Filtronic raises the bar again

published 11 June 2012

Filtronic, the manufacturer of microwave electronics products, has upgraded profit expectations for the second time in three months.

The group said both its broadband and wireless divisions have done better than expected in the final few months of Filtronic's financial year, which runs to the end of May.

The broadband business, in particular, was helped by end-of-programme purchases and favourable currency movements.

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Filtronic says both divisions will now see sales of £13m for the full year to the end of May, giving total sales of £26m, versus market expectations of £24.7m.

Both business segments were also profitable for the full year, enabling the group to move into profitability, albeit before intangible amortisation, for the year as a whole. Brokers covering the stock had pencilled in a loss of £1.97m for the year.

Broker Panmure Gordon, which had been forecasting a £1m loss, said "Filtronic has pulled it out of the bag".

"Even though order visibility is normally poor in the Wireless division, we sense a stronger outlook there, and so today's positive surprise is not just about the Broadband division doing better than we expected," Panmure Gordon analyst George O'Connor suggested.

Filtronic said in its statement that the broadband division continues to have encouraging order coverage into the first half, while the wireless arm is enjoying better forward visibility than is customary for its filter products, which are normally subject to short notice order call-off.

Reiterating its "buy" recommendation, Panmure Gordon said: "We are only at the outset of the 4G roll-out cycle, and operators are beginning to parcel out network upgrades to the OEM [original equipment manufacturer] community. After beating demanding growth forecasts for the Wireless division and, now with a more favourable secular backdrop (4G growth), Filtronic looks well placed to accelerate earnings growth from here."

Panmure Gordon is now forecasting revenue of £26m and adjusted profit before tax of £0.3m for the year just ended, but is leaving its forecasts for the current year unchanged at present.

Filtronic shares had risen 3.26% by 11:51.