inspired
innovation
spirent plc annual report 2005 contents
1 our business at a glance
2 summary of results
3 chairman’s statement
4 chief executive’s overview
6 operating review
9 financial review
12 board of directors
13 corporate social responsibility statement
15 report of the directors
16 statement of directors’ responsibilities in respect of the ﬁnancial statements
17 directors’ statement on corporate governance
20 report on directors’ remuneration
27 independent auditors’ report to the members of spirent plc
28 consolidated income statement
29 consolidated statement of recognised income and expense
30 consolidated balance sheet
31 consolidated cash ﬂow statement
32 notes to the consolidated ﬁnancial statements
95 independent auditors’ report to the shareholders of spirent plc
96 company balance sheet
97 notes to the parent company ﬁnancial statements
114 principal divisions subsidiaries and associates
115 financial history
118 shareholder information
119 glossary
120 contact details
spirent is a leading communications technology company focused on delivering
innovative systems and services to meet the needs of customers worldwide we are 
a global provider of performance analysis and service assurance solutions that enable
the development and deployment of nextgeneration networking technologies such as
broadband services internet telephony 3g wireless and web applications and security
testing the systems group develops power control systems for specialist electrical
vehicles in the mobility and industrial markets
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 2005
and complies with uk regulationsthe annual report is available on spirent’s website
at wwwspirentcom
a separate annual report on form 20f is being prepared to meet us regulations
and will be ﬁled with the us securities and exchange commission by 30 june 2006 spirent plc annual report 2005 1
our business at a glance
we help the world communicate 
faster better and more efficiently
performance anal ysis
spirent’s performance analysis solutions include instruments and systems that measure and analyse
the performance of network equipment particularly the devices that route voice and data messages
to their destination our solutions accelerate the proﬁtable development and deployment of network
equipment and services by emulating realworld conditions in the lab and assuring endtoend
performance of largescale networks these solutions lower development costs and minimise risks
while improving interoperability and scalability
service assurance
our service assurance solutions include remote test fault and service management systems that 
help service providers diagnose problems and determine the action required to ﬁx them spirent’s
service assurance solutions make sure revenuegenerating services are provided or repaired efﬁciently
and effectively customers using spirent’s service assurance solutions beneﬁt through reduced
operating costs improved operations performance metrics and improved customer experience
systems
pg drives technology is a leading supplier of sophisticated electronic control systems for specialist
electrically powered vehicles in the mobility and industrial markets 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 other vehicle functions including seating or platform position lights
turn indicators and vehicle diagnostics 2 spirent plc annual report 2005
summary of results
£ million 2005 2004 change 
continuing group
revenue 2593 2872 10
operating proﬁt
1
115 229 50
adjusted proﬁt before tax
2
49 154 68
reported lossproﬁt before tax 417 112 –
basic lossearnings per share pence 397 098 –
total group
adjusted earnings per share
3
pence 230 314 27
the hellermanntyton division has been treated as a discontinued operation in accordance with international financial reporting standards the table above and the text
below relate to continuing operations only unless otherwise stated
strategic progress
• the disposal of the hellermanntyton division for 
£2889 million announced on 15 december 2005 was
completed on 15 february 2006 proceeds are being used to
repay debt substantially fund the pension scheme buy back
up to £50 million of shares and make selective acquisitions
• we have transformed spirent into a focused
communications company with a signiﬁcantly improved
ﬁnancial position
• the acquisitions of swissqual and quadtex in 2006 will
enhance spirent’s market presence and enable our entry
into new and growing markets
overview of results
• we took ﬁrm actions to address the losses in service
assurance that negatively impacted the ﬁrst half which
resulted in recovery in the second half
performance analysis
• overall revenues and operating proﬁt
1
were slightly ahead
of 2004
• activity levels in the fourth quarter recovered somewhat
following a weaker third quarter
• our wireless activities had a record year with sales growing
by 17 per cent
• launch of the new uniﬁed platform spirent testcenter™
has resulted in competitive wins with new and existing
customers in the second half further progress will be 
made through the addition of greater functionality and
automation over the next 18 months
service assurance
• the division stabilised in the second half reporting a
signiﬁcantly reduced operating loss
1
of £06 million 
ﬁrst half operating loss
1
£90 million
• we are concentrating on the development of new 
solutions for triple play and advanced business services
systems
• the group grew revenue by 20 per cent to £377 million 
and operating proﬁt
1
by 29 per cent to £44 million
notes
1 before material onetime items goodwill impairment and sharebased payment
2 before material onetime items goodwill impairment sharebased payment proﬁt on the disposal of operations and costs associated with the part prepayment of loan notes
3 adjusted earnings per share is based on adjusted earnings as set out in note 13 to the consolidated ﬁnancial statements in 2005 spirent was transformed into a focused communications
business in the first half of the year we carried out major
restructuring within the service assurance division in december
we announced the proposed disposal of the hellermanntyton
division and our share of its associated companies to funds
controlled by doughty hanson  co limited we believe the
consideration of approximately £2889 million at a cash
freedebt free equivalent value represents fair value for the
business and reflects its strong performance under our
management as a result of this sale the group’s financial
position has been signiﬁcantly strengthened
following approval by shareholders at an extraordinary general
meeting held on 24 january 2006 the disposal was completed
on 15 february 2006as previously indicated the proceeds have
been used to repay the outstanding loan notes of £715 million
together with the make whole amount of £74 million and
associated swap break fees of £23 million in addition a special
contribution of £470 million has been made to substantially
fund the uk ﬁnal salary pension scheme and the board intends
to return up to £50 million to shareholders through an on
market share repurchase programme over the coming year
to reﬂect the transformation of the group a proposal will be
made at the forthcoming annual general meeting to rename
spirent plc as spirent communications plc
james wyness will retire from the board with effect from the
date of the 2006 annual general meeting and we would like to
thank him for his valuable contribution during his long service
as a nonexecutive director marcus beresford will assume the
responsibilities of the senior independent director on mr wyness’
retirement
i would like to take this opportunity to thank all of our employees
for their contribution during this year of transformationwe wish
the employees of hellermanntyton success under their new
ownership and thank them for their contribution over many years
spirent plc annual report 2005 3
chairman’s statement
in 2005 spirent was transformed into a 
focused communications business
john weston cbe
chairman
operating profitloss and return on sales are used by the group as key measures of
operating performance and are stated in the text before the effect of material onetime
items goodwill impairment and sharebased payment so that periodonperiod comparisons
are not distorted
the hellermanntyton division for the purposes of these results has been presented as a
discontinued operation and our financial results are presented and discussed for the
continuing spirent group unless otherwise stated 4 spirent plc annual report 2005
chief executive’s overview
introduction and strategy
since joining spirent as chief executive i have set out to transform
the group into a focused communications company during 2005
we have been busy reshaping and restructuring the business
culminating in the disposal of hellermanntyton as well as starting
in 2006 to make selective acquisitions
the decision to focus on communications reﬂects our view that
the sector offers spirent the best top and bottom line growth
opportunities in the mid and long term leveraging our leading
market positions in our key product segments
we are therefore continuing to invest in organic growth
opportunities through research and development and sales and
marketing activities and the launch of new products such as the
spirent testcenter™
we will also continue to make selective acquisitions these
acquisitions will be a good strategic ﬁt with our existing activities
as well as expanding our customer base broadening our
geographic coverage or enabling entry into new markets the
principal strategic drivers for acquisition are to expand our market
position and our competitive offering into markets where we
see strong growth opportunitiesthis will ensure that we remain
a core supplier to our customers whilst at the same time
accelerating our development plans to keep ahead of competition
we will shortly establish our operational headquarters in sunnyvale
california in the centre of silicon valley where we have the
highest concentration of customers i will relocate in the spring
but we will maintain a small corporate headquarters in the uk
results overview
the group’s 2005 results were principally affected by the
operating losses incurred by the service assurance division
which were described in detail at the time of the interim results
in august 2005 these losses were substantially reduced in the
second half as a result of the actions we took in the ﬁrst half
material onetime items of £84 million have been expensed in
the year of this £39 million is in relation to restructuring
actions in the service assurance division and £14 million for
inventory writedowns again in this division other material one
time items of £31 million have been taken in relation to supply
chain initiatives and other restructuring actions within the
group this was reported in our interim results
in the first half we took a goodwill impairment charge of 
£370 million due to the drop in activity in the service assurance
division
performance analysis
revenue and operating proﬁt in the performance analysis division
for 2005 were slightly up on 2004 in this division several of our
end markets were weaker than had been anticipated earlier in
the year particularly so in the third quarter although activity in
the fourth quarter did recover somewhat in addition we are in
a product transition phase as we progressively introduce new and
improved products and solutions encouragingly sales to some
of our largest customers in the equipment manufacturing sector
grew by more than 30 per cent and the division’s wireless and
position location test activities experienced their best year ever
service assurance
revenue in the service assurance division was down 43 per cent
compared with 2004 and as a result the division reported an
operating loss of £96 million of which £90 million was incurred
in the ﬁrst half in the ﬁrst quarter of 2005 our major customers
the us service providers had delayed the release of their full
since joining spirent as chief executive i have set out to transform the group
into a focused communications company during 2005 we have been busy
reshaping and restructuring the business culminating in the disposal of
hellermanntyton as well as starting in 2006 to make selective acquisitions
anders gustafsson
chief executive capital spending budgets partly due to merger activity with a larger
proportion of these budgets shifting towards nextgeneration
rather than existing networksas these trends became apparent
we undertook signiﬁcant restructuring actions in the division
including changing senior management reducing headcount by
around 260 approximately 40 per cent of the total workforce
which resulted in a much reduced loss for the second half of
£06 million during 2005 we have refocused our product
development efforts to generate new solutions for triple play
and advanced business services this will continue through 2006
systems
our systems group grew revenue and operating profit by 
20 per cent and 29 per cent respectively beneﬁting from the
launch of two new wheelchair control systems
acquisitions in 2006
on 23 january 2006 we announced the acquisition of 
swissqual holding ag “swissqual” for an initial consideration
of £277 million paid in cash with up to a further £124 million
payable depending on revenue growth and various technical and
ﬁnancial milestones swissqual provides world class products
and talent in the development of voice and video solutions that
analyse recognise and improve the quality of experience for
users of wireless applications and services
we also announced on 13 february 2006 the acquisition of
quadtex systems inc “quadtex” for an initial consideration of
£42 million with a further consideration of up to £09 million
quadtex is a fast growing us based provider of innovative and
leading test tools for internet protocol multimedia subsystems
“ims” and voice over ip “voip” testing
swissqual and quadtex will enhance spirent’s product offerings
capabilities and customer base in the wireless triple play voice
video data and ims markets
outlook
the disposal of the hellermanntyton division has transformed
spirent into a focused communications company as well as
having signiﬁcantly improved our ﬁnancial position spirent is well
placed to grow organically from its established marketleading
positionswe also have the potential to expand through selective
acquisitions such as swissqual and quadtex announced in 2006
the variable market conditions seen in 2005 have continued
through the beginning of the ﬁrst quarter which is usually our
quietestas 2006 progresses the year will be a period of product
transition as the increased capability of our new products and
solutions will enable us to gain market share as a result we
anticipate that the group’s performance for 2006 will show
recovery over last year with a more pronounced seasonal increase
in activity in the second half
spirent plc annual report 2005 5
operating profitloss and return on sales are used by the group as key measures of
operating performance and are stated in the text before the effect of material onetime
items goodwill impairment and sharebased payment so that periodonperiod comparisons
are not distorted
the hellermanntyton division for the purposes of these results has been presented as a
discontinued operation and our financial results are presented and discussed for the
continuing spirent group unless otherwise stated 6 spirent plc annual report 2005
communications
£ million 2005 2004 change 
revenue
performance analysis 1788 1768 1
service assurance 428 747 43
communications group 2216 2515 12
operating proﬁtloss
performance analysis 220 217 1
service assurance 96 25 –
communications group 124 242 49
return on sales 
performance analysis 123 123
service assurance – 33
communications group 56 96
our communications group spirent communications works behind the
scenes to help the world communicate faster better and more efﬁciently
the world’s leading communications companies use spirent solutions to
conduct performance analysis tests in labs on their latest technologies as
new communications services are introduced spirent provides the tools to
facilitate troubleshooting and improve the quality of these new networks
and services
revenue and operating profit in the performance analysis division was
slightly up in this division we experienced variability in terms of end
customer demand principally in the third quarter and in the broadband test
activities with the division’s wireless and position location test activities
experiencing good growth
in 2005 the operating loss in the service assurance division although
substantially reduced in the second half year affected the performance of
the communications group as a whole
indeed revenue in the service assurance division was down 43 per cent
compared with 2004 and the division reported an operating loss of 
£96 million the reduced revenues were principally a result of the decline
in leased line monitoring and the delay in installation of nextgeneration
assurance solutions firm and signiﬁcant actions were taken in this division
in the ﬁrst half year to reduce the rate of loss
performance analysis
our performance analysis division addresses the needs of service providers
equipment manufacturers large enterprises and government to test the
equipment developed and deployed for telecommunications networks
our solutions test the performance functionality and conformance of
telecoms deviceswe provide effective and efﬁcient test and measurement
capabilities to meet the needs of voice video data and mobile testing to
reduce risk in deploying new products in the nextgeneration ﬁxed line and
wireless networks we achieve this by simulating realworld conditions in
the laboratories of our customers subjecting the equipment under test to
impairment and stress to establish their true capabilitythe increasing scale
and complexity of devices combined with the necessity to increase the
efﬁciency of our customers’ engineers drives demand for more innovative
test solutions our emphasis on customer support and professional services
are important differentiators giving spirent communications a leading
reputation in the market and distinct competitive advantage
revenue and operating proﬁt in the performance analysis division grew by
1 per cent in 2005 we invested £421 million representing 24 per cent of
sales 2004 £432 million and 24 per cent into product development to
increase the capabilities of our existing products and develop innovative
products for launch in 2005 and 2006
the market proved to be volatile and highly competitive during 2005at the
interim stage we reported that market conditions were variable due to lower
spending by the us government and certain us service providers as
expected the variable conditions continued through the second half year
as announced in december revenue for the third quarter was lower than
previously expected although this was partly offset by improved trading in
the fourth quarterwe experienced slower demand in 2005 due to activity
levels with us service providers being markedly lower a result of the impact
of merger activity in the sector and the fact that other customers were
absorbing the high levels of equipment they purchased in 2004 in addition
there was a notable slowdown in the demand for atm test equipment
whilst the us government also shifted its spending to other priorities finally
some major equipment manufacturers continue to work their way through
strategic reviews resulting in further cutting back of their research and
development programmes
in contrast more favourable conditions were seen in the demand for
security testing across all market segments high speed ethernet devices
gig e and 10 gig e requirements for increased scale and the emerging 
needs for triple play testing and video quality testing the transition of
access and metro networks to ethernet saw expansion in demand
particularly in the ﬁrst half yearwireless infrastructure testing has expanded
from functional test to performance test stimulating demand for our
products the emergence of ims is also creating new opportunities for
spirent communications
operating review spirent plc annual report 2005 7
despite the strength of demand for ethernet test equipment aggressive
actions by competition resulted in some loss of market share in this sector
we have responded by establishing a major customer support team to offer
both additional services and to launch new leadingedge product solutions
during the second half year internally we are progressing our initiatives to
increase our own product development efficiency and effectiveness to
improve our product realisation processthe launch of spirent testcenter™
our uniﬁed platform for ethernet testing has resulted in key competitive
wins with major existing as well as new customers our development plans
for spirent testcenter™ throughout the next 18 months will deliver increased
functionality scale ease of use and automation making it an industry
leading platform
total revenues from our top 20 customers grew yearonyear and account
for approximately 40 per cent of revenues growth rates for a number of
these accounts exceeded 30 per cent no one customer represented more
than 10 per cent of the total divisional revenues our revenues by customer
type maintained a similar proﬁle sales to network equipment manufacturers
represented 49 per cent of the total sales to service providers of 17 per cent
government accounted for 8 per cent down compared to 2004 the
remainder includes chip manufacturers and enterprise customers
on a geographic basis there was growth in revenue in europe for all test
solutions but notably for voip web applications and wireless handset test
systems the us market was ﬂat for the reasons described above activity
in the asia pacific region grew building on a remarkable growth rate
particularly in china in 2004we maintained revenue levels in japan despite
difﬁcult market conditionswe enjoyed strong growth in the indian market
our wireless and positioning test products had a record year and sales now
represent 27 per cent of the division’s turnover all product lines achieved
strong growth cdma wcdma and gps we gained market share in the
important wcdma performance test market and made further strong
progress in the sale of gps emulation systems revenues grew in the most
important markets in asia namely china korea and japan and we also made
good progress in europe we have established and opened wireless service
centres in china korea japan and uk offering higher levels of customer
service and support we speciﬁed developed and launched a new hsdpa
capable network emulator for the wcdma market spirent’s navigation
and positioning test division has been selected to supply key test equipment
to support the joint eu and european space agency galileo project galileo
is a major new global navigation system spirent is a leader in navigation
and positioning test
as we look forward into 2006 and the future we feel increased conﬁdence
that our performance analysis solutions in the form of new products such
as spirent testcenter™ and our wireless handset test solutions offer  leading
edge test capabilitieswe expect to see the beneﬁt from market growth as
our customers increase their investment in latest technologies 2006 will 
be a period of product transition as the increased capability of our new
products enable us to gain market share against a background of continued
variable market conditions
service assurance
our service assurance division is focused on the development of network
monitoring systems to enable telecom 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 test of copper
telephone lines in the ﬁeld our systems help service providers reduce their
operational costs by automating and centralising their network testing and
service assurance processes reducing the need for expensive engineering
intervention and facilitating faster responses to customers’ problems
our product solutions are based on a solid business case which offers
carriers increased operational efﬁciencies whilst ensuring the quality of the
voice video and data services they provide
the global telecoms sector continues to migrate from legacy networks
towards ipbased networks and services which will result in substantial new
investment the shift in carriers’ capital expenditure has been slower than
expected for service assurance solutions for the deployment of triple play
serviceswe believe that the service assurance market opportunity will develop
once the build out has taken place and these new services are launched
following a very tough ﬁrst six months of 2005 when we reported a fall in
the division’s revenues of over half and an operating loss of £90 million we
achieved stability during the second half having realised the substantial
cost savings announced in the ﬁrst halfwe have developed a new strategy
for growth to meet the needs of service providers for their new triple play
networks and services in addition we have developed a new generation of
handheld test equipment which will enable ﬁeld test engineers to access
the power of the central ofﬁce test and monitoring systems in the ﬁeld
the revenue proﬁle by customer has remained comparable with 2004 with
over half of the activity being with us incumbent local exchange carriers
the provision of leased line assurance products accounted for approximately
70 per cent of sales throughout the year whilst the provision of service
maintenance and support accounted for 15 per cent the second half
operating loss of £06 million reduced signiﬁcantly from the ﬁrst half loss 8 spirent plc annual report 2005
of £90 millionthis was due to higher revenue of £24 million a gross proﬁt
improvement from a favourable product mix as we shipped software at
higher margins in the second half and the realisation of cost savings
sales opportunities for this division were constrained in 2005 partly as a
result of the major acquisitions made by our customers which has delayed
the sourcing of service assurance solutions as they integrated their
businesses in the long term this industry consolidation is likely to be
beneficial as we aim to extend our embedded solutions and sell new
solutions for triple play ﬁeld test and advanced business services into these
enlarged customers in addition sales decreased due to a rapid shift in
technology whilst customers were not yet ready to install nextgeneration
assurance solutions
we were awarded our ﬁrst triple play contract with telus a major canadian
telecoms company our ﬁrst customer win outside the us for dsl and for
advanced broadband service assurance solutions
we have concentrated on developing new solutions for triple play and
advanced business serviceswhilst we remain cautious about the timing of
the full scale deployment of advanced services by carriers worldwide we
believe that due to the actions taken in 2005 we are well placed to serve
the market requirements as they develop
systems
£ million 2005 2004 change 
revenue 377 313 20
operating proﬁt 44 34 29
return on sales  117 109
figures in the above table relate to pg drives technology only divested businesses
contributed £44 million of revenue and £06 million of operating proﬁt in 2004
the systems group comprises pg drives technology a leading supplier of
control systems for electrically powered medical and small industrial
vehicles revenue and operating proﬁt were up 20 per cent and 29 per cent
respectively return on sales increased to 117 per cent compared with 
109 per cent in 2004
during 2005 we launched two new wheelchair control systems the vr2
low cost mainstream wheelchair control system and the rnet a highly
sophisticated wheelchair system designed for the rehab market that can
incorporate a wide variety of input and output devices to suit many different
disabilities due to the competitiveness of these systems and of our
established vsi sdrive and trio products we were successful in
increasing customer penetration in both the mobility and industrial vehicles
markets during the yearthis was achieved in spite of continuing constraints
in us government healthcare funding for powered wheelchairs we also
moved some more of our production to china to reduce the logistical 
costs of supporting our activities in the asia paciﬁc region in 2006 we are
planning further new product launches that will enable us to strengthen our
position in both our addressed markets
discontinued operations
network products
£ million 2005 2004 change 
revenue 2055 1878 9
operating proﬁt 253 213 19
return on sales  123 113
discontinued operations relate to the hellermanntyton division comprising
the network products group and the investment in associated companies
we announced in december that we had entered into an agreement to
dispose of the hellermanntyton division to funds controlled by doughty
hanson  co limited and this disposal was completed on 15 february 2006
the network products group delivered a strong performance in 2005 with
revenue of £2055 million up 9 per cent compared with 2004 operating
proﬁt of £253 million was ahead by 19 per cent over 2004 and return on
sales improved to 123 per cent from 113 per cent
organic growth was achieved in all regions and also through the associated
company in japan the business continued to increase its automotive sales
despite ﬂattening production levels by the european car manufacturers
and to achieve strong growth through its initiatives in north america in
automatic application systems particularly in automotive and through the
success of its preterminated structured cabling system rapidnet
profit after tax from discontinued operations was £132 million after
charging £67 million of costs related to the disposal of this business
compared with £173 million in 2004
operating review continued
operating profitloss and return on sales are used by the group as key measures of
operating performance and are stated in the text before the effect of material onetime
items goodwill impairment and sharebased payment so that periodonperiod comparisons
are not distorted
the hellermanntyton division for the purposes of these results has been presented as a
discontinued operation and our financial results are presented and discussed for the
continuing spirent group unless otherwise stated spirent plc annual report 2005 9
reporting format
the format of the consolidated results for the spirent group has been
signiﬁcantly altered in this year’s report as a result of two factors ﬁrst the
conversion from uk generally accepted accounting practice “uk gaap”
to international financial reporting standards “ifrs” second the
reclassiﬁcation of the results of the hellermanntyton division comprising
the network products group and the investment in associated companies
to discontinued operationsthe table below sets out revenue and operating
proﬁt for the total group for 2005 and 2004
first half second half
£ million 2005 2005 2005 2004 change 
revenue
continuing 1265 1328 2593 2872 10
discontinued 1039 1016 2055 1878 9
total 2304 2344 4648 4750 2
operating proﬁt
continuing 18 97 115 229 50
discontinued 123 130 253 213 19
total 141 227 368 442 17
return on sales 
continuing 14 73 44 80
discontinued 118 128 123 113
total 61 97 79 93
as our results are reported for the first time in accordance with ifrs
comparative data has been restated all amounts referred to below relate
to continuing operations unless otherwise stated
results
reported revenue from continuing businesses for 2005 of £2593 million
was down 10 per cent and operating profit of £115 million was down 
50 per cent compared with 2004 return on sales for the continuing group
reduced to 44 per cent from 80 per cent in 2004
revenue by market grew in the asia paciﬁc region by 4 per cent but was down
in europe and north america having been affected by the performance of
the service assurance division in both regions
operating proﬁt was impacted by the weakness in the service assurance
division in the ﬁrst half this division reported a loss of £90 million for that
period in the second half year the loss in this division was much reduced
to £06 million mainly as a result of the ﬁrm actions we took revenue and
operating proﬁt in the performance analysis division were up 1 per cent
compared with 2004 proﬁtability in the performance analysis division was
slightly lower in the third quarter of 2005 recovering somewhat in the
fourth the ongoing business in the systems group reported good growth
in 2005 over 2004
nonsegmental costs which are those that cannot be directly attributed to
the operating segments were £53 million excluding material onetime
items and sharebased payment 2004 £53 millionthese costs include the
costs of our board costs in relation to our dual listings and compliance
costs including those in relation to the sarbanesoxley act of 2002
currency impact
in 2005 the effects of currency translation were less marked than in 2004
currency translation increased revenue from continuing operations by 
£17 million and increased profit before tax goodwill impairment and
material onetime items by £02 million
cost of sales and operating expenses
product development spend for 2005 was £584 million or 23 per cent of
revenue 2004 £632 million and 22 per cent respectively of this amount
£421 million 2004 £432 million was spent in the performance analysis
division and £140 million 2004 £172 million in the service assurance division
product development is included in the cost of sales on the income statement
gross proﬁt decreased to £1062 million 41 per cent of sales from £1220 million
42 per cent of sales in 2004 this was a result of the decrease in revenue in
service assurance the low levels of activity in the first half resulting in
unrecovered manufacturing overheads and to the relative increase in
product development spending as a percentage of sales as noted above
financial review 
operating proﬁt was impacted by the weakness in the service assurance
division in the ﬁrst half this division reported a loss of £90 million for that
period in the second half year the loss in this division was much reduced
to £06 million mainly as a result of the ﬁrm actions we took
eric hutchinson
finance director 10 spirent plc annual report 2005
administration costs of £743 million for 2005 2004 £340 million include
a goodwill impairment charge of £370 million made in the ﬁrst half
a sharebased payment charge of £51 million has been reported in
accordance with ifrs 2 ‘sharebased payment’ for the continuing group
this charge represents the expense for share options and other sharebased
incentives calculated using an option pricing model on transition to ifrs
spirent has applied ifrs 2 only to awards made after 7 november 2002 and
not fully vested at 1 january 2005we anticipate that the charge for 2006
will be in the region of £6 million based on current share price and volatility
material onetime items of £84 million have been charged in 2005 that relate
to restructuring costs and inventory writedowns within our businesses
disposal of operations
a onetime proﬁt on the disposal of operations of £39 million has been
reported this relates to the sale of certain nontrading companies
finance charges
net interest expense for 2005 was £66 million being £81 million cost less
£15 million income compared with £68 million in 2004 excluding a make
whole amount in 2004 of £05 million net interest includes a charge of
£11 million in respect of the uk ﬁnal salary pension scheme in accordance
with ias 19 ‘employee beneﬁts’the deﬁcit in this scheme has been reduced
by the special contribution of £470 million in february 2006 and as a result
it is estimated that net interest income in respect of the pension scheme
will be approximately £15 million for 2006 for 2006 and following
repayment of the senior loan notes spirent expects to earn current market
rates of interest on the net cash balance remaining from the disposal of the
hellermanntyton division
lossproﬁt before tax
reported loss before tax was £417 million compared with a profit of 
£112 million for 2004
profit before tax material onetime items goodwill impairment share
based payment proﬁt on disposal of operations and costs associated with
the part prepayment of loan notes is set out below
£ million 2005 2004
reported lossproﬁt before tax 417 112
material onetime items 84 29
goodwill impairment 370 –
sharebased payment 51 48
proﬁt on disposal of operations 39 40
costs associated with the part prepayment of loan notes – 05
adjusted proﬁt before tax 49 154
tax
there was a tax credit of £40 million in 2005 compared with a charge of
£20 million in 2004 due to the release of provisionswe anticipate that the
effective tax rate for 2006 will be approximately 25 per cent
discontinued operations
discontinued operations contributed proﬁt after tax of £132 million compared
with £173 million in 2004this result is after charging £67 million of costs
in relation to the disposal that were incurred and expensed during 2005
earnings per share
we are presenting an adjusted earnings per share measure that adds back
the effect of material onetime items goodwill impairment sharebased
payment proﬁt on the disposal of operations and any related tax as well 
as prior year tax adjustments the adjusted earnings per share measure for
the group as a whole is 230 pence for 2005 compared with 314 pence in
2004 a decrease of 27 per cent the weighted average number of shares
outstanding at the period end was 9504 million 2004 9392 million basic
loss per share from continuing operations was 397 pence compared with
basic earnings per share of 098 pence in 2004
financing and cash ﬂow
at 31 december the group held cash of £492 million compared with 
£517 million at 31 december 2004 borrowings of the continuing group
at the year end were £751 million and borrowings of the discontinued
operations were £97 milliontotal borrowings of the group at 31 december
2005 were £848 million compared with £781 million at 31 december 2004
the effect of translation increased borrowings in 2005 by £77 million due
to the strengthening of the us dollar during the year
our major borrowings in 2005 continued to be the senior loan notes of
1248 million £726 million which were repaid in february 2006 out of
the proceeds of the sale of the hellermanntyton division see post balance
sheet events below during 2005 our £30 million bank facility remained nil
drawn this facility was cancelled in february 2006
total group net cash from operating activities for 2005 was down by 
49 per cent at £294 million compared with £572 million in 2004 due to
the deterioration in service assurance and absorption of working capitalas
reported at the interim stage working capital increased due to a signiﬁcant
reduction in payables of about £12 million a result of the settlement of
liabilities in respect of 2004 for continuing operations there was a cash
outﬂow from operating activities of £11 million for the year this includes
£40 million in respect of restructuring actions 2004 inﬂow £310 million
free cash ﬂow being cash ﬂow before disposals acquisitions and ﬁnancing
for 2005 for the group as a whole was an outﬂow of £68 million compared
with an inﬂow of £230 million in 2004
net capital expenditure increased to £299 million as planned compared
with £248 million in 2004 we expect capital expenditure to be much
reduced in 2006 as the hellermanntyton division comprised the major 
part of this capital expenditure for the continuing group for 2005 was
£148 million and we expect it to be around £13 million in 2006
the depreciation charge was £114 million for 2005 compared with 
£148 million in 2004 we expect the charge for 2006 to be in the region
of £13 million
financial review continued spirent plc annual report 2005 11
net tax payments for the group of £46 million were made in 2005
compared with £31 million in 2004 we have and expect to continue to
beneﬁt from the utilisation of carried forward tax losses in the uk and the
us we expect tax payments for 2006 to be approximately £4 million
in 2005 we made our second additional annual cash contribution of 
£35 million to our uk ﬁnal salary pension scheme the company is not
expected to make a further such payment in 2006 having instead made a
special contribution of £470 million out of the proceeds of the sale of the
hellermanntyton division in february 2006
net interest payments of £65 million in 2005 were below the £72 million
paid in 2004 in addition in 2004 we paid make whole amounts of £23 million
pension fund
at the end of 2005 the deﬁcit in the uk ﬁnal salary pension scheme under
ias 19 had increased to £515 million 31 december 2004 £381 million
the assets have grown during the year by £219 million as a result of the
positive performance of equity markets and additional company contributions
made however the liabilities have grown by £353 million due to falling
bond rates together with changes in longevity assumptions in february
2006 the company made a special contribution of £470 million into the
uk ﬁnal salary pension scheme as had been announced in december 2005
we have reassessed the recognition of the deferred tax asset in relation to
the pension scheme the funding of the scheme will crystallise a tax loss in
2006 that may not be recoverable in the foreseeable future as the company
has signiﬁcant accumulated tax losses in the uk consequently the deferred
tax asset of £111 million which had been recognised at 31 december 2004
has been written off through reserves
dividend
no dividend is being declared in respect of 2005
post balance sheet events
on 23 january 2006 spirent announced that it had entered into an agreement
to acquire swissqual for an initial consideration of chf 625 million 
£277 millionthe initial consideration was paid in cash on completion on
23 january 2006 out of cash resources and utilisation of a new bank facility
that was set up specifically for the purpose a further chf 280 million
£124 million is payable in 2007 depending on revenue growth and various
technical milestones
we also announced on 13 february 2006 the acquisition of quadtex for
75 million £42 million payable in cash on completion with a further 
15 million £09 million payable depending on certain technical milestones
and the retention of key employees
the disposal of the hellermanntyton division was completed on 
15 february 2006 when proceeds of £2889 million for a cash freedebt 
free equivalent value were received these proceeds have been applied 
as follows
• repayment of the senior loan notes of 1248 million £715 million
• payment of the make whole amount an amount which becomes payable
on the early redemption of the senior loan notes of 129 million 
£74 million
• break fees of £23 million in respect of interest rate swaps taken out in
connection with the senior loan notes
• special contribution of £470 million to the uk final salary pension
scheme
• repayment and cancellation of the bank facility in connection with the
acquisition of swissqual
taking these transactions into account the pro forma cash balance is
approximately £150 million of this up to £50 million has been earmarked
to fund the onmarket share repurchase programme the programme is
expected to begin in the second quarter following the completion of certain
actions establishing distributable reserves in the parent company clearance
from the pension regulator and the approval from shareholders to make on
market share repurchases of up to 1499 per cent of our issued ordinary
share capital
following the disposal of the hellermanntyton division the company issued
notices of cancellation in respect of all its borrowing facilities
adoption of international financial reporting standards
spirent has applied ifrs as adopted by the european union for the ﬁrst
time with effect from 1 january 2005 the effect of the transition to ifrs
on the ﬁnancial information now being presented including restatement of
comparatives and the accounting policies adopted has not materially
changed from the information provided in the document issued by spirent
on 15 july 2005 and entitled ‘transition to international financial reporting
standards’
the most signiﬁcant impacts have been in relation to
• the elimination of the charge for goodwill amortisation
• the change in the proﬁt or loss on the disposal of operations
• an increase in the charge for sharebased payment
overall this has had a net beneﬁcial effect on spirent’s historic reported
earnings for 2003 and 2004 however the adoption of ifrs has no impact
on the cash generation of the group
operating profitloss and return on sales are used by the group as key measures of
operating performance and are stated in the text before the effect of material onetime
items goodwill impairment and sharebased payment so that periodonperiod comparisons
are not distorted
the hellermanntyton division for the purposes of these results has been presented as a
discontinued operation and our financial results are presented and discussed for the
continuing spirent group unless otherwise stated executive directors 
1 anders gustafsson chief executive 45 
● ●
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 50 
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 nonexecutive director and chairman of the audit committee
of trifast plc
nonexecutive directors 
3 john weston cbe chairman 54 
●● ●
john weston cbe was appointed nonexecutive 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 nonexecutive chairman of
isoft group plcacra controls and learndirect – the university for industry
4 james wyness 68 
●●● ●
james wyness was appointed to the board in 1979 and is the senior
independent director he was previously managing partner then senior
partner of linklaters he is a nonexecutive director and was previously
chairman of saracens limited he will retire from the board with effect
from the date of the 2006 annual general meeting
5 marcus beresford cbe 63 
●●● ●
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 nonexecutive chairman of ricardo plc and a nonexecutive
director of cobham plc
6 frederick d’alessio 57 
●● ●
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 incaware inc hatteras networks inc
and network equipment technologies inc
7 göran ennerfelt 65 
● ●
göran ennerfelt was appointed to the board in 2000 he is president and
chief executive ofﬁcer of axel johnson gruppen ab a member of the axel
johnson group he is also vice chairman of the confederation of swedish
enterprise as well as a nonexecutive director of svenska handelsbanken
and the swedish national committee of the international chamber of
commerce
8 andrew given 58 
●●● ●
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 nonexecutive director and chairman of
the audit committees of both vt group plc and spectris plc
9 kurt hellström 62 
●● ●
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 televentures
limited kineto wireless gemplus international sa vti far eastone
telecommunications symsoft ab and eqt
12 spirent plc annual report 2005
board of directors
● 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
further biographical details of the directors can be found on the company’s
website at wwwspirentcom the executive directors are supported by a
team of senior management and their biographies can also be found on
the company’s website
12 3 5 4
6 78 9 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 employeeswe have an established investor relations programme
conduct regular customer satisfaction surveys monitor supplier performance
and actively encourage feedback from our employees using a variety of methods
including employee surveys 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 employthe board does not believe that
to date the activities of the group present any signiﬁcant environmental
riskswe have established a committee to coordinate groupwide csr efforts
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 wwwspirentcom 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 following is a
summary of the ethics policy
– all employees have the right and responsibility to ensure that spirent’s
business is conducted with high ethical and legal principles
– our policy is to operate within applicable laws
– discrimination or harassment of any kind will not be tolerated
– as a matter of policy we do not make political donations
– no bribes shall be given or received
– conﬂicts of interest must be avoided
– we aim to be a responsible partner within our local communities and
– employees are encouraged and supported to report in conﬁdence any
suspected wrongdoings “whistleblowing”
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 contribution and development
an environment that fosters innovation and supports a culture of
entrepreneurship and partnership are critical to spirent’s success
appropriate career paths and internal recognition programmes are
developed for both technical and management staff
employees are provided with numerous learning and development
opportunities to fulﬁl their potential a wide variety of both technical and
managerial courses and training materials are available to employees as
are local undergraduate and postgraduate educational opportunities to 
help them to enhance their careers these employment development
opportunities are structured to align with both the group and business
units’ goals and objectives
spirent demonstrates that it values its employees through several reward
and recognition programmes the engineering fellowship programme
honours the top technical talent within the organisation connecting 
the best and the brightest of spirent’s technical expertise the spirit of
spirent programme tracks outstanding service using spirent’s core values –
customer focus innovation collaboration contribution continuous learning
and ethics this programme is implemented across the communications
group to encourage and reward significant contributions to spirent 
by employees furthermore the annual innovation awards programme
recognises all facets of contributions to spirent including outstanding sales
technical innovations and general business innovations
similarly the importance of twoway communication is recognised
particularly as it relates to the business and its performance 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 a variety of tools are utilised to foster twoway
communications including senior management meetings ‘allhands’
employee meetings the regular distribution of an employee newsletter and
the intranet in addition in 2005 spirent undertook its ﬁrst allemployee
survey in its communications group in an effort to better understand the
needs of its employee base actions from the survey will be implemented
throughout 2006 and beyond
leadership development and succession planning are processes which are
also critical to the success of the business these plans are regularly
discussed and updated as the competition for talented employees increases
and the leadership needs of our business grow formal performance reviews
are conducted and are linked to the values of the organisation
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
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
spirent plc annual report 2005 13
corporate social responsibility statement 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
spirent’s ‘operational excellence programme’ which is further described in
the directors’ statement on corporate governance on pages 17 to 19
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 2005 are
– we had 422 incidents that required onsite first aid a small increase from
2004 but eight down compared with 2003
– we saw a decrease in ill healthlong term sickness levels with three cases
reported compared with ﬁve in 2004 and three in 2003
– we saw a reduction in accident frequency and severity and 
– we had three accidents that required short term hospitalisation compared
with two in 2004 and one in 2003
independent external reviews of the company’s health and safety
performance are conducted annually regular designated health and safety
awareness training programmes particularly at our manufacturing sites are
also carried out
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 practicesthe full text of our environmental
policy is available on our website at wwwspirentcom
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
accreditationthe 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 tl9000 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 comply with 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 signiﬁcance of local communities 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 2005 spirent made
charitable cash donations of £96000 2004 £63000
in support of relief efforts following hurricane katrina in the united states
the company matched employee donations spirent also took actions to
help customers that were affected by the hurricane by offering equipment
and personnel to assist them in restoring their networks
in 2005 we continued to support education in our local communities by
offering internships and work experience programmes in the us we
participated in a programme which introduces local high school students
to jobs related to engineeringthrough junior achievement an organisation
which educates young people about business economics and free enterprise
we are involved in an annual ‘job shadow’ day which pairs a student to an
employee in many aspects of the business
our employees help the communities in which we operate by volunteering
their time to various programmes including habitat for humanity an
organisation working to eliminate poverty housingwe continue to donate
materials and equipment to local causes throughout the world during 2005
donations included computers to those affected by the asian tsunami
computer screens and furniture to local schools and mobile phones to a
women’s shelterwe 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 and clothing to people
around the world
spirent continues to support and encourage all our employees and businesses
to ﬁnd new ways of helping their communities
14 spirent plc annual report 2005
corporate social responsibility statement continued the directors present their report the audited consolidated financial
statements and the parent company ﬁnancial statements for the year to
31 december 2005
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
2 to 11 principal divisions subsidiaries and associates are listed on page 114
dividends 
no interim dividend was paid during the year 2004 nil and the directors
do not recommend the payment of a ﬁnal dividend 2004 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
£628 million research and development spend during the year equivalent to
14 per cent of sales 2004 £673 million and 14 per centthe company will
continue to commit resources as appropriate to research and development
major transactions 
on 19 september 2005 the company announced that it had started the
formal process that was expected to result in the sale of its hellermanntyton
division on 15 february 2006 the sale of the division to funds controlled
by doughty hanson  co limited for a cash freedebt free equivalent value
of approximately £2889 million was completed further details of the
transaction are set out in notes 37 and 40 to the consolidated ﬁnancial
statements and note 23 to the parent company ﬁnancial statements
on 23 january 2006 the company announced the acquisition of swissqual
holding ag for an initial consideration of £277 million paid in cash with
up to a further £124 million payable depending on revenue growth and
various technical and financial milestones on 13 february 2006 the
company announced the acquisition of quadtex systems inc for an initial
consideration of £42 million with further consideration of up to £09 million
share capital 
changes in the company’s share capital during the period are given in note
32 to the consolidated financial statements and note 17 to the parent
company ﬁnancial statements
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 ordinary share capital
 held 
barclays plc 132
lexa bv 124
fidelity investments 80
prudential plc 34
legal  general group plc 31
sun life assurance of canada 31
additional shareholder information including a profile of shareholdings
appears on page 118
share listings 
the primary listing for the company’s ordinary shares is on the london
stock exchangethe 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 12 all held ofﬁce throughout the year and up to the date of this
report james wyness will retire from the board with effect from the date
of the 2006 annual general meeting “agm”
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 17 to 19 john weston will retire at the agm on 
3 may 2006 and being eligible offers himself for reelection he does not
have a service contract 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 20 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 and the company’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 13 and 14
employee share schemes 
the company operates a number of share incentive schemes details of
which can be found in note 32 to the consolidated ﬁnancial statements
and note 17 to the parent company ﬁnancial statements
social responsibility and donations 
the group’s corporate social responsibility statement appears on pages 
13 and 14 charitable donations of £96000 were made in the year 2004
£63000 this amount excludes operating units’ support and participation
in local community activities no political donations were made in the year
2004 nil
spirent plc annual report 2005 15
report of the directors 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 2005 the company had an average of 48 days purchases
outstanding in trade creditors 2004 54 days
corporate governance 
the directors’ statement on corporate governance is set out on pages 17
to 19the statement of directors’ responsibilities in respect of preparing the
ﬁnancial statements appears below
going concern 
after making enquiries the directors conﬁrm that they have a reasonable
expectation that the group and company 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 ﬁnancial
statements
annual general meeting 
the agm will be held at 1030am on wednesday 3 may 2006 at the
copthorne hotel london gatwick copthorne way copthorne crawley
west sussex rh10 3pg united kingdom
auditors 
a resolution to reappoint 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 
23 february 2006 
16 spirent plc annual report 2005
report of the directors continued
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 financial statements
comply with the companies act 1985 and for the grouparticle 4 of the
international accounting standards regulation and 
– taking reasonable steps to safeguard the assets of the company and 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
ﬁnancial statements that may be different from comparable legislation in
other jurisdictions
statement of directors’ responsibilities in respect of the ﬁnancial statements
the companies act 1985 requires directors to prepare ﬁnancial statements
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
ﬁnancial statements the directors are required to
– select suitable accounting policies and then apply them consistently
– make judgements and estimates that are both reasonable and prudent
– state whether applicable accounting standards international financial
reporting standards as adopted by the european union or uk generally
accepted accounting practice as appropriate have been followed subject
to any material departures being disclosed and explained in the notes to
the ﬁnancial statements and
– provide additional disclosures when compliance with the specific
requirements is insufﬁcient to enable users to understand the impact of
particular transactions other events and conditions on the financial
position and ﬁnancial performance of the entity 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 assuredthe board
considers that it has complied throughout the year under review with the
requirements of the 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 nonexecutive chairman six further nonexecutive
directors and two executive directors details of whom are given on page
12 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 nonexecutive 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 nonexecutive directors in particular the
chairman devote sufﬁcient time and attention as necessary in order to
perform their duties other professional commitments of the nonexecutive
directors are provided in their biographies on page 12
the board requires that all nonexecutive 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
15 and 16 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
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 james wyness served as the senior
independent director during 2005 and will continue to do so until he retires
from the board at the date of the 2006 annual general meeting marcus
beresford will serve as the senior independent director thereafter
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
nine board meetings during 2005 full attendance of the board is expected
at meetings and in 2005 all directors attended except for the following
absences marcus beresford 1 frederick d’alessio 1 andrew given 2
göran ennerfelt 3 and kurt hellström 3 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 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
performancethe 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 nonexecutive directors 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 directorsthe evaluation process includes
selfassessment by the board and 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 other stakeholders 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 nonexecutive directors at which executive directors are not
present the senior independent director also holds at least annually a
meeting of the other nonexecutive directors at which the chairman is not
present to appraise the chairman’s performance
spirent plc annual report 2005 17
directors’ statement on corporate governance the company has arranged insurance cover in respect of legal action against
its directors and certain other ofﬁcersthe 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
board appointments 
the company’s articles of association require that all directors seek election
by shareholders at the ﬁrst annual general meeting “agm” following their
appointment they also require that all directors seek reelection at least
every three years
board committees 
acquisitions and divestments committee 
chairman anders gustafsson 
the acquisitions and divestments committee comprises the executive
directors and any two nonexecutive 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 nonexecutive 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 2005 the committee held ﬁve meetings at which there was full
attendance by all committee members at all meetings the external
auditors the chief executive the chairman 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 chairmanthe committee also meets with the external auditors
in private for part of each meeting
the committee reviews all published ﬁnancial statements 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
nonaudit work the committee has adopted a policy which prohibits
certain types of nonaudit work from being performed by the company’s
auditors particularly where auditor objectivity and independence would be
at risk other nonaudit work which may be provided by the auditor is put
to tender where considered appropriate prior to any nonaudit 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 2005
appear in note 5 to the consolidated ﬁnancial statements
nomination committee 
chairman john weston 
the nomination committee comprises all the nonexecutive directors and
the chief executive and meets at least once a year during 2005 the
committee held three meetings at which there was full attendance by 
all committee members the committee is responsible for reviewing 
the composition and structure of the board and for identifying and
recommending candidates for executive and nonexecutive 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 2005 the committee held four meetings at
which there was full attendance by all committee members other directors
who are not members may attend at the invitation of the committee
chairman
no director is involved in determining his own remunerationthe 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 other nonexecutive directors
further details on the remuneration committee are included in the report
on directors’ remuneration on pages 20 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 118
a valuable dialogue has been established with principal institutional
investors through a programme of investor relations events throughout the
year during the year the company also discussed major remuneration and
long term incentive proposals with principal investors prior to the 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 inside 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 issueall directors are expected to attend the
agm to take any relevant questionsa 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
18 spirent plc annual report 2005
directors’ statement on corporate governance continued 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 ﬁnancial statements 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 assetsthe 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
process 
the group’s ‘operational excellence programme’ ensures that internal
control and risk management processes continue to become embedded in
the organisation daytoday 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 selfassessment
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 controls 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 sarbanesoxley act of 2002 in the us nyse introduced new
corporate governance standards companies which do not have their
primary listing on 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 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 nominationcorporate 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 however in accordance with the code 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 wwwspirentcom
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
membersthe schemes do not lend money or lease any assets to the group
following completion of the disposal of the hellermanntyton division 
on 15 february 2006 the company made a special contribution of 
£470 million into the uk ﬁnal salary pension scheme which substantially
funds the scheme
reporting 
the statement of directors’ responsibilities in respect of preparing the
ﬁnancial statements is set out on page 16 a report by the auditors ernst
 young llp which includes details of their responsibilities in respect of
the group’s compliance with the code is set out on page 27
spirent plc annual report 2005 19 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 
nonexecutive directors is given on page 12 the committee makes
recommendations to the board on the company’s policy and framework 
of executive 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 senior vice president
of human resources 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 performancerelated 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
performancerelated 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 nonperformance elements
can vary from year to year in designing the performancerelated 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 companieswhen
reviewing salaries the committee is mindful of and sensitive to the wider
scene especially regarding employees’ pay and employment conditions
elsewhere in the group following review in respect of 2005 anders
gustafsson and eric hutchinson were awarded increases in annual base
salary of £20000 and £13500 respectively bringing their total annual base
salary to £460000 and £283500 respectively
pension and other benefits have regard to competitor practice benefits
include a car allowance healthcare and life insurance coverage pension
details are given in paragraphs 4c 6b and 6c
as noted above the company’s remuneration policy applies to senior
executives below board level in respect of 2005 the total remuneration ie
base salary bonus and taxable beneﬁts for the lowest paid and highest
paid senior executive was £132913 and £426646 respectively average
pay for these individuals was £202661
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 2005 anders gustafsson and eric hutchinson participated in
an annual cash bonus scheme which consistent with uk market practice
and levels was structured around a formula providing for an ontarget
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 adjusted earnings per share
“eps” and cash ﬂow accounting for 80 per cent and 20 per cent of any
bonus respectively as the threshold targets for 2005 were not achieved
neither executive director earned a bonus under the annual scheme
20 spirent plc annual report 2005
report on directors’ remuneration in order to facilitate the group’s stated strategy of focusing on growing its
communications group whilst maximising the value of its other businesses
both executive directors were also eligible to receive a cash bonus which was
payable dependent upon the disposal price of the hellermanntyton division
the bonus was structured around a formula providing for an award of up to
25 per cent of base salarythe disposal was completed on 15 february 2006
for a consideration of approximately £2889 million at a cash freedebt
free equivalent value which exceeded the maximum bonus target set by the
committee anders gustafsson and eric hutchinson therefore received
bonuses of £115000 and £70875 respectively equivalent to 25 per cent
of their base salary
c directors’ pensions 
both executive directors participate in pension plans operated by the
company eric hutchinson participates in the noncontributory 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 twothirds of salary subject to hm revenue  customs
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
anders gustafsson receives 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 noncontributory 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 outside of the statutory limits
the company has established an unfunded unapproved retirement beneﬁt
“uurb” on a deﬁned contribution basis and the uurb balance is credited
with interest
in 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
that in principle it would not be appropriate for the company to provide
additional compensation to executives who would be adversely affected
by the change in respect of existing members of the company’s deﬁned
benefit arrangements which includes eric hutchinson the committee
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 in 2004
further details of pension contributions and payments are given in
paragraphs 6b and 6c
d medium and long term incentive plans 
the committee approves the grant of all awards under the employee
incentive plan “eip” in which executive directors participate see below
all grants are subject to the prior satisfactory performance of the individual
and grant amounts vary in accordance with the individual’s potential to
add value to the business over the medium to long term
the executives are also eligible to participate in the company’s all employee
share plans further details of which are provided in note 32 to the
consolidated financial statements and note 17 to the parent company
ﬁnancial statements
executive share option scheme 
the executive share option scheme expired during 2005 and no grants
were made to directors under this scheme during the year further details
in respect of this scheme are provided in note 32 to the consolidated
ﬁnancial statements and note 17 to the parent company ﬁnancial statements
employee incentive plan
during the early part of 2005 a detailed international review was carried
out by kepler associates of long term incentive arrangements in similar
companies as a result of the review and also following discussion with the
company’s major institutional shareholders the eip was designed
details of the eip including the proposed grant levels performance criteria
and vesting schedules were explained in a circular to shareholders in april
2005 “the 2005 circular” the eip was approved by shareholders in may
2005 and both executive directors participated in this plan during the year
under the eip the company is able to grant options and share settled stock
appreciation rights “sars” the exercise of which will be subject to
challenging earnings per share “eps” criteria performance shares may also
be granted the vesting of which will be subject to challenging total
shareholder return “tsr” criteria this combination reﬂects uk market
trends in the use of long term incentives and creates a more balanced
incentive package for executive directors
in normal circumstances sarsoptions under the eip will vest three years
following grant provided the company’s eps growth targets after excluding
inﬂation have been met over a three year performance period the growth
targets in respect of the initial award to executive directors during the year
require that the company’s eps increases within a range of 6 per cent per
annum for 25 per cent vesting and 15 per cent per annum for 100 per cent
vesting over the performance period with a sliding scale between these points
in normal circumstances performance shares under the eip will vest three
years following grant provided the company’s tsr targets have been met
over a three year performance period tsr is the growth in the value of a
share or index assuming dividends and other distributions are reinvested
the performance conditions require spirent’s tsr to be between the median
of a comparator group for 30 per cent vesting and in the upper quartile
of a comparator group for 100 per cent vesting over the performance
period with a sliding scale between these points the comparator group
consists of the 30 largest companies by market capitalisation in the ftse
techmark 100 index excluding those techmark companies who are also
constituents of the ftse 100 at the commencement of the performance
period the committee considers the selected comparator group provides
a suitable benchmark for spirent’s tsr
all eip awards will be tested once on or shortly following the third
anniversary of grant any part of an award which does not vest will lapse
and there will be no opportunity for retesting
spirent plc annual report 2005 21 the executive directors receive a mix of sarsoptions and performance
shares utilising a ratio of two sarsoptions to one performance share
at least 25 per cent of each grant is delivered in sarsoptions and at least
25 per cent in performance shares with the balance of the grant delivered
through a mix of sarsoptions and performance shares as determined by
the committee in normal circumstances the maximum combined award
under the eip will be limited to 250 per cent of salary face value in sars
optionsas explained above grants normally consist partly of sarsoptions
and partly of performance shares with the proviso that the performance
share element may not exceed a face value of 100 per cent of salary ie
using the ratio of two sarsoptions to one performance share the
maximum performance share award would be equivalent to 200 per cent
in sarsoptions in determining any award the committee will of course
have regard to all relevant circumstances
the committee is mindful of the need to continue to manage shareholder
dilution in a responsible manner as explained in the 2005 circular the
current shareholder approved mandate includes an aggregated annual
allowance of up to 31 per cent of the issued share capital under the eip and
the spirent stock incentive plan “ssip” as part of the committee’s
sustainable dilution strategy sars will wherever possible be used in lieu
of options in the operation of the eip and ssipthis sars approach will help
the company manage its actual dilution more efficiently as only the
appreciation value and not the entire share value needs to be funded when
an award is exercised
further information on the sars approach the operation of other share
schemes and shareholder dilution is provided in note 32 to the consolidated
ﬁnancial statements and note 17 to the parent company ﬁnancial statements
the committee believes that the grant structure performance conditions
and grant levels under the eip represent 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 as explained in the 2005 circular
the committee proposed that the performance conditions and award
criteria in respect of the eip will operate for two annual award cycles ie for
2005 and 2006 and that the company will revert to shareholders in 2007
if it wishes to propose any material changes
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 executives 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 executives
as a result of the transition to international financial reporting standards
and the disposal of the hellermanntyton division the committee has resolved
that it will adjust as necessary eps performance condition measurements
in respect of outstanding sarsoptions 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
anders gustafsson entered into a service contract on 1 august 2004 which
currently has an unexpired term of 172 months and is terminable by the
company on 12 months’ notice and by him on six months’ notice eric
hutchinson entered into a service contract on 13 december 1999 which
currently has an unexpired term of 111 months and is terminable at any
time by either party on 12 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 compensationthe company will seek to apply practical mitigation
measures to any payment of compensation on termination taking into
account all relevant circumstancesall 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
nonexecutive directors 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 director concerned during
2005 eric hutchinson served on the board of trifast plc as a nonexecutive
director and received fees of £27500 arising from this appointment
5 nonexecutive directors’ remuneration 
the remuneration of the chairman is determined by the committee and the
remuneration of the other nonexecutive directors is determined by the
boardthe remuneration of all nonexecutive directors is reviewed following
a recommendation by the chief executive and after consultation with
independent external advisers concerning competitive market practicethe
company’s remuneration policy which has not changed during the year and
will apply for the following ﬁnancial year with regards to nonexecutive
directors is to pay fees which are in line with market practice
for 2005 the nonexecutive directors apart from john weston were
awarded increases in basic fees of £3000 bringing their basic fees to
£33000 per annum no remuneration increase was awarded to john weston
in respect his duties as chairman
nonexecutive 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 performancerelated
nonexecutive 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 nonexecutive directors’ fees is provided in
paragraph 6a below
22 spirent plc annual report 2005
report on directors’ remuneration continued 6 directors’ remuneration
1
a individual and total remuneration of the directors holding ofﬁce during 2005
taxable total
5
total
5
salary fees
2
beneﬁts
3
bonus
4
2005 2004
£000 £000 £000 £000 £000 £000
executive directors
n brookes ––––– 2955
m chung ––––– 4439
a gustafsson 4600 – 1047 1150 6797 5836
e hutchinson
6
2835 05 207 709 3756 5857
nonexecutive directors
m beresford – 400 – – 400 370
f d’alessio – 380 – – 380 326
g ennerfelt – 330 – – 330 300
a given – 400 – – 400 370
k hellström – 330 – – 330 19
r moley – 130 – – 130 350
j weston – 1500 – – 1500 1500
j wyness – 400 – – 400 370
total 2005 7435 3875 1254 1859 14423 22692
total 2004 10403 3611 1763 6915 22692
notes
1 information relating to directors’ remuneration in 6a 6b and 6c has been audited by the company’s auditors
2 eric hutchinson earned these fees in respect of his services to the board and its committeesthe nonexecutive directors receive a basic annual fee of £33000 in respect of their services
john weston receives an annual fee of £150000 which covers both his basic annual fee and his additional duties as chairman andrew given and marcus beresford each received an
additional £7000 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 frederick d’alessio and richard
moley received an additional £5000 per annum in recognition of the extensive international travelling commitment required to perform their duties
3 taxable beneﬁts include a car allowance healthcare personal tax advice personal pensions 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 in 2004 and applicable costs are included
in his taxable beneﬁts
4 further details of the annual bonuses earned by the executive directors are provided in paragraph 4b above
5 the 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 my chung and richard moley ceased being directors of the company in june 2004 september 2004 and may 2005 respectively
6 remuneration as shown above excludes fees received as a result of external appointments see paragraph 4f above
b directors’ pensions 
the pensions earned from the noncontributory deﬁned beneﬁt arrangements in place for the participating executive directors during 2005 were as follows
increase accumulated total accrued pension
increase in before inﬂation at at
age at years of accrued pension in accrued pension 31 december 31 december
31 december pensionable during the year during the year 2005
1
2004
2005 service £000 £000 £000 £000
e hutchinson 50 20 90 50 1890 1800
increase before
transfer value total transfer value of pension
2
increase in total inﬂation in total
transfer value before inﬂation at at transfer value transfer value
of the increase in of the increase in 31 december 1 january of pension of pension
accrued pension
2
accrued pension
2
2005 2005 during the year during the year
£000 £000 £000 £000 £000 £000
e hutchinson 1255 700 2635 2213 422 373
notes 
1 the pension entitlements shown are those which would be paid annually from normal retirement age of 60 based on service to 31 december 2005 eric hutchinson’s total accrued
pension is restricted to 20 years’ service
2 the 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 individualthe transfer value cannot therefore be meaningfully added to annual remuneration
3 no additional voluntary contributions have been included in the above table
spirent plc annual report 2005 23 c directors’ remuneration and payments to former directors – summary 
2005
1
2004
1
£000 £000
total emoluments of all directors 1442 2269
gains made on exercise of share options
2
– 8
company contribution to 401k retirement and proﬁt share plan
2
– 11
company contribution to the cash plan in respect of pensions
3
23 11
ex gratia pension to former director
4
5 5
1470 2304
notes
1 figures relate to the period of each director’s board membership
2 an average conversion rate of £1  183 was used for 2004 this related to my chung
3 these payments relate to approved contributions made by the company in respect of anders gustafsson’s participation in the cash plan in respect of those contributions which are
outside of the statutory limits the company has established an unfunded unapproved retirement beneﬁt “uurb” which had a transfer value of approximately £166500 at 31
december 2005 31 december 2004 approximately £44400the transfer value represents a notional accumulation of the company’s contributions see paragraph 4c above for further
information on directors’ pensions
4 this relates to an annual ex gratia pension to geoff bastians who retired from the board in 1984
7 directors’ interests
1
a summary of interests in ordinary share capital 
the beneﬁcial and nonbeneﬁcial 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 2005 at 1 january 2005
ordinary ordinary options and ordinary ordinary options and
shares shares rights to acquire shares shares rights to acquire
beneﬁcial
2
nonbeneﬁcial ordinary shares
3
beneﬁcial
2
nonbeneﬁcial ordinary shares
3
executive directors
4
a gustafsson 50000 180180
5
3232000 – 180180
5
1800000
e hutchinson 753707 – 4091733 738381 – 3282447
nonexecutive directors
m beresford 65225 – – 65225 – –
f d’alessio 28000 – – 28000 – –
g ennerfelt
6
120000000 – – 119000000 – –
a given ––––––
k hellström ––––––
j weston 1662000 – – 1600000 – –
j wyness 346037 – – 346037 – –
notes
1 information relating to directors’ interests in 7a and 7b has been audited by the company’s auditors
2 directors’ beneﬁcial holdings do not form part of the remuneration provided by the company
3 options and other rights to acquire shares in respect of the executive directors include share options share appreciation rights and performance shares
4 the company’s executive directors along with other employees of the group are potential beneﬁciaries of certain ordinary shares held in the employee share ownership trust
“esot” uk executive directors with other employees of the group are also potential beneﬁciaries of the spirent sharesave trust “sst” 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 trustsat 31 december 2005 the deemed beneﬁcial
interests in the esot and the sst were 180180 ordinary shares and 3231940 ordinary shares respectively 31 december 2004 259066 and 3508136 respectively further details
on the company’s share plans are provided in note 32 to the consolidated ﬁnancial statements and note 17 to the parent company ﬁnancial statements
5 the nonbeneﬁcial interests of anders gustafsson arises from a conditional award over shares to a value of £100000 the award was made in 2004 in recognition of his appointment
to the board and the shares which were purchased are held in the esot in normal circumstances the shares will be released beneﬁcially to him on the third anniversary of his
appointment subject to him still being in the company’s employment at that time
6 göran ennerfelt has a connected notiﬁable interest in the spirent ordinary shares held by lexa bv see the report of the directors on pages 15 and 16 which for statutory purposes
is also deemed to be an interest of the director
24 spirent plc annual report 2005
report on directors’ remuneration continued b options and rights to acquire ordinary shares 
market
at at exercise price value on
31 december exercisedlapsed granted 1 january per share date of grant date ﬁrst
plan type
1
2005 during the year during the year 2005 date of grant pence pence exercisable expiry date
a gustafsson esos 1800000 – – 1800000 05 aug 04 56 56 05 aug 07 04 aug 14
eip 1128300 – 1128300 – 25 aug 05 53 53 25 aug 08 24 aug 15
eip 303700 – 303700 – 25 aug 05 nil
2
53 25 aug 08 25 aug 08
e hutchinson esos – 17652
3
– 17652 27 apr 95 108 108 27 apr 98 26 apr 05
esos 42928 – – 42928 29 apr 96 140 140 29 apr 99 28 apr 06
esos 33786 – – 33786 23 apr 97 118 118 23 apr 00 22 apr 07
esos 29586 – – 29586 27 apr 98 152 152 27 apr 01 26 apr 08
srsos 12363 – – 12363 22 oct 98 83 83 01 jan 06 30 jun 06
esos 75156 – – 75156 01 apr 99 133 133 01 apr 02 31 mar 09
esos – 55562
3
– 55562 11 may 00 334 334 11 may 03 10 may 05
esos 105000 – – 105000 09 apr 01 305 305 09 apr 04 08 apr 11
srsos 8693 – – 8693 05 oct 01 93 93 01 dec 08 31 may 09
esos 234000 – – 234000 02 apr 02 134 134 02 apr 05 01 apr 12
esos 387000 – – 387000 02 may 02 113 113 02 may 05 01 may 12
esos 1128000 – – 1128000 25 mar 03 16 16 25 mar 06 24 mar 13
srsos 24721 – – 24721 26 sep 03 38 38 01 dec 10 31 may 11
esos 1128000 – – 1128000 05 aug 04 56 56 05 aug 07 04 aug 14
eip 695300 – 695300 – 25 aug 05 53 53 25 aug 08 24 aug 15
eip 187200 – 187200 – 25 aug 05 nil
2
53 25 aug 08 25 aug 08
notes 
1 key to plan type
eip – employee incentive plan esos – executive share option scheme srsos – uk savings related share option scheme an explanation of each plan and its operation is given in
note 32 to the consolidated ﬁnancial statements and note 17 to the parent company ﬁnancial statements
2 this relates to an award of performance shares under the eipthere is no exercise price payable for a performance share upon vesting further details on performance shares are provided
in paragraph 4d above
3 this award of options lapsed unexercised during the year
the middle market price of an ordinary share on 4 january 2005 being the ﬁrst day the london stock exchange was open for trading in 2005 and
31 december 2005 was 515 pence and 495 pence respectively and during that period ranged between a high of 735 pence and a low of 4125 pence
save as disclosed there have been no changes between the year end and 23 february 2006 the date on which the ﬁnancial statements have been signed
in the directors’ beneﬁcial or nonbeneﬁcial interests in the ordinary share or loan capital of the company or any subsidiary
spirent plc annual report 2005 25 8 total shareholder return performance 
the graph below shows total shareholder return “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 “ftse 350” and the ftse information t echnology 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 provides a particularly representative collection of comparator companies
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 2006 annual
general meeting
signed on behalf of the board 
marcus beresford cbe 
chairman of the remuneration committee
23 february 2006 
rebased index
dec 00
spirent
dec 01 dec 02 dec 03 dec 04 dec 05
ftse 350 ftse it
financial year end
120
100
80
60
40
20
0
26 spirent plc annual report 2005
report on directors’ remuneration continued we have audited the group ﬁnancial statements of spirent plc for the year
ended 31 december 2005 which comprise the consolidated income
statement consolidated statement of recognised income and expense
consolidated balance sheet consolidated cash flow statement and the
related notes 1 to 40these group ﬁnancial statements have been prepared
under the accounting policies set out therein
we have reported separately on the parent company ﬁnancial statements
of spirent plc for the year ended 31 december 2005 and on the information
in the directors’ remuneration report 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 are responsible for preparing the annual report and the group
ﬁnancial statements in accordance with applicable united kingdom law
and international financial reporting standards “ifrs” as adopted by the
european union as set out in the statement of directors’ responsibilities
our responsibility is to audit the group ﬁnancial statements in accordance
with relevant legal and regulatory requirements and international standards
on auditing uk and ireland
we report to you our opinion as to whether the group ﬁnancial statements
give a true and fair view and whether the group ﬁnancial statements have
been properly prepared in accordance with the companies act 1985 and
article 4 of the ias regulationwe also report to you if in our opinion the
directors’ report is not consistent with the group ﬁnancial statements if
we have not received all the information and explanations we require for
our audit or if information speciﬁed by law regarding director’s remuneration
and other transactions is not disclosed
we review whether the corporate governance statement reflects the
company’s compliance with the nine provisions of the 2003 frc combined
code speciﬁed for our review by the listing rules of the financial services
authority 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 other information contained in the annual report and consider
whether it is consistent with the audited group ﬁnancial statements the
other information comprises only the directors’ report the chairman’s
statement the chief executive’s overview the operating review the
financial review and the corporate governance statement we consider 
the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the group financial
statements our responsibilities do not extend to any other information
basis of audit opinion 
we conducted our audit in accordance with international standards on
auditing uk and ireland issued by the auditing practices board an audit
includes examination on a test basis of evidence relevant to the amounts
and disclosures in the group financial statements it also includes an
assessment of the significant estimates and judgments made by the
directors in the preparation of the group financial statements 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 group ﬁnancial
statements 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 group ﬁnancial
statements
opinion 
in our opinion the group ﬁnancial statements
– give a true and fair view in accordance with ifrs as adopted by the
european union of the state of the group’s affairs as at 31 december
2005 and of its loss for the year then ended and 
– have been properly prepared in accordance with the companies act 1985
and article 4 of the ias regulation
ernst  y oung llp
registered auditor
london
23 february 2006
spirent plc annual report 2005 27
independent auditors’ report to the members of spirent plc 2005 2004 2003
year to 31 december notes £ million £ million £ million
continuing operations
revenue 3 4 2593 2872 2918
cost of sales 1531 1652 1743
gross proﬁt 1062 1220 1175
selling and distribution 709 730 700
administration 743 340 369
other operating income – 02 07
operating lossproﬁt 4 390 152 113
add back
material onetime items 7 84 29 75
goodwill impairment 14 370 ––
sharebased payment 33 51 48 09
operating proﬁt before material onetime items goodwill impairment and 
sharebased payment 115 229 197
lossproﬁt from interests in joint ventures 18 – 07 14
operating lossproﬁt of the group and joint venture 390 145 127
proﬁt on the disposal of operations 37 39 40 86
lossproﬁt before interest 351 185 213
finance income 8 15 14 29
finance costs 9 81 82 127
costs associated with the part prepayment of loan notes 9 – 05 161
lossproﬁt before tax 4 5 417 112 46
tax 12 40 20 42
lossproﬁt for the year from continuing operations after tax 377 92 04
discontinued operations
proﬁt for the year from discontinued operations 6 132 173 142
lossproﬁt for the year 245 265 138
attributable to
equity holders of parent 249 262 136
minority shareholders’ interests – discontinued operations 04 03 02
lossproﬁt for the year 245 265 138
lossearnings per share pence 13
basic lossearnings 262 279 146
basic lossearnings from continuing operations 397 098 004
diluted lossearnings 262 274 144
diluted lossearnings from continuing operations 397 096 004
the notes on pages 32 to 94 and page 114 form part of these ﬁnancial statements
28 spirent plc annual report 2005
consolidated income statement 2005 2004 2003
year to 31 december notes £ million £ million £ million
income and expense recognised directly in equity
gains on cash ﬂow hedges taken to equity 19 ––
exchange differences on retranslation of foreign operations 41 15 55
actuarial lossesgains on deﬁned beneﬁt pension plans 11 161 30 03
101 15 58
transfers to income statement
exchange gain transferred to proﬁt on sale – – 24
gains on cash ﬂow hedges 05 ––
transfers to balance sheet
write offreinstatement of deferred tax asset on pension liability 111 – 126
tax on exchange differences – – 02
tax on actuarial gainslosses – 09 01
net expenseincome recognised directly in equity 217 06 157
lossproﬁt for the year 245 265 138
total recognised income and expense for the year 34 462 271 295
attributable to
equity holders of parent 468 269 294
minority shareholders’ interests – discontinued operations 34 06 02 01
462 271 295
effects of changes in accounting policy
equity holders of parent
net gain on cash ﬂow hedges on ﬁrsttime application of ias 39 05 ––
net loss on fair value hedges on ﬁrsttime application of ias 39 10 ––
loan notes at fair value on ﬁrsttime application of ias 39 04 ––
01 ––
the notes on pages 32 to 94 and page 114 form part of these ﬁnancial statements
spirent plc annual report 2005 29
consolidated statement of recognised income and expense consolidated balance sheet
30 spirent plc annual report 2005
2005 2004 2003
at 31 december notes £ million £ million £ million
assets
noncurrent assets
goodwill 14 715 1065 1109
property plant and equipment 15 301 863 902
investment in joint venture and associates 18 – 143 134
trade and other receivables 20 17 15 17
deferred tax 24 10 111 130
1043 2197 2292
current assets
inventories 19 270 540 550
trade and other receivables 20 563 884 852
derivative ﬁnancial instruments 30 26 ––
cash and cash equivalents 21 492 517 376
1351 1941 1778
assets held in disposal group held for sale 6 1641 ––
total assets 4035 4138 4070
liabilities
current liabilities
trade and other payables 22 629 908 876
current tax 247 262 247
derivative ﬁnancial instruments 30 07 ––
short term borrowings and overdrafts 23 39 18 18
provisions and other liabilities 26 41 42 46
963 1230 1187
noncurrent liabilities
trade and other payables 25 07 39 23
derivative ﬁnancial instruments 30 20 ––
long term borrowings 27 712 763 933
deﬁned beneﬁt pension plan deﬁcit 11 515 381 482
deferred tax 24 08 25 29
provisions and other liabilities 26 101 96 133
1363 1304 1600
liabilities included in disposal group held for sale 6 487 ––
total liabilities 2813 2534 2787
net assets 1222 1604 1283
capital and reserves
share capital 32 34 322 319 315
share premium account 34 44 13 6975
capital reserve 34 102 109 177
capital redemption reserve 34 – – 07
translation reserve 34 55 16 30
net unrealised gains and losses 34 19 ––
retained earnings 34 661 1134 6243
equity holders of parent 1203 1591 1261
minority interests 34 19 13 22
total equity 1222 1604 1283
the notes on pages 32 to 94 and page 114 form part of these ﬁnancial statements
signed on behalf of the board
anders gustafsson
director
23 february 2006 consolidated cash ﬂow statement
spirent plc annual report 2005 31
2005 2004 2003
year to 31 december notes £ million £ million £ million
cash ﬂows from operating activities
cash generated from operations 35 340 603 682
tax paidreceived 46 31 89
net cash from operating activities 294 572 771
cash ﬂows from investing activities
dividends received from associates 02 01 01
interest received 14 16 36
disposal of operations 37 24 25 620
purchase of property plant and equipment 15 305 253 167
proceeds from the sale of property plant and equipment 06 05 09
acquisition of subsidiaries 36 – 11 11
contribution to joint venture – 02 05
net cash used infrom investing activities 259 219 483
cash ﬂows from ﬁnancing activities
interest paid 74 84 126
interest element of ﬁnance lease rental payments 05 04 05
costs associated with the part prepayment of loan notes – 23 137
proceeds from the issue of share capital 27 15 07
new borrowings – – 94
repayments of borrowings 02 102 1529
repayments of capital element of ﬁnance lease rentals 14 08 08
net cash used in ﬁnancing activities 68 206 1704
net decreaseincrease in cash and cash equivalents 33 147 450
cash and cash equivalents at the beginning of year 510 369 830
effect of foreign exchange rate changes 11 06 11
cash and cash equivalents at the end of the year 488 510 369
cash and cash equivalents comprise
cash and cash equivalents 21 492 517 376
overdrafts 23 04 07 07
488 510 369
the notes on pages 32 to 94 and page 114 form part of these ﬁnancial statements 1 corporate information
the group’s consolidated ﬁnancial statements for the year ended 31 december 2005 were authorised for issue by the board of directors on 23 february
2006 spirent plc is a public limited company incorporated and domiciled in england and wales the company’s ordinary shares are traded on the london
stock exchange and in the form of american depositary shares on the new york stock exchange
as required by the european union’s ias regulation and the companies act 1985 the group has prepared its consolidated financial statements in
accordance with international financial reporting standards “ifrs” as adopted by the european union “eu” ifrs as adopted by the eu differ in certain
respects from ifrs as issued by the international accounting standards board “iasb” however the consolidated ﬁnancial statements for the periods
presented would be no different had the group applied ifrs as issued by the iasb references to “ifrs” hereafter should be construed as references to
ifrs as adopted by the eu the signiﬁcant accounting policies adopted by the group are set out in note 2
2 summary of signiﬁcant accounting policies
basis of preparation
this is the ﬁrst year in which the group has prepared its ﬁnancial statements under ifrs and the comparatives have been restated from uk generally
accepted accounting practice “uk gaap” to comply with ifrs the group issued a press release on 15 july 2005 incorporating its preliminary 
ifrs ﬁnancial statements for 2003 and 2004 the reconciliations to ifrs from the previously published uk gaap ﬁnancial statements are summarised in
note 39
the accounting policies which follow set out those policies which apply in preparing the ﬁnancial statements for the year ended 31 december 2005where
the group has applied different policies for part of the period since its transition to ifrs on 1 january 2003 this is explained in note 39
basis of consolidation
the consolidated ﬁnancial statements incorporate the ﬁnancial statements of the company and its subsidiaries made up to 31 december each year the
ﬁnancial statements of subsidiaries are prepared for the same reporting year as the parent company using consistent accounting policies
results of subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which
control is transferred out of the group all intra group transactions balances income and expenses are eliminated on consolidation
interests in associates and joint venture
the consolidated ﬁnancial statements include the group’s share of proﬁts or losses of associates and joint ventures
associates are those in which the group is in a position to exercise signiﬁcant inﬂuence but not control or joint control through participation in the operating
policy decisions of the investee results are based on management accounts to 31 december each year the investment in associates is accounted for
using the equity method and carried in the balance sheet at cost plus post acquisition changes in the group’s share of net assets of the associate less any
impairment in value
jointly controlled entities in which the group enters into a contractual arrangement to undertake an economic activity with another party or parties that
is subject to joint control are treated as joint ventures the investment in joint ventures is accounted for using the equity method results are based on
management accounts to 31 december each year
goodwill
goodwill arising on the acquisition of subsidiaries representing the excess of cost over the net fair value of the identiﬁable assets liabilities and contingent
liabilities acquired is capitalised as an intangible asset goodwill is carried at cost less any accumulated impairment losses
goodwill in each cashgenerating unit is tested annually for impairment and more frequently if there is any indication that the current asset value is not
recoverable
for the purpose of impairment testing goodwill is allocated to the related cashgenerating units monitored by management usually at business segment
level or statutory company level as the case may bewhere the recoverable amount of the cashgenerating unit is less than its carrying amount including
goodwill an impairment loss is recognised in the income statement
the carrying amount of goodwill allocated to a cashgenerating unit an operation within a cashgenerating unit an associate or jointly controlled entity
is included in the proﬁt or loss on its disposal
32 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements intangible assets
intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses separately identiﬁable intangible assets such as
patent fees licence fees and trade marks 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 basisthe carrying
value of intangible assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable
intangible assets arising on the group’s various product development projects are recognised only if all of the following conditions are met
i an asset is created that can be separately identiﬁed such as software or a new process
ii it is probable that the asset created will generate future economic beneﬁts
iii the development cost can be measured reliably
iv it is intended that the asset is completed and used and
v there is adequate ﬁnancial technical and other resources to complete use or sell the asset
product development costs are expensed as incurred until the technological feasibility of the product under development has been establishedtechnological
feasibility in spirent’s circumstances occurs when a working model is completed for software development technological feasibility is not established until
the process of developing the software is completeafter technological feasibility is established additional costs are capitalised and amortised on a straight
line basis over the estimated useful life
property plant and equipment
property plant and equipment are stated at cost less accumulated depreciation and accumulated impairment depreciation is not provided on freehold
land depreciation is provided to write off the cost less estimated residual value of all other assets over their estimated useful lives on a straight line basis
at rates which take into account commercial conditions at their location usual asset lives are as follows
freehold buildings 50 years
properties held under ﬁnance leases over the lease period
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 property plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may
not be recoverable
impairment of assets
the group assesses at each reporting date whether there is an indication that an asset may be impaired if any such indication exists or when annual
impairment testing for an asset is required the group makes an estimate of the asset’s recoverable amount an asset’s recoverable amount is the higher
of an asset’s or cashgenerating unit’s fair value less costs to sell and its value in use and is determined for an individual asset unless the asset does not
generate cash inﬂows that are largely independent of those from other assets or groups of assets where the carrying amount of an asset exceeds its
recoverable amount the asset is considered impaired and is written down to its recoverable amount in assessing value in use the estimated future cash
ﬂows are discounted to their present value using a pretax discount rate that reﬂects current market assessments of the time value of money and the
risks speciﬁc to the asset impairment losses of continuing operations are recognised in the income statement of those expense categories consistent with
the function of the impaired asset
an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or
may have decreased if such indication exists the recoverable amount is estimated a previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised if that is the case the
carrying amount of the asset is increased to its recoverable amount the increased amount cannot exceed the carrying amount that would have been
determined net of depreciation had no impairment loss been recognised for the asset in prior years such reversal is recognised in the income statement
after such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount less any residual value on a
systematic basis over its remaining useful life
spirent plc annual report 2005 33 2 summary of signiﬁcant accounting policies continued
leases
finance leases which transfer substantially all the risks and rewards of ownership of the assets concerned are capitalised on the balance sheet at the lower
of fair value of the leased property and net present value of the minimum lease payments at the inception of the lease 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
income statement over the periods of the leases as a ﬁnance cost lease payments are apportioned between the ﬁnance cost and the reduction in the
lease liability so as to achieve a constant rate of interest on the remaining balance of the liability capitalised leased assets are depreciated over their useful
life as above
operating leases are leases where the lessor retains substantially all the risks and rewards of ownership of the asset operating lease rentals are charged
to the income statement on a straight line basis over the period of the lease
inventories
inventories are stated 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 ﬁrstinﬁrstout basis including all attributable overheads based on a normal level of activity and
excluding borrowing costs net realisable value represents selling price less further costs to be incurred to completion and on sale
trade and other receivables
trade receivables which generally have 30 to 90 day terms are recognised and carried at original invoice amount less an allowance for any uncollectible
amounts an estimate for doubtful debts is made when collection of the full amount is no longer probable bad debts are written off when identiﬁed
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less
for the purposes of the consolidated cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above net of
outstanding bank overdrafts
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
revenue recognition
goods and services
revenue is recognised when it is probable that 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
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 componentto 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 earned the right to consideration
34 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued foreign currencies
the consolidated ﬁnancial statements are presented in pounds sterling which is the group’s functional and presentation currency the group determines
the functional currency of its foreign operations and items included in the ﬁnancial statements are measured using that functional currency
transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions monetary assets and liabilities
denominated in foreign currencies are translated at the rates ruling at the balance sheet date nonmonetary assets and liabilities denominated in foreign
currencies are measured in terms of historical costs using the exchange rate at the date of the initial transactions
the functional currencies of the group’s operations are principally us dollar sterling or euro
on consolidation the assets and liabilities of the group’s foreign operations are translated into the group’s presentation currency at exchange rates
prevailing at the balance sheet date the results of foreign operations are translated into sterling using average rates
equity investments in foreign operations include long term intra group loans the settlement of which is neither planned nor likely to occur in the foreseeable
future exchange differences arising from the retranslation of opening net assets of foreign investments and exchange adjustments arising from the
translation of the results of foreign operations are classiﬁed as equity and transferred to the group’s translation reserve such translation differences are
recognised as part of the proﬁt or loss on disposal should an operation be disposed of the group has elected to apply the exemption in ifrs 1 ‘first time
adoption of international financial reporting standards’ which allows the cumulative translation differences for all foreign operations to be deemed to
be zero at the date of transition to ifrs the gain or loss on the subsequent disposal of any foreign operation therefore excludes translation differences
that arose before the date of transition
goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated
at closing rates of exchange as permitted by ifrs 1 the group has elected to treat goodwill and fair value adjustments arising on acquisitions prior to the
date of transition to ifrs and treated as an asset of the parent as sterling denominated
all other exchange proﬁts and losses are taken to the income statement with the exception of differences on foreign currency borrowings that provide
an effective hedge against the group’s equity investments in foreign operations which are taken to equity together with the exchange differences on the
carrying amount of the related investments
financial instruments
financial assets and liabilities are recognised on the group’s balance sheet when it becomes a party to the contractual provisions of the instrument
interestbearing loans and borrowings
loans and overdrafts are initially recognised at fair value of the consideration received net of issue costs issue costs are amortised over the expected life
of the instrument
after initial recognition interestbearing loans and borrowings are subsequently measured at amortised cost using the effective interest methodamortised
cost is calculated by taking into account any issue costs and any discount or premium on settlement
from 1 january 2005 hedge accounting is adopted where derivatives such as ‘ﬁxed to ﬂoating’ interest rate swaps are held as fair value hedges against
ﬁxed interest rate borrowings under fair value hedge accounting ﬁxed interest rate borrowings are revalued at each balance sheet date by the change in
the fair value attributable to the interest rate risk being hedged
equity instruments
equity instruments are recorded at the proceeds received net of direct issue costs
derivative 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 such derivative ﬁnancial instruments are stated at fair value with effect from 1 january 2005
from 1 january 2005 such derivative ﬁnancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into
and are subsequently remeasured at fair value derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative
for those derivatives designated as hedges and for which hedge accounting is desired the hedging relationship is documented at its inception this
documentation identiﬁes the hedging instrument the hedged item or transaction the nature of the risk being hedged and how effectiveness will be
measured throughout its duration such hedges are expected at inception to be highly effective
spirent plc annual report 2005 35 2 summary of signiﬁcant accounting policies continued
forward exchange contracts are used to hedge foreign exchange exposures arising on forecast receipts and payments in foreign currencies the fair value
of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity proﬁles interest rate swaps
are used to hedge the group’s exposure to movements in interest rates the fair value of interest rate swaps is determined by reference to market rates
for similar instruments
for the purpose of hedge accounting hedges are classiﬁed as fair value hedges when they hedge the exposure to changes in the fair value of a recognised
asset or liability or cash ﬂow hedges where they hedge exposure to the variability in cash ﬂows that is due to the risk associated with a recognised asset
or liability or a forecast transaction the group discontinues hedge accounting if the hedging instrument expires or is sold terminated or exercised the
hedge no longer meets the criteria for hedge accounting or the group revokes the designation
in relation to these fair value hedges interest rate swaps which meet the conditions for hedge accounting any gain or loss from remeasuring the hedging
instrument is recognised in the income statement and any gain or loss on the item that is being hedged is adjusted against its carrying amount and
recognised in the income statement
in relation to cash ﬂow hedges forward foreign exchange contracts to hedge ﬁrm commitments or highly probable forecast transactions and which meet
the conditions for hedge accounting the proportion of the gain or loss on the remeasurement of the fair value of the hedging instrument that is deemed
to be effective is recognised in equity and the ineffective portion is recognised in the income statement
when the ﬁrm commitment or highly probable forecast transaction results in the recognition of an asset or liability the associated gains and losses that
have previously been recognised in equity are included in the initial measurement of the carrying amount of the asset or liability at the time the asset or
liability is recognised
for derivatives that do not qualify for hedge accounting any gains or losses arising from changes in fair value are taken to the income statement
gains or losses arising on hedging instruments which are cancelled due to termination of the underlying exposure are taken to the income statement
immediately
derivatives embedded in other ﬁnancial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are
not closely related to those of the host contracts
pension contributions
in the uk the group operates two deﬁned beneﬁt 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 cost of providing beneﬁts under the deﬁned beneﬁt pension schemes is determined separately for each scheme using the projected unit credit method
which attributes entitlement to beneﬁts to the current period to determine current service cost and to the current and prior periods to determine the
present value of deﬁned beneﬁt obligation and is based on actuarial advice past service costs are recognised in the income statement on a straight line
basis over the vesting period or immediately if the beneﬁts have vestedwhen a settlement eliminating all obligations for beneﬁts already accrued or a
curtailment reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement occurs the
obligation and related scheme assets are remeasured using current actuarial assumptions and the resultant gain or loss recognised in the income statement
during the period in which the settlement or curtailment occurs
the interest element of the deﬁned beneﬁt cost represents the change in present value of scheme obligations resulting from the passage of time and is
determined by applying the discount rate to the opening present value of the beneﬁt obligation taking into account material changes in the obligation
during the yearthe expected return on scheme assets is based on an assessment made at the beginning of the year of long term market returns on scheme
assets adjusted for the effect on the fair value of scheme assets of contributions received and beneﬁts paid during the year the difference between the
expected return on scheme assets and the interest cost is recognised in the income statement
actuarial gains and losses are recognised in full in the statement of recognised income and expense in the period in which they occur
the deﬁned beneﬁt pension asset or liability in the balance sheet comprises the total for each scheme of the present value of the deﬁned beneﬁt obligation
using a discount rate based on high quality corporate bonds less any past service cost not yet recognised and less the fair value of scheme assets out
of which the obligations are to be settled directly fair value is based on market price information and in the case of quoted securities is the published
bid price the value of a net pension beneﬁt asset is restricted to the sum of any unrecognised past service costs and the present value of any amount the
group expects to recover by way of refunds from the scheme or reductions in the future contributions
contributions payable to the deﬁned contribution schemes are charged to the income statement in the year for which they are due
36 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 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
sharebased payment
employees including directors of the group receive remuneration in the form of sharebased payment transactions whereby employees render services
in exchange for shares or rights over shares equitysettled transactions
the cost of equitysettled transactions with employees is measured by reference to the fair value at the date at which they are granted the fair value is
determined using a binomial model
the cost of equitysettled transactions is recognised together with a corresponding increase in equity over the period in which the performance conditions
are fulﬁlled ending on the date on which the relevant employees become fully entitled to the award vesting date the cumulative expense recognised
for equitysettled transactions at each reporting date until the vesting date reﬂects the extent to which the vesting period has expired and the number
of awards that will ultimately vest in the opinion of the directors of the company at that date and based on the best available estimates
no expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon a market condition which are treated
as vesting irrespective of whether or not the market condition is satisﬁed provided that all other performance conditions are satisﬁed
where the terms of an equitysettled award are modiﬁed as a minimum an expense is recognised as if the terms had not been modiﬁed in addition an
expense is recognised for any increase in the value of the transaction as a result of the modiﬁcation as measured at the date of modiﬁcation
where an equitysettled award is cancelled it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award
is recognised immediately however if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is
granted the cancelled and new awards are treated as if they were a modiﬁcation of the original award as described in the previous paragraph
the dilutive effect of outstanding options is reﬂected in the computation of diluted earnings per share
the group has an employee share trust for the granting of certain options to employees shares in the group held by the employee share trust are treated
as treasury shares and presented in the balance sheet as a deduction from equity
the group has taken advantage of the transitional provisions of ifrs 1 in respect of equitysettled awards and has applied ifrs 2 ‘sharebased payment’
only to equitysettled awards granted after 7 november 2002 which were unvested at 1 january 2005
tax
current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on tax rates and
laws that are enacted or substantively enacted by the balance sheet date
deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
ﬁnancial statements with the following exceptions
– where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination
that at the time of the transaction affects neither accounting nor taxable proﬁt or loss
– in respect of taxable temporary differences associated with investments in subsidiaries associates and joint ventures where the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future and
– deferred income tax assets are recognised only to the extent that it is probable that taxable proﬁt will be available against which the deductible temporary
differences carried forward tax credits or tax losses can be utilised
deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is
realised or liability is settled based on tax rates and laws enacted or substantively enacted at the balance sheet date
income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity otherwise income tax is recognised in the
income statement
spirent plc annual report 2005 37 2 summary of signiﬁcant accounting policies continued
new standards and interpretations not applied
during the year the iasb and ifric have issued the following standards and interpretations with an effective date after the date of these ﬁnancial
statements
international accounting standards “iasifrs” effective date
ifrs 1 amendment relating to ifrs 6 1 january 2006 
ifrs 4 insurance contracts amendment to ias 39 and ifrs 4 – financial guarantee contracts 1 january 2006
ifrs 6 exploration for and evaluation of mineral assets 1 january 2006
ifrs 6 amendment relating to ifrs 6 1 january 2006
ifrs 7 financial instruments disclosures 1 january 2007 
ias 1 amendment – presentation of financial statements capital disclosures 1 january 2007 
ias 21 amendment to ias 21 – the effects of change in foreign exchange rates net investment in a foreign operation 1 january 2006 
ias 39 fair value option 1 january 2006
ias 39 amendments to ias 39 – transition and initial recognition of financial assets and financial liabilities day 1 proﬁts 1 january 2006
ias 39 cash flow hedge accounting 1 january 2006
ias 39 amendment to ias 39 and ifrs 4 – financial guarantee contracts 1 january 2006
international financial reporting interpretations committee “ifric” 
ifric 4 determining whether an arrangement contains a lease 1 january 2006
ifric 5 rights to interests arising from decommissioning restoration and environmental rehabilitation funds 1 january 2006
ifric 6 liabilities arising from participating in a speciﬁc market – waste electrical and electronic equipment 1 december 2005
ifric 7 applying the restatement approach under ias 39 financial reporting in hyperinﬂationary economies 1 march 2006
the directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group’s ﬁnancial statements
in the period of initial application
upon adoption of ifrs 7 the group will have to disclose additional information about its ﬁnancial instruments their signiﬁcance and the nature and extent
of risks that they give rise to more speciﬁcally the group will need to disclose the fair value of its ﬁnancial instruments and its risk exposure in greater
detail there will be no effect on reported income or net assets
3 revenue
2005 2004 2003
£ million £ million £ million
sales of goods 2288 2509 2518
maintenance and support services 305 363 400
total revenue from continuing operations 2593 2872 2918
revenues for discontinued operations principally relate to sales of goods
4 segmental analysis
the group’s primary reporting format is business segments and its secondary format is geographical segments
business segments
for management purposes the group is currently organised on a worldwide basis into three operating groups communications network products and
systems communications is further subdivided into two divisions performance analysis and service assurance these four operating segments are the
basis on which the group reports its primary segment information
the principal activities of each segment are as follows
– performance analysis division of the communications group develops testing solutions for a broad range of communications technologies critical to
the development of nextgeneration network equipment and devices
– service assurance division of the communications group provides network monitoring and management systems for service providers to assure the quality
of their high bandwidth data services sales include hardware and software products as well as maintenance and support services
– network products group develops and manufactures innovative solutions for fastening identiﬁcation protection and connectivity in electrical and
communications networks marketed under the global brand hellermanntyton and
38 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued – systems group comprises pg drives technology which develops power control systems for specialist electrical vehicles in the mobility and industrial
markets and until august 2003 an aerospace business that provided groundbased logistics support software systems for the aviation market
as described in note 6 the network products group and the investment in associated companies “hellermanntyton division” has been classiﬁed as a
discontinued operation
nonsegmental costs represent corporate expenses nonsegmental assets comprise cash held for central treasury purposes and other corporate assets
and nonsegmental liabilities represent senior unsecured loan notes deﬁned beneﬁt pension fund deﬁcit and other corporate liabilities
2005
£ million
continuing discontinued
operations operations
performance service non network total
analysis assurance communications systems segmental total products operations
revenue
external sales 1788 428 2216 377 – 2593 2055 4648
intersegment sales – 01 01 – – 01 – 01
segment revenue 1788 429 2217 377 – 2594 2055 4649
intersegment sales are charged 
at prevailing market rates
proﬁtloss
operating proﬁtloss before 
material onetime items
goodwill impairment and 
sharebased payment 220 96 124 44 53 115 253 368
material onetime items 25 54 79 – 05 84 04 88
goodwill impairment – 370 370 – – 370 – 370
sharebased payment 36 12 48 01 02 51 05 56
operating lossproﬁt 159 532 373 43 60 390 244 146
share of proﬁt of associates –––––– 27 27
operating lossproﬁt of the group 
and associates 159 532 373 43 60 390 271 119
proﬁtloss on the disposal 
of operations 39 67 28
finance income 15 01 16
finance costs 81 12 93
lossproﬁt before tax 417 193 224
tax 40 61 21
lossproﬁt after tax for the year 377 132 245
other information
product development 421 140 561 23 – 584 44 628
capital expenditure note 15 121 19 140 07 01 148 182 330
depreciation note 15 90 16 106 05 03 114 112 226
assets
segment assets 1390 324 1714 137 543 2394 1480 3874
investment in associates –––––– 161 161
total assets 1390 324 1714 137 543 2394 1641 4035
liabilities
segment liabilities 410 129 539 49 1776 2364 449 2813
net assets 980 195 1175 88 1233 30 1192 1222
spirent plc annual report 2005 39 4 segmental analysis continued
2004
£ million
continuing discontinued
operations operations
performance service non network total
analysis assurance communications systems segmental total products operations
revenue
external sales 1768 747 2515 357 – 2872 1878 4750
intersegment sales – 01 01 – – 01 – 01
segment revenue 1768 748 2516 357 – 2873 1878 4751
intersegment sales are charged 
at prevailing market rates
proﬁtloss
operating proﬁtloss before 
material onetime items and 
sharebased payment 217 25 242 40 53 229 213 442
material onetime items 13 19 06 – 23 29 – 29
sharebased payment 32 14 46 01 01 48 04 52
operating proﬁtloss 198 08 190 39 77 152 209 361
loss from interest in joint venture – 07 07 – – 07 – 07
share of proﬁt of associates –––––– 18 18
operating proﬁtloss of the group
joint venture and associates 198 15 183 39 77 145 227 372
proﬁt on the disposal of operations 40 – 40
finance income 14 02 16
finance costs 82 09 91
costs associated with the part 
prepayment of loan notes 05 – 05
proﬁt before tax 112 220 332
tax 20 47 67
proﬁt after tax for the year 92 173 265
other information
product development 432 172 604 28 – 632 41 673
capital expenditure note 15 100 14 114 06 01 121 135 256
depreciation note 15 119 20 139 04 05 148 106 254
impairment of property plant 
and equipment 06 – 06 – – 06 – 06
assets
assets 1182 730 1912 118 541 2571 1424 3995
investment in joint venture 
and associates – 03 03 – – 03 146 143
total assets 1182 727 1909 118 541 2568 1570 4138
liabilities
segment liabilities 448 115 563 49 1497 2109 425 2534
net assets 734 612 1346 69 956 459 1145 1604
40 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 2003
£ million
continuing discontinued
operations operations
performance service non network total
analysis assurance communications systems segmental total products operations
revenue
external sales 1487 917 2404 514 – 2918 1744 4662
intersegment sales – 02 02 – – 02 – 02
segment revenue 1487 919 2406 514 – 2920 1744 4664
intersegment sales are charged 
at prevailing market rates
proﬁtloss
operating proﬁtloss before 
material onetime items and 
sharebased payment 52 134 186 62 51 197 169 366
material onetime items 51 01 52 – 23 75 – 75
sharebased payment 08 01 09 – – 09 01 10
operating proﬁtloss 07 132 125 62 74 113 168 281
income from interests in 
joint ventures – 02 02 – 16 14 – 14
share of proﬁt of associates –––––– 11 11
operating proﬁtloss of the group
joint ventures and associates 07 130 123 62 58 127 179 306
proﬁt on the disposal of operations 86 – 86
finance income 29 02 31
finance costs 127 10 137
costs associated with the part 
prepayment of loan notes 161 – 161
lossproﬁt before tax 46 171 125
tax 42 29 13
lossproﬁt after tax for the year 04 142 138
other information
product development 394 184 578 44 – 622 38 660
capital expenditure note 15 61 10 71 05 01 77 93 170
depreciation note 15 129 30 159 07 09 175 118 293
impairment of property plant 
and equipment note 15 32 – 32 – – 32 – 32
assets
assets 1214 760 1974 180 438 2592 1344 3936
investment in joint venture 
and associates – 02 02 – – 02 136 134
total assets 1214 758 1972 180 438 2590 1480 4070
liabilities
segment liabilities 400 107 507 113 1772 2392 395 2787
net assets 814 651 1465 67 1334 198 1085 1283
spirent plc annual report 2005 41 4 segmental analysis continued
geographical segments
the group manages its business segments on a global basis and the operations are based in three main geographical areas the following table presents
revenue and other information regarding the group’s geographical segments and is based on the location of the customer and the geographical area in
which the assets are located
2005 2004 2003
£ million £ million £ million
revenue by market
continuing operations
europe 430 493 397
north america 1582 1820 1902
asia paciﬁc rest of americas africa 581 559 619
2593 2872 2918
discontinued operations
europe 1228 1181 1099
north america 420 350 336
asia paciﬁc rest of americas africa 407 347 309
2055 1878 1744
4648 4750 4662
2004 and 2003 comparatives have been restated to reﬂect the geographic location for the customer where sales are made through distributors and the
end customer is known
2005 2004 2003
£ million £ million £ million
revenue by source
continuing operations
europe 612 599 520
north america 1809 2097 2300
asia paciﬁc rest of americas africa 172 176 98
2593 2872 2918
discontinued operations
europe 1310 1250 1162
north america 403 337 321
asia paciﬁc rest of americas africa 342 291 261
2055 1878 1744
4648 4750 4662
geographical assets
continuing operations
europe 766 751 496
north america 1565 1764 2096
asia paciﬁc rest of americas africa 63 53 02
2394 2568 2590
discontinued operations
europe 923 946 886
north america 321 255 254
asia paciﬁc rest of americas africa 397 369 340
1641 1570 1480
4035 4138 4070
42 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 2005 2004 2003
£ million £ million £ million
capital expenditure
continuing operations
europe 19 12 08
north america 126 104 69
asia paciﬁc rest of americas africa 03 05 –
148 121 77
discontinued operations
europe 111 79 57
north america 32 35 18
asia paciﬁc rest of americas africa 39 21 18
182 135 93
330 256 170
5 lossproﬁt before tax
the following items have been included in arriving at lossproﬁt before tax and are disclosed for continuing and discontinued operations
2005 2004 2003
£ million £ million £ million
employee beneﬁt costs note 10 1767 1884 1792
costs of inventories recognised as an expense 1339 1297 1392
writedown of inventories to net realisable value 28 04 01
depreciation of property plant and equipment note 15
owned assets 223 252 290
under ﬁnance leases 03 02 03
lossproﬁt on disposal of property plant and equipment – 04 01
operating leases
minimum lease payments 85 116 117
sublease income 14 11 05
product development costs 628 673 660
net foreign exchange credit 01 03 05
services provided to all of the operations of the group by the auditor ernst  young llp and its associates
audit services
statutory audit 10 14 12
nonaudit services
further assurance services 05 02 01
tax services 03 04 06
08 06 07
18 20 19
fees for further assurance services principally comprise amounts in respect of sec compliance the ifrs conversion project the disposal of the
hellermanntyton division and other advice
for 2005 ernst and young llp were not the auditors of the group’s pension schemes in 2004 ernst and young llp received fees of £15740 for the audit
of the group’s pension schemes a description of the work of the audit committee is set out in the directors’ statement on corporate governance and
includes an explanation of how auditor objectivity and independence is safeguarded when nonaudit services are provided by the auditors
spirent plc annual report 2005 43 6 discontinued operations
on 19 september 2005 spirent plc announced that it had commenced a formal process that was expected to result in the disposal of all of the hellermanntyton
division this decision was consistent with the stated strategy of focusing on growing the communications group this process has progressed and on 
15 december 2005 the board accepted a formal offer from funds controlled by doughty hanson  co limited for this division for £2889 million at a
cash freedebt free equivalent value this transaction was subject to shareholder approval at an extraordinary general meeting held on 24 january 2006
on which date the disposal was approved the disposal was completed on 15 february 2006 at 31 december 2005 the hellermanntyton division was
classiﬁed as a disposal group and was held for sale
the results for discontinued operations are presented below
2005 2004 2003
£ million £ million £ million
revenue 2055 1878 1744
cost of sales 1207 1097 1055
gross proﬁt 848 781 689
expenses 604 572 521
operating proﬁt 244 209 168
share of proﬁt of associates note 18 27 18 11
expenses incurred in relation to the disposal note 37 67 ––
finance income note 8 01 02 02
finance costs note 9 12 09 10
proﬁt before tax from discontinued operations 193 220 171
tax note 12 61 47 29
proﬁt for the year from discontinued operations 132 173 142
expenses include £04 million 2004 and 2003 nil in respect of material onetime items for restructuring
the major classes of assets and liabilities of the discontinued operations measured at the lower of carrying amount and fair value less costs to sell are 
as follows
2005 2004 2003
£ million £ million £ million
assets
goodwill note 14 55 ––
property plant and equipment note 15 709 ––
investment in associates note 18 161 ––
inventories 337 ––
trade and other receivables 379 ––
assets held in disposal group held for sale 1641 ––
liabilities
trade and other payables 352 ––
current tax 19 ––
short term borrowings – ﬁnance lease obligations 09 ––
long term borrowings – ﬁnance lease obligations £81 million other loans £07 million 88 ––
deferred tax 19 ––
liabilities included in disposal group held for sale 487 ––
net assets attributable to discontinued operations 1154 ––
44 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued the net cash ﬂows after tax of the network products group are as follows
2005 2004 2003
£ million £ million £ million
operating 312 262 285
investing 151 136 80
financing 24 17 20
net cash inﬂow 137 109 185
7 material onetime items
2005 2004 2003
£ million £ million £ million
finance renegotiation costs – – 23
inventory provisions 14 ––
restructuring costs including impairment of property plant and equipment and lease provisions 69 16 52
exit from joint venture 01 13 –
84 29 75
the group deﬁnes material onetime items as those items which by their size or nature would distort the comparability of the group’s result from year
to year
material onetime items relating to discontinued operations are shown in note 6
8 finance income
2005 2004 2003
£ million £ million £ million
continuing operations
bank interest receivable 15 14 29
discontinued operations note 6
bank interest receivable 01 02 02
16 16 31
9 finance costs
2005 2004 2003
£ million £ million £ million
continuing operations
bank loans and overdrafts 01 06 24
senior unsecured loan notes 66 67 88
deﬁned beneﬁt pension schemes 11 07 15
leasehold provisions discount adjustment 03 02 –
finance cost before costs associated with the part prepayment of loan notes 81 82 127
costs associated with the part prepayment of loan notes – 05 161
81 87 288
discontinued operations note 6
bank loans and overdrafts 04 05 05
finance leases 05 04 05
other 03 ––
93 96 298
the costs associated with the part prepayment of loan notes in the amount of £05 million in 2004 and £161 million in 2003 comprised the make whole
amount payable to the senior unsecured loan note holders due on early repayment
spirent plc annual report 2005 45 10 employees
the average number of people employed by the group during the year was
2005 2004 2003
number number number
manufacturing 2504 2705 2768
selling and distribution 1436 1394 1310
administration 438 422 420
4378 4521 4498
employee beneﬁt costs were
£ million £ million £ million
remuneration 1481 1607 1545
social security costs 169 174 173
pension and other related costs 61 51 64
expense of sharebased payment note 33 56 52 10
1767 1884 1792
employee numbers and costs include discontinued operations
please refer to the report on directors’ remuneration on pages 20 to 26 for disclosures relating to the emoluments share option and long term incentive
interests and pensions of the directors
11 pensions
deﬁned beneﬁt schemes
the only signiﬁcant deﬁned beneﬁt pension schemes are in the united kingdom and comprise the staff pension plan and the retirement cash plan these
schemes have been combined for the purposes of the following disclosures
the most recent actuarial valuation of schemes’ assets and the present value of the deﬁned beneﬁt schemes’ obligations using the projected unit credit
method at 1 april 2003 have been used and updated by our independent actuaries
i the key ﬁnancial assumptions used were
2005 2004 2003
 
inﬂation 29 29 28
rate of increase in pensionable salaries 36 36 35
rate of increase for pensions in payment pre 2001 service 35 30 30
rate of increase for pensions in payment post 2001 pre april 2005 service 28 27 27
rate of increase for pensions post april 2005 service 21 ––
rate of increase in deferred pensions 29 29 28
rate used to discount scheme liabilities 47 53 54
expected rate of return on scheme assets 64 65 68
the expected long term rate of return on assets has been set reﬂecting the price inﬂation expectation the expected real return on each major asset class
and the long term asset allocation strategy adopted for the schemes
the demographic assumptions are as follows
– for future pensioners that men and women aged 65 will live on average for a further 22 and 24 years respectively and
– for current pensioners that men and women aged 65 will live on average for a further 21 and 24 years respectively
46 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued ii the assets and the liabilities in the schemes were as follows
long term long term long term
rate of return rate of return rate of return
expected 2005 expected 2004 expected 2003
 £ million  £ million  £ million
equities 76 772 75 622 78 613
government bonds 41 221 45 119 48 153
corporate bonds 45 134 50 188 51 96
cash 48 21 50 26 43 45
property 66 55 65 46 68 18
other 52 85 56 68 56 63
fair value of schemes’ assets 64 1288 65 1069 68 988
present value of deﬁned beneﬁt pension schemes’ obligations 1796 1442 1422
net deﬁcit in the schemes 508 373 434
present value of unfunded obligations 07 08 48
deﬁned beneﬁt pension plan deﬁcit 515 381 482
no deferred tax asset has been recognised 2004 £111 million 2003 £130 million in respect of the net deﬁcit in the schemesthe schemes are prohibited
from investing in spirent’s own ﬁnancial instruments
iii analysis of the amounts charged to the income statement
2005 2004 2003
£ million £ million £ million
analysis of amount charged to operating costs
current service cost 20 18 22
total operating charge 20 18 22
analysis of amount charged to ﬁnance costs
expected return on pension schemes’ assets 65 66 57
interest on pension schemes’ liabilities 76 73 72
finance costs 11 07 15
net charge 31 25 37
iv analysis of amount recognised directly in the statement of recognised income and expense
actual return on pension schemes’ assets 211 102 123
expected return on pension schemes’ assets 65 66 57
experience gains on the schemes’ assets 146 36 66
experience gains arising on the schemes’ liabilities 48 24 68
changes in assumptions underlying the present value of the schemes’ liabilities 355 30 131
actuarial lossgain recognised directly in equity 161 30 03
the cumulative amount of actuarial gains and losses recognised since 1 january 2003 in the group’s statement of recognised income and expense is 
£128 million loss 2004 £33 million gain 2003 £03 million gain the directors are unable to determine how much of the pension scheme deﬁcit
recognised on 1 january 2003 and taken directly to equity of £419 million in the group is attributable to actuarial gains and losses since inception of
those pension schemes consequently the directors are unable to determine the amount of actuarial gains and losses that would have been recognised
in the group’s statement of recognised income and expense before 1 january 2003
spirent plc annual report 2005 47 11 pensions continued
v movements in the present value of deﬁned beneﬁt obligations in the current period were as follows
2005 2004 2003
£ million £ million £ million
at 1 january 1442 1422 1309
current service cost 20 18 22
interest cost 76 73 72
employee contributions 06 05 06
beneﬁt payments 55 82 50
actuarial loss 307 06 63
present value of deﬁned beneﬁt pension schemes’ obligations 1796 1442 1422
vi movements in the present value of fair value of schemes’ assets in the current period were as follows
at 1 january 1069 988 890
expected return on schemes’ assets 65 66 57
employer contributions 57 56 19
employee contributions 06 05 06
beneﬁt payments 55 82 50
actuarial gain 146 36 66
fair value of schemes’ assets 1288 1069 988
vii history of experience gains and losses
2005 2004 2003 2002
£ million £ million £ million £ million
present value of deﬁned beneﬁt pension schemes’ obligations 1796 1442 1422 1309
fair value of schemes’ assets 1288 1069 988 890
net deﬁcit in schemes 508 373 434 419
experience gains and losses on schemes’ liabilities
amount £ million 48 24 68 09
percentage of schemes’ liabilities  27 17 48 07
experience gains and losses on schemes’ assets
amount £ million 146 36 66 203
percentage of schemes’ assets  113 34 67 228
48 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued the above schemes are funded and have full uk hm revenue  customs taxexempt approval by which beneﬁts are limited due to the statutory earnings
cap a hm revenue  customs limit on the amount of earnings that can be made pensionable under the schemes 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 group has contractually agreed to pay the additional retirement beneﬁts
itself and a provision is made in respect of this obligation in the balance sheet at 31 december 2005 of £07 million 2004 £08 million 2003 £48 million
this represents the actuarial value as conﬁrmed by the group’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 scheme of £01 million 2004 £01 million 2003 £02 million and interest of nil on the unfunded liability 2004 nil 2003 £03
million the additional deathinservice beneﬁts over the statutory cap are separately insured by the group under an unapproved scheme
on 1 july 2004 nicholas brooks was paid a lump sum of £37 million to commute all of his unfunded unapproved pension entitlement which stood at
£45 million at 31 december 2003
the group contributed £470 million to its uk ﬁnal salary scheme in february 2006 from the proceeds of the sale of the hellermanntyton division 
see note 40
deﬁned contribution schemes
united kingdom
the group maintains deﬁned contribution pension schemes for employees in the uk these schemes are known as “cash builder” “pension builder” and
“executive section” employer contributions into these schemes for 2005 were £03 million 2004 £01 million 2003 £01 million
united states
the group maintains deﬁned contribution pension beneﬁt schemes for employees of its us subsidiaries these schemes also known as 401k plans allow
employees to defer a percentage of their salary for retirement there are four different 401k plans within the us businesses and each of these schemes
has different features regarding group 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 group contributions to the various us schemes totalled 46 million for 2005 2004 46 million 2003 44 million total assets in the
deﬁned contribution schemes at the end of 2005 were 1292 million 2004 1168 million 2003 1031 million there were no deﬁned beneﬁt schemes
in the us as at 31 december 2005 2004 or 2003
other jurisdictions
outside the united kingdom and the united states employees are provided with pension arrangements determined in accordance with approved local
practice and regulations and these arrangements are deﬁned contribution schemes total contributions for 2005 in respect of these schemes amounted
to £03 million 2004 £03 million 2003 £02 million
total contributions to deﬁned contribution schemes were £31 million 2004 £29 million 2003 £30 million
spirent plc annual report 2005 49 12 t ax
tax on the proﬁt on ordinary activities
2005 2004 2003
£ million £ million £ million
tax charge in the income statement
current income tax
foreign tax
continuing operations 19 28 23
discontinued operations 65 46 26
current income tax charge 84 74 49
amounts overprovided in previous years
uk tax 16 – 11
foreign tax 43 13 71
total current income tax 25 61 11
deferred tax
origination and reversal of timing differences 04 17 02
reversal of deferred tax assets – 11 –
total deferred tax 04 06 02
tax charge in the income statement 21 67 13
the tax charge in the income statement is disclosed as follows
income tax creditexpense on continuing operations 40 20 42
income tax expense on discontinued operations note 6 61 47 29
21 67 13
tax relating to items charged or credited to equity
deferred tax
actuarial gains and losses on deﬁned beneﬁt pension plans – 09 01
write offreinstatement of deferred tax asset on pension liability 111 – 126
tax on exchange differences – – 02
tax chargecredit in the statement of recognised income and expense 111 09 123
there was no tax effect in respect of material onetime items 2004 and 2003 nil
a deferred tax asset has not been recognised in relation to the deﬁned beneﬁt pension fund deﬁcit in 2005 as its future recovery is uncertain 2004 £111 million
asset 2003 £130 million assetthis results in a charge of £111 million to the statement of recognised income and expense 2004 nil 2003 £126 million credit
50 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued reconciliation of the total tax charge
the tax expense in the income statement for the year is higher than the standard rate of corporation tax in the uk of 30 per cent 2004 and 2003 30 per cent
the differences are reconciled below
2005 2004 2003
£ million £ million £ million
lossproﬁt before tax from continuing operations 417 112 46
proﬁt before tax from discontinued operations note 6 193 220 171
accounting lossproﬁt before tax 224 332 125 
accounting lossproﬁt multiplied by the uk standard rate of corporation tax 
of 30 per cent 2004 and 2003 30 per cent 67 100 37
expenses not deductible for tax purposes
material onetime items not given credit 26 09 54
intangible assets 106 11 –
tax relief on sharebased payment 12 16 03
disposals 08 12 26
differences in overseas rates and other adjustments 02 17 13
tax overprovided in previous years 59 13 60
other 07 05 08
total tax expensecredit reported in the income statement 21 67 13
13 lossearnings per share
2005 2004 2003
pence pence pence
basic lossearnings per share 262 279 146
basic lossearnings per share from continuing operations 397 098 004
basic earnings per share from discontinued operations 135 181 150
diluted lossearnings per share 262 274 144
diluted lossearnings per share from continuing operations 397 096 004
diluted earnings per share from discontinued operations 133 178 148
adjusted earnings per share 230 314 236
adjusted earnings per share from continuing operations 032 129 084
adjusted earnings per share from discontinued operations 198 185 152
the group discloses adjusted earnings per share attributable to equity shareholders in order to provide a measure to enable periodonperiod comparisons
to be made of its performance
lossearnings per share is calculated by reference to the lossproﬁt for the year and the number of ordinary shares in issue during the year as follows
2005
£ million
continuing discontinued total
operations operations operations
lossproﬁt for the year 377 132 245
less minority shareholders’ interests – 04 04
lossproﬁt for the year attributable to equity holders of parent 377 128 249
material onetime items 84 04 88
goodwill impairment 370 – 370
sharebased payment 51 05 56
proﬁtloss on the disposal of operations 39 67 28
prior year tax credit 59 – 59
prior year tax credit on associate – 15 15
adjusted earnings attributable to equity holders of parent 30 189 219
spirent plc annual report 2005 51 13 lossearnings per share continued
2004
£ million
continuing discontinued total
operations operations operations
proﬁt for the year 92 173 265
less minority shareholders’ interests – 03 03
proﬁt for the year attributable to equity holders of parent 92 170 262
material onetime items 29 – 29
sharebased payment 48 04 52
proﬁt on the disposal of operations 40 – 40
costs associated with the part prepayment of loan notes 05 – 05
prior year tax credit 13 – 13
adjusted earnings attributable to equity holders of parent 121 174 295
2003
£ million
continuing discontinued total
operations operations operations
proﬁtloss for the year 04 142 138
less minority shareholders’ interests – 02 02
proﬁtloss for the year attributable to equity holders of parent 04 140 136
material onetime items 75 – 75
sharebased payment 09 01 10
proﬁt on the disposal of operations 86 – 86
costs associated with the part prepayment of loan notes 161 – 161
attributable tax on material onetime items 17 – 17
prior year tax credit 60 – 60
adjusted earnings attributable to equity holders of parent 78 141 219
2005 2004 2003
number number number
million million million
weighted average number of shares in issue – basic and adjusted 9504 9392 9293
dilutive potential of employee share options 102 181 171
weighted average number of shares in issue – diluted 9606 9573 9464
the shares in issue used to calculate basic and adjusted lossearnings per share exclude the shares held by spirent sharesave trust and the employee
share ownership trust in accordance with ias 33 ‘earnings per share’
52 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 14 goodwill
£ million
cost net of accumulated impairment losses
at 1 january 2003 1136
increase during the year 27
disposal of operations note 37 06
exchange adjustment 48
at 31 december 2003 1109
exchange adjustment 44
at 31 december 2004 1065
attributable to discontinued operation note 6 55
impairment 370
exchange adjustment 75
at 31 december 2005 715
at 31 december 2003
cost gross carrying amount 17855
accumulated impairment losses 16746
net carrying amount 1109
at 31 december 2004
cost gross carrying amount 17453
accumulated impairment losses 16388
net carrying amount 1065
at 31 december 2005
cost gross carrying amount 17773
accumulated impairment losses 17058
net carrying amount 715
goodwill acquired through business combinations has been allocated for impairment testing purposes to two cashgenerating units performance analysis
which is also a reportable segment and the service assurance broadband business unit which together with the field test business unit constitutes the
service assurance reportable segment
the carrying amounts of goodwill at 31 december 2005 by cashgenerating unit are as follows
£ million
service
performance assurance
analysis broadband total
europe 55 – 55
north america 454 206 660
509 206 715
impairment of service assurance broadband
ias 36 ‘impairment of assets’ requires that a cashgenerating unit to which goodwill has been allocated should be tested whenever there is an indication
that the unit may be impaired as a result of the substantial drop in activity levels in service assurance broadband during the ﬁrst half of 2005 this unit
was tested for impairment the recoverable amount of this unit was determined based on a value in use calculation using a pretax discount rate of 
145 per cent following the impairment test a goodwill charge of £370 million was recognised through administration expenses in the ﬁrst half of 2005
spirent plc annual report 2005 53 14 goodwill continued
annual impairment test
the recoverable amounts of the performance analysis and service assurance broadband cashgenerating units at 30 november 2005 the annual impairment
testing date have been calculated based on a value in use calculation using cash ﬂow projections over a ﬁve year period these were based on ﬁnancial
budgets approved by the board for the next year and on approved strategic plans for the following two years cash ﬂows in years four and ﬁve have been
extrapolated using a 40 per cent growth rate which approximates to the average long term growth rate for the industries in which these units operate
the cash ﬂows were discounted using a pretax discount rate of 159 per cent 2004 169 per cent 2003 184 per cent and 172 per cent 2004 156 per
cent 2003 150 per cent respectively in both cases the recoverable amounts of these units were in excess of their carrying values and no further
impairment arose in the second half of 2005
the key assumptions in these value in use calculations were
• revenue growth rates used in the budget and strategic plans
• gross margin
• operating expenses
• discount rate
• growth rate used to extrapolate cash ﬂows beyond the strategic plan period
revenue growth rates used in the budget and strategic plans are based on management’s estimate of growth in the markets served taking into account
products yet to be launched and which are in the development pipeline they are consistent with external sources of information including comparable
companies operating in the same markets and analysts’ forecasts
gross margins are based on historical values achieved by the respective cashgenerating units
operating expenses are based upon historical levels suitably adjusted for increases in activity levels over the term of the cash ﬂow projections
the discount rates are based on the group’s weighted average cost of capital adjusted to reﬂect management’s estimate of the speciﬁc risk proﬁle
associated with the cash ﬂow projections for each cashgenerating unit
long term growth rates are based upon industry analysis and are consistent with analysts’ forecasts
sensitivity to changes in assumptions
with regard to the assessment of value in use of the performance analysis unit management believes that no reasonable possible change in any of the
above key assumptions would cause the carrying value of the unit to exceed its recoverable amount
for the service assurance broadband unit there are reasonable possible changes in key assumptions which would cause the carrying value of the unit to
exceed its recoverable amount in particular the revenue growth assumptions in the strategic plan are based upon the successful execution of a new strategy
for growth to meet the needs of service providers for their new triple play networks and servicesthe strategic plan assumes a signiﬁcant increase in revenues
in 2007 being the full year effect of new products expected to be launched in the second half of 2006 should management fail to execute this strategy
such that the anticipated increase in revenue is not realised by 50 per cent or more in that year and assuming growth is maintained at planned rates
thereafter albeit off a lower base then value in use would be reduced to a value equal to the carrying amount for this unit
54 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 15 property plant and equipment
£ million
fixtures
land and plant and ﬁttings and
buildings machinery equipment total
cost net of accumulated depreciation and accumulated impairment
at 1 january 2003 434 370 296 1100
additions
owned assets 05 116 46 167
leased assets – – 03 03
disposals 02 04 02 08
disposal of operations note 37 04 01 02 07
impairment of property plant and equipment 32 – – 32
depreciation charge for the year 27 146 120 293
exchange adjustment 08 13 07 28
at 1 january 2004 366 322 214 902
additions
owned assets 08 165 80 253
leased assets – – 03 03
interclass transfers – 03 03 –
disposals – 06 03 09
disposal of operations note 37 – – 01 01
impairment of property plant and equipment 05 – 01 06
depreciation charge for the year 23 140 91 254
exchange adjustment 08 11 06 25
at 1 january 2005 338 327 198 863
additions
owned assets 17 163 125 305
leased assets 22 – 03 25
interclass transfers 02 08 06 –
disposals – – 06 06
attributable to discontinued operation note 6 310 273 126 709
depreciation charge for the year 21 123 82 226
exchange adjustment 14 24 11 49
at 31 december 2005 62 110 129 301
at 31 december 2003
cost 498 1207 666 2371
accumulated depreciation and accumulated impairment 132 885 452 1469
net carrying amount 366 322 214 902
at 31 december 2004
cost 488 1293 659 2440
accumulated depreciation and accumulated impairment 150 966 461 1577
net carrying amount 338 327 198 863
at 31 december 2005
cost 167 410 500 1077
accumulated depreciation and accumulated impairment 105 300 371 776
net carrying amount 62 110 129 301
spirent plc annual report 2005 55 15 property plant and equipment continued
property plant and equipment include assets held under ﬁnance leases as follows
£ million
fixtures
plant and ﬁttings and
machinery equipment total
net book value at 31 december 2003 04 06 10
net book value at 31 december 2004 03 05 08
net book value at 31 december 2005 03 – 03
16 capital commitments and contingent liabilities
2005 2004 2003
£ million £ million £ million
capital expenditure commitments
contracted but not provided 04 10 15
for 2005 capital expenditure commitments are for the continuing group
the group has provided indemnities of £10 million 2004 £05 million 2003 £10 million for certain ongoing business obligations under letters of credit
for subsidiary companies
17 subsidiaries
a list of the signiﬁcant investments in subsidiaries including the name country of incorporation and proportion of ownership interest is given on page
114 of these ﬁnancial statements
18 investments in joint venture and associates
2005 2004 2003
£ million £ million £ million
investments in associates – 143 131 
investment in joint venture – – 03 
investments accounted for using the equity method – 143 134 
joint venture
at 1 january – 03 501 
share of retained lossproﬁt – 07 14 
additions – 02 05 
disposal – – 543
exchange adjustment – – 26 
accrued contribution to joint venture – 02 –
at 31 december – – 03 
share of joint venture’s revenue and proﬁt
revenue – – 224 
expenses – 07 199
lossproﬁt before tax – 07 25 
tax – – 11
share of results from joint ventures after tax – 07 14 
56 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued the joint venture company as at 31 december 2004 and 2003 was
location  holding nature of business
spirent dm ltd china 40 communications
during 2004 the group exited from the spirent dm joint venture until exit the group accounted for its interests in the joint venture using the equity method
associates
2005 2004 2003
£ million £ million £ million
at 1 january 143 131 119
exchange adjustment 07 05 02
share of associates’ net proﬁt – discontinued operations note 6 27 18 11
dividend 02 01 01
attributable to discontinued operations note 6 161 ––
at 31 december – 143 131 
gross assets – 162 147
gross liabilities – 19 16
– 143 131
gross assets and gross liabilities of the associates are estimated based on the latest audited ﬁnancial statements
the share of associates net proﬁt includes a prior year tax credit of £15 million in 2005 in respect of tax on the unremitted earnings
the associated companies at 31 december 2005 2004 and 2003 were as follows
 holding nature of business
tyton company of japan 49 cable management products
3mecc 20 cable management products
tyton company of japan has a reporting date of 31 march being the date of preparation of statutory ﬁnancial statements
at 31 december 2005 the investment in associates has been included in assets held in disposal group held for sale as these investments form part of the
hellermanntyton division note 6
19 inventories
2005 2004 2003
£ million £ million £ million
raw materials 58 121 126
work in progress 22 62 50
finished goods 190 357 374
270 540 550
an expense of £28 million 2004 £04 million 2003 £01 million has been recognised in the period for inventory writedowns
spirent plc annual report 2005 57 20 trade and other receivables
2005 2004 2003
£ million £ million £ million
noncurrent assets
other receivables – 02 02
prepayments 17 13 15
17 15 17
current assets
trade receivables 458 746 695
owed by associates – 03 02
other receivables 23 63 82
prepayments and accrued income 82 72 73
563 884 852
580 899 869
trade and other receivables relating to discontinued operations are disclosed in note 6 for 2005
trade and other receivables are noninterest bearing and are generally on 60 day settlement terms trade receivables are presented net of allowances for
estimated irrecoverable amounts of £05 million 2004 £13 million 2003 £16 million which have been estimated by the group’s management based
on prior experience and their assessment of the current economic environment other receivables are noninterest bearing
the directors consider that the carrying amount of trade and other receivables approximates to their fair value
the group’s credit risk is primarily attributable to its trade receivables although the group has no signiﬁcant concentration of credit risk with exposure
spread over a large number of customers
21 cash and cash equivalents
2005 2004 2003
£ million £ million £ million
cash at bank and in hand 223 204 336
short term bank deposits 269 313 40
492 517 376
22 trade and other payables – current
2005 2004 2003
£ million £ million £ million
trade payables 111 280 276
payments received on account 69 01 –
owed to associates – 08 08
other taxes and social security costs 27 51 53
other payables 44 71 100
accruals and deferred income 378 497 439
629 908 876
trade and other payables relating to discontinued operations are disclosed in note 6 for 2005
trade payables are noninterest bearing and are normally settled on 60 day terms other payables are noninterest bearing
the directors consider that the carrying amount of trade payables approximates to their fair value
58 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 23 short term borrowings and overdrafts
2005 2004 2003
£ million £ million £ million
senior unsecured loan notes note 28 32 ––
bank overdrafts secured 04 07 07
bank loans due within one year 02 02 04
finance lease obligations due within one year note 27 01 09 07
39 18 18
bank overdrafts are repayable on demand overdrafts are secured either by mortgages on the freehold properties or by ﬂoating charges on the assets of
the borrowing subsidiaries
24 deferred tax
the movement in the deferred tax liabilities are as follows
other short
accelerated tax term temporary
depreciation differences total
£ million £ million £ million
at 1 january 2003 17 11 28
exchange adjustment – 02 02
movement in respect of pension liability – 05 05
charge for the year note 12 03 01 02
at 1 january 2004 14 15 29
movement in respect of pension liability – 10 10
charge for the year note 12 – 06 06
at 1 january 2005 14 11 25
attributed to discontinued operations note 6 13 06 19
exchange adjustment – 04 04
charge during the year note 12 07 01 06
at 31 december 2005 08 – 08
the movement in the deferred tax assets are as follows
retirement
beneﬁt
other obligations total
£ million £ million £ million
at 1 january 2003 –––
movement in respect of pension liability – 05 05
reinstatement of deferred tax asset on pension scheme note 12 – 126 126
tax on actuarial gain note 12 – 01 01
at 1 january 2004 – 130 130
tax on actuarial gain note 12 – 09 09
movement in respect of pension liability – 10 10
at 1 january 2005 – 111 111
write off of deferred tax asset note 12 – 111 111
recognised during the year note 12 10 – 10
at 31 december 2005 10 – 10
deferred tax assets of £133 million 2004 £133 million 2003 £183 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 ias 12 ‘income taxes’ to recognise a deferred tax asset in respect of these timing differences
spirent plc annual report 2005 59 24 deferred tax continued
a deferred tax asset of £152 million in respect of the uk ﬁnal salary pension scheme has not been recognised in 2005 in 2004 and 2003 an asset was recognised
in addition the group has tax losses arising in the us of £796 million 2004 £706 million 2003 £701 million and in the uk of £422 million 
2004 £396 million 2003 £248 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 us tax losses can be carried forward for 20 years and uk losses can be carried forward indeﬁnitely
in total deferred taxes assets amounting to £742 million 2004 £526 million 2003 £503 million have not been recognised on unutilised losses and 
timing differences
£01 million of deferred tax 2004 £21 million 2003 £21 million 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
temporary differences arising in connection with interests in associates and joint ventures are insigniﬁcant
25 trade and other payables – noncurrent
2005 2004 2003
£ million £ million £ million
other payables 02 11 13
deferred income 04 25 04
pension 01 03 06
07 39 23
26 provisions and other liabilities
£ million
restructuring lease
provisions provisions total
at 1 january 2005 13 125 138
charged during the year 40 30 70
discount on unwind of lease provision – 03 03
utilised in the year 49 30 79
exchange adjustment 01 09 10
at 31 december 2005 05 137 142
60 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued provisions have been analysed as follows
2005 2004 2003
£ million £ million £ million
current 41 42 46
noncurrent 101 96 133
142 138 179
the lease provisions are for the continuing obligations under leases in respect of properties which have been vacated by the groupwhere material lease
obligations are discounted the group expects these provisions to be utilised over the next ten years
the restructuring costs relate to our exit from the spirent dm joint venture
27 long term borrowings
2005 2004 2003
£ million £ million £ million
senior unsecured loan notes note 28 677 648 808
bank loans 22 22 33
other loans – 06 07
finance lease obligations 13 87 85
712 763 933
finance lease obligations
2005 2004 2003 2005 2004 2003
£ million £ million £ million £ million £ million £ million
present value of minimum
minimum lease payments lease payments
amounts payable under ﬁnance leases
within one year 02 14 12 01 09 07
between one and ﬁve years 07 40 38 04 25 22
after ﬁve years 10 70 72 09 62 63
19 124 122 14 96 92
less amounts representing future ﬁnance charges 05 28 30
present value of lease obligations 14 96 92
all leases are on a ﬁxed repayment basis and no arrangements have been entered into for contingent rental paymentsthe group’s obligations under ﬁnance
leases are secured by the lessors’ charges over the leased assets
spirent plc annual report 2005 61 28 senior unsecured loan notes
2005 2004 2003
£ million £ million £ million
due within one year note 23
senior unsecured loan notes 2006 32 ––
due after more than one year note 27
senior unsecured loan notes 2006 – 28 36
senior unsecured loan notes 2009 677 620 772
677 648 808
709 648 808
at 31 december 2005 2004 and 2003 the following loan notes were in issue
a 55 million 2004 55 million 2003 64 million bearing interest at 894 per cent 2004 and 2003 919 per cent repayable on 23 november 2006
b 362 million 2004 362 million 2003 419 million bearing interest at 906 per cent 2004 and 2003 931 per cent repayable on 23 november 2009
c 659 million 2004 659 million 2003 761 million bearing interest at 916 per cent 2004 and 2003 941 per cent repayable on 23 november 2009
and
d 172 million 2004 172 million 2003 198 million bearing interest at 975 per cent 2004 and 2003 1000 per cent repayable on 23 november
2009 an interest rate derivative was entered into in 1999 to reduce the effective interest rate to 928 per cent 2004 and 2003 953 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
the loan note agreement provides for half yearly covenant ratio testing the covenants ratios are as follows
a net interest cover – greater than or equal to 30 times
b net debt to earnings before interest tax depreciation and amortisation “ebitda” – less than or equal to 30 times and
c net worth – greater than £100 million
covenant ratios are calculated using uk gaap as applied at 31 december 2002 as the loan notes were repaid in february 2006 covenant testing is not
required for 31 december 2005
if the group repaid at its option the total principal amount of the loan notes at 31 december 2005 a make whole amount of 143 million £83 million
would become payable
on 15 february 2006 the loan notes were repaid out of the proceeds of sale of the hellermanntyton division a make whole amount of 139 million
£74 million was also paid see note 40
29 financial risk management
the group’s principal ﬁnancial instruments other than derivatives comprise trade receivables trade payables bank and other loans loan notes ﬁnance
leases bank overdrafts cash and short term deposits the main purpose of these ﬁnancial instruments other than trade receivables and trade payables is
to raise ﬁnance for the group’s operations
the group enters into derivative transactions principally interest rate swaps and forward foreign exchange contracts for the management of the group’s
interest rate and currency risks and other exposures when deemed appropriate
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
62 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued interest rate risk
the group’s exposure to market risk for changes in interest rates relates primarily to the group’s long term debt obligations the objective of the group’s
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 2005 after taking into account the effect of interest rate swaps approximately 42
per cent 2004 51 per cent 2003 57 per cent of the group’s borrowings are at a ﬁxed rate of interest as discussed in note 40 post balance sheet events
the group’s senior unsecured loan notes were repaid in february 2006
foreign currency risk
currency exposures arise from trading transactions undertaken by the group in foreign currencies and on the translation of the operating results and net
assets of overseas subsidiaries as a result of the group having signiﬁcant operations in the united states its results can be affected signiﬁcantly by
movements in the us dollar exchange rate during the year sterling weakened against the us dollar
group treasury by means of forward foreign exchange contracts carries out the majority of the transaction hedging activity the group does not enter
into instruments to hedge the translation exposure of the operating results or net assets of its overseas subsidiaries since these are accounting and not
cash exposures however to provide a partial hedge net investment hedges are entered into to match as far as possible the currency of borrowings with
the currency proﬁle of the operating results and net assets
credit risk
the group has no signiﬁcant concentrations of credit riskthe group has implemented policies that require appropriate credit checks on potential customers
before sales commence financial instrument counterparties are subject to preapproval by the group audit committee and such approval is limited to
ﬁnancial institutions with a rating of standard  poors a or moodys a2 or betterthe amount of exposure to any individual counterparty is subject to a limit
liquidity risk
the group’s objective is to ensure that there are sufﬁcient sources of funding to meet projected requirements its operations are ﬁnanced through a
combination of retained earnings and external ﬁnancing financing is raised principally by the 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
30 financial instruments
a interest rate risk
the interest rate proﬁle of the group’s ﬁnancial assets and liabilities at 31 december was as follows
2005
£ million
at ﬂoating noninterest
interest rates bearing total
financial assets
sterling 214 39 253
us dollar 106 29 135
euro 44 20 64
other 55 11 66
419 99 518
trade receivables for the continuing and discontinued operations have been excluded from the above table as they are all due in less than one year and
are noninterest bearing
spirent plc annual report 2005 63 30 financial instruments continued
2004
£ million
at ﬂoating noninterest
interest rates bearing total
financial assets
sterling 291 02 293
us dollar 91 18 109
euro 58 04 62
other 43 12 55
483 36 519
2003
£ million
at ﬂoating noninterest
interest rates bearing total
financial assets
sterling 85 04 89
us dollar 172 11 183
euro 40 06 46
other 43 17 60
340 38 378
the ﬁnancial assets of the group comprise
2005 2004 2003
£ million £ million £ million
receivables due after more than one year excluding prepayments note 20 – 02 02
cash and cash equivalents note 21 492 517 376
derivative ﬁnancial instruments see below 26 ––
518 519 378
floating rate ﬁnancial assets comprise cash deposits at call seven day and monthly rates
2005
£ million
at ﬁxed at ﬂoating noninterest
interest rates interest rates bearing total
financial liabilities
sterling – – 28 28
us dollar 314 446 60 820
euro 14 04 08 26
other – – 48 48
328 450 144 922
trade payables for the continuing and discontinued operations have been excluded from the above table as they are all due in less than one year and are
noninterest bearing
64 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 2004
£ million
at ﬁxed at ﬂoating noninterest
interest rates interest rates bearing total
financial liabilities
sterling – – 30 30
us dollar 302 375 111 788
euro 97 05 08 110
other – 02 – 02
399 382 149 930
2003
£ million
at ﬁxed at ﬂoating noninterest
interest rates interest rates bearing total
financial liabilities
sterling – – 13 13
us dollar 437 404 161 1002
euro 100 04 18 122
other 02 04 – 06
539 412 192 1143
the ﬁnancial liabilities of the group comprise
2005 2004 2003
£ million £ million £ million
short term borrowings and overdrafts note 23 39 18 18
long term senior unsecured loan notes note 27 677 648 808
long term bank loans note 27 22 22 33
long term other loans and ﬁnance lease obligations note 27 13 93 92
noncurrent other payables note 25 02 11 13
provisions note 26 142 138 179
derivative ﬁnancial instruments see below 27 ––
922 930 1143
the ﬂoating rate liabilities at 31 december 2005 comprise primarily 721 million 2004 and 2003 721 million of the senior unsecured loan notes for
which an interest rate swap is 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
finance lease obligations of the discontinued operations of £90 million and other loans of £07 million have not been included in the tables for 2005 see
note 6
spirent plc annual report 2005 65 30 financial instruments continued
the interest rate risk proﬁle at 31 december 2005 of ﬁnancial assets and liabilities is as follows
2005
£ million
more
within 12 23 34 45 than 5
1 year years years years years years total
fixed rate
senior unsecured loan notes 32 – – 258 – – 290
obligations under ﬁnance leases and 
hire purchase contracts 01 01 01 01 01 09 14
us dollar bank loan 42 million at 
7 per cent interest 02 02 20 – – – 24
35 03 21 259 01 09 328
floating rate
cash at bank and in hand 393 ––––– 393
bank overdrafts 04 ––––– 04
senior unsecured loan notes – – – 419 – – 419
interest rate swap see 30e below – – – 20 – – 20
foreign currency contracts 19 ––––– 19
408 – – 439 – – 31
interest on ﬁnancial instruments classiﬁed as ﬂoating rate is repriced at intervals of less than one year interest on ﬁnancial instruments classiﬁed as ﬁxed
rate is ﬁxed until the maturity of the instrument the other ﬁnancial instruments of the group that are not included in the above tables are noninterest
bearing and are therefore not subject to interest rate risk
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 noninterest of ﬁxed rate of ﬁxed rate of noninterest
liabilities liabilities bearing liabilities liabilities liabilities bearing liabilities
 years years  years years
financial liabilities
sterling – – 50 115 23 47
us dollar 92 46 29 92 56 31
euro 49 121 84 57 128 65
other – – – 112 21 –
group 81 64 36 86 69 35
66 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued b undrawn committed borrowing facilities
the undrawn committed borrowing facilities at 31 december were as follows
2005 2004 2003
£ million £ million £ million
expiring in one year or less 301 316 615
the committed borrowing facilities at 31 december 2005 comprise primarily of a £30 million working capital facilitythis facility was cancelled in february
2006 on completion of the sale of the hellermanntyton division
c currency exposure of ﬁnancial assets and liabilities
the table shows the net unhedged monetary assets and liabilities of the group at 31 decemberthese monetary assets and liabilities are not denominated
in their functional currency and therefore give rise to exchange gains and losses in the income statement
2005 
net foreign currency monetary assetsliabilities £ million
sterling us dollar euro other total
functional currency of group operation
sterling – 34 01 06 41
us dollar 06 – 05 – 11
euro 05 08 – 04 01
other 05 05 12 04 16
16 47 16 02 13
2004 
net foreign currency monetary assetsliabilities £ million
sterling us dollar euro other total
functional currency of group operation
sterling – 01 16 03 20
us dollar 07 – 03 18 28
euro 06 09 – – 15
other 05 20 – 07 22
18 12 13 08 01
2003
net foreign currency monetary assetsliabilities £ million
sterling us dollar euro other total
functional currency of group operation
sterling – 10 06 – 04
us dollar 03 – 01 – 04
euro 08 15 – 02 21
other 19 17 09 06 05
30 08 04 08 34
spirent plc annual report 2005 67 30 financial instruments continued
d fair value of ﬁnancial instruments
set out below is a comparison by category of the carrying amounts and fair values of all of the group’s ﬁnancial assets and liabilities other than current
trade and other receivables and current trade and other payables that approximate fair value that are carried in the ﬁnancial statements at other than
fair values
2005 2004 2003 
£ million £ million £ million
book fair book fair book fair
value value value value value value
financial assets
cash and cash equivalents note 21 492 492 517 517 376 376
other debtors note 20 – – 02 02 02 02
financial liabilities
short term borrowings and overdrafts note 23 39 39 18 18 18 18
other ﬁnancial liabilities note 25 02 02 11 11 13 13
long term senior unsecured loan notes note 27 677 761 648 753 808 970
other long term borrowings note 27 35 34 115 117 125 118
provisions and other liabilities note 26 142 142 138 138 179 179
403 486 411 518 765 920
interest rate swaps 20 20 – 10 – 13
currency derivatives 19 19 – 05 – 04
404 487 411 523 765 929
market values have been used to determine the fair value of the long term senior unsecured loan notes the fair value of derivatives and borrowings has
been calculated by discounting the expected future cash ﬂows at prevailing interest rates
e derivative ﬁnancial instruments
the fair value of the derivative ﬁnancial instruments at 31 december 2005 is as follows
£ million
assets liabilities
interest rate swaps – 20
currency derivatives 26 07
26 27
the derivative ﬁnancial instruments are as follows
interest rate swaps
fixed to ﬂoating interest rate swaps were entered into on 23 may 2003 on 721 million of the senior unsecured loan notes the swaps terminate on 
23 november 2009 and can be cancelled at the bank’s option at six monthly intervals the swaps have been transacted with two banks and are split 
480 million and 241 million between them the terms of the 480 million swap allow for either party to exercise a break on 23 november 2008
should a break take place a mark to market settlement would be due at fair value
the interest rate swaps have been designated as hedges and following the adoption of ias 39 on 1 january 2005 are included in the balance sheet as
derivative ﬁnancial instruments noncurrent liabilities at their fair value with movements in fair value being reﬂected through the income statement
68 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued currency derivatives
the group uses forward foreign exchange contracts in the management of transactional exchange rate exposures these contracts are designated where
possible as hedging instruments
at 31 december 2005 the group held foreign exchange contracts designated as hedges in respect of the forward purchase of dollars to establish the sterling
value of the anticipated repayment of senior unsecured loan notes associated with the disposal of the hellermanntyton divisionthe terms of this contract
are as follows
maturity exchange rate
buy us dollars 140000000 26 january 2006 177028
at 31 december 2005 the group held foreign exchange contracts designated as hedges in respect of the forward purchase of yen to establish the sterling
value of the acquisition of the majority interest in the tyton company of japan associated with the disposal of hellermanntyton division the terms of
this contract are as follows
maturity exchange rate
buy y en 5252360000 26 january 2006 20459
at 31 december 2005 the group held various foreign exchange contracts designated as hedges in respect of the forward sale of us dollars and euro on
trading transactions these contracts total £306 million are for various maturity dates over the period to december 2006 and are at exchange rates in
the range 172 to 180 for us dollar contracts and 145 to 146 for euro contracts
hedge of net investment in foreign entities
as at 31 december 2005 senior unsecured loan notes of 1248 million 2004 1248 million 2003 1442 million have been designated as a hedge of
the net investments in the united states and are being used to reduce the exposure of the foreign exchange risk gains or losses on the retranslation of
this borrowing are transferred to equity to offset any gains or losses on translation of the net investments in subsidiaries
unrealised gains and losses on instruments used for hedging are as follows
2005 2004 2003
£ million £ million £ million
total net total net total net
gains gains gains
gains losses losses losses losses
unrealised gainslosses at 1 january 05 10 05 09 09
gainslosses arising in previous years realised in the year 05 – 05 04 09
gainslosses arising before 1 january that were not 
realised in the year – 10 10 13 –
gainslosses arising in the year that were not realised 26 17 09 08 09
unrealised gainslosses on hedges at 31 december 26 27 01 05 09
expected to be realised
in one year or less 26 07 19 05 04
in later years – 20 20 10 13
26 27 01 05 09
spirent plc annual report 2005 69 31 operating lease commitments
at 31 december the group had outstanding commitments for future minimum lease payments under noncancellable operating leases which fall due
as follows
2005 2004 2003
£ million £ million £ million
continuing operations
within one year 76 83 90
in the second to ﬁfth years 171 216 249
over ﬁve years 54 100 104
301 399 443
discontinued operations
within one year 16 17 14
in the second to ﬁfth years 42 47 39
over ﬁve years 90 107 64
148 171 117
449 570 560
the group leases certain land and buildings under noncancellable operating lease agreements with a variety of terms the group also leases certain plant
and equipment under noncancellable operating lease agreements total future sublease payments receivable relating to the above leases amounted to
£54 million 2004 £70 million 2003 £80 million
32 authorised and issued share capital
authorised
2005 2004 2003
£ million £ million £ million
1250 million 2004 and 2003 1250 million ordinary shares of 3
1
⁄ 3 pence each 417 417 417
issued and fully paid
number of
ordinary shares
million £ million
at 1 january 2003 9394 313
allotted pursuant to share options and purchase rights exercised 46 02
at 1 january 2004 9440 315
allotted as deferred consideration for the acquisition of caw networks inc 43 01
allotted pursuant to share options and purchase rights exercised 79 03
at 1 january 2005 9562 319
allotted pursuant to share options and purchase rights exercised 96 03
at 31 december 2005 9658 322
at the annual general meeting held on 4 may 2005 shareholders gave authority for the company to purchase up to 48 million of its own ordinary shares
in the market subject to certain speciﬁed conditionsat 23 february 2006 no purchases have been made or are contracted to be made under such authority
70 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 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 or existing shares being transferred from spirent sharesave trust “sst” as follows
number of consideration
ordinary shares received
million £000
executive share option schemes 21 3417
spirent stock incentive plan 42 8338
acquisition plans
1
06 1086
all employee share schemes 31 14989
100 27830
note
1 the acquisition plans are the netcom amended and restated stock option plan the zarak amended and restated stock option plan and the caw amended and restated stock plan
see notes d e and f on pages 74 and 75
during the year 276196 shares were transferred from the sst to satisfy options exercised under the uk all employee share schemes and 195756 shares
were transferred from the employee share ownership trust “esot” to satisfy options exercised under the spirent stock incentive plan
there has been no material increase in the issued share capital whether by exercise of options purchase rights or otherwise between the end of the year
and 23 february 2006 the date on which these ﬁnancial statements have been signed
a reconciliation of movements in share incentives over the three years to 31 december 2005 is shown below
executive share 2005 employee spirent stock uk sharesave employee stock
option schemes
1
incentive plan
2
incentive plan
3
acquisition plans
4
schemes
5
purchase plans
6
weighted weighted weighted weighted weighted weighted
average average average average average average
number exercise number exercise number exercise number exercise number exercise number exercise
of shares price of shares price of shares price of shares price of shares price of shares price
million pence million pence million pence million pence million pence million pence
options outstanding at
1 january 2003 180 180 – – 796 215 151 59 53 61 33 14
granted 76 16 – – 211 57 – – 34 38 33 50
exercised –––– 04 16 09 17 – – 33 14
forfeited 03 220 – – 334 309 02 47 08 50 – –
expired 27 180 – – 42 289 13 79 08 88 – –
options outstanding at
31 december 2003 226 125 – – 627 108 127 59 71 48 33 50
granted 62 61 – – 250 68 01 9 – – 27 50
exercised 01 29 – – 26 24 18 20 01 41 33 50
forfeited 01 156 – – 59 85 02 17 04 42 – –
expired 15 184 – – 25 284 11 126 07 77 – –
options outstanding at
31 december 2004 271 107 – – 767 94 97 60 59 45 27 50
granted – – 32 40 243 54 – – – – – –
exercised 21 16 – – 42 20 06 18 04 41 27 50
forfeited 05 141 – – 79 67 02 10 03 41 – –
expired 33 175 – – 73 177 02 123 06 68 – –
options outstanding at
31 december 2005 212 105 32 40 816 81 87 62 46 43 – –
options exercisable 
at 31 december 2003 57 152 – – 254 118 127 59 – – – –
at 31 december 2004 82 124 – – 363 118 97 60 02 110 – –
at 31 december 2005 40 152 – – 395 103 87 62 08 48 – –
spirent plc annual report 2005 71 32 authorised and issued share capital continued
notes
1 includes options granted under the 1995 1985 and international executive share option schemes as at 31 december 2005 the 1985 and international executive share option
schemes were closed and no options remained outstanding
2 figures for the 2005 employee incentive plan include share options stock appreciation rights and performance shares in aggregate
3 shows both traditional share options and share settled stock appreciation rights in aggregate a grant of 121 million options with an exercise price of 6075 pence per share awarded
in december 2003 made under the spirent stock incentive plan was partially hedged by 61 million ordinary shares held in trust as at 31 december 2005 195756 ordinary shares
had been transferred out of the esot in respect of the exercise of options from this grant leaving a balance of 59 million shares hedging this award
4 the acquisition plans are share plans which originally granted options over other companies’ shares which have been rolled over into spirent shares when the said companies were
acquired by spirent plc a description of the acquisition plans can be found in notes d to f on pages 74 and 75 of these ﬁnancial statements
5 276196 spirent ordinary shares were transferred from the spirent sharesave trust “sst” to settle the exercise of uk sharesave options in 2005 as at 31 december 2005 32 million
ordinary shares remained in the sst hedging share option grants made under the sharesave schemes
6 the employee stock purchase plans includes the us employee stock purchase plan the global all employee share purchase plan and the uk employee share purchase plan no purchase
rights were outstanding under these plans as at 31 december 2005
the following information relates to the outstanding share options
2005 2004 2003
weighted weighted weighted weighted weighted weighted
range of average average average average average average
exercise exercise remaining exercise remaining exercise remaining
exercise period as at prices price number contractual price number contractual price number contractual
share scheme notes 31 december 2005 pence pence million life pence million life pence million life
executive share a 250306240313 16 16 52 72 16 75 82 16 76 92
option schemes
1
031004040814 5672 62 68 82 62 70 92 72 09 78
110498010512 91163 125 66 46 133 90 55 132 102 63
110503080411 305598 318 26 49 320 36 59 320 40 69
employee 
incentive plan b 250808240815 053
2
40 32 80 –– ––– –
spirent stock c 101003091009 6 6 02 38 6 02 48 6 03 58
incentive plan 141103090410 1318 17 65 40 17 104 50 17 135 60
080504070510 22 22 01 43 22 01 54 22 01 64
120903071212 3856 52 226 65 46 23 59 55 18 65
031002060412 6187 67 394 49 67 467 58 66 270 62
300802120609 94140 115 15 31 119 22 41 121 25 51
210602130309 141190 143 83 32 144 102 42 144 114 52
110501060608 270400 319 17 20 321 24 29 321 30 39
070901140208 488617 583 13 20 585 22 30 583 31 40
acquisition plans d e f 150802250612 811
3
9 01 60 9 03 69 11 07 79
230799121107 1518 18 29 14 18 35 23 18 40 33
230799180108 2436 24 22 19 24 22 29 24 32 39
141100220308 5479 54 01 22 54 01 32 54 02 42
141100121010 90127 103 29 32 103 30 42 101 39 50
170500190709 151 151 04 35 151 05 45 151 05 55
141100121110 350572 523 01 48 519 01 58 535 02 68
sharesave schemes g 011205310511 3841 39 44 22 39 55 31 39 62 41
010106310509 83103 89 01 14 93 03 13 89 08 15
011205301108 142518 314 01 10 214 01 12 142 01 17
employee stock
purchase plans h i j –– – – – 50 27 01 50 33 01
total 1193 1221 1085
notes
1 includes options granted under the 1995 1985 and international executive share option schemesas of 31 december 2005 the 1985 and international executive share option schemes
were closed and no options remained outstanding
2 figures for the 2005 employee incentive plan include share options stock appreciation rights and performance shares in aggregate no exercise price is payable on the vesting of a
performance share
3 these exercise prices relate to the caw amended and restated stock plan and are expressed in this table in sterling using the average exchange rate between pounds sterling and us
dollars for the year the actual exercise price of these options are priced in us dollars at either 1503 us cents or 2003 us cents per share
72 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued potential dilution of issued share capital arising from employee share schemes
in accordance with guidelines issued by the association of british insurers the following information is provided in respect of possible future dilution 
of the company’s issued share capital arising from the exercise of awards under the group’s employee share schemes the issued share capital at 
31 december 2005 was 9658 million the closing price for a spirent ordinary share was 495 pence
at 31 december 2005
maximum
3
maximum
5
weighted number of new weighted number of new
average issue shares average issue shares
total
1
exercise price required to total
4
exercise price required to
total exercisable of all shares held
2
satisfy outstanding of all satisfy all
number below exercisable in trust exercisable below outstanding outstanding
exercisable 495 pence awards or treasury awards 495 pence awards awards
million million pence million million million pence million
discretionary share 
options 374 69 114 59 69 125 101 125
options arising from 
acquisition plans 87 51 62 – 51 52 62 52
stock appreciation rights
6
62 01 68 – 01 30 59 02
conditional shares – – – – – 08 – 08
stock purchase rights – – – – – – – – 
sharesave options 08 08 48 32 – 45 43 13
total 531 129 91 121 260 200
notes
1 this is the number of exercisable awards which have an exercise price less than 495 pence per share being the spirent plc closing share price on 31 december 2005
2 shares held in trust are in relation to shares held by the employee share ownership trust and the spirent sharesave trust these shares were purchased in the market and are held to
satisfy exercises under various employee share schemes market purchased shares have been excluded for the purposes of calculating dilution
3 this is the number of shares which would need to be issued to satisfy the exercise of all exercisable awards with an exercise price of less than 495 pence being the spirent plc closing
share price on 31 december 2005
4 total number outstanding relates to outstanding awards whether exercisable or not which have an exercise price less than 495 pence per share being the spirent plc closing share
price on 31 december 2005
5 this is the number of shares which would need to be issued to satisfy the exercise of outstanding awards whether exercisable or not with an exercise price of less than 495 pence
being the spirent plc closing share price on 31 december 2005
6 this includes stock appreciation rights awarded under the spirent stock incentive plan and employee incentive plan stock appreciation rights awarded under the netcom stock
appreciation rights plan see note k below for details on this plan are not included in the above ﬁgure and are fully hedged by shares in the employee share ownership trust
description of employee share schemes
a 1995 executive share option scheme “esos”
the esos is now closed however outstanding options may still be exercised and has been replaced by the employee incentive plan referred to in b below
the hm revenue  customs “hmrc” approved 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
awards under the esos normally determined annually were at the sole discretion of the remuneration committee after considering recommendations
made to it by the chief executive no price was payable on the grant of an option and no options have been or could 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 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 adjusted eps which is at least 6 per cent more than the increase
in the retail price index over the same period the performance condition is tested on the third anniversary of grant and if it has not been met at that
time at each subsequent anniversary of grant until the option expires ie on the tenth anniversary of grant in normal circumstances
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 adjusted 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 ten 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 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
spirent plc annual report 2005 73 32 authorised and issued share capital continued
b 2005 employee incentive plan “eip”
on 4 may 2005 spirent shareholders approved the eip to replace the now closed esos the eip is currently available for selected employees including
executive directors on a similar discretionary basis as the esos and any awards will be subject to prior satisfactory individual performance no price is
payable on the grant of an award and no award has been granted at a discount to the market price the company is able to grant share options including
hmrc approved options share settled stock appreciation rights “sars” and performance shares under the eip
in normal circumstances options or sars under the eip will vest three years following grant provided the company’s eps growth targets after excluding
inﬂation have been met over a three year performance period the growth targets in respect of the initial award require that the company’s eps increases
within a range of 6 per cent per annum for 25 per cent vesting and 15 per cent per annum for 100 per cent vesting over the performance period with
a sliding scale between these points
in normal circumstances performance shares under the eip will vest three years following grant provided the company’s total shareholder return “tsr”
targets have been met over a three year performance periodthe performance conditions require spirent’s tsr to be between the median of a comparator
group for 30 per cent vesting and the upper quartile of a comparator group for 100 per cent vesting over the performance period with a sliding scale
between these points the comparator group consists of the 30 largest companies by market capitalisation in the ftse techmark 100 index excluding
those techmark companies who are also constituents of the ftse100 index at the commencement of the performance period
all eip awards will be tested once on or shortly following the third anniversary of grant any part of an award which does not vest shall lapse ie there is
no opportunity for retesting
sars granted under the eip will deliver the appreciation value ie the aggregated increase in market value of an ordinary share over the base price of the
sar in the form of new issue ordinary shares this sars approach which is also being utilised for the spirent stock incentive plan see note c below
will help the company manage its dilution headroom more efﬁciently as only the sar gain and not the entire share value needs to be funded using a
sars based approach it is not possible to determine the precise level of dilution until the sars are exercised 22 million sars with a base price of 53
pence were outstanding in respect of the eip as at 31 december 2005 however no sars have been exercised
options and sars granted under the eip expire on the tenth anniversary of their grant unless they have previously lapsed or been exercised
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 annual general
meeting along with several amendments including the ability to award sars as well as stock options the company is mindful of the need to continue to
manage shareholder dilution in a responsible manner the current shareholder approved mandate regarding annual dilution rates includes an annual
allowance of 25 per cent of shares outstanding for the ssip and 06 per cent of shares outstanding for the eip see b abovethe remuneration committee
does not propose any change to the aggregate of 31 per cent of shares outstanding that could be granted annually under both the ssip and eip but believes
it would be helpful to allow ﬂexibility in the mix to reﬂect future operational requirements 385 million sars with a base price of between 42 pence and
71 pence were outstanding in respect of the ssip at 31 december 2005 however no sars have been exercised
awards made pursuant to the ssip normally vest over four years provided that the employee remains in employmentawards 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 applicable eps performance
conditions
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 445 million of the total consideration was satisfied through the 
rollover of outstanding options over netcom shares primarily held by netcom employees into options over approximately 238 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
74 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued e zarak amended and restated stock option plan “zarsop”
out of a total consideration of approximately 449 million ordinary shares issued for the acquisition of zarak systems corporation “zarak” in 2000
approximately 38 million shares arose in connection with the rollover 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 ten
year life from the original date of grant
unvested rolledover 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 rollover 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 ten year life from the original date of grant pursuant to the terms of the merger agreement for caw an additional cash payment
of 788 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 43 million ordinary shares and issued 75000 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 43 million shares 54000 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 669 us cents as each share vests or upon the exercise of a vested option
the ordinary shares subject to rolledover 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 a and 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” and 2005 sharesave scheme
the srsos closed in 2005 and was replaced by the 2005 sharesave scheme srsos options which remain outstanding may still be exercised prior to expiry
however no further grants can be made both schemes operate as hmrc approved saveasyouearn schemes and are open to all uk employees subject
to a qualifying service period any future sharesave invitations will be made under the 2005 sharesave scheme which is broadly similar to the srsos
the employee enters into a saveasyouearn 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 operates the sst to honour the contractual commitment to deliver ordinary shares against the valid exercise of outstanding options under
the srsos the sst a whollyowned subsidiary of spirent plc acts as sole trustee during the year 276196 shares were transferred to participants sst
has waived all rights to receive dividends payable on its registered shareholding except for 001 pence per annum in aggregate and accordingly such
shareholding is not included in the company’s eps calculation as referred to in note 13
spirent plc annual report 2005 75 32 authorised and issued share capital continued
h us employee stock purchase plan “espp”
the espp operates on a broadly similar basis to the sharesave scheme 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 1000 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 1000 net per month
j uk employee share purchase plan “uk espp”
on 4 may 2005 shareholders approved the uk espp which is an hmrc approved share incentive plan available to all uk employees subject to a qualifying
service period the uk espp offers three ways to provide ordinary shares to employees free shares partnership shares and matching shares the uk espp
will operate in conjunction with a trust which will hold the shares on the behalf of participants
each year awards of free shares may be made to eligible employees up to a value of £3000awards may be made subject to performance targets determined
by the directors in normal circumstances free shares must be held in trust for between three and ﬁve years and normally become free of income tax and
national insurance if held for ﬁve years
employees may be offered the opportunity to purchase partnership shares out of monthly contributions taken from pretax salary up to £1500 or 
10 per cent of salary if less the directors determine a savings period of between one and 12 months following which the shares are purchased where
the savings period is longer than one month the purchase price will be the lesser of the price at the beginning of the accumulation period or the price at
the end participants can withdraw partnership shares from the trust at anytime however doing so before ﬁve years may trigger a tax liability
if partnership shares have been offered to employees the company may also offer matching shares up to a maximum of two matching shares for each
partnership share in normal circumstances matching shares must be held in trust for a period of at least three years and may be subject to forfeiture if
the participant leaves employment prior to the end of this period
no awards have been made so far under this plan
k 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 preexercise 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 525 million
at 31 december 2005 the following rights were outstanding under the sarp
number of
rights
rights price outstanding
rights exercise dates pence million
100900290610 182400 24
76 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 33 sharebased payment
the total charge for the year relating to employee sharebased payment plans is as follows
2005 2004 2003
£ million £ million £ million
continuing operations
1995 executive share option scheme 04 03 01
2005 employee incentive plan 01 ––
spirent stock incentive plan 44 36 02
acquisition plans 02 04 05
employee sharesave schemes – 05 01
51 48 09
discontinued operations
1995 executive share option scheme 04 02 01
employee sharesave schemes 01 02 –
05 04 01
56 52 10
the fair value of the options and purchase rights over ordinary shares is estimated as at the date of grant using a binomial model the following table
gives the assumptions made in arriving at the sharebased payments charge
2005 2004 2003
weighted average share price pence 53 65 36
weighted average fair value pence 24 36 19
expected volatility  5055 70 70
expected life years 45 45 45
risk free rate  42 4051 3649
dividend yield  nil10 10 10
the expected volatility was determined by calculating the historical volatility of the company’s share price over the previous two years which management
considers to be the period which is likely to be most representative of future volatility the expected life used in the model has been adjusted based on
management’s best estimate for the effects of nontransferability exercise restrictions and behavioural considerations for performance shares granted
under the 2005 employee incentive plan which have a market based performance condition it has been assumed that there will be 50 per cent vesting
for valuation purposes
spirent plc annual report 2005 77 34 reconciliation of movements in equity
£ million
share capital net unrealised retained
share premium capital redemption translation gains and investment in earnings minority total
capital account reserve reserve reserve losses own shares loss interests equity
at 1 january 2003 as originally stated 313 6961 176 07 – – 21 6485 21 972
changes in accounting policy relating 
to ﬁrsttime application of ifrs – – – – – – 21 49 – 28
at 1 january 2003 as restated note 39 313 6961 176 07 – – – 6534 21 944
changes in equity for 2003
total recognised income and expense 
for the year – – 12 – 30 – – 276 01 295
sharebased payment – – – – – – – 04 – 04
new shares issued 02 14 09 – – – – – – 07
obligation to issue share capital 
caw networks inc – – 27 – – – – – – 27
other movements – – 05 – – – – 11 – 06
at 31 december 2003 315 6975 177 07 30 – – 6243 22 1283
changes in equity for 2004
total recognised income and expense 
for the year – – 12 – 14 – – 295 02 271
sharebased payment – – – – – – – 48 – 48
new shares issued 03 33 21 – – – – – – 15
new shares issued – caw networks inc 01 32 27 – – – – – – 06
cancellation of share premium and 
capital redemption reserve – 7027 – 07 – – – 7034 – –
minority acquired – – – – – – – – 11 11
other movements – – 08 – – – – – – 08
at 31 december 2004 319 13 109 – 16 – – 1134 13 1604
changes in accounting policy relating 
to ﬁrsttime application of ias 39 
‘financial instruments recognition 
and measurement’ note 39 – – – – – 05 – 06 – 01
at 1 january 2005 as restated 319 13 109 – 16 05 – 1128 13 1603
changes in equity for 2005
total recognised income and expense 
for the year – – – – 39 14 – 521 06 462
sharebased payment – – – – – – – 54 – 54
new shares issued 03 31 07 – – – – – – 27
at 31 december 2005 322 44 102 – 55 19 – 661 19 1222
78 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued nature and purpose of reserves
a reconciliation of the opening and closing balance on each reserve is shown in the reconciliation of movements in equity the nature and purpose of
each reserve within equity is as follows
i share premium account this reserve records the consideration premium for shares issued at a value that exceeds their nominal value
ii capital reserve this reserve arises in relation to share option plans in acquired companies
iii capital redemption reserve this reserve has been eliminated as described below
iv translation reserve this reserve is used to record exchange differences arising from the translation of the ﬁnancial statements of foreign subsidiaries
it is also used to record the net investments hedged in these subsidiaries and
v net unrealised gains and losses this reserve records movements in fair value of forward currency contracts
at 31 december 2005 the cumulative amount of goodwill charged to retained earnings as a result of uk gaap accounting policies prior to 1998 is 
£439 million 2004 and 2003 £439 million
investment in own shares
at 31 december 2005 an amount of £26 million 2004 £26 million 2003 £26 million is deducted from retained earnings in relation to the cost of
investment in own shares the investment in own shares relates to 32 million ordinary shares 2004 and 2003 35 million held by the spirent sharesave
trust “sst” and 94 million ordinary shares 2004 and 2003 95 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 held in the esot are primarily held to hedge
awards under various discretionary employee share schemes the market value of own shares held in trust at 31 december 2005 was £62 million 2004
£96 million 2003 £76 million
cancellation of share premium and capital redemption reserves
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 £7027 million and £07 million respectively the cancellation created a reserve in
the ﬁnancial statements 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 nondistributable reserve the special nondistributable reserve at 31
december 2005 is £111 million 2004 £616 million 2003 nil and 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 ﬁnancial statements at the time of the cancellation
the special nondistributable 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 £7034 million the special nondistributable 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 have been satisﬁed in full or on transferring to a blocked trust account a sum equal to the aggregate amount due to any
creditors of spirent plc who were creditors on 24 november 2004 and who remain creditors on the date of release of the special nondistributable reserve
spirent plc annual report 2005 79 35 reconciliation of operating lossproﬁt to cash generated from operations
2005 2004 2003
£ million £ million £ million
continuing operations
operating lossproﬁt 390 152 113
adjustments for
goodwill impairment 370 ––
depreciation of property plant and equipment 114 148 175
loss on the disposal of property plant and equipment 01 05 –
impairment of property plant and equipment – 06 22
sharebased payment 51 48 09
changes in working capital
deferred income received 58 49 02
decreaseincrease in receivables 04 71 67
increasedecrease in inventories 04 35 18
decreaseincrease in payables 168 45 21
decrease in provisions 09 29 59
deﬁned beneﬁt pension plan 38 78 08
cash outﬂowgenerated from continuing operations 11 310 376
discontinued operations
operating proﬁt 244 209 168
adjustments for
depreciation of property plant and equipment 112 106 118
proﬁt on the disposal of property plant and equipment 01 01 01
sharebased payment 05 04 01
changes in working capital
increase in receivables 17 20 29
increasedecrease in inventories 30 45 13
increase in payables 38 40 36
cash generated from discontinued operations 351 293 306
cash generated from operations 340 603 682
80 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 36 acquisition of subsidiaries
2005 2004 2003
£ million £ million £ million
net assets – minority interest acquired – 11 –
goodwill – – 27
– 11 27
consideration
issue of ordinary shares – caw networks inc – 06 27
cash including expenses – 11 –
adjustment to consideration – prior year acquisitions – 06 –
– 11 27
the cash ﬂows in respect of the acquisition of subsidiaries are as follows
cash including expenses – 11 –
cash accrued in prior years – – 11
net cash outﬂow on acquisitions – 11 11
the issue of ordinary shares related to deferred consideration pursuant to the acquisition agreement with caw networks inc 43 million ordinary shares
were issued on 31 march 2004 when the spirent ordinary share price was 755 pence the consideration had been estimated in 2003 and provided at 
£27 million and adjusted in 2004 when the actual share price and exchange rate were known
during 2004 the minority shareholdings in two of the network products group’s subsidiaries were acquired for a cash consideration of £11 million
37 disposal of operations
2005 2004 2003
£ million £ million £ million
net assets disposed of
goodwill note 14 – – 06
property plant and equipment note 15 – 01 07
inventories – 02 23
trade and other receivables – 18 24
trade and other payables – 24 45
provisions – 12 –
investment in joint venture – – 543
net liabilities assets – 15 558
exchange gain transferred to proﬁt on sale – – 24
proﬁt on disposal of operations 39 40 86
disposal costs – hellermanntyton division note 6 67 ––
28 25 620
during 2005 the group disposed of certain nontrading companies for £39 million and incurred costs amounting to £67 million in relation to the disposal
of the hellermanntyton division the sale of the hellermanntyton division was completed on 15 february 2006
during 2004 the group disposed of its aerospace maintenance repair and overhaul software business from within the systems group
during 2003 the group disposed of its aviation information solutions businesses from within the systems group and its interests in the wago joint venture
spirent plc annual report 2005 81 37 disposal of operations continued
cash ﬂows in respect of the disposal of operations are as follows
2005 2004 2003
£ million £ million £ million
cash received on disposal of operations 39 25 620
cash expenses paid on the disposal of the hellermanntyton division 15 ––
net cash ﬂow 24 25 620
expenses accrued on the disposal of the hellermanntyton division 52 ––
28 25 620
38 related party transactions
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in this
note transactions between the group and its associates are disclosed below
trading transactions
during the year group companies entered into the following transactions with related parties who are not members of the group
£ million
amounts owed amounts owed
sales of goods purchases of goods by related parties to related parties
2005 2004 2003 2005 2004 2003 2005 2004 2003 2005 2004 2003
associates 12 13 10 30 23 21 05 03 02 13 08 08
sales to and purchases from related parties are made at normal market prices
the amounts outstanding are unsecured and will be settled in cash no guarantees have been given or received no provisions have been made in respect
of the amounts owed by related parties the amounts owed by and to related parties for 2005 are included in discontinued operations
remuneration of key management personnel
the remuneration of the executive directors who are the key management personnel of the group is set out below in aggregate for each of the categories
speciﬁed in ias 24 ‘related party disclosures’
2005 2004 2003
£000 £000 £000
short term employee beneﬁts 1078 1920 1431
sharebased payment 504 222 61
1582 2142 1492
82 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued 39 transition to ifrs
for all periods up to and including the year ended 31 december 2004 the group prepared its ﬁnancial statements in accordance with uk generally accepted
accounting practice “uk gaap” as described in notes 1 and 2 above these ﬁnancial statements for the year ended 31 december 2005 are the ﬁrst the
group is required to prepare in accordance with international financial reporting standards “ifrs” as adopted by the european union “eu”
accordingly the group has prepared ﬁnancial statements which comply with ifrs applicable for periods beginning on or after 1 january 2005 and the signiﬁcant
accounting policies meeting those requirements are described in note 2 in preparing these ﬁnancial statements the group has started from an opening
balance sheet as at 1 january 2003 the group’s date of transition to ifrs and made those changes in accounting policies and other restatements required
by ifrs 1 for the ﬁrsttime adoption of ifrs this note explains the principal adjustments made by the group in restating its uk gaap balance sheet as
at 1 january 2003 and its previously published uk gaap ﬁnancial statements for the two years ended 31 december 2003 and 31 december 2004
exemptions applied
ifrs 1 allows ﬁrsttime adopters certain exemptions from the general requirement to apply ifrs as effective for december 2005 year ends retrospectively
the group has taken the following exemptions
• comparative information on ﬁnancial instruments is prepared in accordance with uk gaap and the group has adopted ias 32 ‘financial instruments
disclosure and presentation’ and ias 39 ‘financial instruments recognition and measurement’ from 1 january 2005
• ifrs 5 ‘noncurrent assets held for sale and discontinued operations’ has been applied prospectively from 1 january 2005 in accordance with the 
requirements of that standard and ifrs 1 accordingly the comparative balance sheets have not been adjusted for assets and liabilities classiﬁed in 
2005 as held for sale
• ifrs 3 ‘business combinations’ has not been applied to acquisitions of subsidiaries or interests in associates and joint ventures that occurred before 
1 january 2003
• the group has recognised all cumulative actuarial gains and losses on pensions and other postretirement beneﬁts as at 1 january 2003 directly in 
equityaccordingly the group discloses prospectively from 1 january 2003 the information required by ias 19 ‘employee beneﬁts’ on scheme obligations
scheme assets and experience adjustments on scheme assets and liabilities as those amounts are determined
• cumulative currency translation differences for all foreign operations are deemed to be zero as at 1 january 2003
• ifrs 2 ‘sharebased payment’ has not been applied to any equity instruments that were granted on or before 7 november 2002 nor has it been applied
to equity instruments granted after 7 november 2002 that vested before 1 january 2005
accounting policies applied in the two years ended 31 december 2003 and 31 december 2004
as noted above the group adopted ias 32 and ias 39 with effect from 1 january 2005 and as permitted under ifrs 1 the group has not restated
comparative information the new accounting policies as applied for the year ended 31 december 2005 are set out in note 2 for accounting periods up
to the year ended 31 december 2004 the following accounting policies were applied in respect of ﬁnancial instruments in the ﬁnancial statements of group
derivative instruments
the group uses forward foreign currency contracts to reduce exposure to foreign exchange ratesthe group also uses interest rate swaps to adjust interest
rate exposures
the group considers its derivative instruments qualify for hedge accounting when certain criteria are met
forward foreign currency contracts
the rates under such contracts are used to record the hedged item as a result gains and losses are offset against the foreign exchange gains and losses
on the related ﬁnancial assets and liabilities or where the instrument is used to hedge a committed future transaction the gains and losses are not
recognised until the transaction occurs
interest rate swaps
interest differentials are recognised by accruing with net interest payable interest rate swaps are not revalued to fair value or shown on the group balance
sheet at the year end if they are terminated early the gain or loss is spread over the remaining maturity of the original instrument
spirent plc annual report 2005 83 39 transition to ifrs continued
nature of the main adjustments to comply with ias 32 and ias 39
had ias 32 and ias 39 been applied from 1 january 2003 all the group’s derivative instruments would have been brought onto the balance sheet at fair value
availableforsale investments and investments held at fair value through proﬁt and loss would have been carried at fair value rather than at cost
following adoption of ias 32 and 39 by the group forward currency contracts with a positive fair value of £05 million and interest rate swaps with negative
fair value of £10 million have been recognised in the group balance sheet at 1 january 2005
restatement on the ﬁrsttime application of ias 32 and ias 39
£ million
current assets – financial assets 05
noncurrent liabilities – financial liabilities 10
long term borrowings 04
total change in equity note 34 01
explanation of ifrs adjustments to the income statements and balance sheets
the most signiﬁcant adjustments arising from the group’s transition to ifrs are described below and their ﬁnancial effect is set out in the reconciliations
on pages 89 to 93
a ifrs 2 ‘sharebased payment’
ifrs 2 requires an expense to be recognised where the group buys goods or services in exchange for shares or rights over shares equitysettled transactions
or in exchange for other assets equivalent in value to a given number of shares or rights over shares cashsettled transactions the main impact of 
ifrs 2 on the group is the measurement of the expense for employees’ and directors’ share options and other sharebased incentives by using an 
optionpricing model
effect on the income statement
this change has resulted in an increase in the reported charge for sharebased payment of £46 million for 2004 and £04 million for 2003
the effect of this revised policy on the basic and diluted eps is as follows
• for 2004 a decrease in basic earnings per share of 049 pence 2003 004 pence
• for 2004 a decrease in diluted earnings per share of 048 pence 2003 004 pence
effect on equity
there is no net effect on equity
84 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued b ias 19 ‘employee beneﬁts’
ias 19 permits two different approaches for the recognition of actuarial gains and losses the group is adopting 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 and restated the
consolidated balance sheet at 1 january 2003 for the adoption of this standard the implementation of ias 19 in respect of deﬁned beneﬁt pension
schemes has had no effect on the reported results of the group compared with the results reported under uk gaap
under uk gaap a deferred tax asset arose in respect of the retirement beneﬁt obligation on the deﬁned beneﬁt pension schemes and this was set off
against the obligation for disclosure purposes ias 19 requires that the deferred tax asset be separately disclosed as a noncurrent asset
ias 19 also requires companies to make an accrual for holiday pay under uk gaap this was not mandatory
effect on the income statement
the requirement to accrue holiday pay has resulted in a credit to the income statement of £08 million for 2004 and no adjustment for 2003
the effect of this revised policy in respect of the requirement to accrue holiday pay on the basic and diluted eps is as follows
• for 2004 an increase in basic earnings per share of 009 pence 2003 nil
• for 2004 an increase in diluted earnings per share of 008 pence 2003 nil
effect on equity
at 31 december 2004 a deferred tax asset of £111 million has been reclassiﬁed from the deﬁned beneﬁt pension plan deﬁcit to noncurrent assets a
similar reclassiﬁcation was made of £130 million at 31 december 2003 no deferred tax asset was recognised at the transition date 1 january 2003
an additional accrual of £02 million for holiday pay has been reported and included in trade and other payables at 31 december 2004a similar adjustment
of £10 million was made at 31 december 2003 and £10 million at 1 january 2003
spirent plc annual report 2005 85 39 transition to ifrs continued
c ifrs 3 ‘business combinations’
i goodwill amortisation
the group made no acquisitions in 2003 or 2004 and has elected not to restate business combinations prior to the transition date of 1 january 2003 the
effect of the adoption of ifrs 3 on the group’s accounting policies has therefore had no impact on the book value of assets and liabilities acquired for
prior period acquisitions
the adoption of ifrs 3 and ias 36 ‘impairment of assets’ has resulted in the group ceasing annual goodwill amortisation from 1 january 2003 and
introduced the requirement to test for impairment annually at the level of the cashgenerating unit or cashgenerating units to which goodwill has been
allocated unless an event occurs during the year which requires the goodwill to be tested more frequently
in addition the reversal of goodwill amortisation has resulted in a higher goodwill balance denominated in foreign currencies and hence has adjusted the
exchange difference on retranslation of goodwill into sterling at each reporting date
effect on the income statement
goodwill amortisation of £91 million charged in 2004 and £97 million charged in 2003 under uk gaap has been reversed in the restatements under ifrs
the effect of this revised policy due to the adoption of ifrs 3 on the basic and diluted eps is as follows
• for 2004 an increase in basic earnings per share of 097 pence 2003 104 pence
• for 2004 an increase in diluted earnings per share of 096 pence 2003 103 pence
effect on equity
a cumulative exchange difference of £11 million arises on the retranslation of the adjusted goodwill balance at 31 december 2004 the equivalent
cumulative exchange difference was £04 million at 31 december 2003
the reversal of the cumulative goodwill amortisation from transition date together with the exchange effects outlined above have increased the carrying
value of goodwill at 31 december 2004 by £177 million the cumulative adjustment at 31 december 2003 was £93 million
ii proﬁt or loss on disposal
goodwill written off to reserves under uk gaap prior to 1998 has not been reinstated and will not be included in the calculation of any proﬁt or loss on
any subsequent disposal under ifrs
effect on the income statement
goodwill written off to reserves arising prior to 1998 and reinstated under uk gaap on the disposal of operations has been reversed in the amount of
£49 million and £26 million in 2004 and 2003 respectively
the effect of this revised policy due to the adoption of ifrs 3 on the basic and diluted eps is as follows
• for 2004 an increase in basic earnings per share of 052 pence 2003 028 pence
• for 2004 an increase in diluted earnings per share of 051 pence 2003 027 pence
effect on equity
there is no net effect on equity
86 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued d ias 12 ‘income taxes’
ias 12 requires that deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries associates and joint
ventures except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future these deferred tax liabilities were not required to be recognised under uk gaap
effect on the income statement
the tax charge for the group has increased by £01 million and that for the associate by £01 million for 2003 under ifrs there is no effect on the income
statement in 2004 and therefore there is no effect on basic or diluted earnings per share 2003 basic and diluted 002 pence decrease
effect on equity
under ifrs additional deferred tax liabilities for subsidiaries have been recognised of £06 million and for associates of £15 million at 31 december 2004
and at 31 december 2003 at the transition date 1 january 2003 tax liabilities of £04 million for subsidiaries and £14 million for associates have been
recognised under ifrs
e ias 28 ‘investments in associates’ and ias 31 ‘interests in joint ventures’
ias 28 and ias 31 require that the group’s share of the associates’ or joint ventures’ net proﬁt or loss be disclosed in the income statement as one line
after charging or crediting the group’s share of the associates’ or joint ventures’ interest and tax under uk gaap the group’s share of interest and tax
of the associates and joint ventures were disclosed within the interest or tax lines in the income statement
effect on the income statement
an amount of £10 million of tax has been reclassiﬁed to the associates’ result from the tax charge in 2004 under ifrs in 2003 £02 million of interest
and £11 million of tax have been reclassiﬁed to the joint ventures’ result and £09 million of tax to the associates’ result
effect on equity
there is no effect on equity
spirent plc annual report 2005 87 39 transition to ifrs continued
f ias 21 ‘the effects of changes in foreign exchange rates’
the group has elected to adopt ias 21 from the transition date 1 january 2003 as a result any goodwill arising on the acquisition of a foreign subsidiary
and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are now treated as assets and liabilities of the
foreign operation and translated at the closing rate goodwill acquired prior to 1 january 2003 that has been treated as an asset of the parent is reported
in pounds sterling at the date of transition
exchange differences arising from the retranslation of opening net assets of overseas subsidiaries and exchange adjustments arising from the translation
of the results of overseas subsidiaries joint ventures and associates are classiﬁed as equity and transferred to the group’s translation reserve such
translation differences are recognised as part of the proﬁt or loss on disposal should an operation be disposed of the group has elected to apply the
exemption that allows the cumulative translation differences for all foreign operations to be deemed to be zero at the date of transition to ifrs 1 january
2003 the group has similarly elected that the gain or loss on the subsequent disposal of any foreign operation shall exclude translation differences that
arose before the transition date
for disposals in 2003 and 2004 that occurred after the transition date the proﬁt or loss on disposal has been restated so as to include the effect of any
posttransition translation differences
effect on the income statement
there is no effect on the income statement in 2004 in 2003 exchange gains of £24 million on foreign operations disposed of have been credited to the
income statement
the effect of this revised policy on the basic and diluted earnings per share is as follows
• for 2004 there is no effect on basic earnings per share 2003 025 pence increase
• for 2004 there is no effect on diluted earnings per share 2003 025 pence increase
effect on equity
at 31 december 2004 cumulative translation adjustments of £28 million have been transferred to a separate translation reserve in accordance with ias 21
these together with the translation effects of other ifrs adjustments result in a closing balance of £16 million on the translation reserve at this date
the translation reserve at 31 december 2003 was a credit balance of £30 million
g reclassiﬁcations
some reclassiﬁcations are required in the restatements under ifrs
effect on the income statement
for the deﬁned beneﬁt pension schemes 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 were included in other ﬁnance expense or income in the
income statement under uk gaap under ifrs this charge or credit has been reclassiﬁed as ﬁnance costs
effect on equity
under ifrs it is necessary to classify provisions into short term provisions and noncurrent provisions
under ifrs the investment in own shares has been reclassiﬁed to retained earnings in the transition date balance sheet and at 31 december 2003
the investment in own shares was deducted from retained earnings at 31 december 2004 for uk gaap so no adjustment is required
for uk gaap purposes in the following reconciliations the deﬁned beneﬁt pension plan deﬁcit has been reclassiﬁed as a noncurrent liability
other
the group has applied ias 39 prospectively that is with effect from 1 january 2005 and hence no adjustments for ﬁnancial instruments are required in
the income statement restatements for 2003 or 2004
88 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued reconciliation of equity at 1 january 2003
£ million
effect of
notes uk gaap transition to ifrs ifrs
noncurrent assets
goodwill 1136 – 1136
property plant and equipment 1100 – 1100
investment in joint venture 501 – 501
investment in associates a 133 14 119
trade and other receivables 20 – 20
2890 14 2876
current assets
inventories 615 – 615
trade and other receivables 953 – 953
cash and cash equivalents 836 – 836
2404 – 2404
total assets 5294 14 5280
current liabilities
trade and other payables c 880 10 890
current tax 195 – 195
short term borrowings and overdrafts 18 – 18
provisions and other liabilities d – 57 57
1093 67 1160
noncurrent liabilities
trade and other payables 47 – 47
long term borrowings 2436 – 2436
deﬁned beneﬁt pension plan deﬁcit 462 – 462
deferred tax e 24 04 28
provisions and other liabilities d 260 57 203
3229 53 3176
total liabilities 4322 14 4336
net assets 972 28 944
share capital 313 – 313
share premium account 6961 – 6961
capital reserve 176 – 176
capital redemption reserve 07 – 07
retained loss f 6485 49 6534
investment in own shares b 21 21 –
minority interests 21 – 21
total equity 972 28 944
notes to the reconciliation of equity at 1 january 2003
a additional deferred tax liabilities recognised in relation to associates
b investment in own shares reclassiﬁed as treasury stock and shown as a deduction from equity
c accrual for vacation earned but not taken at the year end extended to include all subsidiaries within the group
d reclassiﬁcation of the current portion of lease provisions from provisions under uk gaap to short term provisions under ifrs
e additional deferred tax liabilities recognised in relation to subsidiaries
f net adjustment to retained earnings
spirent plc annual report 2005 89 39 transition to ifrs continued
reconciliation of equity at 31 december 2003
£ million
effect of
notes uk gaap transition to ifrs ifrs
noncurrent assets
goodwill a 1016 93 1109
property plant and equipment 902 – 902
investment in joint venture 03 – 03
investment in associates b 146 15 131
trade and other receivables 17 – 17
deferred tax c – 130 130
2084 208 2292
current assets
inventories 550 – 550
trade and other receivables 852 – 852
cash and cash equivalents 376 – 376
1778 – 1778
total assets 3862 208 4070
current liabilities
trade and other payables d 866 10 876
current tax 247 – 247
short term borrowings and overdrafts 18 – 18
provisions and other liabilities e – 46 46
1131 56 1187
noncurrent liabilities
trade and other payables 23 – 23
long term borrowings 933 – 933
deﬁned beneﬁt pension plan deﬁcit c 352 130 482
deferred tax f 23 06 29
provisions and other liabilities e 179 46 133
1510 90 1600
total liabilities 2641 146 2787
net assets 1221 62 1283
share capital 315 – 315
share premium account 6975 – 6975
capital reserve 177 – 177
capital redemption reserve 07 – 07
translation reserve g – 30 30
investment in own shares h 26 26 –
retained loss i 6249 06 6243
minority interests 22 – 22
total equity 1221 62 1283
notes to the reconciliation of equity at 31 december 2003
a elimination of goodwill amortisation from 1 january 2003
b additional deferred tax liabilities recognised in relation to associates
c deferred tax asset on pension scheme is required to be shown separately
d accrual for vacation earned but not taken at the year end extended to include all subsidiaries within the group
e reclassiﬁcation of the current portion of lease provisions from provisions under uk gaap to short term provisions under ifrs
f additional deferred tax liabilities recognised in relation to subsidiaries
g separate translation reserve required
h reclassify own shares within retained earnings
i net adjustment to retained earnings
90 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued reconciliation of equity at 31 december 2004
£ million
effect of
notes uk gaap transition to ifrs ifrs
noncurrent assets
goodwill a 888 177 1065
property plant and equipment 863 – 863
investment in associates 158 15 143
trade and other receivables 15 – 15
deferred tax b – 111 111
1924 273 2197
current assets
inventories 540 – 540
trade and other receivables 884 – 884
cash and cash equivalents 517 – 517
1941 – 1941
total assets 3865 273 4138
current liabilities
trade and other payables c 906 02 908
current tax 262 – 262
short term borrowings and overdrafts 18 – 18
provisions and other liabilities e – 42 42
1186 44 1230
noncurrent liabilities
trade and other payables 39 – 39
long term borrowings 763 – 763
deﬁned beneﬁt pension plan deﬁcit b 270 111 381
deferred tax d 19 06 25
provisions and other liabilities e 138 42 96
1229 75 1304
total liabilities 2415 119 2534
net assets 1450 154 1604
share capital 319 – 319
share premium account 13 – 13
capital reserve 109 – 109
capital redemption reserve –––
translation reserve f – 16 16
retained earnings g 996 138 1134
minority interests 13 – 13
total equity 1450 154 1604
notes to the reconciliation of equity at 31 december 2004
a elimination of goodwill amortisation from 1 january 2003
b deferred tax asset on pension scheme is required to be shown separately
c accrual for vacation earned but not taken at the year end extended to include all subsidiaries within the group
d additional deferred tax liabilities recognised in relation to subsidiaries
e reclassiﬁcation of the current portion of lease provisions from provisions under uk gaap to short term provisions under ifrs
f separate translation reserve required under ifrs
g net adjustment to retained earnings
spirent plc annual report 2005 91 39 transition to ifrs continued
reconciliation of the income statement for 2003
£ million
effect of
effect of proposed
transition disposal of
notes uk gaap to ifrs hellermanntyton
g
ifrs
continuing operations
revenue 4662 – 1744 2918
cost of sales 2798 – 1055 1743
gross proﬁt 1864 – 689 1175
operating expenses a 1676 93 521 1062
operating proﬁt 188 93 168 113
proﬁt from interests in joint ventures b 27 13 – 14
share of proﬁt of associates c 21 10 11 –
operating proﬁt of the group joint venture and associates 236 70 179 127
proﬁt on the disposal of operations d 36 50 – 86
proﬁt before interest 272 120 179 213
finance income 31 – 02 29
finance costs e 285 13 10 288
other ﬁnance expense e 15 15 – –
proﬁtloss before tax 03 122 171 46
tax f 06 19 29 42
loss for the year from continuing operations after tax 03 141 142 04
discontinued operations
proﬁt for the year from discontinued operations g – – 142 142
lossproﬁt for the year 03 141 – 138
attributable to
equity holders of the parent 05 141 – 136
minority shareholders’ interests – discontinued operations 02 – – 02
lossproﬁt for the year 03 141 – 138
notes to the reconciliation of the consolidated income statement for 2003
a the adjustment to operating expenses under ifrs is made up of the following items
£ million
reversal of uk gaap goodwill amortisation charge 97
additional sharebased payment charge under ifrs 2 04
93
b under ias 31 income from interests in joint ventures is shown net of taxation £11 million and ﬁnance costs £02 million
c under ias 28 share of proﬁt of associates is shown net of tax £09 million and an adjustment of £01 million in relation to deferred tax liabilities under ias 12
d under ifrs goodwill previously written off to reserves of £26 million is not reinstated on the disposal of operations in addition there are exchange gains on foreign operations of £24
million that under ias 21 were taken to equity and on disposal of those operations have now been transferred to the income statement
e the adjustment to ﬁnance costs under ifrs relates to the reclassiﬁcation of the ﬁnance expense arising on deﬁned beneﬁt pension schemes of £15 million to other ﬁnance expense
and a reduction of £02 million for ﬁnance costs of the joint venture
f the adjustment to tax relates to the tax charge for the associates and joint venture see b and c above and a deferred tax charge which arises in relation to temporary differences
for investments in subsidiaries under ias 12
g the income statement has been adjusted to reﬂect the effect of the proposed disposal of the hellermanntyton division which is a discontinued operation under ifrs but not under
uk gaap in 2005
92 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued reconciliation of the income statement for 2004
£ million
effect of
effect of proposed
transition disposal of
notes uk gaap to ifrs hellermanntyton
f
ifrs
continuing operations
revenue 4750 – 1878 2872
cost of sales 2749 – 1097 1652
gross proﬁt 2001 – 781 1220
operating expenses a 1693 53 572 1068
operating proﬁt 308 53 209 152
loss from interest in joint venture 07 – – 07
share of proﬁt of associates b 28 10 18 –
operating proﬁt of the group joint venture and associates 329 43 227 145
lossproﬁt on the disposal of operations c 09 49 – 40
proﬁt before interest 320 92 227 185
finance income 16 – 02 14
finance costs d 89 07 09 87
other ﬁnance expense d 07 07 – –
proﬁt before tax 240 92 220 112
tax e 77 10 47 20
proﬁt for the year from continuing operations after tax 163 102 173 92
discontinued operations
proﬁt for the year from discontinued operations f – – 173 173
proﬁt for the year 163 102 – 265
attributable to
equity holders of the parent 160 102 – 262
minority shareholders’ interests – discontinued operations 03 – – 03
proﬁt for the year 163 102 – 265
notes to the reconciliation of the consolidated income statement for 2004
a the adjustment to operating expenses under ifrs is made up of the following items
£ million
reversal of uk gaap goodwill amortisation charge 91
decrease in vacation accrual 08
additional sharebased payment charge under ifrs 2 46
53
b under ias 28 share of proﬁt of associates is shown net of taxation £10 million
c under ifrs goodwill previously written off to reserves is not reinstated on the disposal of operations
d the adjustment to ﬁnance costs under ifrs relates to the reclassiﬁcation of the ﬁnance expense arising on deﬁned beneﬁt pension schemes to other ﬁnance expense
e the adjustment to tax under ifrs relates to the tax charge for the associates see b above
f the income statement has been adjusted to reﬂect the effect of the proposed disposal of the hellermanntyton division which is a discontinued operation under ifrs but not under
uk gaap in 2005
explanation of material adjustments to the cash ﬂow statement for 2004 and 2003
income taxes of £31 million paid during 2004 2003 received £89 million are classiﬁed as operating cash ﬂows under ifrs but were included in a
separate category of tax cash ﬂows under uk gaap there are no other material differences between the cash ﬂow statements presented under ifrs and
the cash ﬂow statements presented under uk gaap
spirent plc annual report 2005 93 40 post balance sheet events
on 23 january 2006 the group announced that it had entered into an agreement to acquire swissqual holding ag “swissqual” for an initial consideration
of chf 625 million £277 million the initial consideration was paid in cash on completion on 23 january 2006 out of cash resources and utilisation of
a new bank facility that was set up speciﬁcally for the purpose a further chf 280 million £124 million is payable in 2007 depending on revenue growth
and various technical milestones
we also announced on 13 february 2006 the acquisition of quadtex systems inc for 75 million £42 million payable in cash on completion with a
further 15 million £09 million payable depending on certain technical milestones and the retention of key employees
the directors consider it impractical to provide further disclosures in relation to these acquisitions given their proximity to the date of the annual report
the disposal of the hellermanntyton division was completed on 15 february 2006 when proceeds of £2889 million were received at a cash free
debt free equivalent value these proceeds have been applied as follows
• repayment of the senior loan notes of 1248 million £715 million
• payment of the make whole amount an amount which becomes payable on the early redemption of the senior loan notes of 129 million 
£74 million
• break fees of £23 million in respect of interest rate swaps taken out in connection with the senior loan notes
• special contribution of £470 million to the uk ﬁnal salary pension scheme
• repayment and cancellation of the bank facility in connection with the acquisition of swissqual
t aking these transactions into account the pro forma cash balance is approximately £150 million of this £50 million has been earmarked to fund the on
market share repurchase programme the programme is expected to begin in the second quarter following the completion of certain actions establishing
distributable reserves in the parent company clearance from the pension regulator and the approval from shareholders to make onmarket share
repurchases of up to 1499 per cent of the company’s issued share capital
following the disposal of the hellermanntyton division the company issued notices of cancellation in respect of all its borrowing facilities
94 spirent plc annual report 2005
notes to the consolidated ﬁnancial statements continued spirent plc annual report 2005 95
independent auditors’ report to the shareholders of spirent plc 
we have audited the parent company ﬁnancial statements of spirent plc
for the year ended 31 december 2005 which comprise the company
balance sheet and the related notes 1 to 23these parent company ﬁnancial
statements have been prepared under the accounting policies set out
thereinwe have also audited the information in the directors’ remuneration
report that is described as having been audited
we have reported separately on the group ﬁnancial statements of spirent
plc for the year ended 31 december 2005
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 are responsible for preparing the annual report the directors’
remuneration report and the parent company financial statements in
accordance with applicable united kingdom law and accounting standards
united kingdom generally accepted accounting practice as set out in the
statement of directors’ responsibilities
our responsibility is to audit the parent company ﬁnancial statements and
the part of the directors’ remuneration report to be audited in accordance
with relevant legal and regulatory requirements and international standards
on auditing uk and ireland
we report to you our opinion as to whether the parent company ﬁnancial
statements give a true and fair view and whether the parent company
ﬁnancial statements and the part of the directors’ remuneration report to
be audited have been properly prepared in accordance with the companies
act 1985we also report to you if in our opinion the directors’ report is not
consistent with the parent company ﬁnancial statements 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 regarding directors’ remuneration and other transactions
is not disclosed
we read other information contained in the annual report and consider
whether it is consistent with the audited parent company financial
statementsthe other information comprises only the directors’ report the
unaudited part of the directors’ remuneration report the chairman’s
statement chief executive’s overview the operating review and financial
review we consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the parent
company ﬁnancial statements our responsibilities do not extend to any
other information
basis of audit opinion
we conducted our audit in accordance with international standards on
auditing uk and ireland issued by the auditing practices board an audit
includes examination on a test basis of evidence relevant to the amounts
and disclosures in the parent company ﬁnancial statements and the part
of the directors’ remuneration report to be audited it also includes an
assessment of the significant estimates and judgments made by the
directors in the preparation of the parent company ﬁnancial statements
and of whether the accounting policies are appropriate to the company’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 parent company
ﬁnancial statements and the part of the directors’ remuneration report 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 parent company
ﬁnancial statements and the part of the directors’ remuneration report to
be audited
opinion
in our opinion
– the parent company financial statements give a true and fair view in
accordance with united kingdom generally accepted accounting practice
of the state of the company’s affairs as at 31 december 2005 and 
– the parent company ﬁnancial statements and the part of the directors’
remuneration report to be audited have been properly prepared in
accordance with the companies act 1985
ernst  y oung llp
registered auditor
london 
23 february 2006 96 spirent plc annual report 2005
2005 2004
at 31 december notes £ million £ million
fixed assets
tangible assets 4 159 158
fixed asset investments
shares in subsidiaries 5 2332 2633
loans to subsidiaries 6 1191 1753
investment in associate 7 01 01
total ﬁxed assets 3683 4545
current assets
stocks 8 93 86
trade and other debtors 9 219 253
derivative ﬁnancial instruments 16 26 –
cash at bank and in hand 264 289
602 628
current liabilities
creditors due within one year 10 234 197
derivative ﬁnancial instruments 16 06 –
loans due within one year 14 32 –
272 197
net current assets 330 431
assets less current liabilities 4013 4976
long term liabilities
creditors due after more than one year 11 2343 3093
derivative ﬁnancial instruments 16 20 –
provisions for liabilities and charges
deferred tax 12 08 –
provisions 13 17 20
assets less liabilities excluding pension liability 1625 1863
pension liability 3 515 270
assets less liabilities including pension liability 1110 1593
capital and reserves 17
called up share capital 322 319
share premium account 44 13
capital reserve 102 109
merger reserve – 12
net unrealised gains and losses 20 –
proﬁt and loss account 622 1140
shareholders’ funds – equity 1110 1593
the notes on pages 97 to 114 form part of these ﬁnancial statements
signed on behalf of the board
anders gustafsson
director
23 february 2006
company balance sheet spirent plc annual report 2005 97
1 signiﬁcant accounting policies
basis of accounting
the ﬁnancial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards
as the company is included in the consolidated ﬁnancial statements made up to 31 december each year it is not required to present a separate proﬁt
and loss account as provided by section 230 of the companies act 1985
changes in accounting policies
the accounting policies adopted are consistent with those of the previous ﬁnancial year except that the company has adopted the following standards
for which the principal effects of this decision are discussed below
financial reporting standard “frs” 20 ‘sharebased payment’
employees including directors of the company receive remuneration in the form of sharebased payment transactions whereby employees render
services in exchange for shares or rights over shares equitysettled transactions
the cost of equitysettled transactions with employees is measured by reference to the fair value at the date at which they are granted the fair value is
determined using a binomial model
the company has applied frs 20 from 1 january 2005 as allowed by the standard and only to equitysettled awards granted after 7 november 2002
which were unvested at 1 january 2005
frs 25 ‘financial instruments disclosure and presentation’ and frs 26 ‘financial instruments measurement’
from 1 january 2005 the company is required to adopt the provisions of the above standards
the company uses derivative ﬁnancial instruments to hedge its exposures to ﬂuctuations in interest and foreign exchange rates and ‘ﬁxed to ﬂoating’
interest rate swaps to hedge its ﬁxed interest rate borrowingsthe company’s policy is not to undertake any trading activity in ﬁnancial instruments from
1 january 2005 the company accounts for these instruments in accordance with frs 26 see below
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 over the lease period
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 on 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 useful life
operating lease rentals are charged to proﬁt and loss account over the period of the lease
inventories
inventories 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 ﬁrstinﬁrstout basis including all 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
notes to the parent company ﬁnancial statements 98 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
1 signiﬁcant accounting policies continued
trade and other debtors
trade debtors which generally have 30 to 90 day terms are recognised and carried at original invoice amount less an allowance for any uncollectible
amounts an estimate for doubtful debts is made when collection of the full amount is no longer probable bad debts are written off when identiﬁed
provisions
provisions are recorded when the company has a present legal or constructive obligation as a result of a past event which it is probable that it will be
required to settle by an outﬂow of resources and for which a reliable estimate of the amount of the obligation can be made provisions are reviewed at
each balance sheet date and adjusted to reﬂect the current best estimate
where the effect of the time value of money is material the amount of the provision shall be the present value of the expenditures expected to be
required to settle the obligation
revenue recognition
revenue is recognised when it is probable that the economic beneﬁts will ﬂow to the company the revenue can be reliably measured and when the company
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
foreign currencies
transactions in foreign currencies are recorded at the rate ruling at the date of transaction
monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at the balance sheet dateall exchange proﬁts and losses
are taken to the proﬁt and loss account
product development
expenditure is charged to the proﬁt and loss account in the year in which it is incurred
financial instruments
financial assets and liabilities are recognised on the company’s balance sheet when it becomes a party to the contractual provisions of the instrument
interestbearing loans and borrowings
loans and overdrafts are initially recognised at fair value of the consideration received net of issue costs issue costs are amortised over the expected life
of the instrument
after initial recognition interestbearing loans and borrowings are subsequently measured at amortised cost using the effective interest methodamortised
cost is calculated by taking into account any issue costs and any discount or premium on settlement
from 1 january 2005 hedge accounting is adopted where derivatives such as ‘ﬁxed to ﬂoating’ interest rate swaps are held as fair value hedges against
ﬁxed interest rate borrowings under fair value hedge accounting ﬁxed interest rate borrowings are revalued at each balance sheet date by the change in
the fair value attributable to the interest rate risk being hedged
equity instruments
equity instruments are recorded at the proceeds received net of direct issue costs
derivative ﬁnancial instruments
with effect from 1 january 2005 the company uses derivative ﬁnancial instruments to hedge its exposures to ﬂuctuations in interest and foreign exchange
rates the company’s policy is not to undertake any trading activity in ﬁnancial instruments such derivative ﬁnancial instruments are stated at fair value
with effect from 1 january 2005
from 1 january 2005 such derivative ﬁnancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into
and are subsequently remeasured at fair value derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative
for those derivatives designated as hedges and for which hedge accounting is desired the hedging relationship is documented at its inception this
documentation identiﬁes the hedging instrument the hedged item or transaction the nature of the risk being hedged and how effectiveness will be
measured throughout its duration such hedges are expected at inception to be highly effective spirent plc annual report 2005 99
forward exchange contracts are used to hedge foreign exchange exposures arising on forecast receipts and payments in foreign currencies the fair value
of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity proﬁles interest rate swaps
are used to hedge the company’s exposure to movements in interest rates the fair value of interest rate swaps is determined by reference to market rates
for similar instruments
for the purpose of hedge accounting hedges are classiﬁed as fair value hedges when they hedge the exposure to changes in the fair value of a recognised
asset or liability or cash ﬂow hedges where they hedge exposure to the variability in cash ﬂows that is due to the risk associated with a recognised asset
or liability or a forecast transaction
in relation to these fair value hedges interest rate swaps which meet the conditions for hedge accounting any gain or loss from remeasuring the hedging
instrument is recognised in the proﬁt and loss account and any gain or loss on the item that is being hedged is adjusted against its carrying amount and
recognised in the proﬁt and loss account
in relation to cash ﬂow hedges forward foreign exchange contracts to hedge ﬁrm commitments or highly probable forecast transactions and which meet
the conditions for hedge accounting the proportion of the gain or loss on the remeasurement of the fair value of the hedging instrument that is deemed
to be effective is recognised in equity and the ineffective portion is recognised in the proﬁt and loss account
when the ﬁrm commitment or highly probable forecast transaction results in the recognition of an asset or liability the associated gains and losses that
have previously been recognised in equity are included in the initial measurement of the carrying amount of the asset or liability at the time the asset or
liability is recognised
for derivatives that do not qualify for hedge accounting any gains or losses arising from changes in fair value are taken to the proﬁt and loss account
gains or losses arising on hedging instruments which are cancelled due to termination of the underlying exposure are taken to the proﬁt and loss account
immediately
derivatives embedded in other ﬁnancial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are
not closely related to those of the host contracts
policy prior to 1 january 2005
foreign exchange contracts
the rates under foreign currency contracts are used to record the hedged item and as such gains and losses 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
receipts and payments on interest rate swaps 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 company’s balance sheet
pensions
the company operates two deﬁned beneﬁt 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 measured using
the projected unit credit 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 recognised
gains and losses
contributions payable to the other deﬁned contribution schemes are charged to the proﬁt and loss account in the year for which they are due 100 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
1 signiﬁcant accounting policies continued
employee beneﬁts
when an employee has rendered service to the company during an accounting period short term beneﬁts expected to be paid in exchange for that service
are recognised in the same accounting period
sharebased payment
the cost of equitysettled transactions with employees is measured by reference to the fair value at the date at which they are granted the fair value is
determined using a binomial model
the cost of equitysettled transactions is recognised together with a corresponding increase in equity over the period in which the performance conditions
are fulﬁlled ending on the date on which the relevant employees become fully entitled to the award vesting date the cumulative expense recognised
for equitysettled transactions at each reporting date until the vesting date reﬂects the extent to which the vesting period has expired and the number
of awards that will ultimately vest in the opinion of the directors of the company at that date and based on the best available estimates
no expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon a market condition which are treated
as vesting irrespective of whether or not the market condition is satisﬁed provided that all other performance conditions are satisﬁed
where the terms of an equitysettled award are modiﬁed as a minimum an expense is recognised as if the terms had not been modiﬁed in addition
an expense is recognised for any increase in the value of the transaction as a result of the modiﬁcation as measured at the date of modiﬁcation
where an equitysettled award is cancelled it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award
is recognised immediately however if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is
granted the cancelled and new awards are treated as if they were a modiﬁcation of the original award as described in the previous paragraph
the company has an employee share trust for the granting of certain options to employees shares are held by the employee share trust treated as treasury
shares and presented in the balance sheet as a deduction from equity
tax
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 tax 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 belowamounts 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
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 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
2 employees
please refer to the report on directors’ remuneration on pages 20 to 26 for disclosures relating to the emoluments share options and long term incentive
interests and pensions of the directors spirent plc annual report 2005 101
3 pensions
deﬁned beneﬁt schemes
the deﬁned beneﬁt schemes are in the united kingdom and comprise the staff pension plan and the retirement cash plan these schemes have been
combined for the purposes of the following disclosures
the most recent actuarial valuation of the schemes’ assets and the present value of the deﬁned beneﬁt schemes’ obligations using the project unit credit
method at 1 april 2003 have been used and updated by our independent actuaries
i the key ﬁnancial assumptions used were
2005 2004 2003
 
inﬂation 29 29 28
rate of increase in pensionable salaries 36 36 35
rate of increase for pensions in payment pre 2001 service 35 30 30
rate of increase for pensions in payment post 2001 pre april 2005 service 28 27 27
rate of increase for pensions post april 2005 service 21 ––
rate of increase in deferred pensions 29 29 28
rate used to discount scheme liabilities 47 53 54
the expected long term rate of return on assets has been set reﬂecting the price inﬂation expectation the expected real return on each major asset class
and the long term asset allocation strategy adopted for the plans
the demographic assumptions are as follows
– for future pensioners that men and women aged 65 will live on average for a further 22 and 24 years respectively and
– for current pensioners that men and women aged 65 will live on average for a further 21 and 24 years respectively
ii the assets and the liabilities in the scheme were as follows
long term long term long term
rate of return rate of return rate of return
expected 2005 expected 2004 expected 2003
 £ million  £ million  £ million
equities 76 772 75 622 78 613
government bonds 41 221 45 119 48 153
corporate bonds 45 134 50 188 51 96
cash 48 21 50 26 43 45
property 66 55 65 46 68 18
other 52 85 56 68 56 63
fair value of scheme assets 64 1288 65 1069 68 988
present value of funded obligations 1796 1442 1422
net deﬁcit in the schemes 508 373 434
related deferred tax asset – 111 130
deﬁcit in schemes net of tax 508 262 304
present value of unfunded obligations 07 08 48
net pension liability 515 270 352
no deferred tax asset has been recognised in 2005 in respect of the net deﬁcit in the schemes the schemes are prohibited from investing in spirent’s own
ﬁnancial instruments 102 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
3 pensions continued
iii analysis of the amounts charged to the proﬁt and loss account
2005 2004
£ million £ million
analysis of amount charged to operating costs
current service cost 24 18
analysis of amount charged to ﬁnance costs
expected return on pension schemes’ assets 69 66
interest on pension schemes’ liabilities 76 73
finance costs 07 07
net proﬁt and loss charge 31 25
iv analysis of amount recognised directly in equity
actual return less expected return on pension schemes’ assets 146 36
experience gains arising on the schemes’ liabilities 48 24
changes in assumptions underlying the present value of the schemes’ liabilities 355 30
actuarial lossgain recognised directly in equity 161 30
v movement in deﬁcit in the year
deﬁcit in schemes at the beginning of year 373 434
current service cost 24 18
employer contributions paid 57 56
other ﬁnance expense 07 07
actuarial lossgain 161 30
net deﬁcit in the schemes at 31 december 508 373
vi history of experience gains and losses
2005 2004 2003 2002
£ million £ million £ million £ million
difference between the expected and actual return on the schemes’ assets
amount £ million 146 36 66 203
percentage of the schemes’ assets  113 34 67 228
experience gains and losses on scheme liabilities
amount £ million 48 24 68 09
percentage of the present value of the schemes’ liabilities  27 17 48 07
total amount recognised in the statement of recognised gains and losses
amount £ million 161 30 03 236
percentage of the present value of the schemes’ liabilities  90 21 02 180 spirent plc annual report 2005 103
the above schemes are funded and have full uk hm revenue  customs taxexempt approval by which beneﬁts are limited due to the statutory earnings
cap a hm revenue  customs limit on the amount of earnings that can be made pensionable under the schemes 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 onlythe company has contractually agreed to pay the additional retirement beneﬁts
itself and a provision is made in respect of this obligation in the balance sheet at 31 december 2005 of £07 million 2004 £08 million 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 £01 million 2004 £01 millionthe additional deathinservice beneﬁts over the statutory cap are separately insured by the company
under an unapproved scheme
the company made a special contribution of £470 million into the uk ﬁnal salary pension scheme in february 2006 see note 23
deﬁned contribution schemes
united kingdom
the company maintains deﬁned contribution pension schemes for employees in the uk these schemes are known as “cash builder” “pension builder”
and “executive section” employer contributions into these schemes for 2005 were £03 million 2004 £01 million
4 t angible assets
£ million
land and buildings fixtures
plant and ﬁttings and
freehold long lease short lease machinery equipment total
cost
at 1 january 2005 10 91 04 323 89 517
additions
owned assets 02 – – 26 04 32
disposals – – – 03 02 05
at 31 december 2005 12 91 04 346 91 544
depreciation and impairment
at 1 january 2005 05 21 02 258 73 359
provided during the year – 03 – 22 06 31
disposals – – – 03 02 05
at 31 december 2005 05 24 02 277 77 385
net book value at 31 december 2004 05 70 02 65 16 158
net book value at 31 december 2005 07 67 02 69 14 159 104 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
5 shares in subsidiaries
£ million
cost
at 1 january 2005 17174
additions 02
transfers to subsidiaries 8962
disposals 13
at 31 december 2005 8201
provisions
at 1 january 2005 14541
increases in provisions 290
transfers 8962
at 31 december 2005 5869
net book value at 31 december 2005 2332
6 loans to subsidiaries
£ million
at 1 january 2005 1753
advances 66
repayments 718
exchange adjustment 90
at 31 december 2005 1191
7 investments in associates
£ million
cost
at 1 january and 31 december 2005 01
the associated company as at 31 december 2005 and 31 december 2004 was
location  holding nature of business
tyton company of japan japan 49 cable management products
8 stocks
2005 2004
£ million £ million
raw materials 31 26
work in progress 07 07
finished goods 55 53
93 86 spirent plc annual report 2005 105
9 trade and other debtors
2005 2004
£ million £ million
due within one year
trade debtors 87 90
owed by subsidiaries 85 92
owed by associates 01 01
other debtors 19 20
tax recoverable 13 36
prepayments and accrued income 14 14
219 253
10 creditors due within one year
2005 2004
£ million £ million
trade creditors 90 89
owed to subsidiaries 15 20
other creditors 39 13
accruals and deferred income 78 64
other taxes and social security costs 12 11
234 197
11 creditors due after more than one year
2005 2004
£ million £ million
senior unsecured loan notes note 14 677 648
owed to subsidiaries 1664 2441
deferred income – 03
pension 02 01
2343 3093
12 deferred tax
£ million
at 1 january 2005 –
charge for the year 08
at 31 december 2005 08
2005 2004
£ million £ million
deferred tax provided
capital allowances in advance of the corresponding charges for depreciation 08 – 106 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
13 provisions
£ million
lease provisions
at 1 january 2005 20
utilised in the year 03
at 31 december 2005 17
provisions have been analysed as follows
current 03
noncurrent 14
17
these provisions are in respect of obligations for properties which have been vacated under operating leases
14 senior unsecured loan notes
2005 2004
£ million £ million
due within one year
senior unsecured loan notes 2006 32 –
due after more than one year note 11
senior unsecured loan notes 2006 – 28
senior unsecured loan notes 2009 677 620
677 648
709 648
at 31 december 2005 and 2004 the following loan notes were in issue
a 55 million bearing interest at 894 per cent 2004 919 per cent repayable on 23 november 2006
b 362 million bearing interest at 906 per cent 2004 931 per cent repayable on 23 november 2009
c 659 million bearing interest at 916 per cent 2004 941 per cent repayable on 23 november 2009 and
d 172 million bearing interest at 975 per cent 2004 1000 per cent repayable on 23 november 2009 an interest rate derivative was entered into
in 1999 to reduce the effective interest rate to 928 per cent 2004 953 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
the loan note agreement provides for half yearly covenant ratio testing the covenant ratios are as follows
a net interest cover – greater than or equal to 30 times
b net debt to earnings before interest tax depreciation and amortisation “ebitda” – less than or equal to 30 times and
c net worth – greater than £100 million
covenant ratios are calculated using uk gaap as applied at 31 december 2002 as the loan notes were repaid in february 2006 testing is not required
for 31 december 2005
if the company repaid at its option the total principal amount of the loan notes at 31 december 2005 then a make whole amount of 143 million
£83 million would become payable
on 15 february 2006 the loan notes were repaid out of the proceeds of sale of the hellermanntyton division a make whole amount of 139 million
£74 million was also paid see note 23 spirent plc annual report 2005 107
15 operating lease commitments
at the balance sheet date the company had annual commitments which expire as follows
2005 2004
£ million £ million
in the second to ﬁfth years 02 02
over ﬁve years 11 11
13 13
16 derivative ﬁnancial instruments
the company has taken advantage of the exemption under frs 25 ‘financial instruments disclosure and presentation’ for parent company ﬁnancial
statements the disclosures in respect of the company are included in the consolidated ﬁnancial statements
the fair value of derivative ﬁnancial instruments at 31 december 2005 is as follows
£ million
assets liabilities
interest rate swaps – 20
currency derivatives 26 06
26 26
expected to be recognised
in one year or less 26 06
more than one year – 20
26 26
interest rate swaps
fixed to ﬂoating interest rate swaps were entered into on 23 may 2003 on 721 million of the senior unsecured loan notes the swaps terminate on 
23 november 2009 and can be cancelled at the bank’s option at six monthly intervals the swaps have been transacted with two banks and are split 
480 million and 241 million between them the terms of the 480 million swap allow for either party to exercise a break on 23 november 2008
should a break take place a mark to market settlement is due at fair value
the interest rate swaps have been designated as hedges and following the adoption of ias 39 on 1 january 2005 are included in the balance sheet as
derivative ﬁnancial instruments noncurrent liabilities at fair value with movements in the fair value being reﬂected through the proﬁt and loss account
currency derivatives
the company uses forward foreign exchange contracts in the management of transactional exchange rate exposures these contracts are designated
where possible as hedging instruments
at 31 december 2005 the company held foreign exchange contracts designated as hedges in respect of the forward purchase of us dollars to establish
the sterling value of the anticipated repayment of senior unsecured loan notes associated with the disposal of the hellermanntyton division the terms
of this contract are as follows
maturity exchange rate
buy us dollars 140000000 26 january 2006 177028
at 31 december the company held foreign exchange contracts designated as hedges in respect of the forward purchase of yen to establish the sterling
value of the acquisition of the majority interest in the tyton company of japan associated with the disposal of the hellermanntyton division the terms
of this contract are as follows
maturity exchange rate
buy y en 5232360000 26 january 2006 20459
at 31 december the company held various foreign exchange contracts designated as hedges for various transactional exchange expenses 108 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
17 capital and reserves
£ million
called up share proﬁt
share premium capital merger net unrealised and loss
capital account reserve reserve gains and losses account
2
at 1 january 2005 as originally stated 319 13 109 12 – 1140
changes in accounting policy on adopting 
frs 26 ‘financial instruments measurement’ –––– 04 06
at 1 january 2005 as restated 319 13 109 12 04 1134
new shares issued 03 31 07 – – –
loss for the year
3
––––– 259
sharebased payment ––––– 07
actuarial loss recognised on the pension schemes ––––– 161
unrealised gains and losses –––– 16 –
deferred tax written off on pension schemes ––––– 111
transfer
4
– – – 12 – 12
at 31 december 2005 322 44 102 – 20 622
notes
1 the company has taken advantage of the exemption given in section 230 of the companies act 1985 not to publish its proﬁt and loss account
2 the company’s proﬁt and loss account of £622 million 2004 £1140 million includes nondistributable reserves of £511 million 2004 £511 million and a special nondistributable
reserve of £111 million 2004 £616 million
3 the loss for the year dealt with in the ﬁnancial statements of the company was £259 million 2004 £68 million
4 a transfer has been made between merger reserve and the proﬁt and loss account
deﬁned beneﬁt pension schemes
amounts included within reserves in respect of the deﬁned beneﬁt pension schemes are as follows
2005 2004
£ million £ million
proﬁt and loss account excluding pension fund deﬁcit 1130 1402
pension fund deﬁcit note 3 508 262
proﬁt and loss account including pension fund deﬁcit 622 1140
restatement on the adoption of frs 25 ‘financial instruments disclosure and presentation’ and frs 26 ‘financial instruments measurement’
under previous uk gaap gains and losses from derivative ﬁnancial instruments used for hedging purposes are not recognised in earnings or as adjustments
to carrying amounts until the underlying hedged transaction matures or occurs frs 26 requires all derivatives to be recognised at fair value on the 
balance sheet
following the adoption of frs 25 and frs 26 forward currency contracts with a positive fair value of £04 million and interest rate swaps with a negative
fair value of £10 million have been recognised on the company balance sheet at 1 january 2005
£ million
current assets – financial assets 04
long term liabilities – financial liabilities 10
long term borrowings 04
total change in equity 02 spirent plc annual report 2005 109
share capital
authorised issued and fully paid
2005 2004 2005 2004
£ million £ million £ million £ million
called up share capital – ordinary shares of 3
1
⁄ 3 pence each 417 417 322 319
changes during the year in the ordinary share capital were as follows
number of
ordinary shares
million
issued and fully paid at 1 january 2005 9562
allotted pursuant to share options and purchase rights exercised 96
issued and fully paid at 31 december 2005 9658
at the annual general meeting held on 4 may 2005 shareholders gave authority for the company to purchase up to 48 million of its own ordinary shares
in the market subject to certain speciﬁed conditionsat 23 february 2006 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 or existing shares being transferred from spirent sharesave trust “sst” as follows
number of consideration
ordinary shares received
million £000
executive share option schemes 21 3417
spirent stock incentive plan 42 8338
acquisition plans 06 1086
all employee share schemes 31 14989
100 27830
during the year 276196 shares were transferred from the sst there has been no material increase in the issued share capital whether by exercise of
options purchase rights or otherwise between the end of the year and 23 february 2006 the date on which these ﬁnancial statements have been signed
investment in own shares
at 31 december 2005 the spirent employee share ownership trust held 95 million ordinary shares 2004 103 million ordinary shares to satisfy awards
under various sharebased incentive schemes of this number 04 million ordinary shares were unconditionally vested at 31 december 2005 2004 06 million
ordinary shares at 31 december 2005 the sst held 32 million ordinary shares 2004 35 million ordinary shares to satisfy awards made to uk based
employees under an all employee share scheme the market value of own shares held in trust at 31 december 2005 was £62 millon 2004 £96 millon
employee share schemes
the company operates a number of employee option schemes as described below the following options and purchase rights over ordinary shares under
these schemes have been granted and remain outstanding 110 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
17 capital and reserves continued
a reconciliation of option movements over the year to 31 december 2005 is shown below
executive share 2005 employee
option schemes incentive plan uk sharesave schemes
weighted weighted weighted
number average number average number average
of shares exercise price of shares exercise price of shares exercise price
millions pence millions pence millions pence
options outstanding at 31 december 2004 162 90 – – 45 45
granted –– 31 41 ––
exercised 18 16 – – 03 41
forfeited 03 172 – – 02 41
expired 19 160 – – 05 68
options outstanding at 31 december 2005 122 88 31 41 35 42
options exercisable at 31 december 2005 15 143 – – 05 46
the following information relates to the outstanding share options at 31 december 2005
2005
weighted weighted
range of average average
exercise period as at exercise prices exercise price number remaining
share scheme notes 31 december 2005 pence pence million contractual life
executive share option schemes a 250306240313 16 16 32 72
031004040814 5672 60 48 84
290499010512 113152 131 32 50
110503080411 305334 316 10 49
employee incentive plan b 250808240815 053
1
41 31 80
sharesave schemes c 011205310511 3841 39 34 23
011206310507 93142 100 01 14
total 188
note
1 figures for the 2005 employee incentive plan include share options stock appreciation rights and performance shares in aggregate no exercise price is payable on the vesting of a
performance share
a 1995 executive share option scheme “esos”
the esos is now closed however outstanding options may still be exercised and has been replaced by the employee incentive plan referred to in b below
the hm revenue  customs “hmrc” approved esos incorporates the guidelines issued by the association of british insurers at that time it was
subsequently amended by the board to facilitate the award of unapproved share options both in the uk and overseas
awards under the esos normally determined annually were at the sole discretion of the remuneration committee after considering recommendations
made to it by the chief executive no price was payable on the grant of an option and no options have been or could 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 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 adjusted eps which is at least 6 per cent more than the increase
in the retail price index over the same period the performance condition is tested on the third anniversary of grant and if it has not been met at that
time at each subsequent anniversary of grant until the option expires ie on the tenth anniversary of grant in normal circumstances spirent plc annual report 2005 111
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 adjusted 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 ten 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 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
b 2005 employee incentive plan “eip”
on 4 may 2005 spirent shareholders approved the eip to replace the now closed esos scheme the eip is currently available for selected employees
including executive directors on a similar discretionary basis as the esos and any awards will be subject to prior satisfactory individual performance no
price is payable on the grant of an award and no award has been granted at a discount to the market price the company is able to grant share options
including hmrc approved options share settled stock appreciation rights “sars” and performance shares under the eip
in normal circumstances options or sars under the eip will vest three years following grant provided the company’s eps growth targets after excluding
inﬂation have been met over a three year performance period the growth targets in respect of the initial award require that the company’s eps increases
within a range of 6 per cent per annum for 25 per cent vesting and 15 per cent per annum for 100 per cent vesting over the performance period with
a sliding scale between these points
in normal circumstances performance shares under the eip will vest three years following grant provided the company’s total shareholder return “tsr”
targets have been met over a three year performance periodthe performance conditions require spirent’s tsr to be between the median of a comparator
group for 30 per cent vesting and the upper quartile of a comparator group for 100 per cent vesting over the performance period with a sliding scale
between these points the comparator group consists of the 30 largest companies by market capitalisation in the ftse techmark 100 index excluding
those techmark companies who are also constituents of the ftse100 index at the commencement of the performance period
all eip awards will be tested once on or shortly following the third anniversary of grant any part of an award which does not vest shall lapse ie there is
no opportunity for retesting
sars granted under the eip will deliver the appreciation value ie the aggregated increase in market value of an ordinary share over the base price of the
sar in the form of new issue ordinary shares this sars approach will help the company manage its dilution headroom more efﬁciently as only the sar
gain and not the entire share value needs to be funded using a sars based approach it is not possible to determine the precise level of dilution until the
sars are exercised
options and sars granted under the eip expire on the tenth anniversary of their grant unless they have previously lapsed
c uk savings related share option scheme “srsos” and 2005 sharesave scheme
the srsos closed in 2005 and was replaced by the 2005 sharesave scheme srsos options which remain outstanding may still be exercised prior to
expiry however no further grants can be made both schemes operate as hmrc approved saveasyou earn schemes and are open to all uk employees
subject to a qualifying service period any future sharesave invitations will be made under the 2005 sharesave scheme which is broadly similar to the
srsos
the employee enters into a saveasyouearn 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 operates the sst to honour the contractual commitment to deliver ordinary shares against the valid exercise of outstanding options under
the srsos and the sst a whollyowned subsidiary of spirent plc acts as sole trustee during the year 276196 shares were transferred to participants
sst has waived all rights to receive dividends payable on its registered shareholding except for 001 pence per annum in aggregate and accordingly such
shareholding is not included in the company’s eps calculation as referred to in note 13 to the consolidated ﬁnancial statements 112 spirent plc annual report 2005
notes to the parent company ﬁnancial statements continued
18 sharebased payment
the total charge for the year relating to employee sharebased payment plans was £07 million all of which related to equitysettled sharebased payment
transactionsthe company has applied frs 20 from 1 january 2005 as allowed by the standard and only to equitysettled awards granted after 7 november
2002 which were unvested at 1 january 2005 the charge relates to the following schemes
2005
£ million
1995 executive share option scheme 04
2005 employee incentive plan 02
all employee share plans 01
total 07
the fair value of the options and purchase rights over ordinary shares is estimated as at the date of grant using a binomial model the following table
gives the assumptions made in arriving at the sharebased payments charge
2005
weighted average share price pence 53
weighted average fair value pence 24
expected volatility  50
expected life years 45
risk free rate  42
dividend yield  nil
the expected volatility was determined by calculating the historical volatility of the company’s share price over the previous two years which management
considers to be the period which is likely to be most representative of future volatility the expected life used in the model has been adjusted based on
management’s best estimate for the effects of nontransferability exercise restrictions and behavioural considerations for performance shares granted
under the 2005 employee incentive plan which have a market based performance condition it has been assumed that there will be 50 per cent vesting
for valuation purposes
19 related party transactions
the company has taken advantage of the exemption under frs 8 ‘related party disclosures’ and as such disclosures are provided in the consolidated ﬁnancial
statements
20 subsidiaries
a list of the signiﬁcant investments in subsidiaries including the name country of incorporation and proportion of ownership interest is given on page
114 of this annual report spirent plc annual report 2005 113
21 capital commitments and contingent liabilities
2005 2004
£ million £ million
capital expenditure commitments 
contracted but not provided 01 01
contingent liabilities 
bank guarantees 15 16
spirent plc has provided indemnities of £10 million 2004 £05 million for certain ongoing business obligations under letters of credit for subsidiary
companies
22 directors emoluments and transactions with directors
please refer to the report on directors’ remuneration on pages 20 to 26 for disclosures relating to the remuneration share options and long term incentives
and pensions of the directors
23 post balance sheet events
on 23 january 2006 spirent announced that it had entered into an agreement to acquire swissqual holding ag “swissqual” for an initial consideration
of chf 625 million £277 million the initial consideration was paid in cash on completion on 23 january 2006 out of cash resources and utilisation of
a new bank facility that was set up speciﬁcally for the purpose a further chf 280 million £124 million is payable in 2007 depending on revenue growth
and various technical milestones
we also announced on 13 february 2006 the acquisition of quadtex systems inc for 75 million £42 million payable in cash on completion with a
further 15 million £09 million payable depending on certain technical milestones and the retention of key employees
the directors consider it impractical to provide further disclosures in relation to these acquisitions given their proximity to the date of the annual report
the disposal of the hellermanntyton division was completed on 15 february 2006 when proceeds of £2889 million for a cash freedebt free equivalent
value were received these proceeds have been applied as follows
• repayment of the senior loan notes of 1248 million £715 million
• payment of the make whole amount an amount which becomes payable on the early redemption of the senior loan notes of 129 million 
£74 million
• break fees of £23 million in respect of interest rate swaps taken out in connection with the senior loan notes
• special contribution of £470 million to the uk ﬁnal salary pension scheme
• repayment and cancellation of the bank facility in connection with the acquisition of swissqual
taking these transactions into account the pro forma cash balance is approximately £150 million of this up to £50 million has been earmarked to fund
the onmarket share repurchase programme the programme is expected to begin in the second quarter following the completion of certain actions
establishing distributable reserves in the parent company clearance from the pension regulator and the approval from shareholders to make onmarket
share repurchases of up to 1499 per cent of the company’s issued share capital
following the disposal of the hellermanntyton division the company issued notices of cancellation in respect of all its borrowing facilities 114 spirent plc annual report 2005
 held at
31 december 2005
communications
communications performance analysis and service assurance systems
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
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
spirent communications india pvt limited 100
bangalore india
spirent communications asia limited 100
hong kong
spirent communications technology beijing limited 100
beijing prc
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
 held at
31 december 2005
network products

electrical and data network cable management and connectivity products
and systems
trading divisions of spirent plc
hellermanntyton 100
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
the above companies operate and are incorporated in the countries listedall shareholdings
in the companies are held indirectly by spirent plc except where indicated by an asterisk
 where the shareholding is held directly by spirent plcthe activity mentioned is indicative
and not comprehensive
the percentage held reﬂects the proportion of shares controlled and not the beneﬁcial interest
‡associate
on 15 february 2006 spirent plc disposed of the hellermanntyton division which included
all the companies and divisions listed in this section
principal divisions subsidiaries and associates spirent plc annual report 2005 115
£ million
2005 2004 2003 2002
†
2001
†
ifrs ifrs ifrs uk gaap uk gaap
consolidated income statement
continuing operations
revenue 2593 2872 2918 3942 5546
operating lossproﬁt 390 152 113 9591 7517
add back
material onetime items 84 29 75 383 320
goodwill impairment 370 – – 9016 7246
goodwill amortisation – – – 546 839
sharebased payment 51 48 09 05 –
operating proﬁt before material onetime items goodwill 
impairment and amortisation and sharebased payment 115 229 197 359 888
joint venture’s lossproﬁt – 07 14 74 96
share of loss of associate – – – 10 02
proﬁtloss on disposal of operations 39 40 86 484 28
lossproﬁt before interest 351 185 213 10011 7451
net ﬁnance expense 66 68 98 118 212
costs associated with the part prepayment of loan notes – 05 161 – –
lossproﬁt before tax 417 112 46 10129 7663
tax 40 20 42 240 268
lossproﬁt from continuing operations after tax 377 92 04 10369 7931
discontinued operations 132 173 142 134 293
lossproﬁt for the year 245 265 138 10503 7638
minority interest 04 03 02 04 02
lossproﬁt attributable to equity holders of parent 249 262 136 10507 7640
consolidated balance sheet
goodwill 715 1065 1109 1136 9877
property plant and equipment 301 863 902 1100 1376
investments – 143 134 634 626
working capital excluding cash overdrafts and deferred tax 33 230 273 466 327
operating assets 983 2301 2418 3336 12206
net assets classiﬁed as held for sale 1154 ––––
derivative ﬁnancial instruments net 01 ––––
net borrowings 259 264 575 1618 1791
provisions and other liabilities 142 138 179 284 15
deferred tax 02 86 101 – 258
deﬁned beneﬁt pension plan deﬁcit 515 381 482 462 156
net assets 1222 1604 1283 972 10502
equity holders of parent 1203 1591 1261 951 10478
minority interests 19 13 22 21 24
total equity 1222 1604 1283 972 10502
† 2001 and 2002 have been restated to present the hellermanntyton division and in 2001 the sensing solutions group as discontinued operations
financial history 116 spirent plc annual report 2005
financial history continued
£ million
2005 2004 2003 2002 2001
ifrs ifrs ifrs uk gaap uk gaap
investment
capital expenditure – owned assets 305 253 167 276 594
– leased assets 25 03 03 02 08
depreciation 226 254 293 336 372
product development 628 673 660 777 959
share information
basic lossearnings per share pence 262 279 146 11390 8349
basic lossearnings per share from continuing operations pence 397 098 004 11240 8667
adjusted earnings per share pence 230 314 236 341 770
adjusted earnings per share from continuing operations pence 032 129 084 207 445
diluted lossearnings per share pence 262 274 144 11390 8349
diluted lossearnings per share from continuing operations pence 397 096 004 11240 8667
fully paid ordinary shares in issue at year end million 9658 9562 9440 9394 9332
segmental analysis
business segments
revenue
performance analysis 1788 1768 1487 1840 2414
service assurance 428 747 917 1314 1892
communications 2216 2515 2404 3154 4306
systems 377 313 379 343 291
ongoing operations 2593 2828 2783 3497 4597
other disposals
2
– 44 135 445 949
continuing operations 2593 2872 2918 3942 5546
network products 2055 1878 1744 1647 1704
sensing solutions – – – – 768
4648 4750 4662 5589 8018
operating proﬁt
1
performance analysis 220 217 52 105 386
service assurance 96 25 134 208 448
communications 124 242 186 313 834
systems 44 34 68 38 42
nonsegmental 53 53 51 – –
ongoing operations 115 223 203 351 876
other disposals
2
– 06 06 08 12
continuing operations 115 229 197 359 888
network products 253 213 169 150 149
sensing solutions – ––– 81
368 442 366 509 1118 spirent plc annual report 2005 117
£ million
2005 2004 2003 2002 2001
ifrs ifrs ifrs uk gaap uk gaap
geographical segments
revenue
europe 612 590 494 398 384
north america 1809 2062 2191 3004 4210
asia paciﬁc rest of americas africa 172 176 98 95 03
ongoing operations 2593 2828 2783 3497 4597
other disposals
2
– 44 135 445 949
continuing operations 2593 2872 2918 3942 5546
network products 2055 1878 1744 1647 1704
sensing solutions – – – – 768
4648 4750 4662 5589 8018
rates against sterling
average exchange rates for major currencies
us dollar 182 183 164 151 144
euro 146 147 145 159 161
number
average employment by geographical area
europe 1771 1742 1722 1909 2730
north america 1813 1988 2071 2622 3608
asia paciﬁc rest of americas africa 794 791 705 648 1474
4378 4521 4498 5179 7812
notes
1 before goodwill amortisation and impairment material onetime items and sharebased payment
2 other disposals includes other less signiﬁcant disposals and closures which do not qualify as discontinued operations 118 spirent plc annual report 2005
shareholder analysis
at 23 february 2006 the number of registered shareholders was 6335 and
the number of ordinary shares in issue was 9664 million
percentage number percentage
number of total of shares of share
of holdings shareholders million capital
range of holdings
15000 4375 6906 67 069
500110000 769 1214 58 060
1000150000 774 1222 163 169
50001100000 96 152 68 070
100001250000 81 128 136 141
250001500000 68 107 251 260
5000011000000 45 071 321 332
1000001highest 127 200 8600 8899
total 6335 10000 9664 10000
held by
individuals 5009 7907 297 307
institutions 1326 2093 9367 9693
total 6335 10000 9664 10000
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 wwwshareviewcouk 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 authorised
and 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 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
830am and 430pm monday to friday and for internet services visit
wwwshareviewcoukdealing
a postal dealing service for buying and selling ordinary shares is also
available and a dealing form can be obtained by calling 0870 606 0302
share price information
the spirent share price is available via the company’s website
wwwspirentcom 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
97233 pence per share
american depositary receipts – 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 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 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
wwwnysecom
spirent website at wwwspirentcom
the spirent website provides further information about spirent and its
operating groups and also provides access to annual and interim reports
company news and share price information
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
united kingdom or call 44 020 7291 3310 for an application form or visit
wwwmpsonlineorguk
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
wwwsharegiftorg or telephone 44 020 7337 0501
annual general meeting
the company’s annual general meeting will be held at 1030am on
wednesday 3 may 2006 at the copthorne hotel london gatwick
copthorne way copthorne crawley west sussex rh10 3pg united
kingdom shareholders who are not attending the agm may appoint a
proxy and vote their shares electronically by using wwwsharevotecouk or
crest and following the instructions on the enclosed form of proxy
advisers
auditor
ernst  young llp
brokers
jpmorgan cazenove limited
citigroup
financial adviser
n m rothschild  sons limited
contact details appear on page 120
shareholder information spirent plc annual report 2005 119
3g third generation future generation of mobile communications following ﬁrst generation analogue and second digital
10 gig e 10gigabit ethernet networking technology enabling ethernet data to be transported at 10 gigabits per second
access the connection between the local exchange and the homeofﬁce etc also referred to as the access network or the
local loop
atm asynchronous highspeed transmission technology used for transporting multiple simultaneous services voice data and 
transfer mode multimedia applications with high quality of service levels
broadband generic term for devices with a bandwidth greater than one megabit per second
cdma code division technology allowing communications circuits to carry multiple conversations simultaneously thus increasing 
multiple access its capacity
dsl digital subscriber line technology that uses existing telephonecopper lines to transport highbandwidth data such as multimedia and video
to service subscribers
ethernet a family of networking technologies developed for local area networks and now migrating to metro area networks
gig e gigabit ethernet transmission protocol over a local area network that operates at a speed of 10 billion bits gigabit per second
gps global positioning system a system for determining location and height at any point on the earth’s surface a receiver uses minute differences
in measured time signals from clocks on satellites to calculate these positions and altitudes
hsdpa highspeed downlink an evolution of wcdma
packet access 
internet protocol multimedia a standardised nextgeneration architecture for telecoms operators who want to provide mobile and ﬁxed multimedia 
subsystem ims services
internet telephony generic term used to describe various approaches to running voice telephony over ip internet protocol
ip internet protocol data protocol used by many networking devices to facilitate and control the ﬂow of data
metro a metropolitan city area generally excludes suburban zones but can include university campuses
triple play voice video and data transmitted over a single transport medium
voip voice over ip the technology that makes it possible to have a telephone conversation where the signal is carried over the 
internet or a dedicated network in internet protocol ip packets instead of over dedicated voice transmission lines
wcdma wideband cdma a global standard for mobile 3g
glossary 120 spirent plc annual report 2005
head ofﬁce and registered ofﬁce
spirent plc
spirent house
crawley business quarter
fleming way
crawley
west sussex rh10 9ql
united kingdom
tel 44 01293 767676
fax 44 01293 767677
email plcspirentcom
website wwwspirentcom
spirent plc
registered in england no 470893
auditor
ernst  young llp
1 more london place
london se1 2af
united kingdom
tel 44 020 7951 2000
website wwweycom
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 wwwshareviewcouk
adr depositary
the bank of new york
investor relations
po box 11258
church street station
new y ork
ny 102861258
usa
tel 1 888 bny adrs toll free – us
tel 1 610 382 7836 outside us
email shareownersbankofnycom
website wwwadrbnycom
contact details cautionary statement regarding forwardlooking statements
this annual report may contain forwardlooking 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 eventsyou 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 forwardlooking 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 forwardlooking
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 nextgeneration
technology and deploy advanced ipbased 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 achieve the beneﬁts of our cost
reduction goals 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 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 forwardlooking statements contained in this annual report whether as a result
of new information future events or otherwise 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 london 44 020 7467 9300
front cover photography by jean paul froget
printed by royle corporate print
the paper used in this report is elemental chlorinefree
wwwspirentcom


Summary:
 4 spirent plc annual report 2005
chief executive’s overview
introduction and strategy
since joining spirent as chief executive i have set out to transform
the group into a focused communications company during 2005
we have been busy reshaping and restructuring the business
culminating in the disposal of hellermanntyton as well as starting
in 2006 to make selective acquisitions
the decision to focus on communications reﬂects our view that
the sector offers spirent the best top and bottom line growth
opportunities in the mid and long term leveraging our leading
market positions in our key product segments
we are therefore continuing to invest in organic growth
opportunities through research and development and sales and
marketing activities and the launch of new products such as the
spirent testcenter™
we will also continue to make selective acquisitions these
acquisitions will be a good strategic ﬁt with our existing activities
as well as expanding our customer base broadening our
geographic coverage or enabling entry into new markets the
principal strategic drivers for acquisition are to expand our market
position and our competitive offering into markets where we
see strong growth opportunitiesthis will ensure that we remain
a core supplier to our customers whilst at the same time
accelerating our development plans to keep ahead of competition
we will shortly establish our operational headquarters in sunnyvale
california in the centre of silicon valley where we have the
highest concentration of customers i will relocate in the spring
but we will maintain a small corporate headquarters in the uk
results overview
the group’s 2005 results were principally affected by the
operating losses incurred by the service assurance division
which were described in detail at the time of the interim results
in august 2005 these losses were substantially reduced in the
second half as a result of the actions we took in the ﬁrst half
material onetime items of £84 million have been expensed in
the year of this £39 million is in relation to restructuring
actions in the service assurance division and £14 million for
inventory writedowns again in this division other material one
time items of £31 million have been taken in relation to supply
chain initiatives and other restructuring actions within the
group this was reported in our interim results
in the first half we took a goodwill impairment charge of 
£370 million due to the drop in activity in the service assurance
division
performance analysis
revenue and operating proﬁt in the performance analysis division
for 2005 were slightly up on 2004 in this division several of our
end markets were weaker than had been anticipated earlier in
the year particularly so in the third quarter although activity in
the fourth quarter did recover somewhat in addition we are in
a product transition phase as we progressively introduce new and
improved products and solutions encouragingly sales to some
of our largest customers in the equipment manufacturing sector
grew by more than 30 per cent and the division’s wireless and
position location test activities experienced their best year ever
service assurance
revenue in the service assurance division was down 43 per cent
compared with 2004 and as a result the division reported an
operating loss of £96 million of which £90 million was incurred
in the ﬁrst half in the ﬁrst quarter of 2005 our major customers
the us service providers had delayed the release of their full
since joining spirent as chief executive i have set out to transform the group
into a focused communications company during 2005 we have been busy
reshaping and restructuring the business culminating in the disposal of
hellermanntyton as well as starting in 2006 to make selective acquisitions
anders gustafsson
chief executive capital spending budgets partly due to merger activity with a larger
proportion of these budgets shifting towards nextgeneration
rather than existing networksas these trends became apparent
we undertook signiﬁcant restructuring actions in the division
including changing senior management reducing headcount by
around 260 approximately 40 per cent of the total workforce
which resulted in a much reduced loss for the second half of
£06 million during 2005 we have refocused our product
development efforts to generate new solutions for triple play
and advanced business services this will continue through 2006
systems
our systems group grew revenue and operating profit by 
20 per cent and 29 per cent respectively beneﬁting from the
launch of two new wheelchair control systems
acquisitions in 2006
on 23 january 2006 we announced the acquisition of 
swissqual holding ag “swissqual” for an initial consideration
of £277 million paid in cash with up to a further £124 million
payable depending on revenue growth and various technical and
ﬁnancial milestones swissqual provides world class products
and talent in the development of voice and video solutions that
analyse recognise and improve the quality of experience for
users of wireless applications and services
we also announced on 13 february 2006 the acquisition of
quadtex systems inc “quadtex” for an initial consideration of
£42 million with a further consideration of up to £09 million
quadtex is a fast growing us based provider of innovative and
leading test tools for internet protocol multimedia subsystems
“ims” and voice over ip “voip” testing
swissqual and quadtex will enhance spirent’s product offerings
capabilities and customer base in the wireless triple play voice
video data and ims markets
outlook
the disposal of the hellermanntyton division has transformed
spirent into a focused communications company as well as
having signiﬁcantly improved our ﬁnancial position spirent is well
placed to grow organically from its established marketleading
positionswe also have the potential to expand through selective
acquisitions such as swissqual and quadtex announced in 2006
the variable market conditions seen in 2005 have continued
through the beginning of the ﬁrst quarter which is usually our
quietestas 2006 progresses the year will be a period of product
transition as the increased capability of our new products and
solutions will enable us to gain market share as a result we
anticipate that the group’s performance for 2006 will show
recovery over last year with a more pronounced seasonal increase
in activity in the second half
spirent plc annual report 2005 5
operating profitloss and return on sales are used by the group as key measures of
operating performance and are stated in the text before the effect of material onetime
items goodwill impairment and sharebased payment so that periodonperiod comparisons
are not distorted
the hellermanntyton division for the purposes of these results has been presented as a
discontinued operation and our financial results are presented and discussed for the
continuing spirent group unless otherwise stated