Filtronic Regulatory News (FTC)

9 Aug 2005 07:01

Filtronic PLC09 August 2005 FILTRONIC PLC ("Filtronic") Sale of Handset Products Division to Technitrol, Inc Filtronic (LSE - FTC/L), an original designer and global manufacturer ofmicrowave electronic subsystems for the wireless telecommunications and defenceindustries, announces the agreed disposal of its mobile handset antennabusiness, LK Products OY ("LK"), to Technitrol, Inc (NYSE - TNL), a worldwideproducer of electronic components and electrical contact products and otherproducts to a diversity of electronics-based and electrical industries, for aninitial consideration of €67 million (approximately £46.6m or approximately$82.8 million). In addition, the terms of the purchase include a revenue-based deferredconsideration whereby Technitrol will pay Filtronic one Euro for each Euro ofrevenue in excess of €85 million achieved by LK for the 12 months ending 31 May2006. Closing of the transaction is expected before 30 September 2005. The consideration proceeds are being financed either entirely with cash on handor with a combination of cash and credit under Technitrol's multi-currencycredit facility. LK is the market leader in the provision of internal antennas for mobilehandsets, with an estimated global market share of about 16%. It is based inKempele, Finland and has additional production operations in China and Hungary,with offices in South Korea and San Diego, California. LK contributed 17%, or£50 million (2004 restated: £60.2 million), of Filtronic's total group sales of£262.9 million in its financial year ended 31 May 2005 (2004 restated:£245.1milliion) and made an operating profit of £3.6 million (2004 restated:£11.2 million). As at 31 May 2005, LK represented consolidated gross assetsof approximately £48 million, including goodwill of approximately £27m. Said John Roulston, Filtronic CEO, "The sale of the handset products businessserves strategic goals for both buyer and seller and will also bring advantageto customers. Filtronic will use the proceeds to eliminate its long-term bankdebt, thereby freeing the company to take more advantage of the growing wirelessinfrastructure market. Technitrol, on the other hand, will gain immediate marketshare in a business sector where its volume production methods and materialsourcing capacity can contribute efficiencies and its market imprint canaccelerate diversification. Customers will benefit from the energy of the newownership and the synergies forged with Technitrol's volume product range." "Filtronic will continue to cooperate technologically with LK Products so thatstrategic plans for the ongoing group are preserved by this sale. Throughout thesale process we became very impressed by the outlook of Technitrol's managementand we firmly believe our technology cooperation will bring future businessopportunities for both of us." In Filtronic's preliminary results for the financial year ended 31 May 2005, theCompany disclosed last week that its core Wireless Infrastructure increasedsales to £168.4 million (2004 restated: £145.2 million) and produced anoperating profit of £18.1 million (2004 restated: £10.7 million). Its otherdivision, Integrated Products, produced a sales increase to £43.6 million (2004restated: £38.4 million) and its loss declined to £9.9 million (2004 restated:Loss £13.4 million). Particular emphasis was put on ramping sales of compoundsemiconductor pHEMT switches to handset giant RF MicroDevices through astrategic supply agreement announced at the half-year. Sales at LK declined 17% year on year in 2004/2005, reflecting lower thananticipated levels of activity in the second half of the financial year withreduced levels of activity with the division's principal customer. Antennavolumes in the financial year were 104 million units (2004 121 million units),of which over 50% were manufactured in China. The operating margin reflectedthis reduced level of activity and with the impact of the fixed nature ofdepreciation on automated lines in Finland, operating margins for the year fellto 11% before goodwill amortisation, 7% after goodwill amortisation. In its current fiscal year, LK is expected to produce a strong recovery inrevenue as projects acquired and product qualified over the past nine monthsreach production ramp-up. The longer term outlook is supported by efforts inceramic antennas for cellular and non-cellular applications and extruded metalstructures for integrated assemblies. Roulston said, "The strong forecast for recovery in LK is based on specificprojects for identified customers and is the fruit of technical efforts over thepast year. It underpins the value of the revenue-based earn-out component of thedeal for Filtronic's shareholders." The LK business will be the cornerstone of the antenna products division withinthe newly formed signal products group at Technitrol's Pulse unit. "LK is acutting-edge antenna and wireless component integration business that will givePulse a very strong presence in the rapidly advancing wireless communicationsmarket," said Technitrol Chairman and Chief Executive Officer James M. Papada,III. "With an estimated 16% of the global market, LK is the world's number-twosupplier of handset antennas, with solid positions at Nokia, the world's leadingcell phone maker, and Samsung, the fastest-growing major cell phone producer.To the combined business, Pulse brings global manufacturing disciplines,marketing expertise and customer relationships that will facilitate expansion ofexisting markets and entry into new markets." LK is the world's leading supplier of internal antennas for mobile devices, theprimary focus of the business and the fastest-growing handset antenna platform.It is also a leader in the integration of single or multiple antennas with othercomponents in wireless devices to increase functionality and save space. Itemploys more than 100 research and development personnel and holds 250 activeand pending patents. Its patents span the areas of RF technology, manufacturingprocesses, mechanical characteristics and component integration strategy. JPMorgan Cazenove acted as sole financial adviser to Filtronic. Commenting on outlook in Filtronic's fiscal 2005 results announced on 1 August,Executive Chairman, Prof. David Rhodes said, "We see continued growth prospectsfor the group. Wireless Infrastructure is experiencing a substantial marketrecovery and the strategic efforts undertaken over the past few years in poweramplifiers is increasing our presence in this important market sector. InIntegrated Products, we have acquired volume contracts in compoundsemiconductors for our foundry at Newton Aycliffe and strengthened our defenceposition in the United States." ENDS A conference call for analysts will take place at 3.00pm (for no longer than 45 minutes) on Tuesday 9 August 2005. For details please contact Paul McManus on 020 7153 1485 or paul.mcmanus@binnspr.co.uk For further information, please contact the following: Filtronic PlcJohn Roulston, Group Chief Executive Officer Tel: 01274 530 622 Mob: 07800 706 318Charles Hindson, Group Finance Director Tel: 01274 530 622 Mob: 07800 706 319www.filtronic.com Binns & Co PR LtdPeter Binns Tel: 020 7153 1477 Mob: 07768 392 582Paul McManus Tel: 020 7153 1485 Mob: 07980 541 893 JPMorgan CazenoveDavid Anderson Tel: 020 7155 4728 Technitrol, Inc David J. Stakun, VP, Corporate Communications Tel: 001 215 355 2900, ext. 228 Mob: 001 267 467 2367www.technitrol.com About Technitrol, Inc Based in Philadelphia, Technitrol is a worldwide producer of electroniccomponents, electrical contacts and assemblies and other precision-engineeredparts and materials for manufacturers in the data networking, broadband/Internetaccess, telecommunications, military/aerospace, automotive and electricalequipment industries. 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