Filtronic — On track to meet FY25 expectations

Filtronic (AIM: FTC)

Last close As at 20/11/2024

GBP0.75

1.00 (1.35%)

Market capitalisation

GBP165m

More on this equity

Research: TMT

Filtronic — On track to meet FY25 expectations

Prior to its AGM on 31 October Filtronic confirmed that it was confident of delivering FY25 results in line with market expectations. It expects a higher revenue weighting in H125 reflecting the phasing of orders from its largest customer. Filtronic has made good progress with its technology roadmap, manufacturing capacity and engineering hires, and is in advanced discussion for further contracts in the space and aerospace & defence markets, supporting continued growth of the business.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Filtronic

On track to meet FY25 expectations

AGM trading update

Tech hardware and equipment

1 November 2024

Price

74.0p

Market cap

£162m

Net cash (£m) at end FY24
(including PPE lease liabilities)

5.2

Shares in issue

219.0m

Free float

66.1%

Code

FTC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Filtronic is a designer and manufacturer of advanced radio frequency communications products, supplying a number of market sectors including mobile telecommunications infrastructure, space, public safety and aerospace & defence.

Analysts

Katherine Thompson

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5700

Filtronic is a research client of Edison Investment Research Limited

Prior to its AGM on 31 October Filtronic confirmed that it was confident of delivering FY25 results in line with market expectations. It expects a higher revenue weighting in H125 reflecting the phasing of orders from its largest customer. Filtronic has made good progress with its technology roadmap, manufacturing capacity and engineering hires, and is in advanced discussion for further contracts in the space and aerospace & defence markets, supporting continued growth of the business.

Year

end

Revenue
(£m)

EBITDA*
(£m)

PBT*
(£m)

Diluted EPS*
(p)

DPS
(p)

P/E
(x)

05/23

16.3

1.3

0.1

0.06

0

N/A

05/24

25.4

4.9

3.4

1.43

0

51.7

05/25e

39.9

9.3

7.1

3.02

0

24.5

05/26e

41.1

9.5

6.9

2.93

0

25.2

Note: *EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

As we have previously written, through H224 and H125 Filtronic has seen a strong order flow from SpaceX. It has ramped up production to meet volume and quality requirements, with the addition of a new production line in July and an additional line planned for November. SpaceX orders have been for gateway link rollouts to support the growth of the Starlink constellation as well as to retrofit existing gateway links with E-band solid state power amplifiers (SSPAs). As the retrofit is likely to complete in H125, Filtronic expects FY25 revenue to be H1-weighted, with H225 orders focused solely on supporting new gateways.

Progress with the technology roadmap includes the launch of a W-band SSPA at the European Microwave Exhibition and positive early results from the development of gallium nitride V-band chipsets. These chips will be used in both transceivers and SSPAs and the company has already seen strong interest in the SSPA for space applications, where it could be used for communication links. The company has successfully recruited engineers to support product, opportunity pipeline and customer development, allowing it to work on projects for the European Space Agency, QinetiQ and BAE while developing new products and supporting SpaceX.

The company has won some smaller development contracts in recent months and is in advanced discussions for further contracts in the space and aerospace & defence markets. It has won several contracts in the space market that make use of its plastic encapsulation machinery, originally purchased to provide sovereign capability for defence customers. The company will report H125 results on 4 February 2025. With our FY25 estimates well supported, we maintain our forecasts.

General disclaimer and copyright

This report has been commissioned by Filtronic and prepared and issued by Edison, in consideration of a fee payable by Filtronic. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Filtronic and prepared and issued by Edison, in consideration of a fee payable by Filtronic. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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