in the form of American Depositary Shares 
and these are evidenced by American Depositary Receipts (ADRs), each
one of which represents four Ordinary shares. The Bank of New York is
the authorised Depositary bank for the Company’s ADR programme.
Directors
The names and brief biographical details of the current directors are shown
on page 11. All held ofﬁce throughout the year and up to the date of this
Report with the exception of Anders Gustafsson, who was appointed as
Chief Executive and as a director of the Company on 1 August 2004,
and Kurt Hellström, who was appointed as a non-executive director 
on 9 December 2004. Nicholas Brookes retired as Chief Executive and 
as a director of the Company on 30 June 2004. My Chung resigned 
as a director on 3 September 2004. Richard Moley will retire from the
Board with effect from the date of the 2005 Annual General Meeting.
Retirement and election of directors
Pursuant to the Company’s Articles of Association and the revised
Combined Code on Corporate Governance (see the Directors’ statement
on corporate governance on pages 16 to 18), Marcus Beresford and Eric
Hutchinson will retire by rotation at the Annual General Meeting (AGM)
on 4 May 2005 and, being eligible, offer themselves for re-election.
James Wyness, having served more than nine years on the Board, also
offers himself for re-election. Having been appointed since the last AGM,
Anders Gustafsson and Kurt Hellström will also retire at the forthcoming
AGM and, being eligible, offer themselves for election. Anders Gustafsson
and Eric Hutchinson are the only two directors subject to election or 
re-election who have service contracts with the Company.
Directors’ interests
Göran Ennerfelt has a connected notiﬁable interest in the Spirent
Ordinary shares held by Lexa BV (see Substantial shareholdings on 
this page) which, for statutory purposes, is also deemed to be an 
interest of the director.
The directors’ interests (including those of their immediate families and
any connected persons) in the share capital of the Company are set out
in the Report on directors’ remuneration on pages 19 to 26.
Save as disclosed, no contracts or arrangements have been entered into
during the year or subsisted at the year end in which any director had,
directly or indirectly, a material interest which was signiﬁcant in relation
to the Group’s business.
Employees
The Group’s employment policies regarding disabled persons and further
information on employee training, development and involvement is explained
in the Corporate social responsibility statement on pages 12 and 13.
Employee share schemes
The Company operates a number of share incentive schemes, details of
which can be found in note 31 to the Accounts. The Company operates 
all employee share plans in the UK, the US and Canada.
Social responsibility and donations
The Group’s Corporate social responsibility statement appears on pages
12 and 13. Charitable donations of £63,000 were made in the year 
(2003 £63,000). This amount excludes operating units’ support and
participation in local community activities. No political donations were
made in the year (2003 nil).
Creditor payment policy
Group operating companies are responsible for agreeing the terms and
conditions under which business transactions with their suppliers are
conducted and it is Group policy to comply with those terms and to
make suppliers aware of them.
At 31 December 2004 the Company had an average of 54 days purchases
outstanding in trade creditors (2003 52 days).
14 Spirent plc Annual Report 2004
Report of the directors Corporate governance
The Directors’ statement on corporate governance is set out on pages 16
to 18. The Statement of directors’ responsibilities in respect of preparing
the accounts appears below.
Going concern
After making enquiries, the directors conﬁrm that they have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason, the 
going concern basis continues to be adopted in preparing the Accounts.
Annual General Meeting
The AGM will be held at 10.30am on Wednesday 4 May 2005 at 
The Copthorne Hotel (London Gatwick), Copthorne Way, Copthorne,
Crawley, West Sussex RH10 3PG, United Kingdom.
Auditors
A resolution to re-appoint Ernst & Young LLP as auditors and authorising
the directors to determine their remuneration will be proposed at the
forthcoming AGM.
By Order of the Board
Paul Eardley
Company Secretary
24 February 2005
The directors are responsible for:
–keeping proper accounting records which disclose with reasonable
accuracy at any time the ﬁnancial position of the Company and the
Group and enable them to ensure that the accounts comply with 
the Companies Act 1985; and
– taking reasonable steps to safeguard the assets of the Group and 
to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of 
the Company’s website. Financial information published on the website 
is based on legislation in the UK governing the preparation and
dissemination of accounts that may be different from comparable
legislation in other jurisdictions.
Spirent plc Annual Report 2004 15
Statement of directors’ responsibilities in respect of the accounts
The Companies Act 1985 requires directors to prepare accounts for each
accounting period which give a true and fair view of the state of affairs of
the Company and the Group at the end of the accounting period and of
the proﬁt or loss of the Group for that period. In preparing the accounts
the directors are required to:
– select suitable accounting policies and then apply them consistently;
– make judgements and estimates that are both reasonable and prudent;
and
– state whether applicable accounting standards have been followed,
subject to any material departures being disclosed and explained in 
the notes to the accounts. The Board is committed to maintaining high standards of corporate
governance, the process by which the Group is directed and managed,
risks are identiﬁed and controlled and effective accountability assured.
The Board considers that it has complied throughout the year under
review with the requirements of the revised Combined Code on
Corporate Governance (the Code) which was issued in 2003. This
statement describes how the principles and provisions of corporate
governance set out in the Code have been applied within the Group.
The Board
The Board comprises a non-executive Chairman, seven further non-
executive directors and two executive directors, details of whom are given
on page 11. The roles of Chairman and Chief Executive are separate with
a clear division of responsibility between them which is set out in writing
and agreed by the Board.
The size, balance and composition of the Board supports the Board’s 
role, which is to determine the long term direction and strategy of the
Group, create value for shareholders, monitor the achievement of business
objectives, ensure that good corporate governance is practised and to ensure
that the Group meets its other responsibilities to its shareholders, customers
and other stakeholders. The Board is also responsible for ensuring that
appropriate processes are in place in respect of succession planning for
appointments to the Board and to senior management positions.
The non-executive directors (each appointed for an initial three year
term) have a wide range of skills and experience which helps to ensure
that independent judgement is exercised on issues such as strategy 
and performance and also that a proper balance of power is maintained
for full and effective control. The non-executive directors (in particular
the Chairman) devote sufﬁcient time and attention as necessary in 
order to perform their duties. Other professional commitments of the
non-executive directors are provided in their biographies on page 11.
The Board requires that all non-executive directors are independent 
in character and judgement and the independence of each director is
reviewed at least annually. As Göran Ennerfelt has a material notiﬁable
interest in the share capital of the Company (see the Report of the
directors on pages 14 and 15), the Board has concluded that he is not 
to be considered as independent of the management of the Company.
In accordance with the Code, the Board has reviewed the independence
of James Wyness, who has served on the Board in excess of nine years.
The review concluded that James Wyness is independent in character and
in the exercise of his judgement and for these reasons the Board considers
him to be independent. In accordance with the Code, James Wyness will
stand for annual re-election at each Annual General Meeting (AGM).
The Board has appointed James Wyness as the senior independent director.
The senior independent director is available to meet shareholders upon
request if they have concerns which contact through the normal channels
of the Chairman or executive directors has failed to resolve, or for which
such contact is inappropriate.
It is the policy of the Board to hold at least six Board meetings a year,
including a meeting to review and approve long term strategy. There were
10 Board meetings during 2004. Full attendance of the Board is expected
at meetings and in 2004 all directors attended except for the following
absences: Nicholas Brookes (1), My Chung (3), Marcus Beresford (2),
Frederick D’Alessio (2), Göran Ennerfelt (5), Richard Moley (1) and James
Wyness (1). The reasons for the absences were due to either unavoidable
changes in the Board meeting calendar at short notice, the director being
ill or the director having to be elsewhere for other urgent business. Where
the director was absent, full documentation for the meeting was issued
and brieﬁngs were provided as appropriate.
A schedule of matters speciﬁcally reserved for the Board’s decision has
been adopted whilst certain other responsibilities have been delegated 
to four standing Committees with clearly deﬁned terms of reference
which, together with the composition of each Committee, are reviewed
annually. Each Committee is provided with sufﬁcient resources so that it
may undertake its duties.The terms of reference for the Audit, Remuneration
and Nomination Committees are available upon request to the Company
Secretary and are also available on the Company’s website.
The executive directors are supported by a team of senior managers 
who are responsible for assisting in the development and achievement of
the Group’s corporate strategy, business plans, budgets and for reviewing
operational and ﬁnancial performance. The team, together with the
executive directors, are responsible for agreeing and monitoring policies
and other matters not reserved for the Board. Further details of the senior
management team can be found on the Company’s website.
To ensure good communication between the Board and each Committee,
the Company Secretary is the appointed Secretary to all standing Board
Committees.
All directors receive appropriate training and induction upon appointment
and subsequently as necessary. Non-executives enhance their understanding
of the Group through regular business sector presentations, the receipt 
of monthly reports from the Chief Executive and site visits. The Chairman
and the executive directors are responsible for ensuring that the Board
receives accurate and clear information in a timely manner for Board
meetings and on other occasions.
The Board has established a process to evaluate the performance of the
Board, its Committees and individual directors. The evaluation process
includes self-assessment by the Board together with the assistance of 
an external adviser. Key processes include assessments of the:
–relevant contribution of the Board, each Committee, each director 
and the overall composition of the Board;
–effectiveness of the leadership of the Company Chairman;
–effectiveness of relationships and communications with key
management; and
– quality of information provided to the Board to enable it to perform 
its duties.
Key outputs of the process are used to further improve areas which are
working well and to address any weaknesses.
In addition to the evaluation process, the Chairman holds regular meetings
with the other non-executives at which executive directors are not present.
The senior independent director also holds, at least annually, a meeting of
the other non-executives at which the Chairman is not present to appraise
the Chairman’s performance.
The Company has arranged insurance cover in respect of legal action against
its directors and certain other ofﬁcers. The directors also have access to
the advice and services of the Company Secretary (and if necessary, access
to further independent advice, at the Company’s expense), who advises the
Board and its Committees in respect of their procedures, directors’ duties
and responsibilities, corporate governance and all compliance matters. The
appointment and removal of the Company Secretary is a matter reserved
to the Board.
16 Spirent plc Annual Report 2004
Directors’ statement on corporate governance Board appointments
The Company’s Articles of Association require that all directors seek election
by shareholders at the ﬁrst AGM following their appointment. They also
require that all directors seek re-election at least every three years.
Board Committees
Acquisitions and Divestments Committee
Chairman, Anders Gustafsson
The Acquisitions and Divestments Committee comprises the executives
and any two non-executive directors.The Committee is primarily concerned
with the evaluation and approval of any acquisitions and divestments
delegated to it by the Board.
Audit Committee
Chairman, Andrew Given
The Audit Committee comprises three independent non-executive directors.
The Code requires that the Audit Committee includes a member who has
recent, signiﬁcant and relevant ﬁnancial experience and the Board believes
that Andrew Given provides such experience.
During 2004, the Committee held ﬁve meetings and there was full
attendance by Committee members with the exception of Marcus
Beresford who was absent for one meeting. At all meetings the external
auditors, the Chief Executive, the Finance Director, the Head of Internal
Control and the Head of Financial Reporting are in attendance. Other
directors who are not members may attend at the invitation of the
Committee Chairman. The Committee also meets with the external
auditors in private for part of each meeting.
The Committee reviews all published accounts and post audit ﬁndings
before their presentation to the Board, focusing in particular on accounting
policies, compliance, management judgement and estimates. It also monitors
the Group’s internal control and risk management regime (including the
effectiveness of the internal audit function) and ﬁnancial reporting. Any
signiﬁcant ﬁndings or identiﬁed weaknesses are closely examined so that
appropriate action can be taken, monitored and reported to the Board.
The Audit Committee also advises the Board on the appointment of
external auditors and on the scope, results and cost effectiveness of both
audit and non-audit work. The Committee has adopted a policy which
prohibits certain types of non-audit work that may be performed by the
Company’s auditors, particularly where auditor objectivity and independence
would be at risk. Other non-audit work which may be provided by the
auditor is put to tender where considered appropriate. Prior to any non-
audit work being awarded to the auditors, consideration is also given to
costs, quality of service and efﬁciency. The Audit Committee also assesses
the overall objectivity of the auditors’ services so that an independent
professional relationship is maintained. Details of the auditors’ remuneration
for 2004 appear in note 5 to the Accounts.
Nomination Committee
Chairman, John Weston
The Nomination Committee comprises all the non-executive directors
and the Chief Executive and meets at least once a year. During 2004,
the Committee held two meetings at which there was full attendance by
Committee members with the exception of Nicholas Brookes, Frederick
D’Alessio, Göran Ennerfelt,Andrew Given, Richard Moley and James Wyness,
each of whom was absent for one meeting. The Committee is responsible
for reviewing the composition and structure of the Board and for identifying
and recommending candidates for executive and non-executive positions,
based on the required role and capabilities which have been speciﬁed for
the appointment. Executive search consultants are used by the Committee
to assist this process as appropriate.
Remuneration Committee
Chairman, Marcus Beresford
The Remuneration Committee consists exclusively of independent non-
executive directors. During 2004, the Committee held six meetings and
there was full attendance by Committee members with the exception of
Marcus Beresford and Frederick D’Alessio, each of whom was absent for
one meeting. Other directors who are not members may attend at the
invitation of the Committee Chairman.
No director is involved in determining his own remuneration. The
Remuneration Committee has delegated responsibility for setting
remuneration for all executive directors and the Chairman, whilst 
the Board is responsible for setting the remuneration of the non-
executive directors.
Further details on the Remuneration Committee are included in 
the Report on directors’ remuneration on pages 19 to 26.
Relations with shareholders
The Board attaches considerable importance to its relationships and
communication with shareholders. Communication is facilitated by full
year and interim reports issued to shareholders. Further information and
services available to shareholders are described on page 72.
A valuable dialogue has been established with principal institutional
investors through a programme of investor relations events throughout
the year. The Company also discusses major remuneration and long term
incentive proposals with principal investors prior to any required shareholder
approval. In addition to a dialogue with principal shareholders, the Board
also commissions external advisers to undertake investor perception
reviews, the results of which are reported to the Board. All contact with
institutional investors, ﬁnancial analysts, fund managers, brokers and 
the media is controlled by written guidelines to ensure the protection 
of price-sensitive information during such dialogue.
It is the Company’s practice to issue the Notice convening the AGM 
at least 20 working days before the meeting and to propose separate
resolutions on each substantially separate issue. All directors are expected
to attend the AGM to take any relevant questions. A report showing the
number of proxy votes cast for, against and withheld for each resolution
is available for shareholders attending the AGM in respect of resolutions
which have been voted on by a show of hands. These results are also
posted on the Company’s website.
Internal control
Introduction
The Board has overall responsibility for the Group’s system of internal
control, which comprises a process for identifying, evaluating and managing
the risks faced by the Group and for regularly reviewing its effectiveness in
accordance with the Guidance for Directors on Internal Control (Turnbull).
The Board conﬁrms that this process was in place throughout the year
under review and up to the date of approval of these Accounts. The primary
aim is to operate a system which is appropriate to the business and which
can, over time, increase shareholder value whilst safeguarding the Group’s
assets. The system is designed to manage, rather than eliminate, the risk
of failure to achieve business objectives and can only provide reasonable
and not absolute assurance against material misstatement or loss.
Spirent plc Annual Report 2004 17 Process
The Group’s ‘Operational Excellence Programme’ ensures that internal
control and risk management processes continue to become embedded
in the organisation. Day-to-day responsibility for effective internal control
and risk monitoring rests with senior management at operating group and
business unit level.
Spirent operates corporate internal control and risk management functions
which report into the Head of Internal Control. The functions operate on a
global basis and play a key role in providing an objective view and continuing
assessment of the effectiveness of the internal control systems throughout
the Group to operating management, the Audit Committee and the Board.
The work programme of the functions is focused on the areas perceived
to be of greatest risk to the Group and is agreed annually in advance by
the Audit Committee.
The Group’s system of internal control and risk management comprises an
integrated risk management strategy consisting of regular self-assessment
encompassing all operating units and preparation of a remedial action plan,
as appropriate. This system is coordinated by Spirent’s corporate internal
control and risk management functions. Signiﬁcant risks are also regularly
reviewed by the Audit Committee and by the Board.
In addition to this process, the following key elements are critical to the
overall internal control environment:
– an organisational structure with clear operating procedures, deﬁned
lines of responsibility and delegated levels of authority;
– an Ethics Policy (which has been approved by the Board), which 
sets standards of professionalism and integrity for all employees and
operations. The Ethics Policy also includes ‘whistleblowing’ procedures
whereby employees may report, in conﬁdence, suspected wrongdoings;
–a comprehensive strategic planning, ﬁnancial control and budgeting
system which is properly documented and regularly reviewed; and
–a disciplined acquisitions and divestments due diligence process and
post acquisition integration programme.
Review of effectiveness
The Board, assisted by the Audit Committee, has reviewed the effectiveness
of the system of internal control for the period under review, taking account
of material developments since that date using the process set out above.
US corporate governance compliance
As the Company has a secondary listing on the New York Stock Exchange
(NYSE), it is subject to certain US legislation. Following the introduction
of the Sarbanes-Oxley Act 2002 in the US, the NYSE introduced new
corporate governance standards. Companies which do not have their
primary listing on the NYSE (such as Spirent) are generally permitted to
follow home country practice (ie the UK Listing Rules and the Code) in
lieu of NYSE’s standards. Generally, NYSE’s corporate governance standards
do not vary signiﬁcantly from those adopted in the UK, however, NYSE
rules require any such signiﬁcant variances to be disclosed. Following a
review of the NYSE corporate governance standards, the following are
considered signiﬁcant variances to home country practice:
–NYSE rules provide that nomination committees should consist
entirely of independent directors. Spirent’s Nomination Committee
(whose constitution is in accordance with the Code) includes Anders
Gustafsson and Göran Ennerfelt, neither of whom are independent;
–NYSE rules provide that nomination/corporate governance committees
are responsible for developing and recommending to the Board a set 
of corporate governance principles applicable to the Company. Spirent,
however, reserves these responsibilities for the whole Board (in accordance
with the Code); and
–NYSE rules require audit committees to be directly responsible for the
appointment and retention of the Company’s external auditor. Spirent’s
Audit Committee, in accordance with the Code, however, is responsible
for making recommendations to the Board on the appointment and
retention of the auditor.
In accordance with NYSE requirements, the above summary of signiﬁcant
variances in corporate governance practices can be found on the Company’s
website at www.spirent.com/corporategovernance
Pensions governance
The Group’s principal pension and retirement schemes exist in the UK and
the US. Scheme funds are held separately from those of the Group and
are administered by Trustees (which include employees and independent
members).The schemes do not lend money or lease any assets to the Group.
Reporting
The Statement of directors’ responsibilities in respect of preparing the
accounts is set out on page 15. A report by the auditors, Ernst & Young
LLP, which includes details of their responsibilities in respect of the
Company’s compliance with the Code, is set out on page 27.
18 Spirent plc Annual Report 2004
Directors’ statement on corporate governance continued 1. Introduction and compliance
This Report has been prepared by the Remuneration Committee (the
Committee) and approved by the Board in compliance with statutory
requirements and the Combined Code on Corporate Governance (the
Code) issued in 2003.
The Board considers that it has complied throughout the year under review
with the requirements of the Code. The Directors’ statement on corporate
governance and this Report describe how the principles of corporate
governance set out in the Code have been applied within the Group.
2. Role and remit of the Remuneration Committee
The composition of the Committee, made up wholly of independent 
non-executive directors, is given on page 11. The Committee makes
recommendations to the Board on the Company’s policy and framework
of executive directors’ remuneration and its cost. The Committee also
determines the remuneration of each executive director and certain
other senior executives. In addition, the Committee is responsible on
behalf of the Board for monitoring and managing shareholder dilution
arising from share incentive plans.
In order to assist the Committee in carrying out its duties, during the
year the Committee consulted on a regular basis with its independent
external remuneration advisers. During the year the Committee retained
Watson Wyatt (who are also consultant actuaries to the Company on
pension matters) as advisers. Other advisers during the year were as
follows (additional services provided, all by appointment of the Company,
are shown alongside in brackets):
– JPMorgan Cazenove Limited (who are one of the Company’s brokers);
–Kepler Associates; and
– Linklaters (who are one of the Company’s legal advisers).
The Committee also consulted with the Company’s Head of Compensation
and Beneﬁts and the Company Secretary regarding remuneration and related
corporate governance issues. In addition, with respect to the remuneration
of senior executives (for whom the Company’s remuneration policy also
applies, see below), the Committee also consulted with the Chief Executive.
3. Remuneration policy
The Company’s remuneration policy, which has not changed during the
year and will apply for the following ﬁnancial year, is to:
–attract, retain and motivate the high calibre professional, managerial
and technological expertise necessary to realise the Group’s business
objectives without paying excessively;
– ensure that the remuneration framework and its constituent 
reward elements are competitive and where appropriate reﬂect the
international nature of the Group’s business and the markets within
which it operates; and
– maintain the correct balance and linkage between individual and
business performance so as to align the interests of the executive with
those of shareholders, particularly that of enhancing shareholder value.
The Committee has developed remuneration packages that ﬁt this policy
on an integrated and total reward basis. This is achieved by providing base
salary plus beneﬁts, pension beneﬁts, an annual short term incentive bonus
and discretionary awards under the Company’s share incentive plans,
the latter two elements of which are performance-related. In normal
circumstances, it is the Committee’s policy that at least 50 per cent of an
executive director’s target total annual remuneration package is based on
performance-related elements. The recent history of the Company’s share
price volatility and its consequent impact on the ‘value’ of the long term
incentive component of the total remuneration package means in practice
that the actual balance of performance versus non-performance elements
can vary from year to year. In designing the performance-related elements
of remuneration, the Committee has followed the provisions set out in
Schedule A to the Code.
The Committee continues to monitor and review the level and constituent
elements of remuneration packages and will consult with its major
institutional shareholders as appropriate with regards to any signiﬁcant
proposed changes.
4. Executive directors’ remuneration
a) Base salary and beneﬁts
The level of base salary is reviewed and established annually by reference
to both the performance and responsibilities of the individual and prevailing
market rates for executives of similar status in comparable companies.
When reviewing salaries, the Committee is mindful of and sensitive to
the wider scene, especially regarding employees’ pay and employment
conditions elsewhere in the Group. For 2004, Eric Hutchinson and My Chung
were awarded increases in annual base salary of £20,000 and $20,000,
respectively, bringing their total annual base salary to £270,000 and
$370,000. My Chung left the Company by mutual agreement and resigned
as a director in September 2004. Nicholas Brookes retired as a director of
the Company in June 2004, however, no base salary increase was awarded
to him during 2004 prior to his retirement.
Pension and other beneﬁts have regard to competitor practice in the home
country of each executive. Beneﬁts include a company car or car allowance
and healthcare, disability and life insurance coverage. Pension details are
given in paragraphs 4(c) and 7(b).
As noted above, the Company’s remuneration policy applies to the 
most senior managers below Board level. In respect of 2004, the total
remuneration (ie base salary, bonus and taxable beneﬁts) for the lowest
paid and highest paid senior manager was £125,500 and £437,500,
respectively. Average pay for these individuals was £264,548.
b) Annual and other incentive bonus schemes
The Committee reviews annual incentive bonus scheme targets and
performance conditions each year to incentivise the executive to meet
the short term strategic objectives of the Company.
In respect of 2004, Eric Hutchinson participated in an annual scheme which,
consistent with UK market practice and levels, was structured around a
formula providing for an on-target performance bonus of 50 per cent of
base salary with a maximum of 100 per cent of base salary for exceptional
performance. Performance was measured against targets in the Company’s
headline earnings per share (EPS) and cash ﬂow, accounting for 80 per cent
and 20 per cent of any bonus, respectively. During the year, he earned an
annual bonus of £270,000, equivalent to 100 per cent of base salary.
The Committee also awarded Eric Hutchinson an additional payment of
£14,167 in respect of his additional duties as acting Chief Executive for
the interim period between the retirement of Nicholas Brookes and the
appointment of Anders Gustafsson.
Spirent plc Annual Report 2004 19
Report on directors’ remuneration 4. Executive directors’ remuneration continued
Anders Gustafsson was appointed Chief Executive in August 2004 and
participated in the same annual bonus arrangements as Eric Hutchinson
on a pro-rata basis for the year. He was entitled to a guaranteed minimum
on-target performance bonus (pro-rated for the year) in respect of 2004.
He earned an annual bonus of £183,300, equivalent to 100 per cent of
base salary pro-rated for the year.
As part of his joining arrangements, and in order to provide one time only
compensation for the loss of certain beneﬁts from his previous position,
Anders Gustafsson received other awards. He received a conditional
award over Spirent shares to a value of £100,000 upon his appointment.
The shares will be held in a trust for three years, as detailed in paragraph
7(a) below. He was also awarded a signing bonus of £100,000 upon 
his appointment. The signing bonus is repayable to the Company if his
employment terminates before the ﬁrst anniversary for any reason other
than death, disability or certain other events.
My Chung (who was US based) resigned as a director in September 2004
and participated in an annual bonus scheme which was apportioned pro-
rata until the date of his resignation. Consistent with US market practice
and levels, for 2004 he had a target bonus opportunity of 50 per cent 
with a maximum opportunity of 200 per cent of salary for exceptional
performance. Performance was measured against proﬁt targets and cash
generation targets for the Communications group, accounting for 80 per cent
and 20 per cent of any bonus, respectively. He earned an annual bonus 
of $123,333 (£67,395 using an exchange rate of £1 = $1.83), which was
equivalent to 50 per cent of base salary pro-rated for the period he served
as a director during the year.
Nicholas Brookes did not participate in an annual bonus plan in respect
of 2004.
c) Directors’ pensions
Eric Hutchinson participates in the non-contributory funded senior executive
level of the Spirent Group Staff Pension and Life Assurance Plan (the Staff
Plan). This deﬁned beneﬁt arrangement will provide him at normal
retirement age of 60, and dependent on length of service, with a pension
of up to two-thirds of salary, subject to Inland Revenue limits and other
statutory conditions. It also provides for dependants’ pensions and a cash
lump sum on death. Pensionable salary is the director’s base salary only.
Nicholas Brookes, who retired in June 2004, also participated in the Staff
Plan up until his retirement. The Company undertook to Nicholas Brookes,
whose salary for approved pension purposes under the Staff Plan was capped
by the provisions of the Finance Act 1989 (£99,000 and £102,000 for 
the tax years 2003/2004 and 2004/2005, respectively), that his beneﬁt
entitlements shall be as if the ‘cap’ did not apply.
The Company had a contractual liability, as disclosed in previous annual
reports, to pay Nicholas Brookes an unfunded unapproved retirement
beneﬁt (UURB) which was agreed when he joined the Company in 1995.
It was agreed to commute all of his pension entitlement under the UURB
in exchange for a lump sum payment of £3.7 million in cash, which was
paid to him upon his retirement.
Anders Gustafsson is entitled to receive from the Company a pension
contribution of 30 per cent of basic salary. Subject to statutory limits the
Company makes approved contributions into the executive section of 
the Spirent Retirement Cash and Life Assurance Plan (the Cash Plan).
The Executive section of the Cash Plan is non-contributory and provides
beneﬁts on a deﬁned contribution basis. Contributions to the Cash Plan
are held in an individual account and invested in accordance with member
elections. The Cash Plan provides for a dependant’s pension and a cash
lump sum on death in service. In respect of those contributions which are
not paid into the Cash Plan the Company has established an UURB on a
deﬁned contribution basis and the UURB balance is credited with interest.
My Chung participated in the Spirent International Inc Retirement and
Proﬁt Share Plan, a deﬁned contribution plan approved under section 401(k)
of the US Internal Revenue Code (the IR Code). The Company made
matching contributions of up to 2 per cent and was permitted to make
discretionary proﬁt sharing contributions of up to 8 per cent of the
maximum compensation permitted for these purposes under the IR Code.
Under the IR Code, the maximum annual amount of an employee’s
compensation that can be taken into account in determining the employer’s
contribution is $205,000 in respect of 2004. The normal retirement age
under this plan is 65 and, consistent with local practice, bonuses were
pensionable for all participating US employees, including My Chung.
During 2004, the Committee conducted a review of UK executive pension
provisions in the light of the Government’s tax simpliﬁcation changes,
which are expected to come into effect in April 2006. The Committee
concluded, as a principle, that it would not be appropriate for the Company
to provide additional compensation to executives who would be adversely
affected. In respect of existing members of the Company’s deﬁned beneﬁt
arrangements, the Committee has concluded that no material changes
will be made to existing arrangements. In determining arrangements for
Anders Gustafsson, the implications of the tax simpliﬁcation changes
were taken into account as part of the Committee’s deliberations on 
an appropriate remuneration package when he joined the Company.
Further details of pension contributions and payments are given in
paragraphs 6(b) and 6(c).
d) Medium and long term incentive plans
The Committee approves the grant of all options under the Executive
Share Option Scheme (ESOS) and the Spirent Stock Incentive Plan (SSIP)
in which executive directors participate (see below). The SSIP was formerly
known as the Spirent Stock Option Plan. All grants are subject to prior
satisfactory individual performance and grant amounts vary with the
individual’s potential impact on longer term business results.
The executives are also eligible to participate in the Company’s all employee
share plans (further details of which are provided in note 31 to the Accounts).
Executive Share Option Scheme
As stated in the circular to shareholders dated 2 June 2004 regarding 
an Extraordinary General Meeting, authority for granting further options
under the ESOS expires during 2005 and no further annual grants will be
made under the ESOS prior to its expiry. A replacement to the ESOS will
be proposed in due course.
All executive directors who served during the year participated in the
ESOS. All ESOS grants made after 11 May 2000 to executive directors are
subject to enhanced performance conditions on exercise. The performance
conditions require the Company’s headline EPS to increase over a period 
of three consecutive ﬁnancial years within a range of 9 per cent (minimum
performance for 25 per cent option vesting) and 15 per cent (for 100 per cent
option vesting), with a sliding scale between these points. In addition,
performance testing over the 10 year option term is measured from a 
base point ﬁxed at the date of grant. Performance will be tested on the
third anniversary of grant and, if the target conditions at that time have
20 Spirent plc Annual Report 2004
Report on directors’ remuneration continued not yet been met in full, performance will be tested again on the fourth
and ﬁfth anniversaries of grant only, with the performance hurdle being
increased in proportion to the extended period. The Committee recognises
that some shareholders have expressed concern in respect of retesting 
on performance conditions and this will be reﬂected in the proposals 
for a replacement ESOS when the current scheme expires later in 2005.
The current scheme allows executive directors to receive annual awards of
options up to three times base salary, however, in determining any award
the Committee will have regards to prevailing relevant circumstances.
ESOS grants made before 11 May 2000 to executive directors are subject
to a performance condition which was in line with prevailing market practice
at that time. The performance condition on exercise is that, over a period
of three consecutive ﬁnancial years, there has been an increase in the
Company’s headline EPS which is at least 6 per cent more than the increase
in the Retail Price Index over the same period. The same performance
condition is tested on the third anniversary of grant and, if the performance
condition has not been met at that time, at each subsequent anniversary
of grant until the expiry of the option (on the tenth anniversary of grant).
Spirent Stock Incentive Plan
The SSIP was approved by shareholders in June 2004 for Communications
group employees. My Chung, who was Group President of Spirent
Communications and a director of the Company until September 2004,
participated in the SSIP.
SSIP awards prior to June 2004 normally vest over four years, with 
25 per cent exercisable on the ﬁrst anniversary of the date of grant,
and thereafter in equal proportions on a monthly basis. In line with
prevailing market practice and as previously approved by shareholders,
no pre-exercise performance conditions attach to SSIP awards granted
prior to June 2004.
From June 2004, SSIP awards granted to senior Communications group
executives, including My Chung, were exercisable only on the achievement
of performance conditions. The present four year vesting has been retained
but awards vest (ie become exercisable) at 25 per cent per annum provided
targets in EPS growth are met.The targets are broadly the annual equivalent
to those which currently exist for executive directors under the ESOS.
Further information on the ESOS and SSIP is provided in note 31 to 
the Accounts.
The Committee believes that the grant structure, performance conditions
and grant levels under the ESOS and SSIP have represented the most
appropriate medium to long term incentive arrangements enabling Spirent
to compete for, motivate and retain the highest calibre executives which
it needs to drive the business forward and increase shareholder value.
In order to assist further in aligning the interests of executives and
shareholders, shareholding guidelines are in place which encourage
executive directors and certain senior managers to build up a meaningful
level of shareholding of up to two times salary through the retention of
shares following exercise. Attainment of these guidelines will be taken into
account by the Committee in determining future awards for executive
directors and senior managers.
As a result of the transition to International Financial Reporting
Standards, the Committee has resolved that it will adjust as necessary
EPS performance condition measurements in respect of outstanding
options to ensure that performance is measured on a consistent basis.
e) Service contracts
The Committee’s policy is to offer service contracts which provide for no
more than 12 months’ notice from the Company in normal circumstances.
Nicholas Brookes retired from the Board in June 2004 and had entered into
a service contract on 5 May 1995 (which was amended on 1 January 2003)
which was terminable at any time by either party on 12 months’ notice.
Eric Hutchinson entered into a service contract on 13 December 1999
which currently has an unexpired term of 122 months and is terminable
at any time by either party on 12 months’ notice. My Chung resigned from
the Board in September 2004 and had entered into a service contract 
on 9 May 2001 which was terminable at any time by the Company on 
12 months’ notice and by him on six months’ notice. Anders Gustafsson
entered into a service contract on 1 August 2004 which currently has 
an unexpired term of 186 months and is terminable by the Company 
on 12 months’ notice and by him on six months’ notice.
All contracts contain provisions for the Company to make payment in
lieu of notice and for removal of the director for poor performance or
misconduct without compensation. The Company will seek to apply
practical mitigation measures to any payment of compensation on
termination, taking into account all relevant circumstances. All service
contracts contain appropriate provisions to protect the legitimate
interests of the Company with respect to preventing any terminated
director from working in a business which competes against the
Company. Service contracts do not contain any compensation rights
which could be increased on a change of control in the Company.
f) External appointments
Spirent recognises the mutual beneﬁt for executive directors to serve 
as non-executives of companies in other industries outside the Group.
Such appointments are subject to prior Board approval and any related
fee entitlements are for the account of the executive concerned. In June
2004 Eric Hutchinson joined the board of Trifast plc as a non-executive
director and received fees of £14,596 arising from this appointment.
5. Non-executive directors’ remuneration
The remuneration of the Chairman is determined by the Committee and
the remuneration of the other non-executive directors is determined by
the Board. The remuneration of all non-executive directors is reviewed
following a recommendation by the Chief Executive and after consultation
with independent external advisers concerning competitive market practice.
The Company’s remuneration policy (which has not changed during the
year and will apply for the following ﬁnancial year) with regards to non-
executive directors is to pay fees which are in line with market practice.
No remuneration increase was awarded in respect of 2004.
Non-executive directors are not eligible to participate in bonus or share
incentive arrangements and their service does not qualify for pension
purposes or other beneﬁts. No element of their fees is performance-
related. Non-executive directors do not have service contracts and are
normally appointed, subject to the Company’s Articles of Association, for
an initial three year term. Any subsequent extension to the term by the
Board is not automatic and is subject to prior recommendation of the
Nomination Committee.
Further information on non-executive directors’ fees is provided in
paragraph 6(a) below.
Spirent plc Annual Report 2004 21 6. Directors’ remuneration
1
a) Individual and total remuneration of the directors holding ofﬁce during 2004
Taxable Total
5
Total
5
Salary Fees
2
beneﬁts
3
Bonus
4
2004 2003
£000 £000 £000 £000 £000 £000
Executive directors
N Brookes 250.0 0.1 22.1 23.3 295.5 744.7
M Chung
6
337.0 – 16.9 90.0 443.9 275.3
A Gustafsson 183.3 – 117.0 283.3 583.6 –
E Hutchinson
7
270.0 0.5 20.3 294.9 585.7 398.7
Non-executive directors
M Beresford – 37.0 – – 37.0 37.0
F D’Alessio – 32.6 – – 32.6 –
G Ennerfelt – 30.0 – – 30.0 30.0
A Given – 37.0 – – 37.0 8.5
K Hellström – 1.9 – – 1.9 –
R Moley – 35.0 – – 35.0 35.0
J Weston – 150.0 – – 150.0 150.0
J Wyness – 37.0 – – 37.0 37.0
P Cheng ––––– 35.0
Total 2004 1,040.3 361.1 176.3 691.5 2,269.2 1,751.2
Total 2003 963.4 334.0 86.1 367.7 1,751.2
Notes
1 Information relating to directors’ remuneration has been audited by the Company’s auditors.
2 Nicholas Brookes and Eric Hutchinson earned these fees in respect of their services to the Board and its Committees. The non-executive directors receive a basic annual fee of
£30,000 in respect of their services. John Weston receives an annual fee of £150,000 which covers both his basic annual fee and his additional duties as Chairman. Andrew Given 
and Marcus Beresford each received an additional £7,000 per annum in recognition of their extra responsibilities as Chairmen of the Audit Committee and Remuneration Committee,
respectively. An additional annual fee, equivalent to that paid to the Chairman of the Audit or Remuneration Committee, is paid to the senior independent director (currently James
Wyness). Richard Moley and Frederick D’Alessio each received an additional £5,000 per annum in recognition of the extensive international travelling commitment required to
perform their duties.
3Taxable beneﬁts include a company car or car allowance and life, disability and healthcare insurance coverage, personal tax advice and premiums for life assurance.
In accordance with the Company’s normal policy it was agreed to meet the costs, subject to a cap, of Anders Gustafsson relocating from the US to the UK in order to commence 
his appointment and these costs are included in his taxable beneﬁts.
4 In 2001, Nicholas Brookes, My Chung and Eric Hutchinson each received deferred cash bonus awards which were held as Ordinary shares on a non-beneﬁcial basis (see paragraph
7(a) below for further details). The shares were released to the respective directors during 2004 and the market value of those shares at the time of release is included in the bonus
ﬁgures above.
Further details of the annual bonuses earned by the executive directors who served during the year are provided in paragraph 4(b) above. In 2003, Nicholas Brookes, My Chung and
Eric Hutchinson earned annual bonuses of £200,000, £42,700 and £125,000, respectively.
5The ﬁgures relate to the period of each director’s Board membership. Andrew Given, Frederick D’Alessio, Anders Gustafsson and Kurt Hellström were appointed to the Board in
October 2003, January 2004, August 2004 and December 2004, respectively. Paul Cheng, Nicholas Brookes and My Chung either retired or resigned as directors in December 2003,
June 2004 and September 2004, respectively.
6 My Chung resigned as a director of the Company in September 2004 and received his annual base salary in US dollars (2004 $370,000 per annum; 2003 $350,000 per annum).
An average exchange rate of £1 = $1.83 was used in respect of 2004 remuneration (2003 £1 = $1.64). 2004 salary relates to base salary of £134,800 for the period until his
resignation from the Board plus £202,200, being the equivalent of 12 months’ salary in accordance with the termination provisions of his service contract.
7Remuneration as shown above excludes fees received as a result of external appointments (see paragraph 4(f) above).
22 Spirent plc Annual Report 2004
Report on directors’ remuneration continued b) Directors’ pensions
The pensions earned from the non-contributory deﬁned beneﬁt arrangements in place for the participating executive directors during 2004 were as follows:
Increase, Accumulated total accrued pension
Increase before inﬂation, At At
Age at Years of in accrued pension in accrued pension 31 December 31 December
31 December pensionable during the year during the year 2004
1
2003
2004 service £000 £000 £000 £000
N Brookes
2
57 17 8.3 3.3 286.1 277.8
E Hutchinson 49 20 12.3 6.5 180.0 166.7
Increase, before
Transfer value, Total transfer value of pension
3
Increase in inﬂation, in total
Transfer value before inﬂation, At At total transfer value transfer value
of the increase of the increase 31 December 1 January of pension of pension
in accrued pension
3
in accrued pension
3
2004 2004 during the year during the year
£000 £000 £000 £000 £000 £000
N Brookes
2
144.0 55.3 5,078 4,876 201.6 113.9
E Hutchinson 151.6 79.7 2,213 1,811 401.5 338.3
Notes
1The pension entitlements shown are those which would be paid annually from normal retirement age of 60 based on service to 31 December 2004. Eric Hutchinson’s total accrued
pension is restricted to 20 years’ service.
2 Nicholas Brookes retired as a director and Chief Executive in June 2004 and the above ﬁgures relate to the period up to the date of his retirement. See paragraph 4(c) above for
further information in respect of the unfunded pension provision relating to his pension undertaking in excess of the statutory earnings cap.
3The transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11 and represents a liability of the Company (in respect 
of unfunded arrangements) and of the Staff Plan (in respect of funded arrangements), not a sum paid or due to the individual. The transfer value cannot therefore be meaningfully
added to annual remuneration.
4 No additional voluntary contributions have been included in the above table.
c) Directors’ remuneration and payments to former directors – summary
2004
1
2003
1
£000 £000
Total emoluments of all directors 2,269 1,751
Gains made on exercise of share options
2
8 1
Company contribution to 401(k) Retirement and Proﬁt Share Plan
2
11 12
Company contribution to the Cash Plan in respect of pensions
3
11 –
Ex gratia pension to former director
4
5 5
2,304 1,769
Notes
1Figures relate to the period of each director’s Board membership.
2Prevailing average conversion rates of £1 = $1.64 and £1 = $1.83 were used for 2003 and 2004, respectively. These relate to My Chung.
3These payments relate to Anders Gustafsson.
4This relates to an annual ex gratia pension to Geoff Bastians, who retired from the Board in 1984.
Spirent plc Annual Report 2004 23 7. Directors’ interests
1
a) Summary of interests in Ordinary share capital
The beneﬁcial and non-beneﬁcial interests of the directors (and their immediate families and any connected persons) in the Ordinary share capital of the
Company at the beginning and end of the year are set out below. The Company’s statutory register of directors’ interests contains full details of directors’
shareholdings and options over shares and is available for inspection at the registered ofﬁce during normal business hours on any business day.
At 31 December 2004
2
At 1 January 2004
2
Ordinary Ordinary Options and Ordinary Ordinary Options and
shares shares rights to acquire shares shares rights to acquire
beneﬁcial
3
non-beneﬁcial Ordinary shares beneﬁcial
3
non-beneﬁcial Ordinary shares
Executive directors
4
N Brookes 2,973,398 – 3,583,990 2,947,083 26,315
5
3,602,135
M Chung 75,721 – 2,341,327 31,377 39,620
6
3,174,349
A Gustafsson – 180,180
6
1,800,000 – – –
E Hutchinson 738,381 – 3,282,447 726,210 12,171
5
2,154,447
Non-executive directors
M Beresford 65,225 – – 65,225 – –
F D’Alessio 28,000 –––––
G Ennerfelt
7
119,000,000 – – 119,000,000 – –
A Given ––––––
K Hellström ––––––
R Moley 1,010,000 – – 1,010,000 – –
J Weston 1,600,000 – – 1,600,000 – –
J Wyness 346,037 – – 346,037 – –
Notes
1 Information relating to directors’ interests has been audited by the Company’s auditors.
2The ﬁgures relate to the period of each director’s Board membership. Frederick D’Alessio, Anders Gustafsson and Kurt Hellström were appointed to the Board in January 2004,
August 2004 and December 2004, respectively. Nicholas Brookes retired and My Chung resigned as directors in June 2004 and September 2004, respectively.
3 Directors’ beneﬁcial holdings do not form part of the remuneration provided by the Company.
4The Company’s executive directors, with other employees of the Group, are potential beneﬁciaries of certain Ordinary shares held in the Employee Share Ownership Trust (ESOT).
The UK executive directors, with other employees of the Group, are also potential beneﬁciaries of the Spirent Sharesave Trust (SST), which was formerly known as the Spirent
Qualifying Employee Share Ownership Trust. As potential beneﬁciaries of the ESOT and the SST, the respective directors are deemed by the Companies Act 1985 to be interested 
in some of the Ordinary shares held by those Trusts. At 31 December 2004, the deemed beneﬁcial interests in the ESOT and the SST were 259,066 Ordinary shares and 3,508,136
Ordinary shares, respectively (31 December 2003 281,626 and 3,508,136, respectively). Further details on the Company’s share plans are provided in note 31 to the Accounts.
The deemed interests of the executive directors in respect of the shares held in the ESOT and the SST are not included in the table above.
5The non-beneﬁcial interests of Nicholas Brookes and Eric Hutchinson represented their respective £100,000 and £46,250 deferred cash bonus awards made under the terms of 
the annual incentive bonus plan for 2000. The bonuses were used to purchase shares in the market in 2001 and the shares were held in the ESOT for a period of three years from
that date. The directors obtained a beneﬁcial interest in the shares when they were released from the ESOT in 2004 following completion of the three year deferment period.
6The non-beneﬁcial interests of My Chung and Anders Gustafsson over 39,620 shares and 180,180 shares, respectively, exist in a similar manner to that described in note 5 above
except that My Chung’s interest arises from a deferred cash bonus of $175,000 and Anders Gustafsson’s interest arises from a conditional award over shares to a value of £100,000.
The awards were made to My Chung and Anders Gustafsson in 2001 and 2004, respectively, both in recognition of their appointments to the Board. My Chung obtained a beneﬁcial
interest in the shares when they were released from the ESOT in 2004 (on the third anniversary of his appointment to the Board). Anders Gustafsson’s shares will be released beneﬁcially
to him from the ESOT on the third anniversary of his appointment, subject to him still being in the Company’s employment at that time.
7 Göran Ennerfelt has a connected notiﬁable interest in the Spirent Ordinary shares held by Lexa BV (see the Report of the directors on pages 14 and 15) which, for statutory
purposes, is also deemed to be an interest of the director.
24 Spirent plc Annual Report 2004
Report on directors’ remuneration continued b) Options and rights to acquire Ordinary shares
At At Exercise price
31 December Exercised/lapsed Granted 1 January per share Date ﬁrst
Plan type
1
2004
2
during the year during the year 2004
2
Date of grant pence exercisable Expiry date
N Brookes ESOS 221,068 – – 221,068 30.09.96 136 30.09.99 29.06.05
ESOS 30,410 – – 30,410 23.04.97 118 23.04.00 29.06.05
ESOS 43,922 – – 43,922 27.04.98 152 27.04.01 29.06.05
ESOS 149,590 – – 149,590 11.05.00 334 11.05.03 29.06.05
ESOS 205,000 – – 205,000 09.04.01 305 09.04.04 29.06.05
SRSOS
3
– 18,145 – 18,145 05.10.01 93 – 30.06.04
ESOS 468,000 – – 468,000 02.04.02 134 30.06.04 01.10.05
ESOS 774,000 – – 774,000 02.05.02 113 30.06.04 01.11.05
ESOS 1,692,000 – – 1,692,000 25.03.03 16 30.06.04 24.09.06
M Chung ESOS 93,482 – – 93,482 16.07.98 163 16.07.01 31.12.05
ESOS 112,734 – – 112,734 01.04.99 133 01.04.02 31.12.05
ESOS 65,819 – – 65,819 11.05.00 334 11.05.03 31.12.05
SSIP 341,921 – – 341,921 11.05.00 334 11.05.01 01.03.05
SARP 42,740 – – 42,740 12.05.00 335 12.05.01 01.03.05
SSIP 250,000 – – 250,000 08.12.00 613 08.12.01 01.03.05
ESOS 80,000 – – 80,000 09.04.01 305 09.04.04 31.12.05
SSIP 178,747 16,253 – 195,000 09.04.01 305 09.04.02 01.03.05
SSIP 499,995 250,005 – 750,000 02.04.02 134 02.04.03 01.03.05
ESPP
4
– 17,328 – 17,653 01.01.03 14 01.01.04 01.01.04
ESOS 225,000 – – 225,000 25.03.03 16 31.12.04 31.12.05
SSIP 437,497 562,503 – 1,000,000 25.03.03 16 25.03.04 01.03.05
ESPP 13,392 – 13,392 – 01.01.04 50 05.01.05 05.01.05
SSIP
3
– 600,000 600,000 – 05.08.04 56 – 31.12.04
A Gustafsson ESOS 1,800,000 – 1,800,000 – 05.08.04 56 05.08.07 04.08.14
E Hutchinson ESOS 17,652 – – 17,652 27.04.95 108 27.04.98 26.04.05
ESOS 42,928 – – 42,928 29.04.96 140 29.04.99 28.04.06
ESOS 33,786 – – 33,786 23.04.97 118 23.04.00 22.04.07
ESOS 29,586 – – 29,586 27.04.98 152 27.04.01 26.04.08
SRSOS 12,363 – – 12,363 22.10.98 83 01.01.06 30.06.06
ESOS 75,156 – – 75,156 01.04.99 133 01.04.02 31.03.09
ESOS 55,562 – – 55,562 11.05.00 334 11.05.03 10.05.10
ESOS 105,000 – – 105,000 09.04.01 305 09.04.04 08.04.11
SRSOS 8,693 – – 8,693 05.10.01 93 01.12.08 31.05.09
ESOS 234,000 – – 234,000 02.04.02 134 02.04.05 01.04.12
ESOS 387,000 – – 387,000 02.05.02 113 02.05.05 01.05.12
ESOS 1,128,000 – – 1,128,000 25.03.03 16 25.03.06 24.03.13
SRSOS 24,721 – – 24,721 26.09.03 38 01.12.10 31.05.11
ESOS 1,128,000 – 1,128,000 – 05.08.04 56 05.08.07 04.08.14
Notes
1Key to plan type:
ESOS – Executive Share Option Scheme; ESPP – US Employee Stock Purchase Plan; SARP – Stock Appreciation Rights Plan; SRSOS – UK Savings Related Share Option Scheme;
SSIP – Spirent Stock Incentive Plan (formerly known as the Spirent Stock Option Plan).
An explanation of each plan and its operation is given in note 31 to the Accounts.
2Figures relate to the period of each director’s Board membership.
3The options expired prior to the date ﬁrst exercisable.
4The ﬁnal exercise price and number of purchase rights under the ESPP, an all employee share plan, cannot be determined until maturity (ie 12 months following the date of grant).
The purchase rights granted calculation was based on the market price of an Ordinary share (less a 15 per cent discount) at the date of grant and the rate of exchange between the
US dollar and sterling on the date of grant. In accordance with the rules of the ESPP, My Chung’s purchase rights were exercised automatically as part of a maturity on 1 January 2004
over 17,328 Ordinary shares in respect to his 2003 ESPP account. The small difference between the rights outstanding at the year end and the amount purchased was caused by
exchange rate ﬂuctuations between the US dollar and sterling.
Spirent plc Annual Report 2004 25 7. Directors’ interests continued
The middle market price of an Ordinary share on 2 January 2004 (the
London Stock Exchange having been closed for trading on 1 January 2004)
and 31 December 2004 was 58.25 pence and 73.75 pence, respectively,
and during that period ranged between a high of 89.5 pence and a low 
of 47.75 pence.
Save as disclosed, there have been no changes between the year end and
24 February 2005 (the date on which the Accounts have been signed) in
the directors’ beneﬁcial or non-beneﬁcial interests in the Ordinary share
or loan capital of the Company or any subsidiary.
8. Total Shareholder Return (TSR) performance
The graph below shows TSR performance (ie growth in the value of a share
or index, assuming dividends and other distributions are reinvested) for the
last ﬁve ﬁnancial years of Spirent plc as shown against the FTSE 350 Index
and the FTSE Information Technology Index (FTSE IT). The Committee
believes that both the FTSE 350 and the FTSE IT provide broad equity
market indices against which the performance of Spirent can be fairly
compared, and that the FTSE IT index provides a particularly representative
collection of comparator companies.
Rebased Index
Dec 99
Spirent
Dec 00 Dec 01 Dec 02 Dec 03 Dec 04
FTSE 350 FTSE IT
Financial year end
200
160
120
80
40
0
9. Shareholder advisory resolution in respect of the report on
directors’ remuneration
In accordance with statutory requirements, an ordinary resolution to
approve this Remuneration Report will be proposed at the forthcoming
2005 Annual General Meeting.
Signed on behalf of the Board
Marcus Beresford CBE
Chairman of the Remuneration Committee
24 February 2005
26 Spirent plc Annual Report 2004
Report on directors’ remuneration continued We have audited the Group’s accounts for the year ended 31 December 2004
which comprise the Consolidated proﬁt and loss account, Consolidated
statement of total recognised gains and losses, Reconciliation of movements
in shareholders’ funds, Consolidated balance sheet, Consolidated cash 
ﬂow statement, Reconciliation of net cash ﬂow to movement in net debt,
Company balance sheet, the related notes 1 to 34 and the schedule of
Principal divisions, subsidiaries and associates. These accounts have been
prepared on the basis of the accounting policies set out therein. We have
also audited the information in the Report on directors’ remuneration that
is described as having been audited.
This report is made solely to the Company’s members, as a body, in
accordance with Section 235 of the Companies Act 1985. 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 auditors’ 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.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report, the Report
on directors’ remuneration and the accounts in accordance with applicable
United Kingdom law and accounting standards are set out in the Statement
of directors’ responsibilities in respect of the accounts.
Our responsibility is to audit the accounts and the part of the Report on
directors’ remuneration to be audited in accordance with relevant legal
and regulatory requirements, United Kingdom Auditing Standards and 
the Listing Rules of the Financial Services Authority (the Listing Rules).
We report to you our opinion as to whether the accounts give a true and
fair view and whether the accounts and the part of the Report on directors’
remuneration to be audited have been properly prepared in accordance
with the Companies Act 1985.We also report to you if, in our opinion, the
Report of the directors is not consistent with the accounts, if the Company
has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information
speciﬁed by law or the Listing Rules regarding directors’ remuneration
and transactions with the Group is not disclosed.
We review whether the Directors’ statement on corporate governance
reﬂects the Company’s compliance with the nine provisions of the 2003
FRC Code on Corporate Governance speciﬁed for our review by the Listing
Rules, and we report if it does not.We are not required to consider whether
the Board’s statements on internal control cover all risks and controls, or
form an opinion on the effectiveness of the Group’s corporate governance
procedures or its risk and control procedures.
We read the other information contained in the Annual Report and consider
whether it is consistent with the accounts.This other information comprises
the Highlights, Our business at a glance, Chairman’s letter, Chief Executive’s
letter, Operating and ﬁnancial review, Board of directors, Corporate social
responsibility statement, Report of the directors, Directors’ statement 
on corporate governance, the unaudited part of the Report on directors’
remuneration, Financial history, Shareholder information and Contact
details. We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the
accounts. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing
Standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the accounts and the part of the Report on directors’
remuneration to be audited. It also includes an assessment of the
signiﬁcant estimates and judgements made by the directors in the
preparation of the accounts, and of whether the accounting policies 
are appropriate to the Group’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufﬁcient evidence to give reasonable assurance that the accounts
and the part of the Report on directors’ remuneration to be audited 
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the accounts and the part
of the Report on directors’ remuneration to be audited.
Opinion
In our opinion the accounts give a true and fair view of the state of affairs
of the Company and of the Group as at 31 December 2004 and of the
proﬁt of the Group for the year then ended, and the accounts and the
part of the Report on directors’ remuneration to be audited have been
properly prepared in accordance with the Companies Act 1985.
Ernst & Y oung LLP
Registered Auditor
London
24 February 2005
Spirent plc Annual Report 2004 27
Independent auditors’ report to the members of Spirent plc 2004 2003
Year to 31 December Notes £ million £ million
Before Exceptional
exceptional items items Total Total
Turnover – Group and share of joint venture 475.0 – 475.0 488.6
Less share of joint venture’s turnover ––– (22.4)
Turnover 2, 3 475.0 – 475.0 466.2
Cost of sales (274.9) – (274.9) (279.8)
Manufacturing margin 200.1 – 200.1 186.4
Operating expenses 4 (166.4) (2.9) (169.3) (167.6)
Operating proﬁt 2, 3, 5 33.7 (2.9) 30.8 18.8
Operating exceptional items 6 – 2.9 2.9 7.5
Goodwill amortisation 9.1 – 9.1 9.7
Operating proﬁt before goodwill amortisation and exceptional items 42.8 – 42.8 36.0
(Loss)/income from interests in joint ventures (0.7) – (0.7) 2.7
Income from interests in associates 2.8 – 2.8 2.1
Operating proﬁt of the Group, joint ventures and associates 35.8 (2.9) 32.9 23.6
Non-operating exceptional items
(Loss)/proﬁt on the disposal of operations 33 – (0.9) (0.9) 3.6
Proﬁt before interest 35.8 (3.8) 32.0 27.2
Net interest payable 8 (6.8) – (6.8) (9.3)
Exceptional interest payable 8 – (0.5) (0.5) (16.1)
Other ﬁnance expense 10 (0.7) – (0.7) (1.5)
Proﬁt before taxation 2 28.3 (4.3) 24.0 0.3
Taxation 11 (7.7) – (7.7) (0.6)
Proﬁt/(loss) after taxation 20.6 (4.3) 16.3 (0.3)
Minority shareholders’ interest – equity (0.3) (0.2)
Proﬁt/(loss) attributable to shareholders 16.0 (0.5)
Basic earnings/(loss) per share 12 1.70p (0.05)p
Headline earnings per share 12 2.99p 2.31p
Diluted earnings/(loss) per share 12 1.67p (0.05)p
The notes on pages 33 to 68 form part of these Accounts.
28 Spirent plc Annual Report 2004
Consolidated proﬁt and loss account Spirent plc Annual Report 2004 29
Consolidated statement of total recognised gains and losses
2004 2003
Year to 31 December Notes £ million £ million
Proﬁt/(loss) attributable to shareholders 16.0 (0.5)
Gain on lapsed options 31 1.2 1.2
Exchange adjustment on subsidiaries, joint ventures and associates 31 (0.7) 6.1
Overseas taxation on exchange adjustment – (0.2)
Reinstatement of deferred tax asset on pension liability 11 – 12.6
Actuarial gain recognised on the pension schemes 10, 31 3.0 0.3
Taxation on actuarial gain 11, 31 (0.9) (0.1)
Total recognised gains and losses for the year 18.6 19.4
Reconciliation of movements in shareholders’ funds
2004 2003
Year to 31 December Notes £ million £ million
Shareholders’ funds at 1 January 119.9 95.1
Total recognised gains and losses 18.6 19.4
Other movements
New shares issued 31 2.1 0.7
Reversal of employee share scheme cost 31 0.2 –
Other 31 (2.0) 2.1
Goodwill on disposal of subsidiaries acquired before 1998 31 4.9 2.6
Shareholders’ funds at 31 December 143.7 119.9
The notes on pages 33 to 68 form part of these Accounts. 2004 2003
At 31 December Notes £ million £ million
Fixed assets
Intangible assets 13 88.8 101.6
Tangible assets 14 86.3 90.2
Investments 18
Investment in joint venture – 0.3
Investment in associates 15.8 14.6
15.8 14.9
Total ﬁxed assets 190.9 206.7
Current assets
Stocks 19 54.0 55.0
Debtors 20 89.9 86.9
Cash at bank and in hand 22 51.7 37.6
195.6 179.5
Current liabilities
Creditors due within one year 23 (116.8) (111.3)
Loans and overdrafts 24 (1.8) (1.8)
(118.6) (113.1)
Net current assets 77.0 66.4
Assets less current liabilities 267.9 273.1
Long term liabilities
Creditors due after more than one year 25 (80.2) (95.6)
Provisions for liabilities and charges 26
Deferred taxation (1.9) (2.3)
Other provisions (13.8) (17.9)
(15.7) (20.2)
Assets less liabilities (excluding pension liability) 172.0 157.3
Pension liability 10 (27.0) (35.2)
Assets less liabilities (including pension liability) 145.0 122.1
Capital and reserves 31
Called up share capital 31.9 31.5
Share premium account 1.3 697.5
Capital reserve 10.9 17.7
Capital redemption reserve – 0.7
Investment in own shares – (2.6)
Proﬁt and loss account 99.6 (624.9)
Shareholders’ funds – equity 143.7 119.9
Minority interests – equity 1.3 2.2
Total equity 145.0 122.1
The notes on pages 33 to 68 form part of these Accounts.
Signed on behalf of the Board
Anders Gustafsson
Director
24 February 2005
30 Spirent plc Annual Report 2004
Consolidated balance sheet 2004 2003
Year to 31 December Notes £ million £ million
Net cash inﬂow from operating activities 7 60.3 68.2
Dividends received from associates 0.1 0.1
Returns on investments and servicing of ﬁnance 21 (9.5) (23.2)
Taxation 21 (3.1) 8.9
Capital expenditure and ﬁnancial investment 21 (24.8) (15.8)
Acquisitions and disposals 21 1.2 60.4
Management of liquid resources 21 – 0.1
Financing 21 (9.5) (143.6)
Net cash inﬂow/(outﬂow) 14.7 (44.9)
Reconciliation of net cash ﬂow to movement in net debt
2004 2003
Year to 31 December Notes £ million £ million
Net cash inﬂow/(outﬂow) 14.7 (44.9)
Cash outﬂow arising from the change in debt and lease ﬁnancing 11.0 144.3
Cash inﬂow arising from the change in liquid resources – (0.1)
Movement arising from cash ﬂows 22 25.7 99.3
Debt issue costs 22 0.3 (0.8)
New ﬁnance leases 22 (0.3) (0.3)
Exchange adjustment 22 5.4 6.1
Movement in net debt 31.1 104.3
Net debt at 1 January 22 (57.5) (161.8)
Net debt at 31 December 22 (26.4) (57.5)
The notes on pages 33 to 68 form part of these Accounts.
Spirent plc Annual Report 2004 31
Consolidated cash ﬂow statement 2004 2003
At 31 December Notes £ million £ million
Fixed assets
Tangible assets 14 15.8 15.2
Shares in subsidiaries 16 263.3 542.2
Loans to subsidiaries 17 175.3 218.2
Investments 18
Investment in associate 0.1 0.1
Total ﬁxed assets 454.5 775.7
Current assets
Stocks 19 8.6 3.5
Debtors 20 25.3 18.8
Cash at bank and in hand 28.9 13.8
62.8 36.1
Current liabilities
Creditors due within one year 23 (19.7) (18.1)
Net current assets 43.1 18.0
Assets less current liabilities 497.6 793.7
Long term liabilities
Creditors due after more than one year 25 (309.3) (595.5)
Provisions for liabilities and charges
Other provisions 26 (2.0) (0.5)
Assets less liabilities (excluding pension liability) 186.3 197.7
Pension liability 10 (27.0) (35.2)
Assets less liabilities (including pension liability) 159.3 162.5
Capital and reserves 31
Called up share capital 31.9 31.5
Share premium account 1.3 697.5
Capital reserve 10.9 17.7
Capital redemption reserve – 0.7
Merger reserve 1.2 1.2
Investment in own shares – (2.6)
Proﬁt and loss account 114.0 (583.5)
Total equity 159.3 162.5
The notes on pages 33 to 68 form part of these Accounts.
Signed on behalf of the Board
Anders Gustafsson
Director
24 February 2005
32 Spirent plc Annual Report 2004
Company balance sheet 1. Accounting policies
Basis of accounting
The Accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards.
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 Company is not required to present a separate proﬁt and loss account as provided by Section 230 of the Companies Act 1985.
Results of subsidiaries acquired in the year are consolidated from the date of acquisition. The consolidated accounts include the Group’s share of proﬁts
of its joint ventures and associates.
Associates are entities in which the Group has a continuing participating interest, other than subsidiaries, and exercises signiﬁcant inﬂuence over their operating
and ﬁnancial policies. Results are based on management accounts to 31 December.The investment in associates is accounted for using the equity method.
Entities in which the Group holds an interest on a long term basis and which are jointly controlled by the Group and other parties are treated as joint
ventures. Joint ventures are accounted for using the gross equity method. Results are based on management accounts to 31 December.
All intra group transactions, balances, income and expenses are eliminated on consolidation.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of transaction. The results of overseas subsidiaries, joint ventures and
associates are translated into sterling using average rates.
Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at the balance sheet date. Proﬁts and losses arising
from the re-translation of opening net assets of overseas subsidiaries, treating long term intra group loans as part of the equity investment, and exchange
adjustments arising from the translation of the results of overseas subsidiaries, joint ventures and associates, are dealt with through reserves.
All other exchange proﬁts and losses are taken to the proﬁt and loss account, with the exception of differences on foreign currency borrowings used to
ﬁnance or provide a hedge against Group equity investments in overseas subsidiaries, which are taken directly to reserves together with the exchange
differences on the carrying amount of the related investments.
Financial instruments
The Group uses derivative ﬁnancial instruments to hedge its exposures to ﬂuctuations in interest and foreign exchange rates. The Group’s policy is not
to undertake any trading activity in ﬁnancial instruments. Financial instruments will be accounted for as hedges when designated as hedges at the inception
of the contract.
Forward exchange contracts are used to hedge foreign exchange exposures arising on forecast receipts and payments in foreign currencies.The rates under these
contracts are used to record the hedged item, and as such gains and losses on foreign currency contracts are offset against the foreign exchange gains and losses
on the related ﬁnancial assets and liabilities.Where the contract is a hedge against future transactions, gains and losses are deferred until the transaction occurs.
Interest rate swaps are occasionally used to hedge the Group’s exposure to movements in interest rates. Receipts and payments on interest rate
instruments are recognised on an accruals basis over the life of the underlying ﬁnancial instrument. Interest rate swaps are not revalued to fair value 
or shown in the Group balance sheet at the year end but are disclosed in the fair value table in note 29.
Gains or losses arising on hedging instruments, which are cancelled due to the termination of the underlying exposure, are taken to the proﬁt and loss
account immediately.
Finance costs associated with debt issuances are charged to the proﬁt and loss account over the life of the instruments.
The aggregate fair values at the balance sheet date of the hedging instruments described above are disclosed in note 29.
Liquid resources include short term deposits, government securities and similar securities, which are readily convertible into known amounts of cash.
Short term debtors and creditors that meet the deﬁnition of a ﬁnancial asset or liability, respectively, have been excluded from all analyses prepared
under Financial Reporting Standard (FRS) 13 ‘Derivatives and Other Financial Instruments: Disclosures’, including numerical disclosures except for the
analysis of net currency exposure, as permitted by the Standard.
Revenue recognition
Revenue is recognised when it is probable that the economic beneﬁts will ﬂow to the Group, the revenue can be reliably measured and when the 
Group has transferred to the buyer the signiﬁcant risks and rewards of ownership. In addition, revenue is only recognised when collectibility is probable.
For the sale of services, revenue is recognised in accounting periods in which the service is rendered. Revenue from maintenance contracts is recognised
over the period of performance.
Revenue from product sales of hardware and software is recognised at the time of delivery and acceptance and when there are no signiﬁcant vendor
obligations remaining. It is not until acceptance has occurred that the risks and rewards of ownership are transferred to the buyer. Terms of acceptance
are dependent upon the speciﬁc contractual arrangement agreed with the customer.
Spirent plc Annual Report 2004 33
Notes to the accounts 1. Accounting policies continued
Contractual arrangements are accounted for as two or more separate transactions only where the commercial substance is that the individual components
operate independently of each other because they are capable of being provided separately from one another and it is possible to attribute reliable fair values to
every component. To the extent that a separate component comprises a product sale of hardware or software, revenue is recognised as described above.
Revenue is recognised on other components as the Group fulﬁls its contractual obligations and to the extent that it has obtained the right to consideration.
The Group does not enter into a signiﬁcant number of long term contracts. Revenue and estimated proﬁts on long term contracts are recognised under
the percentage-of-completion method of accounting. When estimates of total contract revenues and costs indicate a loss, a provision for the entire
amount of the contract loss is recognised in the period in which the loss becomes evident.
The Group does not enter into bill and hold transactions.
Product development
Expenditure is charged to the proﬁt and loss account in the year in which it is 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.
Share based compensation
The Group operates a stock appreciation rights plan which gives rise to a proﬁt and loss charge in respect of the intrinsic value of the award. This expense
is charged over the vesting period.
Other share based awards do not currently attract a proﬁt and loss charge, as, other than the SAYE schemes discussed below, shares are not granted at
a discount to the market price at the date of the invitation.
The Group operates Inland Revenue approved SAYE schemes together with equivalent schemes for overseas employees that allow the grant of options
at a discount to the market price at the date of the invitation. The Group and the Company have made use of the exemption under Urgent Issues Task
Force (UITF) Abstract 17 ‘Employee Share Schemes’ not to recognise any compensation charge in respect of these schemes.
These schemes are discussed in more detail in note 31.
Pension contributions
In the UK the Group operates two pension schemes for the beneﬁt of employees. These schemes require contributions to be made to separately
administered funds, based on triennial actuarial valuations. Other schemes are deﬁned contribution in nature.
The assets of the deﬁned beneﬁt schemes are measured at their market value at the balance sheet date and the liabilities of the schemes are measured
using the projected unit method. The discount rate used to measure the schemes’ liabilities is the current rate of return on an AA corporate bond of
equivalent term and currency to the liabilities. The extent to which the schemes’ assets exceed or fall short of the schemes’ liabilities is shown as a
surplus or deﬁcit in the balance sheet net of deferred tax.
The regular service cost of providing retirement beneﬁts to employees in deﬁned beneﬁt schemes is charged to operating proﬁt in the year together
with the cost of providing beneﬁt improvements in respect of past service and gains or losses arising on settlements and curtailments.
A credit for the expected return on the schemes’ assets and a charge for the increase during the period in the present value of the schemes’ liabilities because
the beneﬁts are one year closer to settlement, are included in other ﬁnance expense in the proﬁt and loss account. Differences arising between the actual and
expected returns on the schemes’ assets together with changes in the actuarial assumptions are included in the statement of total recognised gains and losses.
Contributions payable to the other overseas deﬁned contribution plans are charged to the proﬁt and loss account in the year for which they are due.
Government grants
Government grants towards research and development costs are recognised as income over periods which match them with the related costs and are
deducted in reporting the related expense.
Capital grants are treated as deferred income and are released to the proﬁt and loss account over the estimated useful lives of the assets to which they relate.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable represents the amount expected to be paid or recovered in respect of taxable proﬁt for the year and is calculated using tax
rates that have been enacted or substantially enacted at the balance sheet date.
Deferred taxation is provided on an undiscounted basis on all timing differences that have originated but not reversed at the balance sheet date except
as referred to below. Amounts provided are calculated with reference to tax rates that are expected to apply in the periods in which the timing differences
are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
34 Spirent plc Annual Report 2004
Notes to the accounts continued Provision is made for tax that would arise on the remittance of the retained earnings of overseas subsidiaries, associates and joint ventures, only to the
extent that, at the balance sheet date, the dividends have been accrued as receivable.
Deferred tax assets are recognised only to the extent that it is considered more likely than not that there will be suitable taxable proﬁts from which the
future reversal of the underlying timing differences can be deducted.
Deferred tax is not provided on gains on fair value adjustments to ﬁxed assets arising at acquisition, or gains on the disposal of ﬁxed assets that have been
rolled over into replacement assets, unless there is a binding agreement to dispose of the assets concerned. Provision will not be made where it is considered
more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only when the replacement assets are sold.
Goodwill
Goodwill arising on the acquisition of subsidiaries and representing the excess of cost over the fair value of the attributable assets and liabilities acquired is
capitalised as an intangible asset and amortised over its estimated useful economic life up to a maximum of 20 years. Goodwill is reviewed for impairment
at the end of the ﬁrst full ﬁnancial year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may
not be recoverable. Goodwill arising prior to 1998 and previously written off against reserves, has not been reinstated but, in accordance with FRS 10
‘Goodwill and Intangible Assets’, would be charged to the proﬁt and loss account on the subsequent disposal of the business to which it related. Where
impairment has been identiﬁed in accordance with FRS 11 ‘Impairment of Fixed Assets and Goodwill’, goodwill arising prior to 1998 has also been
reviewed for impairment.
Other intangible assets
Other separately identiﬁable intangible assets such as patent fees, licence fees and trademarks, 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.
Tangible assets
Depreciation is not provided on freehold land. Depreciation is provided to write off all other assets over their estimated useful lives at rates which take
into account commercial conditions at their location. Usual asset lives are as follows:
Freehold buildings 50 years
Leasehold properties 50 years or lease period if less
Plant and machinery 3 to 8 years
Fixtures, ﬁttings and equipment
Building installations 20 years or lease period if less
Fittings and equipment 3 to 8 years
Motor vehicles 3 to 5 years
Business systems software 4 years
The carrying values of tangible ﬁxed assets are reviewed for impairment in periods if events or changes in circumstances indicate the carrying value
may not be recoverable.
Leases
Finance leases, which transfer substantially all the risks and rewards of ownership of the assets concerned, are capitalised in the balance sheet at net
present value. The corresponding liabilities are recorded as long term or current liabilities depending on the period when they are due. The interest
elements of the rental obligations are charged to the proﬁt and loss account over the periods of the leases as a ﬁnance cost. Capitalised leased assets
are depreciated over their estimated useful life.
Operating lease rentals are charged to the proﬁt and loss account over the period of the lease.
Stocks
Stocks are valued at the lower of cost and estimated net realisable value. 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 attributable overheads based on a normal level of activity. Net
realisable value represents the selling price less further costs to be incurred to completion and on sale.
Provisions
Provisions are recorded when the Group has a present, legal or constructive obligation as a result of a past event 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 plc Annual Report 2004 35 2. Segmental analysis
2004 2003
£ million £ million
Turnover
Performance Analysis 176.8 148.7
Service Assurance 74.7 91.7
Communications 251.5 240.4
Network Products 187.8 174.4
Systems 35.7 51.4
475.0 466.2
Proﬁt before taxation
Operating proﬁt before goodwill amortisation and exceptional items
Performance Analysis 19.7 4.4
Service Assurance 0.2 9.4
Communications 19.9 13.8
Network Products 20.4 16.7
Systems 2.5 5.5
42.8 36.0
Operating exceptional items
Performance Analysis 1.3 (5.1)
Service Assurance (1.9) (0.1)
Communications (0.6) (5.2)
Non-segmental (2.3) (2.3)
(2.9) (7.5)
Goodwill amortisation
Performance Analysis (3.7) (3.9)
Service Assurance (5.1) (5.5)
Communications (8.8) (9.4)
Network Products (0.3) (0.3)
(9.1) (9.7)
Operating proﬁt 30.8 18.8
(Loss)/income from interests in joint ventures (0.7) 2.7
Income from interests in associates 2.8 2.1
(Loss)/proﬁt on the disposal of operations (0.9) 3.6
Total net interest payable note 8 (7.3) (25.4)
Other ﬁnance expense (0.7) (1.5)
Proﬁt before taxation 24.0 0.3
36 Spirent plc Annual Report 2004
Notes to the accounts continued 2004 2003
£ million £ million
Operating assets
Performance Analysis 68.6 85.6
Service Assurance 51.4 60.5
Communications 120.0 146.1
Network Products 97.9 93.7
Systems 6.6 5.0
Segmental operating assets note 3 224.5 244.8
Investment in joint venture note 18 – 0.3
Investment in associates note 18 15.8 14.6
Tax payable note 23 (26.2) (24.7)
Operating assets 214.1 235.0
Net debt note 22 (26.4) (57.5)
Provisions for liabilities and charges note 26 (15.7) (20.2)
Assets less liabilities (excluding pension liability) 172.0 157.3
Pension liability note 10 (27.0) (35.2)
Assets less liabilities (including pension liability) 145.0 122.1
3. Geographical analysis
Turnover by market
Europe 167.4 149.6
North America 223.4 229.3
Asia Paciﬁc, Rest of Americas, Africa 84.2 87.3
475.0 466.2
Turnover by source
Europe 184.9 168.2
North America 243.4 262.1
Asia Paciﬁc, Rest of Americas, Africa 46.7 35.9
475.0 466.2
Spirent plc Annual Report 2004 37 3. Geographical analysis continued
2004 2003
£ million £ million
Operating proﬁt
Operating proﬁt before goodwill amortisation and exceptional items
Europe 20.6 21.7
North America 20.1 13.0
Asia Paciﬁc, Rest of Americas, Africa 2.1 1.3
42.8 36.0
Operating exceptional items
Europe (2.1) (2.3)
North America (0.8) (5.2)
(2.9) (7.5)
Goodwill amortisation
Europe (1.5) (1.5)
North America (7.6) (8.2)
(9.1) (9.7)
Operating proﬁt 30.8 18.8
Operating assets
Europe 54.0 74.0
North America 159.3 158.8
Asia Paciﬁc, Rest of Americas, Africa 11.2 12.0
Segmental operating assets note 2 224.5 244.8
4. Net operating expenses
Before Exceptional
exceptional items items Total Total
Selling and distribution 116.7 – 116.7 110.0
Administration 49.9 2.9 52.8 58.3
Other operating income (0.2) – (0.2) (0.7)
Net operating expenses including goodwill amortisation and exceptional items 166.4 2.9 169.3 167.6
Included within administration costs above
Operating exceptional items – 2.9 2.9 7.5
Goodwill amortisation 9.1 – 9.1 9.7
Net operating expenses before goodwill amortisation and exceptional items 157.3 – 157.3 150.4
38 Spirent plc Annual Report 2004
Notes to the accounts continued 5. Operating proﬁt
Operating proﬁt is arrived at after charging:
2004 2003
£ million £ million
Operating exceptional items note 6 2.9 7.5
Goodwill amortisation 9.1 9.7
Depreciation
Owned assets 25.2 29.0
Finance leased assets 0.2 0.3
Operating lease costs
Plant and equipment 0.5 0.4
Land and buildings 11.1 11.3
Product development costs 67.3 66.0
Disclosure of fees paid to auditors
Audit services
Audit fees – Ernst & Young LLP 1.4 1.2
Other fees paid to Ernst & Young
Further assurance services 0.2 0.1
Tax services 0.4 0.6
0.6 0.7
These fees were paid to:
Ernst & Young LLP 0.5 0.5
Ernst & Young overseas 0.1 0.2
0.6 0.7
Spirent plc Annual Report 2004 39 6. Operating exceptional items
2004 2003
£ million £ million
Finance renegotiation costs – 2.3
Restructuring costs (including asset write-downs and lease provisions) 1.6 5.2
Exit from joint venture 1.3 –
2.9 7.5
7. Reconciliation of operating proﬁt to net cash inﬂow from operating activities
Operating proﬁt 30.8 18.8
Depreciation 25.4 29.3
Loss/(proﬁt) on disposal of tangible ﬁxed assets 0.4 (0.1)
Tangible ﬁxed asset write-downs 0.6 2.2
Goodwill amortisation 9.1 9.7
Stock compensation expense 0.6 0.6
Deferred income received 4.9 0.2
(Increase)/decrease in debtors (9.1) 3.8
(Increase)/decrease in stocks (1.0) 3.1
Increase in creditors 9.3 5.7
Decrease in provisions (2.9) (5.9)
Pension fund liability (7.8) 0.8
Net cash inﬂow from operating activities 60.3 68.2
8. Net interest payable
Interest receivable and similar income 1.6 3.1
Interest payable
Senior unsecured loan notes (6.7) (8.8)
Bank loans and overdrafts (0.9) (2.6)
Other loans (0.2) (0.3)
Discount on unwind of lease provision (0.2) –
Interest on ﬁnance leases (0.4) (0.5)
(6.8) (9.1)
Share of joint venture’s interest – (0.2)
Net interest payable (6.8) (9.3)
Exceptional interest expense (0.5) (16.1)
Total net interest payable (7.3) (25.4)
On prepayment of the senior unsecured loan notes a make-whole amount becomes due. These amounts are included above in the exceptional interest
expense of £0.5 million (2003 £16.1 million).
40 Spirent plc Annual Report 2004
Notes to the accounts continued 9. Employees
The average number of people employed by the Group during the year was:
2004 2003
Number Number
Manufacturing 2,705 2,768
Selling and distribution 1,394 1,310
Administration 422 420
4,521 4,498
Their payroll costs were:
£ million £ million
Remuneration 160.7 154.5
Social security costs 17.4 17.3
Other pension costs 5.1 6.4
183.2 178.2
Please refer to the Report on directors’ remuneration on pages 19 to 26 for disclosures relating to the remuneration, share options and long term
incentives and pensions of the directors.
10. Pensions
Deﬁned beneﬁt schemes
The only signiﬁcant deﬁned beneﬁt plans are in the UK and comprise the Staff Pension Plan and Retirement Cash Plan. These plans have been
combined for the purposes of the following disclosures.
The most recent actuarial valuation at 1 April 2003 has been used and updated by our independent actuaries.
i) The ﬁnancial assumptions used to calculate the schemes’ liabilities were:
2004 2003 2002
% %%
Valuation method – projected unit
Inﬂation 2.9 2.8 2.3
Rate of increase in salaries 3.6 3.5 3.0
Rate of increase for pensions in payment pre 2001 service 3.0 3.0 3.0
Rate of increase for pensions in payment post 2001 service 2.7 2.7 2.3
Rate of increase in deferred pensions 2.9 2.8 2.3
Rate used to discount schemes’ liabilities 5.3 5.4 5.5
Spirent plc Annual Report 2004 41 10. Pensions continued
ii) The assets and the liabilities in the schemes for the Group and Company were as follows:
Long term Long term Long term
rate of return rate of return rate of return
expected 2004 expected 2003 expected 2002
%£ million %£ million % £ million
Equities 7.5 62.2 7.8 61.3 7.5 52.5
Gilts 5.0 11.9 4.8 15.3 4.5 15.7
Bonds 4.5 18.8 5.1 9.6 5.0 7.4
Cash 5.0 2.6 4.3 4.5 4.0 2.3
Property 6.5 4.6 6.8 1.8 6.5 4.3
Other 5.6 6.8 5.6 6.3 5.5 6.8
Total market value of assets 106.9 98.8 89.0
Actuarial value of liability (144.2) (142.2) (130.9)
Net deﬁcit in the schemes (37.3) (43.4) (41.9)
Related deferred tax asset 11.1 13.0 –
Deﬁcit in schemes, net of tax (26.2) (30.4) (41.9)
Actuarial value of unfunded pension liability (0.8) (4.8) (4.3)
Net pension liability (27.0) (35.2) (46.2)
iii) Analysis of the amounts charged to the proﬁt and loss account
2004 2003
£ million £ million
Analysis of amount charged to operating costs
Current service cost 1.8 2.2
Analysis of amount credited to other ﬁnance expense
Expected return on pension schemes’ assets 6.6 5.7
Interest on pension schemes’ liabilities (7.3) (7.2)
Other ﬁnance expense (0.7) (1.5)
Net proﬁt and loss charge 2.5 3.7
Analysis of amount recognised in statement of total recognised gains and losses
Actual return less expected return on pension schemes’ assets 3.6 5.5
Experience gains and losses arising on the schemes’ liabilities 2.4 6.8
Changes in assumptions underlying the present value of the schemes’ liabilities (3.0) (12.0)
Actuarial gain recognised in the statement of total recognised gains and losses 3.0 0.3
Movement in deﬁcit in the year
Deﬁcit in the schemes at 1 January (43.4) (41.9)
Current service cost (1.8) (2.2)
Employer contributions paid 5.6 1.9
Other ﬁnance expense (0.7) (1.5)
Actuarial gain 3.0 0.3
Net deﬁcit in the schemes at 31 December (37.3) (43.4)
42 Spirent plc Annual Report 2004
Notes to the accounts continued iv) History of experience gains and losses
2004 2003 2002
Difference between the expected and actual return on the schemes’ assets
Amount (£ million) 3.6 5.5 (20.3)
Percentage of the schemes’ assets (per cent) 3.4 5.6 (22.8)
Experience gains and losses on the schemes’ liabilities
Amount (£ million) 2.4 6.8 (0.9)
Percentage of the present value of the schemes’ liabilities (per cent) 1.7 4.8 (0.7)
Total amount recognised in the statement of total recognised gains and losses
Amount (£ million) 3.0 0.3 (23.6)
Percentage of the present value of the schemes’ liabilities (per cent) 2.1 0.2 (18.0)
The Group will continue to make additional contributions of £3.5 million per annum on 1 July in order to comply with the Minimum Funding Requirements
for the UK deﬁned beneﬁt plans.
The above plans are funded and have full UK Inland Revenue tax-exempt approval by which beneﬁts are limited due to the statutory earnings cap (an Inland
Revenue limit on the amount of earnings that can be made pensionable under the plans for members who joined after May 1989). Certain members,
whose salaries are in excess of this cap, have had their beneﬁts increased through unapproved unfunded arrangements to the level that would otherwise
have applied in respect of the basic salary only. The Company has contractually agreed to pay the additional retirement beneﬁts itself and a provision at
31 December 2004 of £0.8 million (2003 £4.8 million) is included in the net pension liability above. This represents the actuarial value, as conﬁrmed by
the Company’s pension advisers, of the unapproved beneﬁt entitlements accrued at that date. The value is assessed and reviewed on a Market Value basis
in line with the Main Plan Valuation and adjusted each year by the charge for the year (equivalent to a contribution to a funded plan) of £0.1 million
(2003 £0.2 million) and interest on the unfunded liability of nil (2003 £0.3 million). The additional death-in-service beneﬁts over the statutory cap 
are separately insured by the Company under an unapproved scheme.
Deﬁned contribution schemes
United Kingdom
The Group maintains deﬁned contribution pension schemes for employees in the UK. These plans are known as ‘Cash Builder’ or ‘Pension Builder’ and
employer contributions into these schemes for 2004 were £0.1 million (2003 £0.1 million).
United States
The Group maintains deﬁned contribution pension beneﬁt plans for employees of its US subsidiaries. These plans, known as 401(k) plans, allow employees
to defer a percentage of their salary for retirement. There are four different 401(k) plans within the US businesses and each of these plans has different
features regarding Company contributions, maximum deferral percentages and investment choices.
The investment choices offered are among a selection of diversiﬁed mutual funds offering a broad mix of investment return potential with varying levels
of risk. In aggregate the Company contributions to the various US plans totalled $4.6 million for 2004 (2003 $4.4 million). Total assets in the deﬁned
contribution plans at the end of 2004 were $116.8 million (2003 $103.1 million). There were no deﬁned beneﬁt plans in the US at 31 December 2004.
Other jurisdictions
Outside the UK and the US employees are provided with pension arrangements determined in accordance with approved local practice and regulations and
these arrangements are deﬁned contribution schemes.Total contributions for 2004 in respect of these schemes amounted to £0.3 million (2003 £0.2 million).
Total contributions to deﬁned contribution schemes were £2.9 million (2003 £3.0 million).
Spirent plc Annual Report 2004 43 11. T axation
Analysis of charge for the period
2004 2003
£ million £ million
Current tax
Overseas taxation 7.4 4.9
Under/(over) provision in prior years
UK tax – 1.1
Overseas taxation (1.3) (7.1)
6.1 (1.1)
Share of joint venture’s taxation – 1.1
Share of associates’ taxation 1.0 0.9
Total current tax charge 7.1 0.9
Deferred tax
Origination and reversal of timing differences 1.7 (0.3)
Origination of deferred tax assets (1.1) –
Total deferred tax charge/(credit) 0.6 (0.3)
Total tax charge for the year 7.7 0.6
There was no tax effect in respect of operating exceptional items (2003 £1.7 million credit) nor was there any effect in respect of the non-operating
exceptional items (2003 nil).
In 2003 a credit of £12.6 million arose in the statement of total recognised gains and losses as a deferred tax asset was recognised on the pension 
fund liability.
A charge of £0.9 million (2003 £0.1 million) arises on the actuarial gain and this has been included in the statement of total recognised gains and losses.
Factors affecting tax charge for the period
The current tax charge for the year is lower than the standard rate of corporation tax in the UK (30 per cent).
The differences are explained as follows:
2004 2003
£ million £ million
Proﬁt before tax 24.0 0.3
Proﬁt before tax multiplied by the standard rate of corporation tax in the UK of 30 per cent (2003 30 per cent) 7.2 0.1
Expenses not deductible for tax (primarily goodwill amortisation) 3.8 7.3
Movement in timing differences (0.6) 0.3
Different tax rates on overseas earnings and other adjustments (2.0) (0.8)
Tax overprovided in previous years (1.3) (6.0)
Total current tax charge 7.1 0.9
44 Spirent plc Annual Report 2004
Notes to the accounts continued Factors that may affect future tax charges
Deferred tax assets of £13.3 million (2003 £18.3 million) arising principally on timing differences in the US and UK have not been recognised. These assets
can only be realised when they reverse against suitable taxable proﬁts. Although the directors ultimately expect to realise these assets, there is currently
insufﬁcient evidence under FRS 19 ‘Deferred Tax’ to recognise a deferred tax asset in respect of these timing differences.
In addition, the Group has tax losses arising in the US of £70.6 million (2003 £70.1 million) and in the UK of £39.6 million (2003 £24.8 million) that are
available for offset against future taxable proﬁts. A deferred tax asset has not been recognised in respect of these losses as their future recovery is uncertain.
In total, deferred tax assets amounting to £52.6 million (2003 £50.3 million) have not been recognised on unutilised losses and timing differences.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries, associates and the joint venture. No deferred tax asset has been
recognised in respect of the tax deduction which may be available on the future exercise of stock options.
12. Earnings/(loss) per share
Earnings/(loss) per share is calculated by reference to the proﬁt/(loss) for the year and the number of Ordinary shares in issue during the year as follows:
2004 2003
£ million £ million
Basic earnings/(loss) attributable to shareholders 16.0 (0.5)
Operating exceptional items 2.9 7.5
Goodwill amortisation 9.1 9.7
Loss/(proﬁt) on the disposal of operations 0.9 (3.6)
Exceptional interest charge 0.5 16.1
Prior year tax credit (1.3) (6.0)
Attributable taxation on exceptional items – (1.7)
Headline earnings attributable to shareholders 28.1 21.5
Number Number
million million
Weighted average number of shares in issue – basic and headline 939.2 929.3
Dilutive potential of employee share options 18.1 –
Weighted average number of shares in issue – diluted 957.3 929.3
The shares in issue used to calculate basic and headline earnings/(loss) per share exclude the shares held by the Spirent Sharesave Trust (SST) (formerly
Spirent Qualifying Employee Share Ownership Trust) and the Spirent Employee Share Ownership Trust (ESOT) in accordance with FRS 14 ‘Earnings per Share’.
Spirent plc Annual Report 2004 45 13. Intangible assets
Goodwill
2004
£ million
Group
Cost
At 1 January 1,785.5
Exchange adjustment (40.2)
At 31 December 1,745.3
Amortisation
At 1 January 1,683.9
Provided during the year 9.1
Exchange adjustment (36.5)
At 31 December 1,656.5
Net book value at 31 December 2004 88.8
Net book value at 31 December 2003 101.6
14. T angible assets
2004
£ million
Land and buildings Fixtures,
Plant and ﬁttings and
Freehold Long lease Short lease machinery equipment Total
Group
Cost
At 1 January 16.4 11.0 22.4 120.7 66.6 237.1
Exchange adjustment (0.8) 0.1 (0.8) (4.4) (3.5) (9.4)
Additions
Owned assets 0.1 0.1 0.6 16.5 8.0 25.3
Leased assets –––– 0.3 0.3
Inter-class transfers ––– (0.7) 0.7 –
Disposals –– (0.2) (2.8) (4.5) (7.5)
Disposal of operations note 33 –– (0.1) – (1.7) (1.8)
At 31 December 15.7 11.2 21.9 129.3 65.9 244.0
Depreciation
At 1 January 2.9 1.8 8.5 88.5 45.2 146.9
Exchange adjustment (0.2) – (0.5) (3.3) (2.9) (6.9)
Provided during the year 0.4 0.4 1.5 14.0 9.1 25.4
Inter-class transfers ––– (0.4) 0.4 –
Fixed asset write-down – 0.5 – – 0.1 0.6
Disposals –– (0.2) (2.2) (4.2) (6.6)
Disposal of operations note 33 –– (0.1) – (1.6) (1.7)
At 31 December 3.1 2.7 9.2 96.6 46.1 157.7
Net book value at 31 December 12.6 8.5 12.7 32.7 19.8 86.3
46 Spirent plc Annual Report 2004
Notes to the accounts continued 2004
£ million
Land and buildings Fixtures,
Plant and ﬁttings and
Freehold Long lease Short lease machinery equipment Total
Company
Cost
At 1 January 1.0 9.0 0.4 28.4 6.6 45.4
Additions – 0.1 – 2.8 0.7 3.6
Disposals ––– (0.6) (0.3) (0.9)
Transfers in ––– 1.7 1.9 3.6
At 31 December 1.0 9.1 0.4 32.3 8.9 51.7
Depreciation
At 1 January 0.4 1.4 0.2 22.9 5.3 30.2
Provided during the year 0.1 0.2 – 2.2 0.8 3.3
Fixed asset write-down – 0.5 – – 0.1 0.6
Disposals ––– (0.6) (0.3) (0.9)
Transfers in ––– 1.3 1.4 2.7
At 31 December 0.5 2.1 0.2 25.8 7.3 35.9
Net book value at 31 December 0.5 7.0 0.2 6.5 1.6 15.8
Tangible assets include the following ﬁnance leased assets:
Group
Net book value at 1 January 0.4 0.6 1.0
Depreciation provided during the year – 0.2 0.2
Net book value at 31 December 0.3 0.5 0.8
15. Capital commitments and contingent liabilities
2004 2003
£ million £ million
Group Company Group Company
Capital expenditure commitments
Contracted but not provided 1.0 0.1 1.5 0.8
Contingent liabilities
Bank guarantees – 1.6 – 1.8
Spirent plc, the parent company, has provided indemnities of £0.5 million (2003 £1.0 million) for certain ongoing business obligations under letters 
of credit for subsidiary companies.
Spirent plc Annual Report 2004 47 16. Shares in subsidiaries
2004
£ million
Company
Cost
At 1 January 1,996.3
Additions 155.5
Transfers to subsidiaries (433.9)
Disposals (0.5)
At 31 December 1,717.4
Provisions
At 1 January and 31 December 1,454.1
Net book value at 31 December 263.3
17. Loans to subsidiaries
Company
At 1 January 218.2
Exchange adjustment (3.2)
Advances 13.7
Repayments (53.4)
At 31 December 175.3
18. Fixed asset investments
Joint ventures
Group
At 1 January 0.3
Share of retained loss (0.7)
Additions 0.2
Accrued contribution to the joint venture 0.2
At 31 December –
The joint venture company at 31 December 2004 and 31 December 2003 was:
% holding Nature of business
Spirent DM Ltd 40 Communications
It was agreed in 2004 that the Group would exit from the Spirent DM joint venture.
In 2003 the joint venture result included the Group’s share of the proﬁt of WAGO. Spirent divested of its interests in WAGO in April 2003.
48 Spirent plc Annual Report 2004
Notes to the accounts continued 2004 2003
£ million £ million
Proﬁt and loss account
Share of turnover – 22.4
(Loss)/proﬁt before taxation (0.7) 2.5
Taxation – 1.1
Share of (loss)/proﬁt after taxation (0.7) 1.4
The share of the gross and net assets of the joint venture included in the consolidated ﬁnancial statements at 31 December 2004 is nil (2003 £0.3 million).
Associates
2004
£ million
Group Company
Cost
At 1 January and 31 December 0.1
Share of retained proﬁts and reserves
At 1 January 14.6 –
Exchange adjustment (0.5) –
Share of retained proﬁts for the year 1.7 –
At 31 December 15.8 –
Net book value at 31 December 15.8 0.1
The associated companies at 31 December 2004 and 31 December 2003 were as follows:
% holding Nature of business
Tyton Company of Japan 49 Cable management products
3M/ECC 20 Cable management products
19. Stocks
2004 2003
£ million £ million
Group Company Group Company
Raw materials 12.1 2.6 12.6 0.5
Work in progress 6.2 0.7 5.0 0.1
Finished goods 35.7 5.3 37.4 2.9
54.0 8.6 55.0 3.5
Spirent plc Annual Report 2004 49 20. Debtors
2004 2003
£ million £ million
Group Company Group Company
Due within one year
Trade debtors 74.6 9.0 69.5 6.3
Owed by subsidiaries – 9.2 – 8.2
Owed by associates 0.3 0.1 0.2 –
Other debtors 6.3 2.0 8.2 0.4
Tax recoverable – 3.6 – 2.6
Prepayments and accrued income 7.2 1.4 7.3 1.3
88.4 25.3 85.2 18.8
Due after one year
Other debtors 0.2 – 0.2 –
Prepayments 1.3 – 1.5 –
1.5 – 1.7 –
Total debtors 89.9 25.3 86.9 18.8
21. Notes to the cash ﬂow statement
2004 2003
£ million £ million
Returns on investments and servicing of ﬁnance
Interest received 1.6 3.6
Interest paid (8.4) (12.6)
Interest element of ﬁnance lease rental payments (0.4) (0.5)
Exceptional interest paid (2.3) (13.7)
Net cash outﬂow for returns on investments and servicing of ﬁnance (9.5) (23.2)
Taxation
Corporation tax paid – (3.3)
Overseas tax (paid)/received (3.1) 12.2
Tax (paid)/received (3.1) 8.9
Capital expenditure and ﬁnancial investment
Capital expenditure (25.3) (16.7)
Receipts from sales of tangible assets 0.5 0.9
Net cash outﬂow for capital expenditure and ﬁnancial investment (24.8) (15.8)
Acquisitions and disposals
Acquisition of subsidiaries note 32 (1.1) (1.1)
Contribution to joint venture (0.2) (0.5)
Disposal of operations note 33 2.5 62.0
Net cash inﬂow for acquisitions and disposals 1.2 60.4
Management of liquid resources
Sale of investments – 0.1
Financing
Issue of share capital 1.5 0.7
New loans – 9.4
Repayment of loans (10.2) (152.9)
Repayment of capital element of ﬁnance lease rentals (0.8) (0.8)
Net cash outﬂow from ﬁnancing (9.5) (143.6)
50 Spirent plc Annual Report 2004
Notes to the accounts continued 22. Analysis of changes in net debt
£ million
1 January Cash Non-cash Exchange 31 December
2004 ﬂow changes adjustment 2004
Cash at bank and in hand 37.6 14.7 – (0.6) 51.7
Overdrafts (0.7) – – – (0.7)
Net cash 36.9 14.7 – (0.6) 51.0
Bank loans due within one year (0.4) (0.1) 0.3 – (0.2)
Other loans and ﬁnance lease obligations due within one year (0.7) (0.1) – (0.1) (0.9)
Net liquid funds 35.8 14.5 0.3 (0.7) 49.9
Senior unsecured loan notes due after one year (80.8) 10.3 – 5.7 (64.8)
Bank loans due after one year (3.3) 0.9 – 0.2 (2.2)
Other loans and ﬁnance lease obligations due after one year (9.2) – (0.3) 0.2 (9.3)
Net debt (57.5) 25.7 – 5.4 (26.4)
23. Creditors due within one year
2004 2003
£ million £ million
Group Company Group Company
Trade creditors 28.0 8.9 27.6 5.3
Payments received on account 0.1 – ––
Owed to subsidiaries – 2.0 – 2.0
Owed to associates 0.8 – 0.8 –
Other creditors 7.1 1.3 10.0 1.2
Accruals and deferred income 49.5 6.4 42.9 8.8
Corporation tax – UK and overseas 26.2 – 24.7 –
Other taxes and social security costs 5.1 1.1 5.3 0.8
116.8 19.7 111.3 18.1
24. Loans and overdrafts
Secured bank overdrafts 0.7 – 0.7 –
Bank loans due within one year note 27 0.2 – 0.4 –
Other loans and ﬁnance lease obligations due within one year note 27 0.9 – 0.7 –
1.8 – 1.8 –
Where applicable overdrafts are secured either by mortgages on the freehold properties or by ﬂoating charges on the assets of the borrowing subsidiaries.
25. Creditors due after more than one year
Senior unsecured loan notes note 28 64.8 64.8 80.8 80.8
Bank loans note 27 2.2 – 3.3 –
Other loans and ﬁnance lease obligations note 27 9.3 – 9.2 –
Owed to subsidiaries – 244.1 – 514.4
Other creditors 1.1 – 1.3 –
Deferred income 2.5 0.3 0.4 0.3
Pension 0.3 0.1 0.6 –
80.2 309.3 95.6 595.5
Spirent plc Annual Report 2004 51 26. Provisions for liabilities and charges
Deferred taxation
2004 2003
£ million £ million
Group Company Group Company
At 1 January 2.3 –
Movement in respect of pension liability (1.0) –
Charge for the year note 11 0.6 –
At 31 December 1.9 –
Deferred taxation provided
Capital allowances in advance of the corresponding charges for depreciation 1.4 – 1.4 –
Other short term timing differences 0.5 – 0.9 –
1.9 – 2.3 –
In accordance with FRS 19 ‘Deferred T ax’, deferred tax assets have not been recognised in respect of total tax losses of £110.2 million (2003 £94.9 million).
In addition, deferred tax assets of £13.3 million (2003 £18.3 million) arising principally in respect of timing differences have not been recognised (see note 11).
Other provisions
2004
£ million
Group Company
Lease provisions
At 1 January 17.9 0.5
Charged during the year 1.7 1.7
Released during the year (1.8) –
Released during the year in respect of prior year disposals (1.2) –
Discount on unwind of lease provision 0.2 –
Utilised during the year (4.1) (0.2)
Exchange adjustment (0.2) –
At 31 December 12.5 2.0
Restructuring costs
Charged during the year 1.3 –
At 31 December 1.3 –
Total other provisions 13.8 2.0
Current 4.2 0.3
Non-current 9.6 1.7
Total other provisions 13.8 2.0
The lease provisions are for the continuing obligations under leases in respect of properties which have been vacated by the Group. Where material,
lease obligations are discounted. The Company expects these provisions to be utilised over the next 12 years.
The restructuring costs relate to our exit from the Spirent DM joint venture and will be paid in 2005.
52 Spirent plc Annual Report 2004
Notes to the accounts continued 27. Loans and ﬁnance lease obligations
2004 2003
£ million £ million
Group Company Group Company
Secured
Bank loans wholly repayable within ﬁve years 2.4 – 3.7 –
Other loans not wholly repayable within ﬁve years 0.6 – 0.7 –
Finance lease obligations 9.6 – 9.2 –
12.6 – 13.6 –
Repayment schedules for amounts due at 31 December are as follows:
Bank loans
Between two and ﬁve years 2.0 – 2.8 –
Between one and two years 0.2 – 0.5 –
Due after more than one year note 25 2.2 – 3.3 –
Due within one year note 24 0.2 – 0.4 –
Total bank loans 2.4 – 3.7 –
Other loans and ﬁnance leases
After ﬁve years 6.8 – 7.0 –
Between two and ﬁve years 1.7 – 1.5 –
Between one and two years 0.8 – 0.7 –
Due after more than one year note 25 9.3 – 9.2 –
Due within one year note 24 0.9 – 0.7 –
Total other loans and ﬁnance leases 10.2 – 9.9 –
Total loans 12.6 – 13.6 –
Where applicable loans are secured either by mortgages on the freehold properties or by ﬂoating charges on the assets of the borrowing subsidiaries.
The long term secured loans are repayable in the year 2017 and bear interest at an average rate of 4 per cent.
Spirent plc Annual Report 2004 53 28. Senior unsecured loan notes
2004 2003
£ million £ million
Group Company Group Company
Senior unsecured loan notes 2006 2.8 2.8 3.6 3.6
Senior unsecured loan notes 2009 62.2 62.2 77.4 77.4
65.0 65.0 81.0 81.0
Less debt issuance costs (0.2) (0.2) (0.2) (0.2)
Due after more than one year note 25 64.8 64.8 80.8 80.8
At 31 December 2004 the following loan notes were in issue:
i) $5.5 million bearing interest at 9.19 per cent repayable on 23 November 2006;
ii) $36.2 million bearing interest at 9.31 per cent repayable on 23 November 2009;
iii) $65.9 million bearing interest at 9.41 per cent repayable on 23 November 2009;
iv) $17.2 million bearing interest at 10.00 per cent repayable on 23 November 2009. An interest rate derivative was entered into in 1999 to reduce 
the effective interest rate to 9.53 per cent.
Loan notes are repayable:
i) at maturity; or
ii) at any time at the Company’s option in an amount of not less than 5 per cent of the aggregate principal amount then outstanding plus a 
make-whole amount.
If Spirent plc repaid at its option the total principal amount of the loan notes at 31 December 2004 then a make-whole amount of $22.1 million 
(£11.5 million) would become payable.
29. Financial risk management
The key objective of the Group 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.
The major risks managed by Treasury, under the approved policies, are liquidity and reﬁnancing risk, interest rate and currency risk and counterparty
credit risk. Financial instruments including derivatives are used to manage these exposures when deemed appropriate.
Financing
The Group’s objective is to ensure that there are sufﬁcient sources of funding to meet projected requirements. Its operations are ﬁnanced through a
combination of retained earnings and external ﬁnancing. Financing is raised principally by the parent company and lent to subsidiaries on commercial
terms. Debt is largely sourced from the syndicated bank market and the US private placement market.
At 31 December 2004, the amount of senior unsecured loan notes was $124.8 million, equivalent to £65.0 million at 31 December 2004 exchange
rates. These notes have maturity dates of 2006 and 2009.
Committed bank facilities amounted to £30 million at 31 December 2004 on which there were no amounts drawn. These facilities matured on 
2 February 2005 but were replaced with a new 364-day bank facility of £30 million. This new facility has a 12 month term-out option.
Interest rate management
The objective of our interest rate management policy is to reduce the volatility of the interest charge. Interest rate exposure is managed through 
an optimum mix of ﬁxed and ﬂoating rate debt and the use of interest rate swaps.
At 31 December 2004 the Group’s borrowings were composed of 51 per cent of ﬁxed rate debt. This excludes $72.1 million of senior unsecured loan
notes which have been swapped into ﬂoating rates through the use of interest rate swaps which terminate on 23 November 2009. These swaps are
callable at the counterparties’ option at six monthly intervals.
Our interest charge excluding exceptional interest expense was £6.8 million (2003 £9.3 million). A one percentage point movement in short term 
US dollar interest rates based on the year end position would impact proﬁt before taxation by approximately £0.3 million.
54 Spirent plc Annual Report 2004
Notes to the accounts continued Currency management
Currency exposures arise from trading transactions undertaken by subsidiaries in foreign currencies and on the translation of the operating results and
net assets of our overseas subsidiaries.
Group Treasury, by means of forward foreign exchange contracts, carries out the majority of the transaction hedging activity.
We do not enter into instruments to hedge the translation exposures of the operating results or net assets of our overseas subsidiaries since these are
accounting and not cash exposures. However, to provide a partial hedge we match, as far as possible, the currency of our borrowings with the currency
proﬁle of our operating results and net assets.
At 31 December 2004 the balance sheet translation exposure was 61 per cent hedged (2003 61 per cent).
During the year sterling strengthened against the US dollar the main currency to which we are exposed.
Interest rate risk
The interest rate proﬁle of the Group’s ﬁnancial assets and liabilities at 31 December after taking into account interest rate swaps was as follows:
2004
£ million
At ﬂoating Non-interest
interest rates bearing Total
Financial assets
Sterling 29.1 0.2 29.3
US dollar 9.1 1.8 10.9
Euro 5.8 0.4 6.2
Others 4.3 1.2 5.5
48.3 3.6 51.9
2003
£ million
At ﬂoating Non-interest
interest rates bearing Total
Financial assets
Sterling 8.5 0.4 8.9
US dollar 17.2 1.1 18.3
Euro 4.0 0.6 4.6
Others 4.3 1.7 6.0
34.0 3.8 37.8
The ﬁnancial assets of the Group comprise:
2004 2003
£ million £ million
Debtors due after more than one year (excluding prepayments) note 20 0.2 0.2
Cash at bank and in hand note 22 51.7 37.6
51.9 37.8
Floating rate ﬁnancial assets comprised cash deposits at call, seven day and monthly rates. The weighted average period to maturity for ﬁnancial assets
on which no interest is paid is less than one year.
Spirent plc Annual Report 2004 55 29. Financial risk management continued
2004
£ million
At ﬁxed At ﬂoating Non-interest
interest rates interest rates bearing Total
Financial liabilities
Sterling –– 3.0 3.0
US dollar 30.2 37.5 11.1 78.8
Euro 9.7 0.5 0.8 11.0
Other – 0.2 – 0.2
39.9 38.2 14.9 93.0
2003
£ million
At ﬁxed At ﬂoating Non-interest
interest rates interest rates bearing Total
Financial liabilities
Sterling –– 1.3 1.3
US dollar 43.7 40.4 16.1 100.2
Euro 10.0 0.4 1.8 12.2
Other 0.2 0.4 – 0.6
53.9 41.2 19.2 114.3
2004 2003
Weighted Weighted Weighted Weighted
Average average period average period Average average period average period
interest rates to maturity to maturity interest rates to maturity to maturity
of ﬁxed rate of ﬁxed rate of non-interest of ﬁxed rate of ﬁxed rate of non-interest
liabilities liabilities bearing liabilities liabilities liabilities bearing liabilities
%years years %years years
Financial liabilities
Sterling –– 5.0 11.5 2.3 4.7
US dollar 9.2 4.6 2.9 9.2 5.6 3.1
Euro 4.9 12.1 8.4 5.7 12.8 6.5
Other ––– 11.2 2.1 –
Group 8.1 6.4 3.6 8.6 6.9 3.5
The ﬁnancial liabilities of the Group comprise:
2004 2003
£ million £ million
Bank overdrafts, current instalment of loans and ﬁnance lease obligations note 24 1.8 1.8
Senior unsecured loan notes due after more than one year note 25 64.8 80.8
Bank loans due after more than one year note 25 2.2 3.3
Other loans and ﬁnance lease obligations due after more than one year note 25 9.3 9.2
Other creditors falling due after more than one year note 25 1.1 1.3
Provisions note 26 13.8 17.9
93.0 114.3
2003 comparatives have been restated to include provisions.
The ﬂoating rate liabilities at 31 December 2004 comprise primarily $72.1 million (2003 $72.1 million) of the senior unsecured loan notes for which
interest rate swaps are in place. Other ﬂoating rate liabilities bear interest at various rates set with reference to the prevailing LIBOR or equivalent for
the time period and country.
56 Spirent plc Annual Report 2004
Notes to the accounts continued Maturity of ﬁnancial liabilities
The maturity proﬁle of the Group’s ﬁnancial liabilities at 31 December was as follows:
2004 2003
£ million £ million
In one year or less, or on demand 6.0 6.4
In more than one year but not more than two years 6.0 4.7
In more than two years but not more than ﬁve years 70.0 14.5
In more than ﬁve years 11.0 88.7
93.0 114.3
The undrawn committed borrowing facilities at 31 December were as follows:
Expiring in one year or less 31.6 61.5
The committed borrowing facilities comprise primarily of a £30 million multi-currency revolving credit facility.
The Group put in place a new £30 million 364-day working capital facility effective from 17 February 2005 with a 12 month term-out option to replace
the existing £30 million facility.
Currency exposure of ﬁnancial assets and liabilities
The table shows the net unhedged monetary assets and liabilities of Group companies at 31 December. These monetary assets and liabilities are not
denominated in their functional currency and therefore give rise to exchange gains and losses in the proﬁt and loss account.
2004
Net foreign currency monetary assets/(liabilities) £ million
Sterling US dollar Euro Other Total
Functional currency of Group operation
Sterling – 0.1 1.6 0.3 2.0
US dollar (0.7) – (0.3) (1.8) (2.8)
Euro (0.6) (0.9) – – (1.5)
Other (0.5) 2.0 – 0.7 2.2
(1.8) 1.2 1.3 (0.8) (0.1)
2003
Net foreign currency monetary assets/(liabilities) £ million
Sterling US dollar Euro Other Total
Functional currency of Group operation
Sterling – (1.0) 0.6 – (0.4)
US dollar (0.3) – (0.1) – (0.4)
Euro (0.8) (1.5) – 0.2 (2.1)
Other (1.9) 1.7 (0.9) 0.6 (0.5)
(3.0) (0.8) (0.4) 0.8 (3.4)
Spirent plc Annual Report 2004 57 29. Financial risk management continued
Fair value of ﬁnancial instruments
2004 2003
£ million £ million
Book Fair Book Fair
value value value value
Primary ﬁnancial instruments held or issued to ﬁnance the Group’s operations
Short term borrowings and current portion of long term borrowings (1.8) (1.8) (1.8) (1.8)
Long term senior unsecured loan notes (64.8) (75.3) (80.8) (97.0)
Other long term borrowings (11.5) (11.7) (12.5) (11.8)
Cash and other liquid funds 51.7 51.7 37.6 37.6
Other ﬁnancial assets 0.2 0.2 0.2 0.2
Other ﬁnancial liabilities (14.9) (14.9) (19.2) (19.2)
(41.1) (51.8) (76.5) (92.0)
Derivative ﬁnancial instruments held to manage the interest rate and currency proﬁle
Interest rate swaps – (1.0) – (1.3)
Forward foreign exchange contracts – 0.5 – 0.4
(41.1) (52.3) (76.5) (92.9)
The derivative ﬁnancial instruments are as follows:
i) Interest rate swaps for $72.1 million (£37.6 million). The swaps terminate on 23 November 2009 and can be cancelled at the bank’s option at six
monthly intervals, with no mark to market settlement. The swaps have been transacted with two banks and are split $48.0 million and $24.1 million
between them. The terms of the $48.0 million swap allow for either party to exercise a break on 23 November 2005 or 23 November 2008. The
swap for $24.1 million allows either party to exercise a break at 23 November 2005. If a break is exercised a mark to market settlement is made 
at the fair value. At 31 December 2004 the fair value was £1.0 million which would have been payable by Spirent to the banks.
ii) Forward foreign exchange contracts to hedge material transactional exposures.
Hedges
It is the Group’s policy to hedge a proportion of its transactional currency exchange exposures using forward foreign currency contracts and its interest
rate exposures by using interest rate swaps. Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged
itself is recognised.
Unrecognised gains and losses on instruments used for hedging are as follows:
2004 2003
£ million £ million
Total net Total net
Gains Losses gains/(losses) gains/(losses)
Unrecognised gains/(losses) at 1 January 0.4 (1.3) (0.9) 0.9
(Gains)/losses arising in previous years recognised in the year (0.4) – (0.4) (0.9)
Gains/(losses) arising before 1 January that were not recognised in the year – (1.3) (1.3) –
Gains/(losses) arising in the year that were not recognised 0.5 0.3 0.8 (0.9)
Unrecognised gains/(losses) on hedges at 31 December 0.5 (1.0) (0.5) (0.9)
Expected to be recognised
In one year or less 0.5 – 0.5 0.4
In later years – (1.0) (1.0) (1.3)
0.5 (1.0) (0.5) (0.9)
58 Spirent plc Annual Report 2004
Notes to the accounts continued 30. Operating lease commitments
Annual commitments which expire:
2004 2003
£ million £ million
Group Company Group Company
In respect of land and buildings (subject to periodic rent reviews)
Within one year 0.5 – 0.3 –
In the second to ﬁfth years 5.0 0.1 5.2 0.1
Over ﬁve years 4.0 1.1 4.4 0.6
9.5 1.2 9.9 0.7
In respect of plant and equipment
Within one year 0.2 – 0.4 –
In the second to ﬁfth years 0.4 0.1 0.1 –
0.6 0.1 0.5 –
31. Capital and reserves
2004
£ million
Called up Share Capital Investment Proﬁt
share premium Capital redemption Merger in own and loss
capital account reserve reserve reserve shares
5
account
2
Group
At 1 January 31.5 697.5 17.7 0.7 – (2.6) (624.9)
Exchange adjustment on subsidiaries,
joint venture and associates –––––– (0.7)
New shares issued 0.3 3.3 (2.1) – – – –
Issue of new shares – Caw Networks, Inc. 0.1 3.2 (2.7) – – – –
Reversal of employee share scheme cost –––––– 0.2
Cancellation of share premium and 
capital redemption reserve
4
– (702.7) – (0.7) – – 703.4
Proﬁt for the year –––––– 16.0
Goodwill on disposal of subsidiaries 
acquired before 1998 –––––– 4.9
Transfer of investment in own shares
5
––––– 2.6 (2.6)
Gain on lapsed options –– (1.2) – – – 1.2
Actuarial gain recognised on the pension schemes–––––– 3.0
Taxation on actuarial gain –––––– (0.9)
Other movements –– (0.8) – – – –
At 31 December 31.9 1.3 10.9 – – – 99.6
Spirent plc Annual Report 2004 59 31. Capital and reserves continued
2004
£ million
Called up Share Capital Investment Proﬁt
share premium Capital redemption Merger in own and loss
capital account reserve reserve reserve shares
5
account
1
Company
At 1 January 31.5 697.5 17.7 0.7 1.2 (2.6) (583.5)
New shares issued 0.3 3.3 (2.1) ––––
Issue of new shares – Caw Networks, Inc. 0.1 3.2 (2.7) ––––
Reversal of employee share scheme cost –––––– 0.2
Cancellation of share premium and 
capital redemption reserve
4
– (702.7) – (0.7) – – 703.4
Loss for the year
3
–––––– (6.8)
Transfer of investment in own shares
5
––––– 2.6 (2.6)
Gain on lapsed options –– (1.2) – – – 1.2
Actuarial gain recognised on the pension schemes–––––– 3.0
Taxation on actuarial gain –––––– (0.9)
Other movements –– (0.8) ––––
At 31 December 31.9 1.3 10.9 – 1.2 – 114.0
Notes
1The Company’s proﬁt and loss account of £114.0 million (2003 £583.5 million deﬁcit) includes non-distributable reserves of £51.1 million (2003 £51.1 million), and a special 
non-distributable reserve of £61.6 million (2003 nil).
2At 31 December 2004 the cumulative amount of goodwill charged to reserves since 1977, net of goodwill relating to subsidiaries disposed of or impaired, is £36.4 million (2003 £41.3 million).
3The loss after taxation for the year dealt with in the accounts of the Company was £6.8 million (2003 loss £32.4 million).
4 On 24 November 2004 Spirent plc was granted an order of the High Court for the approval of the cancellation of the share premium account and capital redemption reserve 
(the Cancellation) which stood at that date at £702.7 million and £0.7 million, respectively. The Cancellation created a reserve in the accounts of the Company which was applied 
to eliminate the deﬁcit in distributable reserves. The balance of this reserve created after the deﬁcit in distributable reserves had been eliminated was transferred to a special 
non-distributable reserve. The special non-distributable reserve, which at 31 December 2004 stood at £61.6 million, will be increased in future years to the extent that the Company
subsequently realises any value from its assets in excess of the value at which those assets were recorded in the Company’s accounts at the time of the Cancellation.
The special non-distributable reserve will have a maximum value equal to the aggregate of the share premium account and capital redemption reserve at the time of the Cancellation,
being £703.4 million. The special non-distributable reserve will be used to eliminate deﬁcits arising in future years and is only capable of being distributed to the shareholders of the
Company once all the creditors of the Company which existed at the date of the Cancellation have consented to the cancellation or been satisﬁed in full.
5The investment in own shares relates to 3.5 million Ordinary shares (2003 3.5 million) held by the Spirent Sharesave Trust Limited (SST) and 9.5 million Ordinary shares 
(2003 9.5 million) held by the Spirent Employee Share Ownership Trust (ESOT). Shares held by the SST will be used to satisfy options under the Company’s Savings Related 
Share Option Schemes. Shares in the ESOT are primarily held to hedge awards under various discretionary employee share schemes.
The cost of investment in own shares has been deducted from the proﬁt and loss reserve at 31 December 2004.
The market value of own shares held in trust at 31 December 2004 was £9.6 million (2003 £7.6 million).
60 Spirent plc Annual Report 2004
Notes to the accounts continued Deﬁned beneﬁt pension schemes
Amounts included within reserves in respect of the deﬁned beneﬁt pension schemes are as follows:
2004 2003
£ million £ million
Group Company Group Company
Proﬁt and loss account excluding pension fund deﬁcit 125.8 140.2 (594.5) (553.1)
Pension fund deﬁcit note 10 (26.2) (26.2) (30.4) (30.4)
Proﬁt and loss account including pension fund deﬁcit 99.6 114.0 (624.9) (583.5)
Share capital
Authorised Issued and fully paid
2004 2003 2004 2003
£ million £ million £ million £ million
Called up share capital – Ordinary shares of 3
1
⁄ 3 pence each 41.7 41.7 31.9 31.5
Changes during the year in the Ordinary share capital were as follows:
Number of
Ordinary shares
million
Issued and fully paid at 1 January 2004 944.0
Allotted as deferred consideration for the acquisition of Caw Networks, Inc. 4.3
Allotted pursuant to share options and purchase rights exercised 7.9
Issued and fully paid at 31 December 2004 956.2
At the Annual General Meeting (AGM) held on 11 May 2004, shareholders gave authority for the Company to purchase up to 47.4 million of its own
Ordinary shares in the market subject to certain speciﬁed conditions. At 24 February 2005, no purchases have been made or are contracted to be made
under such authority.
In accordance with the rules of the following share schemes, options and purchase rights were exercised during the year which resulted in new Ordinary
shares being allotted by the Company as follows:
Number of Consideration
Ordinary shares received
million £000
Executive Schemes 0.1 18.9
Spirent Stock Incentive Plan 2.6 605.3
Netcom Amended and Restated Stock Option Plan 1.5 339.5
Caw Amended and Restated Stock Plan
1
0.3 27.4
All Employee Share Schemes 3.4 521.9
Total 7.9 1,513.0
Note
1The exercise consideration for options under this plan is paid in US dollars and has been converted into sterling in the above table at an exchange rate of £1 = $1.83, being the
average exchange rate for 2004.
Spirent plc Annual Report 2004 61 31. Capital and reserves continued
During the year, no shares were transferred from Spirent Sharesave Trust Limited.
On 4 January 2005, 2.7 million Ordinary shares were allotted following the automatic exercise of purchase rights under the Company’s US Employee
Stock Purchase Plan and the Global All Employee Share Purchase Plan. Between 1 January 2005 and 24 February 2005 approximately 1.2 million Ordinary
shares were allotted following exercises under other employee share schemes. With the exception of the foregoing, there has been no material increase
in the issued share capital, whether by exercise of options, purchase rights or otherwise, between the year end and 24 February 2005, the date on which
these Accounts have been signed.
Employee share schemes
At 31 December 2004 the following options and purchase rights over Ordinary shares have been granted and remained outstanding under the Company’s
various employee share schemes. Figures for the options or purchase rights outstanding and the exercise price per Ordinary share have each been adjusted,
where relevant, for the 3:1 subdivision of share capital in 2000 and for the rights issue effected in 2000.
Number of
outstanding
Option/purchase Exercise price options/purchase
right exercise per share rights
dates pence million
Discretionary schemes
1985 Executive Share Option Scheme a 29.04.98-26.04.05 108 0.1
1995 Executive Share Option Scheme a 29.04.99-04.08.14 16-598 27.0
International Executive Share Option Scheme b 11.04.98-10.04.05 104 0.1
Spirent Stock Incentive Plan
1
c 11.05.01-08.12.11 6-617 76.7
Acquisition related schemes
Netcom Amended and Restated Stock Option Plan d 23.07.99-19.07.09 15-151 8.7
Zarak Amended and Restated Stock Option Plan e 14.11.00-12.11.10 127-572 0.6
Caw Amended and Restated Stock Plan f 15.08.02-25.06.12 15-20
2
0.3
All employee share save schemes
3
UK Savings Related Share Option Scheme g 01.06.04-31.05.11 38-518 5.9
US Employee Stock Purchase Plan
4
h 04.01.05-04.01.05 50 2.5
Global All Employee Share Purchase Plan
4
i 04.01.05-04.01.05 50 0.2
Total
5
122.1
Notes
1A grant of options awarded in December 2003 under the Spirent Stock Incentive Plan (SSIP) is partially covered by 6.1 million Ordinary shares currently held in the ESOT. These
shares were originally purchased in the market to cover awards made under the Company’s now closed Long Term Share Purchase Plan and the Stock Appreciation Rights Plan but
the awards relating to the shares lapsed before exercise. Although 6.1 million Ordinary shares are included above in the number of options outstanding, market-purchased shares
held for the purpose of satisfying SSIP awards do not count towards the Company’s overall dilution calculations.
2Exercise prices per share for options under the Caw Amended and Restated Stock Plan are denominated in US dollars and are expressed as US cents in the above table.
3The Company has taken advantage of the exemption within UITF Abstract 17 ‘Employee Share Schemes’ in accounting for all employee share schemes.
4The exercise price and number of shares subject to the purchase rights outstanding cannot ultimately be determined until the maturity of each respective offering period 
(ie normally 12 months following the date of grant). The exercise price and number of purchase rights outstanding as shown above are based on the market price of an Ordinary
share (less the applicable 15 per cent discount) at the date of grant.
5At 31 December 2003 there were 108.5 million options/purchase rights outstanding.
62 Spirent plc Annual Report 2004
Notes to the accounts continued a) 1985 and 1995 Executive Share Option Schemes (ESOS)
The Inland Revenue approved 1995 ESOS incorporates the guidelines issued by the Association of British Insurers (ABI) at that time. It was subsequently
amended by the Board to facilitate the award of unapproved share options both in the UK and overseas. There are currently 328 participating executives
in the ESOS.
Awards under the 1995 ESOS, normally determined annually, are at the sole discretion of the Remuneration Committee after considering recommendations
made to it by the Chief Executive. No price is payable on the grant of an option and no options have been, or can be, granted at a discount to the
market price.
The normal exercise period for options granted under the ESOS is between the third and tenth anniversary of the date of grant. Options awarded under
the 1995 ESOS are subject to the achievement of an earnings per share (EPS) performance condition before they can be exercised. The condition is that
over a period of three consecutive ﬁnancial years, there has been an increase in the Company’s headline EPS which is at least 6 per cent more than the
increase in the Retail Price Index over the same period.
All ESOS grants made after 11 May 2000 to the executive directors and certain senior managers are subject to enhanced performance conditions on
exercise. These are more fully explained in the Report on directors’ remuneration on pages 19 to 26.
The Remuneration Committee may in future impose different performance targets which they consider to be no less demanding. Options granted
under the 1985 ESOS are exercisable unconditionally.
b) International Executive Share Option Scheme (IESOS)
Certain US executives have previously been granted unapproved options under the IESOS with participation and awards being at the discretion of the
Remuneration Committee. Options are exercisable unconditionally and normally between the third and tenth anniversary of the date of grant. Again,
no options have been granted at a discount to the market price. The IESOS is closed and has been replaced by the unapproved arrangements to the
1995 ESOS referred to in (a) above.
c) Spirent Stock Incentive Plan (SSIP)
The SSIP (formerly the Spirent Stock Option Plan) was introduced in 2000. This discretionary plan is primarily targeted at selected employees in the
Communications group with grants normally determined annually by reference to the seniority and contribution of the individual, together with the
performance of the relevant business and prevailing local market practice. Under the SSIP, grants are also permitted to selected newly hired and
promoted employees on a monthly basis.
Following an Extraordinary General Meeting held in June 2004, shareholders approved the renewal of the SSIP until the Company’s 2007 AGM along
with several amendments including the ability to award stock appreciation rights (SARs) as well as stock options. SARs will deliver the appreciation
value (ie the aggregated increase in the market value of an Ordinary share over the SAR price) in the form of new issue Ordinary shares. The SARs
approach will help the Company manage its dilution headroom more efﬁciently as only the SAR gain and not the entire share value will need to be
funded. Using a SARs-based approach, it is not possible to determine the precise level of dilution until the SARs are exercised. 20.1 million SARs, with
exercise prices of between 56 pence and 71 pence were outstanding at 31 December 2004, however, no SARs were exercised in 2004.
Awards made pursuant to the SSIP normally vest over four years, provided that the employee remains in employment. Awards normally become 
25 per cent exercisable on the ﬁrst anniversary of the date of grant, and thereafter in equal proportions on a monthly basis over a further 36 months.
Any award not exercised by the seventh anniversary of grant will lapse.
SSIP awards granted from June 2004 to certain senior managers will only become exercisable subject to the achievement of certain performance
conditions which are broadly the annual equivalent of the enhanced conditions for the ESOS, described above.
No price is payable on the grant of options or SARs and no options or SARs have been, or can be, granted at a discount to the market price.
d) Netcom Amended and Restated Stock Option Plan (NARSOP)
Spirent completed the acquisition of Netcom Systems, Inc. (Netcom) in 1999. $44.5 million of the total consideration was satisﬁed through the 
roll-over of outstanding options over Netcom shares, primarily held by Netcom employees, into options over approximately 23.8 million Ordinary
shares (as adjusted) on substantially similar terms as previously existed under the NARSOP. All remaining outstanding options are fully vested and
exercisable until they expire.
Spirent plc Annual Report 2004 63 31. Capital and reserves continued
e) Zarak Amended and Restated Stock Option Plan (ZARSOP)
Out of a total consideration of approximately 44.9 million Ordinary shares issued for the acquisition of Zarak Systems Corporation (Zarak) in 2000,
approximately 3.8 million shares arose in connection with the roll-over of outstanding options over Zarak shares into options over Spirent Ordinary
shares on substantially similar terms as previously existed under the ZARSOP. These options are primarily held by Zarak employees and have either 
a ﬁve or 10 year life from the original date of grant.
Unvested rolled-over options were capable of immediate exercise (ie prior to their respective vesting date) and any shares arising from such an event
were held in the ESOT until the relevant vesting date. The option holder was entitled to the beneﬁcial (but not legal) interest in the shares whilst they
were held in trust but they remained subject to forfeiture (with the original option exercise prices being refunded to the participant) if the participant’s
employment was terminated prior to the vesting date. All ZARSOP options and resulting shares held in the ESOT have now fully vested.
f) Caw Amended and Restated Stock Plan (CARSP)
Out of a total initial consideration for the acquisition of Caw Networks, Inc. (Caw) in 2002 of $49 million, approximately $4 million was in respect 
of Spirent Ordinary shares and options which arose on the roll-over of outstanding options and shares under the previous Caw employee stock plan.
The options and shares will vest over a period expiring in 2006 on substantially similar terms as previously existed under the CARSP. The options are
held by Caw employees and have a 10 year life from the original date of grant. Pursuant to the terms of the Merger Agreement for Caw, an additional
cash payment of 78.8 US cents was payable as each share vested or upon the exercise of a vested option.
Any Ordinary shares issued under the CARSP are restricted until they have vested or are not at risk from forfeiture under the plan rules. Unvested
rolled-over options are capable of immediate exercise (ie prior to their respective vesting date) and any shares arising from such an event are held in
the ESOT until the relevant vesting date. The option holder is entitled to the beneﬁcial (but not legal) interest in the shares whilst they are held in the
ESOT but they remain subject to forfeiture (with the original option exercise prices being refunded to the participant) if the participant’s employment
is terminated prior to the vesting date.
In accordance with the original terms for acquiring Caw, in March 2004, Spirent allotted 4.3 million Ordinary shares and issued 75,000 options
following the achievement by Caw of certain technical and ﬁnancial earn out targets. Participation in the CARSP entitled the participants to a share 
in the earn out. Any earn out payment for an outstanding CARSP option was made by increasing the number of shares subject to the option and
decreasing the per share exercise price so as to preserve the existing aggregate total exercise price. Of the 4.3 million shares, 54,000 shares were issued
to the ESOT in respect of unvested restricted shares, which remained subject to forfeiture prior to vesting. As a result of the earn out, the additional
cash payment referred to above was adjusted to 66.9 US cents as each share vests or upon the exercise of a vested option.
In accordance with the rules of the ESOS noted in (a) above, the Ordinary shares subject to rolled-over options from the acquisition of Netcom, Zarak,
and Caw, or granted under the SSIP, do not count toward ABI scheme limits. The plans mentioned in (d) to (f) above are closed to new entrants and no
further awards of options can be made under them.
g) UK Savings Related Share Option Scheme (SRSOS)
The SRSOS is an Inland Revenue approved scheme and is open to all UK employees, subject to a qualifying service period. The employee enters into 
a Save-As-You-Earn contract with the Company’s savings carrier to save a regular sum of between £5 and £250 per month for a ﬁxed period of either
three or ﬁve years.
No price is payable on the grant of an option. The option exercise price is calculated by reference to the middle market price of an Ordinary share on the
business day prior to the beginning of the invitation period, discounted by up to 20 per cent at the Board’s discretion. Options are normally exercisable
within six months of the third, ﬁfth or seventh anniversary of the contract commencement date, as elected by the option holder at the start of the contract.
The Company has established an employee share ownership trust to honour the contractual commitment to deliver Ordinary shares against the valid
exercise of outstanding options under the SRSOS and the SST, a wholly-owned subsidiary of Spirent plc, acts as sole trustee. During the year no shares
were transferred to participants. SST has waived all rights to receive dividends payable on its registered shareholding except for 0.01 pence per annum
in aggregate and accordingly such shareholding is not included in the Company’s EPS calculation as referred to in note 12.
64 Spirent plc Annual Report 2004
Notes to the accounts continued h) US Employee Stock Purchase Plan (ESPP)
The ESPP operates on a broadly similar basis to the SRSOS. It enables the Company to grant eligible US employees the right to acquire Spirent American
Depositary Shares using proceeds of a savings contract. When joining the ESPP, participants enter into a contract to save up to 15 per cent of basic
salary (gross), subject to an individual maximum of $1,000 (net) per month, over a contract period of 12 months by way of regular payroll deductions.
No price is payable on the grant of a purchase right. The purchase price will be based on the market value of an Ordinary share either on the ﬁrst day 
of the offering period or on the last day of the offering period, whichever price is lower, less a 15 per cent discount or, where shares are to be subscribed,
their nominal value (if greater).
i) Global All Employee Share Purchase Plan (GAESPP)
The GAESPP was approved by shareholders in 2001 and offers employees in countries other than the UK or US an opportunity to share in the Company’s
performance through share ownership. The GAESPP was implemented in Canada in January 2002 and operates on similar terms to the ESPP above, with
participants entering into a 12 month contract to save up to 15 per cent of basic salary (gross), subject to an individual maximum of Cdn $1,000 (net)
per month.
j) Stock Appreciation Rights Plan (SARP)
The SARP was introduced in September 1999 as an interim incentive arrangement for the employees of Netcom following the closure of the NARSOP
described in (d) above and subsequently for certain other employees in the Communications group. Under the SARP, recruitment, promotion and recognition
awards over Ordinary shares have been made in line with historic and local competitive market practice on a quarterly basis at the discretion of a
committee of senior executives. The operation of the SARP reﬂects as far as practicable the now closed NARSOP. Accordingly, rights under the SARP
vest over four years, 25 per cent vesting one year after the date of grant and the remainder vesting on a monthly basis over a further 36 months.
Rights granted are not subject to the fulﬁlment of any pre-exercise performance conditions.
The SARP will deliver the appreciation value (ie the aggregated increase in the market value of an Ordinary share over the rights price) in the form of
existing Ordinary shares which have been purchased in the market by the Company’s ESOT. The maximum number of shares over which SARP awards
can be made is 5.25 million.
At 31 December 2004, the following rights were outstanding under the SARP:
Number of
rights
Rights price outstanding
Rights exercise dates pence million
10.09.00-29.06.10 182-416 2.6
Spirent Employee Share Ownership Trust (ESOT)
At 31 December 2004 the ESOT held 10.3 million Ordinary shares (2003 11.2 million Ordinary shares) to satisfy awards under various share based
incentive schemes as described above. Of this number, 0.6 million Ordinary shares were unconditionally vested at 31 December 2004 (2003 1.3 million
Ordinary shares).
Spirent plc Annual Report 2004 65 32. Acquisition of subsidiaries
2004 2003
£ million £ million
Total Total
Minority interest 1.1 –
Net assets 1.1 –
Goodwill – 2.7
1.1 2.7
Consideration
Issue of Ordinary shares – Caw Networks, Inc. 0.6 2.7
Cash (including expenses) 1.1 –
Adjustment to consideration – prior year acquisitions (0.6) –
1.1 2.7
The cash ﬂows in respect of the purchase of subsidiaries are as follows
Cash (including expenses) (1.1) –
Cash (accrued in prior years) – (1.1)
Net cash outﬂow on acquisitions (1.1) (1.1)
The issue of Ordinary shares related to deferred consideration pursuant to the acquisition agreement of Caw Networks, Inc. 4.3 million Ordinary shares
were issued on 31 March 2004 when the Spirent Ordinary share price was 75.5 pence. The consideration had been estimated in 2003 and provided at
£2.7 million.
During the year we acquired the minority shareholdings in two of our Network Products subsidiaries for a cash consideration of £1.1 million.
33. Disposal of operations
2004 2003
£ million £ million
Total Total
Net assets disposed of
Fixed assets
Intangible assets – 0.6
Tangible assets 0.1 0.7
Stocks 0.2 2.3
Debtors 1.8 2.4
Creditors (2.4) (4.5)
Provisions (1.2) –
Investment in joint venture – 54.3
Net (liabilities)/assets (1.5) 55.8
Goodwill reinstated 4.9 2.6
3.4 58.4
(Loss)/proﬁt on disposal of operations (0.9) 3.6
2.5 62.0
Satisﬁed by
Cash (less expenses) 2.5 62.0
The cash ﬂows in respect of the disposal of operations are as follows
Cash (less expenses) – net cash inﬂow from disposals 2.5 62.0
During the year the Group disposed of its aerospace maintenance, repair and overhaul software business from within its Systems group.
The business sold during the year contributed £1.2 million to the Group’s operating cash ﬂows, contributed nil in respect of net returns on investments
and servicing of ﬁnance, paid £0.2 million of taxation and utilised £0.1 million for capital expenditure.
66 Spirent plc Annual Report 2004
Notes to the accounts continued 34. Related party transactions
During the year Group companies entered into the following transactions with related parties who are not members of the Group:
2004
Sales to Purchases from Amounts owed Amounts owed
related parties related parties by related parties to related parties
£ million £ million £ million £ million
Associates
Tyton Company of Japan 1.3 0.8 0.3 0.6
3M/ECC – 1.5 – 0.2
2003
Sales to Purchases from Amounts owed Amounts owed
related parties related parties by related parties to related parties
£ million £ million £ million £ million
Associates
Tyton Company of Japan 1.0 0.9 0.2 0.6
3M/ECC – 1.2 – 0.2
Sales to and purchases from related parties are made at normal market prices. Outstanding balances at year end are unsecured and settlement occurs
in cash.
Spirent plc Annual Report 2004 67 % held at
31 December 2004
Communications
Communications performance analysis and service assurance systems
Performance Analysis
Spirent Communications Inc 100
Calabasas, California, USA
Eatontown, New Jersey, USA
Honolulu, Hawaii, USA
Sunnyvale, California, USA
Spirent Communications of Ottawa Ltd 100
Nepean, Ontario, Canada
Spirent Communications (SW) Ltd* 100
Paignton, Devon, UK
Service Assurance
Spirent Communications of Rockville, Inc. 100
Rockville, Maryland, USA
Spirent Communications (Scotland) Ltd* 100
Hamilton, Glasgow, UK
Spirent Communications Ltd* 100
Crawley, West Sussex, UK
Network Products
Electrical and data network cable management and connectivity products 
and systems
Trading divisions of Spirent plc
HellermannTyton
Aldridge, West Midlands, UK
Plymouth, Devon, UK
Wythenshawe, Manchester, UK
HellermannTyton (Pty) Ltd 100
Johannesburg, South Africa
HellermannTyton SA 100
Trappes, France
HellermannTyton AB 100
Järfälla, Sweden
HellermannTyton GmbH 100
Vienna, Austria
HellermannTyton GmbH 100
Tornesch, Germany
HellermannTyton Ltda 100
Jundaí, Brazil
HellermannTyton Pte Ltd 75
Yishun, Singapore
HellermannTyton Data Ltd* 100
Northampton, UK
HellermannTyton Corporation 100
Milwaukee, Wisconsin, USA
Tyton Company of Japan Ltd*‡ 49
Tokyo, Japan
% held at
31 December 2004
Systems
Control systems for the mobility and industrial markets
PG Drives Technology Ltd 100
Christchurch, Dorset, UK
PG Drives Technology Inc 100
Anaheim, California, USA
The above companies operate and are incorporated in the countries listed. All shareholdings
in the companies are held indirectly by Spirent plc, except where indicated by an asterisk (*)
where the shareholding is held directly by Spirent plc. The activity mentioned is indicative
and not comprehensive.
The percentage held reﬂects the proportion of shares controlled and not the beneﬁcial interest.
‡ Associate
68 Spirent plc Annual Report 2004
Principal divisions, subsidiaries and associates Spirent plc Annual Report 2004 69
Financial history
£ million
2004 2003 2002
1
2001
1
2000
1
Consolidated proﬁt and loss account
Turnover – Group and share of joint venture 475.0 488.6 634.5 880.1 772.7
Less share of joint venture’s turnover – (22.4) (75.6) (78.3) (76.0)
Turnover 475.0 466.2 558.9 801.8 696.7
Operating proﬁt/(loss) 30.8 18.8 (970.6) (734.3) 110.0
Operating exceptional items
Goodwill impairment – – 923.3 724.6 –
Other 2.9 7.5 41.6 34.9 2.2
Goodwill amortisation 9.1 9.7 56.1 86.6 25.7
Operating proﬁt before goodwill amortisation and exceptional items 42.8 36.0 50.4 111.8 137.9
Joint ventures’ (loss)/proﬁt (0.7) 2.7 7.4 9.6 13.3
Associates’ proﬁt net of goodwill amortisation 2.8 2.1 0.8 1.2 2.7
Non-operating exceptional items
(Loss)/proﬁt on disposal and closure of operations (0.9) 3.6 (48.4) 14.5 (18.1)
Proﬁt on disposal of tangible ﬁxed assets – ––– 3.2
Proﬁt/(loss) before interest 32.0 27.2 (1,010.8) (709.0) 111.1
Net interest payable (6.8) (9.3) (12.3) (22.8) (29.3)
Exceptional interest payable (0.5) (16.1) – – –
Other ﬁnance (expense)/credit (0.7) (1.5) (0.3) 0.4 –
Proﬁt/(loss) before taxation 24.0 0.3 (1,023.4) (731.4) 81.8
Taxation (7.7) (0.6) (26.9) (32.4) (30.6)
Minority interest (0.3) (0.2) (0.4) (0.2) (0.5)
Proﬁt/(loss) attributable to shareholders 16.0 (0.5) (1,050.7) (764.0) 50.7
Dividends – – (12.5) (40.0) (36.1)
Proﬁt/(loss) for the year 16.0 (0.5) (1,063.2) (804.0) 14.6
Consolidated balance sheet
Intangible assets 88.8 101.6 113.6 987.7 1,816.8
Tangible assets 86.3 90.2 110.0 137.6 136.2
Investments 15.8 14.9 63.4 62.6 53.6
Working capital (excluding cash, overdrafts and deferred tax) 23.2 28.3 46.6 32.7 111.1
Operating assets 214.1 235.0 333.6 1,220.6 2,117.7
Net borrowings (26.4) (57.5) (161.8) (179.1) (326.4)
Provisions for liabilities and charges (15.7) (20.2) (28.4) (1.5) (2.1)
Deferred tax asset – –– 25.8 15.8
Net assets (excluding pension liability) 172.0 157.3 143.4 1,065.8 1,805.0
Pension liability (27.0) (35.2) (46.2) (15.6) –
Net assets (including pension liability) 145.0 122.1 97.2 1,050.2 1,805.0
Shareholders’ funds – equity 143.7 119.9 95.1 1,047.8 1,801.3
Minority interest – equity 1.3 2.2 2.1 2.4 3.7
145.0 122.1 97.2 1,050.2 1,805.0
Investment
Capital expenditure
Owned assets 25.3 16.7 27.6 59.4 44.8
Leased assets 0.3 0.3 0.2 0.8 2.5
Depreciation 25.4 29.3 33.6 37.2 25.1
Product development 67.3 66.0 77.7 95.9 60.3 70 Spirent plc Annual Report 2004
Financial history continued
2004 2003 2002
1
2001
1
2000
1
Share information
Basic earnings/(loss) per share
4
(pence) 1.70 (0.05) (113.90) (83.49) 7.40
Headline earnings per share
4
(pence) 2.99 2.31 3.36 7.70 12.61
Diluted earnings/(loss) per share (pence) 1.67 (0.05) (113.90) (83.49) 7.18
Dividend per share (pence) – – 1.35 4.35 4.35
Fully paid Ordinary shares in issue at year end (million) 956.2 944.0 939.4 933.2 926.5
£ million
Segmental analysis
Turnover
Performance Analysis 176.8 148.7 184.0 241.4 280.0
Service Assurance 74.7 91.7 131.4 189.2 9.2
Communications 251.5 240.4 315.4 430.6 289.2
Network Products 187.8 174.4 164.7 170.4 181.4
Systems 31.3 37.9 34.3 29.1 26.5
470.6 452.7 514.4 630.1 497.1
Disposals
2
4.4 13.5 44.5 171.7 199.6
475.0 466.2 558.9 801.8 696.7
Operating proﬁt
3
Performance Analysis 19.7 4.4 10.0 38.6 97.0
Service Assurance 0.2 9.4 20.8 44.8 1.6
Communications 19.9 13.8 30.8 83.4 98.6
Network Products 20.4 16.7 15.0 14.9 25.3
Systems 1.9 6.1 3.8 4.2 5.1
42.2 36.6 49.6 102.5 129.0
Disposals
2
0.6 (0.6) 0.8 9.3 8.9
42.8 36.0 50.4 111.8 137.9 Spirent plc Annual Report 2004 71
£ million
2004 2003 2002
1
2001
1
2000
1
Operating proﬁt/(loss) by source
Europe 20.4 21.5 18.9 16.9 17.8
North America 19.7 13.8 29.8 84.0 108.5
Asia Paciﬁc, Rest of Americas, Africa 2.1 1.3 0.9 1.6 2.7
42.2 36.6 49.6 102.5 129.0
Disposals
2
0.6 (0.6) 0.8 9.3 8.9
42.8 36.0 50.4 111.8 137.9
Operating exceptional items
Goodwill impairment – – (923.3) (724.6) –
Other (2.9) (7.5) (41.6) (34.9) (2.2)
Goodwill amortisation (9.1) (9.7) (56.1) (86.6) (25.7)
30.8 18.8 (970.6) (734.3) 110.0
Earnings before interest, taxation, depreciation, amortisation and 
exceptional items 68.2 65.3 84.0 149.0 163.0
Impact of exchange rate movement on proﬁt before taxation
3
(Cost)/beneﬁt (2.5) 0.7 (1.1) 1.9 6.1
Rates against sterling
Average exchange rates for major currencies
US dollar 1.83 1.64 1.51 1.44 1.51
Euro 1.47 1.45 1.59 1.61 1.64
Number
Average employment by geographical area
Europe 1,742 1,722 1,909 2,730 2,826
North America 1,988 2,071 2,622 3,608 2,894
Asia Paciﬁc, Rest of Americas, Africa 791 705 648 1,474 1,230
4,521 4,498 5,179 7,812 6,950
Notes
1Restated in 2002 and 2001 for the adoption of FRS 17 ‘Retirement Beneﬁts’ and in 2002, 2001 and 2000 for the adoption of UITF 38 ‘Accounting for ESOP Trusts’.
2 Disposals include discontinued operations and other less signiﬁcant disposals and closures.
3 Before goodwill amortisation and exceptional items.
4The weighted average number of shares in issue used to calculate earnings/(loss) per share excludes the shares held by the SST, the ESOT and Greenwood Nominees. Shareholder analysis
At 24 February 2005, the number of registered shareholders was 7,207
and the number of Ordinary shares in issue was 959.6 million.
Percentage Number Percentage
Number of total of shares of share
of holdings shareholders million capital
Range of holdings:
1-5,000 4,963 68.87 7.9 0.83
5,001-10,000 880 12.21 6.6 0.69
10,001-50,000 883 12.25 18.8 1.96
50,001-100,000 125 1.73 8.8 0.90
100,001-250,000 111 1.54 18.3 1.91
250,001-500,000 66 0.92 23.6 2.46
500,001-1,000,000 60 0.83 43.5 4.53
1,000,001-Highest 119 1.65 832.1 86.72
Total 7,207 100.00 959.6 100.00
Held by:
Individuals 5,532 76.76 33.2 3.46
Institutions 1,675 23.24 926.4 96.54
Total 7,207 100.00 959.6 100.00
Lloyds TSB Registrars*
Enquiries concerning shareholdings, change of address or other
particulars should be directed in the ﬁrst instance to the Company’s
Registrar, Lloyds TSB Registrars on 0870 600 3964. They also provide 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.
Spirent Single Company ISA
Lloyds TSB Registrars (a division of Lloyds TSB Bank plc, which is regulated
by the Financial Services Authority) operate a Single Company Individual
Savings Account (ISA) in which Spirent Ordinary shares can be held in a
tax efﬁcient manner. Full details and an application form can be obtained
from Lloyds TSB Registrars on 0870 242 4244.
Internet, telephone and postal share dealing services – 
Lloyds TSB Registrars
Lloyds TSB Registrars Shareview Dealing is a telephone and Internet
service that provides a simple and convenient way of buying and selling
Spirent Ordinary shares. For telephone services call 0870 850 0852
between 8.30am and 4.30pm, Monday to Friday, and for Internet 
services visit www.shareview.co.uk/dealing
A postal dealing service for buying and selling Ordinary shares is also
available and a dealing form can be obtained by calling 0870 242 4244.
Share price information
The Spirent share price is available via the Company’s website
(www.spirent.com) and also in various newspapers published in the UK.
UK capital gains tax
For the purposes of capital gains tax, the market value of an Ordinary
share on 31 March 1982, as adjusted for subsequent capitalisation issues,
was 97.233 pence per share.
72 Spirent plc Annual Report 2004
Shareholder information
American Depositary Receipts (ADRs) – The Bank of New Y ork*
The Company’s shares are traded on the New York Stock Exchange
(ticker: SPM) in the form of American Depositary Shares (ADS) and 
these are evidenced by ADRs, each one of which represents four Ordinary
shares. The Bank of New York is the authorised Depositary bank for the
Company’s ADR programme. The Company’s ADS price is quoted daily 
in the Wall Street Journal and can be obtained from either the Spirent
website or via the New York Stock Exchange website at www.nyse.com
Spirent website at www.spirent.com
The Spirent website provides further information about Spirent and 
its operating groups and also provides access to annual reports, press
releases, share price information and links to Spirent operating group
websites. Additional corporate governance information may also be 
found on this website.
Unsolicited mail
The Company is obliged by law to make its share register available 
upon request to the public and to other organisations, which may use 
it as a mailing list, resulting in shareholders receiving unsolicited mail.
Shareholders wishing to limit the receipt of such mail should write 
to the Mailing Preference Service, DMA House, 70 Margaret Street,
London W1W 8SS or call +44 (0)20 7291 3310 for an application 
form or visit www.mps-online.org.uk
ShareGIFT
Shareholders who hold only a small number of shares, where dealing costs
may make it uneconomical to sell them, may wish to consider donating
them to charity through ShareGIFT, a registered charity administered by
The Orr Mackintosh Foundation. The relevant share transfer form can be
obtained from Lloyds TSB Registrars. Further information is available at
www.sharegift.org or telephone +44 (0)20 7337 0501.
Annual General Meeting
The Company’s Annual General Meeting will be held at 10.30am on
Wednesday 4 May 2005 at the Copthorne Hotel (London Gatwick),
Copthorne Way, Copthorne, Crawley, West Sussex RH10 3PG United
Kingdom.
Advisers
Auditor
Ernst & Young LLP*
Brokers
JPMorgan Cazenove Limited
Citigroup
Financial Adviser
N M Rothschild & Sons Limited
* Contact details appear on the inside back cover. Contact details
Cautionary statement regarding forward-looking statements
This Annual Report may contain forward-looking statements (as that term is deﬁned in the United States
Private Securities Litigation Reform Act of 1995) 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.
Such factors include, but are not limited to: the extent to which customers continue to invest in next-
generation technology and deploy advanced IP-based services; our ability to successfully expand our
customer base; our ability to continue to beneﬁt from generally improving market conditions; the
prevailing market conditions and pace of economic recovery; our ability to improve efﬁciency and 
adapt to economic changes and other changes in demand or market conditions; our ability to develop
and commercialise new products and services, extend our existing capabilities in IP services and expand 
our product offering internationally; our ability to attract and retain qualiﬁed personnel; the effects of
competition on our business; ﬂuctuations in exchange rates and heavy exposure to a weak US dollar;
changes in the business, ﬁnancial condition or prospects of one or more of our major customers; risks 
of doing business internationally; the ﬁnancial burden of our pension fund deﬁcit; risks relating to the
acquisition or sale of businesses and our subsequent ability to integrate businesses; our reliance on
proprietary technology; our exposure to liabilities for product defects; our reliance on third party
manufacturers and suppliers; and other risks described from time to time in Spirent plc’s Securities and
Exchange Commission periodic reports and ﬁlings. 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.
Head ofﬁce and registered ofﬁce
Spirent plc
Spirent House
Crawley Business Quarter
Fleming Way
Crawley
West Sussex RH10 9QL
United Kingdom
Tel: +44 (0)1293 767676
Fax: +44 (0)1293 767677
Email: plc@spirent.com
Website: www.spirent.com
Spirent plc
Registered in England No: 470893
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
United Kingdom
Tel: +44 (0)20 7951 2000
Website: www.ey.com
Registrar
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex BN99 6DA
United Kingdom
Service Helplines:
Tel: 0870 600 3964 (UK)
Tel: +44 121 415 7047 (overseas)
Website: www.shareview.co.uk
ADR depositary
The Bank of New York
Investor Relations
PO Box 11258
Church Street Station
New Y ork
NY 10286-1258
USA
Tel: 1 888 BNY ADRS (toll free – US)
Tel: +1 (610) 382 7836 (outside US)
Email: shareowners@bankofny.com
Website: www.adrbny.com www.spirent.com
Spirent and the Spirent logo are trademarks or registered
trademarks of Spirent plc.All other trademarks or registered
trademarks mentioned herein are held by their respective
companies. All rights reserved.
Designed and produced by CGI BrandSense.
Front cover photography by Ric Gemmell.
Printed by CTD Printers.
The paper used in this report is elemental chlorine-free.