Filtronic Regulatory News (FTC)

12 Jun 2006 12:00

Filtronic PLC12 June 2006 12 June 2006 FILTRONIC PLC Filtronic plc announces the sale of the filter-based transmit receive module and power amplifier businesses of its Wireless Infrastructure division and the statement on trading for the year ended 31 May 2006 Filtronic plc ("Filtronic"), a leading global designer and manufacturer ofcustomised microwave electronic subsystems and compound semiconductor componentsfor the wireless telecommunications and defence industries, announces the saleof the filter-based transmit receive module and power amplifier businesses ofits Wireless Infrastructure division (the "Wireless Infrastructure business"disposal). The proposed disposal does not include Filtronic's activities forpoint to point radio backhaul equipment or power amplifier modules, orFiltronic's other divisions (Compound Semiconductors and Defence Electronics).Filtronic also issues its statement on trading for the year ended 31 May 2006. Disposal of the Wireless Infrastructure business In a separate announcement released today, Filtronic announced that the Boardsof Filtronic plc (LSE: FTC) ("Filtronic") and Powerwave Technologies, Inc.(Nasdaq: PWAV) ("Powerwave") have entered into a definitive agreement for thesale to Powerwave of the filter-based transmit receive module and poweramplifier businesses of Filtronic's Wireless Infrastructure Division (the "Wireless Infrastructure business") for a consideration of 20.7 million newlyissued shares of Powerwave common stock and US$150 million cash. Thetransaction is subject to the approval of Filtronic's shareholders, as well ascustomary closing conditions and certain regulatory approvals. Powerwave andFiltronic expect the closing of the transaction to occur in the third quarter ofcalendar 2006. The Wireless Infrastructure business's gross assets as at 31 May2005 were £101.1m and operating profit for the year ended 31 May 2005 was£18.1m. Filtronic is not expecting a tax charge to arise as a result of thisdisposal. Trading Update Following the end of the financial year on 31 May 2006, Filtronic also issuesthe following statement on trading for this period: "The overall performance of the group for the financial year is satisfactory. The performance in the second half of the financial year, compared with thefirst half of the financial year, by division was: • Compound Semiconductors has met its target of run rate operating break even over the fourth quarter of the financial year with strong revenue growth of approximately 45%. This has substantially reduced operating losses with underlying performance in line with market expectations. This is before the recognition of the release of £2.7m of deferred income in the period arising from the re-negotiation of arrangements on past government grants. • Moderate revenue growth in Defence Electronics of approximately 10%, providing increased underlying profit. • Revenue decline of 7% in Wireless Infrastructure, reflecting unseasonally low demand in the third quarter of the financial year (covering December 2005 to February 2006). Closing net debt at the end of the financial year was approximately £13m. A key part of the strategy for the group is to achieve further substantialgrowth in value for Compound Semiconductors. This division is seeing stronglong term market growth as the mobile handset industry continues to adoptswitches based on GaAs pHEMT technology, with the expectation that they will beused in around 80% of handsets produced by 2008. The Board has therefore committed to a plan to expand the semiconductor facilityto give Filtronic the potential to increase the size of this business by up tothree times in the coming two years, at an estimated cost of £45m over the nexttwelve months. This is to meet demand forecasts from a number of establishedhandset module suppliers and to support its agreement with SELEX. The Boardconsiders that Compound Semiconductors is well positioned to build on the priorinvestment in the facility and, through this expansion, to create substantialvalue for the group in the medium term. To assist in financing the expansion in Compound Semiconductors, and pending thecompletion of the disposal of the Wireless Infrastructure business, Filtronichas arranged an additional bank facility of £15m, which is available until 30November 2006. Bank facilities are therefore currently £35m. Filtronic willretain the cash element of the proceeds due on the completion of this disposalprincipally to repay bank debt and to finance the Compound Semiconductorsexpansion plan outlined above, along with working capital for general corporatepurposes. The Board will decide the appropriate timing for the sale of the Powerwaveshares, due as part of the proceeds of the disposal of the WirelessInfrastructure business, and intends, subsequent to their realisation, to returnthe proceeds to shareholders. Commenting on these announcements, Professor David Rhodes, Group Chief ExecutiveOfficer, said: "2006 has been eventful for Filtronic as I have sought to revitalise themarket's appreciation of the value inherent in the group. As a result of ourreview of strategic options, the Board decided that the Wireless Infrastructurebusiness would have greater opportunities for growth with a larger partner. Iam delighted that this will be Powerwave, enhancing its position as a leadingprovider in the commercial wireless infrastructure market. Part of the expected proceeds will be used to expand Compound Semiconductorswhere we have considerable opportunity to grow our presence in the supply ofswitch components for mobile handsets. The aim is to enhance our position asthe number one supplier of switches for handsets with a substantial market sharein a market of over one billion units a year, so creating significant value overthe next two to three years. I have also wanted our shareholders to benefit from the sustained growth we arecurrently experiencing in the Wireless Infrastructure market, where our orderbook on our largest product line has recently extended from two to twelve weeksdespite increasing our production capacity. The balance of the expected saleconsideration is therefore in Powerwave shares. This will enable ourshareholders to now participate in Powerwave's growth, and indirectly benefitfrom the recent significant increase in demand in our Wireless Infrastructurebusiness. Contacts: Filtronic plc Professor David Rhodes, Group Chief Executive Officer 07850 827 280 (mobile)Charles Hindson, Group Finance Director 07800 706 319 (mobile) Filtronic website: www.filtronic.com Parkgreen CommunicationsPaul McManus 020 7786 9600/ 07980 541 893 (mobile) JPMorgan CazenoveDavid Anderson, Managing Director 020 7155 4728 / 07748 776 433 (mobile) This press release contains forward-looking statements within the meaning ofSection 27A of the United States Securities Act of 1933 and Section 21E of theUnited States Securities Exchange Act of 1934 that are subject to the "safeharbor" created by those sections. Some of the forward-looking statements inthis document can be identified by the use of forward-looking terms such as"believe", "intend", "expect", "may", "will", "estimate", "should", "could","anticipate", "plan" or other comparable terms, including statements regardingbenefits of the proposed sale, anticipated future financial and operatingperformance and results, including estimates for future revenue, the timeschedule for closing the transaction, satisfaction of conditions to closing, theuse of expected proceeds from the proposed sale. These statements are based onFiltronic's management's current expectations. There are a number of risks anduncertainties that could cause actual results to differ materially fromprojected results. For example, the parties may be unable to obtain thenecessary approvals required for the acquisition, including regulatory approvalsand approval of Filtronic's shareholders. The sale may involve unexpected costs.We may be unable to sell the Powerwave common stock we receive as consideration.Our businesses may suffer as a result of uncertainty surrounding theacquisition. JPMorgan Cazenove Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Filtronicplc. JPMorgan Cazenove Limited is not acting for any other person in relationto the disposal and JPMorgan Cazenove Limited will not be responsible to any person other than Filtronic plc forproviding the protections afforded to clients of JPMorgan Cazenove Limited orfor providing advice in relation to the contents of this document or thedisposal. This information is provided by RNS The company news service from the London Stock Exchange