Filtronic looking for connection when mobile market picks up

The firm, which has cash to spend, was left with its present point-to-point radio operations when it sold most of its wireless infrastructure business to US firm Powerwave Technologies in 2006.

But Filtronic now plans to buy its way back into the base station market and is looking to buy a business which makes microwave modules and filters.

Filtronic, which was founded in 1977 by University of Leeds professor David Rhodes in his garage, also revealed it has moved its headquarters from Shipley to Newton Aycliffe in County Durham. It retains a manufacturing site in Shipley.

The company yesterday reported on a tough half year which saw mobile phone operators stifle spending, almost halving sales for the six months to the end of November and driving profits down to about breakeven point. But the firm, which has downsized significantly in recent years, said it is now in the ascendancy again, announcing a major new contract starting in June.

"Whilst the market is in a trough, we are winning market share," said chief executive Hemant Mardia. "Next financial year for us is realistic (to talk about recovery). We have weathered the storm. We've got the growth opportunities and new products and new customers."

Filtronic said revenues for the period fell to 9.6m from 18.3m a year earlier. Pre-tax profits were 92,000 compared with 2.4m a year earlier.

Since the end of 2008, demand for Filtronic's point-to-point technology, which links mobile phone base stations, slumped as customers worked through existing inventories of stock to conserve cash.

In developing countries, tough credit conditions meant mobile phone projects were held back. Delays in awarding new licences in countries such as India also restrained spending. In developed countries, operators focused on technology such as smart phones and net books, but this led to a "temporary hiatus" in infrastructure spending.

But Filtronic believes all of this points to significant pent-up demand. Mobile phone users globally are forecast to leap from 4.5 billion to seven billion over the next three years, which will mean huge pressure on the backhaul networks which link users.

"Operators are being very careful with the amount of capital expenditure and they are now facing some choices about next generation equipment," said Dr Mardia. "The underlying drivers are really favourable. Growth in data traffic literally is exponential."

While subdued conditions are expected to continue for the rest of its financial year, which ends in May, it then expects conditions to improve.

The new contract to supply modules to an unnamed original equipment manufacturer (OEM) will kick in from June and is expected to be a five-to-seven-year deal. In addition, Filtronic hopes to buy a bolt-on company over the next year to give it access to base station technology, complementing its radio technology.

The group had cash of 16.3m at the end of November, which it will use on the acquisition.

"We have the knowledge and understanding of this market and this industry," said Dr Mardia. "The key thing we are looking for is the product. It's a significant market space. I want to keep focused on the wireless infrastructure sector."

Analysts said the results were in line with their expectations, and expect growth to follow.

1.25m grant to fund research and development

Filtronic has won a 1.25m grant from Yorkshire Forward to fund its research and development.

The regional development agency awarded the grant to Filtronic to invest in developing a Gigabit radio.

The technology, which Filtronic will spend two years developing, is designed to transmit five to 10 times more data than existing radios. It will be developed to launch into the market once 4G high speed data is rolled out by mobile phone operators. The successor to 3G and 2G standards, it will allow mobile phone users to stream high speed, high data services on their mobile phones.

This could mean people are able to access data on mobile phones at comparable speeds to home broadband.

The work will be done at Filtronic's site in Shipley.

"It's about securing the position of key companies like ourselves in the area," said chief executive Hemant Mardia.

"They saw that we have a very strong exploitation route," he added.