Filtronic forsees growth in OEM market after 'disappointing' half-year results

Project delays and challenging trading conditions saw revenue plummet 64% at electronic company

Alan Needle, chief executive officer at Filtronic
Alan Needle, chief executive officer at Filtronic

Electronics firm Filtronic is targeting future growth after a “transition” year which saw revenues plummet and a profit turn into a £4m loss.

The company, which employs 80 people in County Durham, yesterday reported interim results for the six months ending November 30, which showed revenues falling 64% to £7.3m, compared to £20.1m in the comparable period the year before. Sales within the firm’s wireless division dropped from £16.5m to £3.9m, while broadband sales fell slightly from £3.6m to £3.4m.

As a result, Filtronic reported a half-year operating loss before amortisation and exceptional items of £4.1m, down from a £1.7m profit in the first half of the 2013/14 financial year.

But the company’s chief financial officer Rob Smith said the downturn had been expected in the midst of a “transition year”, and the completion of a major project since then had seen the business return to a “baseline” level.

Filtronic had also been hit by delays and challenging trading conditions. However, a gradual change in focus would help bring stability in the medium-term.

Mr Smith said: “We’ve been working to realign the business to address the Original Equipment Manufacturer market.

“Previously, we have supplied mobile phone operators, in which case you get a project, do it and that’s the end of it.

“With OEMs, it is about products and projects that stretch on for a number of years, which should create a much more sustainable long-term business model.”

With other opportunities now arising in the Chinese market and in sectors such as defence, some growth would be seen in the second-half of the year, with momentum then building in the fist half of next year and beyond.

Filtronic chairman Howard Ford agreed there were reasons to be optimistic.

He said: “Whilst we are disappointed with the sales performance in the first half and forsee that the upturn in the second is likely to be later than we had originally planned, we remain confident in our strategy and in the sales growth potential from the OEM products we have developed and are continuing to develop.”

Established in 1979, Filtronic, which designs and manufactures microwave electronics products for the wireless telecoms infrastructure market, became a listed company in the mid-1980s.

It now employs 160 people across three UK sites - including one at NETPark in Sedgefield, from which the broadband business is run - as well as three sites in the US and one in Sweden. The company also works with a manufacturing subcontractor in China.

According to the interim report, the results reflected reduced levels of sales activity in the wireless business following completion of a TV interference mitigation filter contract in the first half of the previous year.

Other factors included a delay caused by “technical issues” on a major contract for an advanced integrated antenna incorporating Filtronic filters and combiners, the delay of two programmes with an OEM, and the non-appearance of a further anticipated order.

The broadband business, meanwhile, had been adversely affected by the curtailment of orders from customers selling to Russia, a market that had been an early adopter of E-band and V-band technology.

Mr Ford added: “Despite these setbacks, we remain confident in our strategy and the sales growth potential from the qualified OEM products we are supplying and are continuing to develop. This should lead to a much improved trading performance over the medium-term.”

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