Filtronic returns to profit

Filtronic's CEO Rob Smith said the firm delivered significant volumes of integrated antennas to its lead OEM customer

The Leeds-based firm reported a marked improvement in trading with sales increasing sharply, particularly in Filtronic Wireless. It said this is a direct result of the actions taken over the past 18 months to restructure the business.

Filtronic Wireless reported sales of £18.7m, up from £1.9m the previous year.

Overall sales more than quadrupled from £4.5m to £21.6m and the group made an operating profit of £1.8m against a loss of £4.3m the previous year.

Chairman Reg Gott said: “We have made good progress in a relatively short period to return the business to profitability and we are encouraged with the growing opportunity pipeline.

"The improved revenues, better product margins and lower overheads have enabled us to report a return to profitability and a cash inflow from operations. However, we would caution that the phasing of customer order fulfilment for 2017 has been significantly biased to the first half and, consequently, we expect revenues to be lower in the second half of 2017."

He said that both Filtronic Broadband and Filtronic Wireless have seen an improvement in the opportunity pipeline.

"We have set ourselves the objectives of diversifying our customer base and broadening our product range in order to reduce our dependence on mobile telecommunications infrastructure Original Equipment Manufacturers (OEMs) whose business has historically been very lumpy and difficult to forecast."

Filtronic Broadband recently secured its first major supply agreement in the defence and aerospace sector and it expects initial, small revenues from this new multi-year agreement to start in the second half of 2017 with more substantial contributions from 2018.

The group said the UK’s decision to leave the European Union is expected to have a relatively minor impact on the firm, given the international nature of its trading.

It has seen a modest gain from the fall in the value of sterling as the majority of its sales revenue is in US dollars.

"We have made good progress in a relatively short period to return the business to profitability and we are encouraged by the growing opportunity pipeline," said Mr Gott.

"We are confident that we are on the right product and technology pathways, and see many exciting opportunities in our chosen target markets."

The group said it is working hard to secure new customers for its latest generation of antenna products and has made good progress in building a pipeline of opportunities. "However, we are mindful that until our customer and product base are further widened we are likely to see ongoing short-term volatility in our revenues and profitability," said Mr Gott.

The group's CEO Rob Smith said: "Over the recent past our focus has been on developing OEM business in the mobile telecommunication infrastructure market and during the first half of our financial year we delivered significant volumes of integrated antennas to our lead OEM customer.

"This has been the main driver of our growth so far this year and the successful execution of this programme has been a major achievement for the business that helps

establish our credibility in this segment of the market."

He confirmed that the profile of orders for the current financial year has been weighted to the first half and therefore the group expects a reduction of volumes in the second half as the current orders for this product come to an end.

"Having strengthened our sales team, we have recently engaged with several mobile network operators to introduce our new antenna products," said Mr Smith.

"Whilst these engagements are at a relatively early stage we have received positive feedback and interest in our innovative technology approach that offers significant operational advantages over our competitors."

Filtronic said that new spectrum releases in the US (600 MHz) and Europe (700 MHz and 1400 MHz) to increase network capacity is expected to generate further infrastructure equipment expenditure and it will release new, more advanced, antennas that address these opportunities at the Mobile World Congress exhibition at the end of February.