Filtronic Regulatory News (FTC)

Filtronic plc

("Filtronic", the "Company" or the "Group")

Trading Update

Following the end of its financial year to 31 May 2014, Filtronic plc (LSE: FTC), the designer and manufacturer of microwave electronics products for the wireless telecoms infrastructure market, issues the following statement, updating the guidance given in the Interim Management Statement of 31 March 2014.

During the final quarter of the financial year, both the Wireless and Broadband businesses traded in line with the Board's expectations, delivering full year unaudited revenues of £23m (2013: £31m) and £9.7m (2013: £8.1m) respectively. After central costs and the costs of establishing the new antenna activity, the Group expects to report a small operating loss, of not more than £0.5m, before exceptional items and the amortisation of goodwillfor the year ended 31 May 2014 ("FY2014"). The Group had net cash at the year end of £2.5m.

Broadband has continued to grow revenues for its new E Band radio productsand order cover now extends into the second half of the financial year ending 31 May 2015 ("FY2015"). The Broadband business completed its relocation to a lower cost facility at the North East Technology Park in Sedgefield, County Durham, and the combined effects of the lower operating cost base and the improving volumes enabled Broadband to achieve a small underlying profit, on a run rate basis, at the conclusion of FY2014.

The March Interim Management Statement referred to delays in a number of potentially large operator projects where Filtronic Wireless ("Wireless") has been approved as a qualified supplier. The Board still expects some of these projects to deliver revenue in FY2015 but the timing and quantum of such revenues still remains uncertain.

The increasing complexity and high levels of data traffic being generated by 4G demand is reshaping the cellular telecommunications infrastructure market. This shift in the market is resulting in OEMs taking a more dominant role in supplying base station equipment. Filtronic, responding to this change has, since the beginning of 2014, focused significant resources on increasing its share of these long-term OEM programmes. Filtronic has continued to address projects from operators during this transition period, but the number of these opportunities has been decreasing and the programmes where we have developed product have been subject to customer delays resulting in a temporary reduction in Wireless's addressable market. It is believed that this strategic repositioning will benefit Wireless by providing a better balance of customers and programmes, compared to the more cyclical project-based operator business. As stated in the March Interim Management Statement, Filtronic is currently engaged on approximately twice the number of wireless infrastructure projects as was the case a year ago. To this end Wireless has been successful in securing both a number of new platform wins for base-station filters, combiners and tower mounted amplifiers together with three antenna design wins.

The OEM qualification process takes longer between design win and revenuegeneration than project-based business. However, the Board believes that this strategy is repositioning the Group for a period of sustained growth. The first of the new design wins will enter volume manufacture in the first half of FY2015 and the Board expects progressive volume growthfor the second half of FY2015 and beyond. 

Work on existing Operator projects and thestart of the new OEM programmes are expected to deliver Wireless revenuesfor the first half of FY2015 at a similar level to the second half of FY2014 but the repositioning strategy is likely to push out the Board's earlier expectations for the timing of the growth trajectory of the Wireless business by approximately 12 months and, as a consequence, the Board expects the Group's performance for FY2015 will now be considerably lower than current market expectations.

The results for the financial year ended 31 May 2014 will be announced on 28 July 2014.

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