The Saltaire-based business, which makes technology to link and upgrade mobile phone base stations, said operating profit before exceptional items was £2.1m for the year to the end of May, compared with £2.5m in the previous year.

Filtronic, which has downsized significantly in recent years to concentrate on its core point-to-point business, said overall revenue from continuing operations fell 28 per cent to £28.8m.

The company suffered from a drop-off in orders as customers worked through existing inventories of stock to conserve cash. A key customer who saw a significant drop in Asian sales, as mobile phone operators cut back on capital-intensive projects, bled through to Filtronic.

Shares yesterday closed down 3.5p at 33p.

"We are being cautious," said chief executive Dr Hemant Mardia. "We have planned pretty conservatively. Visibility from all our original equipment manufacturers is fairly low so it's really hard to predict (an upturn).

"As we are investing in new products we do see new additional revenues over the next financial year."

The company said its focus is increasingly profitable as margins moved up to seven per cent from six per cent a year ago.

Filtronic says it is building for the future as it prepares for an "explosion" in demand for upgrades of overstretched mobile networks.

It is investing in research and development (R&D) over this financial year, "responding to the market need for much higher capacity".

Dr Mardia said over the next few years mobile traffic is expected to increase massively, driven by high-tech devices such as Apple's iphone and mobile phone internet 'dongles', meaning huge pressure on backhaul.

R&D will also focus on expanding into the aerospace sector, and yesterday said defence giant Selex has placed its first order for microwave modules for aircraft radar as part of a long-term agreement announced earlier this year.

The company closed the year with net cash of £16.2m, which Dr Mardia said may be used for "opportunistic" bolt-on acquisitions.