Filtronic pins hopes on 4G growth

The Leeds-based group said the roll-out of 4G is still in its early stages, with only 19 per cent of American handsets equipped to receive 4G signals.

In Europe, the penetration is much lower, at between three and five per cent.

But there is massive growth for Filtronic to go for with US take-up of 4G expected to reach 85 per cent by 2019 and European uptake to reach 55 per cent by 2019.

Filtronic’s wireless division helps mobile phone operators upgrade base stations to handle more data.

The firm’s technology allows operators to use their existing network infrastructure to overlay third-generation (3G) and fourth-generation (4G) services.

Filtronic’s chief executive Alan Needle said the US is leading the uptake of 4G, partly because 3G was so poor in the US compared with Europe where customers have received a much better service.

However, so many customers are demanding internet services through their mobiles that the 3G network is close to capacity.

“Europe is finding it can’t cope with 3G networks,” said Mr Needle.

“To get a satisfactory experience using 4G apps, there needs to be significantly more speed in Europe.”

In the six months to November 30, Filtronic said wireless sales rose 39 per cent to £16.5m.

This was offset by a disappointing first half at the group’s other division, broadband, which is switching from legacy products to new areas such as E Band, which provides very high data transfer speeds (up to 3 Gbps), high transfer distance and reliability.

As consumers use more data-intensive applications such as video streaming on their mobile phones, operators will be forced to find more bandwidth for the backhaul infrastructure of their networks.

Analysts believe the effectiveness and low-cost of e-band radio will make it a strong new player in this backhaul market.

“The take up of e-band has been slower than we were hoping, but it is beginning now,” said Mr Needle.

“We’re confident that e-band will pick up in popularity.”

The broadband division reported a 20 per cent fall in half year sales to £3.6m.

The group said a reduction in headcount in the broadband business in June, which involved the loss of 16 jobs to bring the workforce down to 84, reduced fixed costs.

No more redundancies are envisaged.

Overall group revenues rose 23 per cent to £20.1m.

While the wireless business made an operating profit of £3.2m, the broadband division made a loss of £1.1m. Once central costs of £400,000 were taken into account, the group made an operating profit of £1.7m.

At the pre-tax stage, it made a profit of £93,000, up from a £1.2m loss last year.

Analyst Adam Lawson, at Panmure, said: “Interim results reveal a strong half from wireless... but a disappointing performance from broadband.

“This translates into reduced revenue and profit expectations for 2014. However, we expect ongoing infrastructure investment, demand for new antenna and broadband products and an improving revenue mix to deliver enhanced revenue and profit expectations in 2015, offsetting some adverse currency impact from strengthening sterling.

“We believe management is making all the right decisions in terms of product investment and remain convinced that this, combined with an unchanged operator investment environment, will ultimately drive premium revenue and profit growth over the medium and long term.”

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