Filtronic — Upgrading on stronger H225 expectations

Filtronic (AIM: FTC)

Last close As at 17/12/2024

GBP0.77

5.00 (6.94%)

Market capitalisation

GBP169m

More on this equity

Research: TMT

Filtronic — Upgrading on stronger H225 expectations

Filtronic’s H125 trading update confirmed that the company expects to report FY25 results ahead of current market expectations. Robust customer demand has resulted in some orders being pulled forward from FY26 into H225. We upgrade our FY25 revenue and profit forecasts, with diluted normalised EPS up 26%, and maintain our FY26 forecasts. This assumes that further orders are received in H225 to replenish the order backlog. Filtronic’s strong position in the space market and growing presence in the aerospace and defence market provide it with multiple sources of growth.

Katherine Thompson

Written by

Katherine Thompson

Director

Filtronic_resized

TMT

Filtronic

Upgrading on stronger H225 expectations

Trading update

Tech hardware and equipment

17 December 2024

Price

72p

Market cap

£158m

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

%

1m

3m

12m

Abs

2.7

2.7

289.9

Rel (local)

0.3

2.9

257.7

52-week high/low

79.5p

19.5p

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.

Next events

H125 results

4 February

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Filtronic is a research client of Edison Investment Research Limited

Filtronic’s H125 trading update confirmed that the company expects to report FY25 results ahead of current market expectations. Robust customer demand has resulted in some orders being pulled forward from FY26 into H225. We upgrade our FY25 revenue and profit forecasts, with diluted normalised EPS up 26%, and maintain our FY26 forecasts. This assumes that further orders are received in H225 to replenish the order backlog. Filtronic’s strong position in the space market and growing presence in the aerospace and defence market provide it with multiple sources of growth.

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

50.3

05/25e

43.0

11.2

8.9

3.80

0

19.0

05/26e

41.1

9.5

6.9

2.93

0

24.6

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

Order pull-in drives stronger FY25

At its AGM update on 31 October, Filtronic noted that it expected FY25 revenue to be H1-weighted. Its largest customer, Space X, placed orders through the course of FY24 and H125 for gateway link rollouts to support the growth of the Starlink satellite constellation, as well as to retrofit existing gateway links with E-band solid state power amplifiers. The retrofit was largely completed in H125 with the remaining orders supporting expansion of the network. Filtronic has now confirmed that orders have been pulled forward from FY26 into H225, which should result in stronger results than current market expectations for FY25.

Upgrading FY25 forecasts

We have revised our forecasts to reflect the pull-in of orders into FY25. We maintain our FY26 forecasts assuming that the company’s largest customer will place further orders during H225 and FY26. We also expect Filtronic to see an acceleration in orders from aerospace and defence customers post the government’s strategic defence review (which is due to report in spring 2025). We have upgraded our FY25 revenue forecast by 7.6%, with EBITDA up 19.7%, PBT up 25.9% and diluted EPS up 25.8%.

Valuation: Growing confidence

The stock trades on a P/E of 19.0x FY25e and 24.6x FY26e. Using a 10-year reverse discounted cash flow with a weighted average cost of capital of 8%, the current share price is arrived at using revenue growth of 11% per year for FY27–34e and EBITDA margins growing from an estimated 23% in FY26 to 25% over the period. In our view, the relationship with SpaceX, the potential to widen the customer base in the space market and growing penetration of the aerospace and defence market all provide avenues for sustainable growth.

Changes to forecasts

Exhibit 1: Changes to forecasts

£m

FY25e
old

FY25e
new

Change

y-o-y

FY26e
old

FY26e
new

Change

y-o-y

Revenues

39.9

43.0

7.6%

69.0%

41.1

41.1

0.0%

-4.3%

EBITDA

9.3

11.2

19.7%

128.4%

9.5

9.5

0.0%

-15.3%

EBITDA margin

23.4%

26.0%

2.6pp

6.8pp

23.0%

23.0%

0.0pp

-3.0pp

Reported operating profit

7.4

9.3

24.7%

156.7%

7.3

7.3

0.1%

-21.7%

Reported operating margin

18.6%

21.6%

3.0pp

7.4pp

17.6%

17.6%

0.0pp

-3.9pp

Reported PBT

7.1

8.9

25.9%

165.9%

6.9

6.9

0.1%

-22.5%

Normalised net income

7.1

8.9

25.9%

180.3%

6.9

6.9

0.1%

-22.5%

Reported net income

7.1

8.9

25.9%

184.5%

6.9

6.9

0.1%

-22.5%

Normalised basic EPS (p)

3.26

4.10

25.8%

178.1%

3.17

3.16

-0.1%

-22.8%

Normalised diluted EPS (p)

3.02

3.80

25.8%

165.4%

2.93

2.93

-0.1%

-22.8%

Reported basic EPS (p)

3.26

4.10

25.8%

182.3%

3.17

3.16

-0.1%

-22.8%

Net debt/(cash)

(6.7)

(8.2)

22.9%

56.8%

(11.9)

(13.8)

15.4%

68.1%

Source: Edison Investment Research

Exhibit 2: Financial summary

Year end May

£m

2021

2022

2023

2024

2025e

2026e

INCOME STATEMENT

Revenue

 

 

15.6

17.1

16.3

25.4

43.0

41.1

EBITDA

 

 

1.8

2.8

1.3

4.9

11.2

9.5

Operating profit (before amort. and excepts.)

 

0.6

1.6

0.2

3.7

9.3

7.3

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.1

0.4

0.0

0.0

0.0

0.0

Reported operating profit

0.6

2.0

0.2

3.6

9.3

7.3

Net Interest

(0.4)

(0.1)

(0.2)

(0.2)

(0.3)

(0.3)

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

0.1

1.5

0.1

3.4

8.9

6.9

Profit Before Tax (reported)

 

 

0.2

1.9

0.1

3.4

8.9

6.9

Reported tax

(0.2)

(0.4)

0.4

(0.2)

0.0

0.0

Profit After Tax (norm)

0.3

1.2

0.1

3.2

8.9

6.9

Profit After Tax (reported)

0.1

1.5

0.5

3.1

8.9

6.9

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

0.3

1.2

0.1

3.2

8.9

6.9

Net income (reported)

0.1

1.5

0.5

3.1

8.9

6.9

Average Number of Shares Outstanding (m)

213

215

215

216

218

219

EPS - normalised (p)

 

 

0.14

0.54

0.07

1.47

4.10

3.16

EPS - normalised fully diluted (p)

 

 

0.14

0.53

0.06

1.43

3.80

2.93

EPS - basic reported (p)

 

 

0.03

0.68

0.22

1.45

4.10

3.16

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

6.2

5.4

7.4

8.2

13.8

14.7

Intangible Assets

1.7

1.5

1.8

2.3

2.9

3.6

Tangible Assets

3.3

3.0

4.3

4.9

9.9

10.1

Investments & other

1.2

0.9

1.3

1.0

1.0

1.0

Current Assets

 

 

8.4

11.1

10.7

17.0

26.4

31.5

Stocks

2.2

2.6

2.8

3.3

5.5

5.3

Debtors

3.3

4.5

5.3

6.6

9.4

9.5

Cash & cash equivalents

2.9

4.0

2.6

7.2

11.4

16.7

Other

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(3.6)

(4.0)

(4.8)

(8.2)

(11.4)

(10.7)

Creditors

(2.4)

(3.0)

(3.7)

(5.4)

(9.6)

(8.9)

Short-term borrowings including lease liabilities

(0.6)

(0.5)

(0.6)

(0.9)

(0.9)

(0.9)

Other

(0.6)

(0.5)

(0.5)

(1.9)

(0.9)

(0.9)

Long-term Liabilities

 

 

(1.7)

(1.4)

(1.7)

(2.3)

(4.7)

(4.4)

Long-term borrowings

(1.6)

(1.3)

(1.7)

(2.1)

(4.5)

(4.3)

Other long-term liabilities

(0.1)

(0.1)

(0.0)

(0.1)

(0.1)

(0.1)

Net assets

 

 

9.4

11.0

11.5

14.8

24.2

31.1

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

9.4

11.0

11.5

14.8

24.2

31.1

CASH FLOW

Op Cash Flow before WC and tax

1.8

2.8

1.3

4.9

11.2

9.5

Working capital

1.1

(0.8)

(0.4)

1.5

(1.9)

(0.5)

Exceptional & other

(1.0)

0.3

0.0

0.0

0.0

0.0

Tax

0.5

0.0

0.0

(0.0)

0.0

0.0

Operating Cash Flow

 

 

2.5

2.3

0.9

6.3

9.2

9.0

Capex (including capitalised R&D)

(0.4)

(0.3)

(1.5)

(1.6)

(4.2)

(2.3)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

Net interest

(0.2)

(0.2)

(0.2)

(0.2)

(0.3)

(0.3)

Equity financing

0.0

0.0

0.0

0.1

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

1.9

1.9

(0.8)

4.6

4.7

6.3

Opening net debt/(cash)

 

 

0.7

(0.8)

(2.2)

(0.3)

(4.2)

(6.0)

FX

0.0

0.0

0.0

0.0

0.4

0.0

Other non-cash movements

(0.4)

(0.5)

(1.1)

(0.7)

(3.3)

(0.8)

Closing net debt/(cash) including lease liabilities

 

(0.8)

(2.2)

(0.3)

(4.2)

(6.0)

(11.6)

Property lease liabilities

1.2

1.0

1.295

1.0

2.2

2.2

Closing net debt/(cash)

 

 

(2.0)

(3.1)

(1.6)

(5.2)

(8.2)

(13.8)

Source: Filtronic, Edison Investment Research


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

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

More on Filtronic

View All

Latest from the TMT sector

View All TMT content

Research: Consumer

Borussia Dortmund — Taking on the world

Borussia Dortmund is one of the leading football clubs in Europe, with a strong track record in its domestic league, which has enabled it to feature regularly in Europe’s leading club competitions. Its relatively consistent success and, therefore, high level of media exposure means it is well positioned to benefit from structural growth drivers such as increasing global interest in football, which will support the growth of its multiple revenue streams. Perhaps most importantly, the club’s sporting success has been achieved with low levels of investment versus its peers, which reflects management’s financial prudence.

Continue Reading
Borussia-Dortmund_resized

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free