Trading Update

Filtronic plc

 ("the Company")

Trading Update

Filtronic plc (AIM: FTC), the designer and manufacturer of microwave electronics products for the wireless telecoms infrastructure market and adjacent markets, is pleased to provide the following update for the three months ended 31st August 2016 at the Annual General Meeting ("AGM") being held today.

The Board is pleased to announce that the Company has traded strongly in the first quarter. Revenues were £11.7m (2015: £2.2m) resulting in the Group returning to profitability with an operating profit of £1.0m (2015: £2.0m operating loss). The net cash balance at the quarter end was £0.9m. These results demonstrate significant improvement when compared with those achieved in FY2016 where the results for the full year were sales of £13.6m, an operating loss of £7.0m and net debt of £0.4m at the period end.

The improved financial performance was primarily driven by sales of our new ultra-wide band integrated antennas to our lead customer following the successful production ramp in the final quarter of FY2016, together with improving demand for our mmWave backhaul products and base station filters.

Whilst the Board is pleased with the progress made and remains confident that the long-term prospects for the business are good, it is mindful that these results are currently being driven primarily by demand from one customer for a single product type. Roll-out programs for wireless infrastructure projects are naturally very lumpy and it is, therefore, to be expected that until these new antenna products gain greater traction in the broader market over the course of the next year, we will continue to experience short-term variations in sales performance for at least the balance of FY2017. It should also be noted that seasonality in installing infrastructure in the telecoms industry is skewed toward the spring and summer months and therefore we expect sales of these products to be lower in the 2nd and 3rd quarters of the financial year than for the 1st Quarter.

To address our customer concentration, Filtronic Wireless has recently recruited additional experienced senior sales executives in Europe and North America to target opportunities with mobile network operators. Initial engagement with potential clients has resulted in favourable feedback. However, it is likely that building business with new clients will take time and we do not anticipate appreciable sales to new customers from these new selling initiatives until FY2018.

Filtronic Wireless continues to build and develop its product portfolio to address opportunities available in the market and will be releasing further antenna variants that support the new frequencies being released in the US (600MHz) and Europe (1400MHz). These developments are incremental steps based on our existing platform with prototypes expected to become available to evaluate in Q2 of FY2017 and available to the market in H2.

Filtronic Broadband meanwhile continues to see steady growth in sales of Orpheus, its latest generation E-band transceiver, with demand at our lead customer continuing to ramp. A key objective for Filtronic Broadband has been to diversify its customer base and product offering. To this end we have been developing a number of potential new client opportunities for Orpheus, both in telecommunications backhaul and adjacent markets. In addition, we are starting to gain traction in the design and manufacture of filter products and specialist high-frequency assembly and test services which are both supplied to defence & aerospace customers. These opportunities are at varying stages of development and whilst we do not expect all prospects to be converted, the Board is encouraged by the level of interest being generated.

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This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.