Filtronic boosted by mobile upgrade demand

Shipley-based Filtronic said it ended its June to May financial year strongly, and momentum has continued.

The company, which makes technology to link mobile phone base stations, plus overhaul mobile infrastructure, said trading in April and May was better than expected in its broadband business.

Its Isotek wireless arm, bought in 2010 for £10.7m in cash and shares, finished the year strongly with sales on several programmes for the United States market “gathering momentum”.

Filtronic expects annual sales in both its broadband and wireless divisions to have reached £13m – giving revenues of £26m compared with £15.5m a year earlier. Both divisions were also profitable, compared with last year’s £7m loss.

“It’s a great set of results across the board,” said chief executive Hemant Mardia. “It’s a great vindication of the strategy I put into place three to four years ago. We are growing significantly.”

Shares in Filtronic closed up 3p at 29p.

Filtronic was hammered in 2010/11 by falling sales in its broadband business as one of its customers was bought out by a rival. At the time it also reported slower-than-expected revenue growth in its Isotek business.

But yesterday the firm said orders are growing as the demands of data-hungry mobile devices such as smartphones and tablet PCs heap pressure on congested mobile networks.

Filtronic’s wireless arm helps mobile phone operators upgrade base stations but allows them to use existing infrastructure and delay when they have to put in completely new kit. The division targets a $500m market.

“The significant growth is in wireless as we expected,” said Dr Mardia.

“It’s grown from £3.4m to £13m. We’ve taken a technology business and scaled it into a commercial business with significant traction. That growth is set to continue.

“It (Isotek) looked early stage but I knew it had the technology and products that would fit mobile broadband extremely well.

“We’re at the beginning of the roll-out cycle for infrastructure upgrades.”

The US is already upgrading third generation (3G) networks to 4G, creating a high-capacity mobile broadband network capable of handling video streaming, gaming and TV over mobile devices. Britain is expected to roll out 4G within a couple of years.

About 30 of Filtronic’s workforce of more than 160 staff are based in the US, where it covers sales and engineering. It already works with two of the major technology firms upgrading networks – Alcatel-Lucent and Ericsson.

“The US has led the way because of Apple and the iPhone and iPad,” said Dr Mardia. “We’re very strongly positioned in the US.

“It continues to be an exponential increase in traffic. As the power of smartphones is increasing, more and more video is going to come down.

“If operators don’t upgrade networks they will lose subscribers.”

Filtronic said its wireless arm has better-than-normal visibility for its filter products. Its broadband division has “encouraging” first-half orders.

Analysts at Daniel Stewart and Panmure Gordon hiked forecasts.

“This great end is really a great start,” said George O’Connor at house broker Panmure.

From birth in a garage

Filtronic traces its roots to 1977 when it was founded by University of Leeds Professor David Rhodes in his garage.

It grew into a world leader in microwave electronic components, with operations in four continents.

However, Filtronic downsized in recent years, selling the bulk of the wireless infrastructure business in 2006 to Powerwave Technologies for £184m.

Land and buildings in Saltaire were also sold, and in 2008 the compound semi-conductors arm was disposed of for £12.5m. In late 2008 Filtronic sold its defence electronics business for £13m.

Filtronic resumed growth in 2010 with the £10.7m cash and shares acquisition of Leeds wireless firm Isotek.