Filtronic tunes in for growth despite half year profits hit

WIRELESS communications company Filtronic today reported a heavy reduction in half year revenues and profits but is confident a “major” new customer will boost its prospects.

The Shipley-based company, which designs and manufactures microwave electronics products for the wireless telecoms infrastructure market, saw revenues from continuing operations drop to £9.6m for the half year to November 30 2009 compared to £18.3m over the corresponding half the previous year.

Revenues were £10.5m over the second half of last year.

Operating profit before exceptional items at the firm, which is now exclusively focused on its point-to-point business, was £300,000 compared to £1.8m, while profit before tax from continuing operations was £100,000, down from £2.4m.

Chairman Howard Ford said: “The board expects the reduced demand levels, which have prevailed since late 2008, to continue through the remainder of the financial year until a recovery in telecoms infrastructure expenditure materialises. 

“The completion of last year’s measures to reduce overhead and other costs, as well as further actions implemented by the board this year, have allowed the group to deliver breakeven profit and positive cash performance in the first half. 

“Expenditure on core technology and new product development has been maintained to enhance competitiveness and to position the business for growth.”

Mr Ford said the deal with the unnamed customer had been signed and that shipments were set to begin in its next financial year.

Filtronic, which has wound up its defined benefit pension scheme, had generated £2.1m of cash inflow from operating activities before exceptional items and capital expenditure.

The firm has also won a Yorkshire Forward research grant of £1.25m.

Analyst Eric Burns, of stockbroker WH Ireland in Leeds, said the firm’s profits had been hit by a number of management changes at the firm and redundancy costs but were broadly in line with expectations.

Mr Burns said thanks to Filtronic’s new contract, its 2011 financial year “should be shaping up pretty well”.

“Whilst short-term visibility remains hampered, the financial year 2010 is likely to be the low point in the cycle,” he said.

“Assuming that is the case, we would expect any re-rating to commence well ahead of a return to growth and therefore reiterate our Buy stance.”