![](/cdn/assets/images/search/clock.png)
We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Filtronic Plc | LSE:FTC | London | Ordinary Share | GB0003362992 | ORD 0.1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
2.00 | 2.94% | 70.00 | 69.00 | 71.00 | 71.00 | 68.00 | 68.00 | 1,380,571 | 11:02:46 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Electronic Components, Nec | 25.43M | 3.14M | 0.0144 | 48.61 | 148.65M |
TIDMFTC
RNS Number : 8167H
Filtronic PLC
01 August 2023
1 August 2023
FILTRONIC PLC
AUDITED FULL YEAR RESULTS FOR THE YEARED 31 MAY 2023
Filtronic plc (AIM: FTC), the designer and manufacturer of products and sub-systems for the aerospace & defence, telecommunications infrastructure and space markets, announces its full year results for the 12 months ended 31 May 2023.
Financial Highlights
2023 2022 Revenue GBP16.3m GBP17.1m Adjusted EBITDA* GBP1.3m GBP2.8m Adjusted operating profit** GBP0.2m GBP1.6m Exceptional items - GBP0.4m Operating profit GBP0.2m GBP2.0m Profit before taxation GBP0.1m GBP1.9m Profit for the year GBP0.5m GBP1.5m Basic earnings per share 0.22p 0.68p Diluted earnings per share 0.21p 0.68p Net cash balance as at 31 May GBP0.3m GBP2.2m Net cash when excluding right of use property GBP1.6m GBP3.1m leases Cash generated from operating activities GBP1.0m GBP2.3m
*Adjusted EBITDA is earnings before interest, taxation, depreciation, amortisation and exceptional items.
** Adjusted operating profit is operating profit before exceptional items.
Operational Highlights
-- Another year of profitable trading despite the headwinds from the global semiconductor shortages, geopolitical uncertainty and a challenging economic environment.
-- First contract win in the low earth orbit space sector, valued at GBP2.3m, to a market leader
-- Launched the Morpheus X2 E-band transceiver and secured production orders valued at GBP0.9m, that more than doubles the transmission range of current 5G backhaul radio links.
-- Two new defence contract wins with the MoD through the DSTL framework.
-- Series of recent contract wins totalling over GBP2.0m across a diverse range of new telecommunication and private network customers, demonstrating the execution of our objective to broaden the customer base.
-- Further developed the opportunity pipeline, having improved our direct and indirect sales channels improving customer engagement, as well as strengthening the engineering team to facilitate revenue growth.
-- Achieved IASME Governance Gold to augment our cyber security, positioning us well to win more sensitive work.
-- Eight new products launched during the year, spanning high-power versions of standard telecom products, new filter designs for defence and quantum computing and a range of solid state power amplifiers for space and ground station applications.
Commenting on the outlook , Jonathan Neale, Chairman, said: " The broad strategic goals of Filtronic remain the same. We seek value growth through provision of high-speed, low-latency, radio frequency electronics subsystem design and manufacture, for blue chip customers in growth markets. We are encouraged by the increase in market activity and the rate of requests for quotations in important complex products demanding world class capability. Strengthening our business development and engineering teams has been critical to be able to respond quickly. On several occasions this year we have proved ourselves capable to deliver world class engineering with innovative, complex solutions, demonstrating the kind of responsiveness to develop, and deliver at volume, high-quality mission critical products. Recent wins in the important and emerging low earth orbit space market, which is gathering pace, help us demonstrate our leading-edge technology and high-performance culture.
We remain committed to R&D investment, to be ready to meet the needs of those markets. We have progressively pivoted a proportion of our R&D to align priority technology readiness programmes to ensure we are ready to capitalise on opportunities at Ka, E and Q/V-band frequencies. We aim to have a degree of configurable platform solutions on product categories to be able to recycle IP and know-how for speed and efficiency. Of course, we seek greater scale in our business. We believe this will come. There have been some frustrations, inevitably, as the post-covid supply semiconductor issues unwind, but we continue to be paced by some end customer significant contract wins in key markets. Sovereign defence and communications technology demands are exciting but predicting contract timing remains an art not a science. The roll out of 5G telecommunication infrastructure technology remains important as the world continues to digitise, however, we note the recent market announcements from key providers in India indicating a somewhat stop-start deployment. These are features not faults in our markets and consequently these are the challenges we must meet. Agility and ambition remain tempered by an understanding of the need for a strong balance sheet and cash focus."
Annual General Meeting
The Annual General Meeting will take place at 11am on 26 October 2023 at Plexus building, Thomas Wright Way, Netpark, Sedgefield, County Durham, TS21 3FD.
Filtronic plc Tel. 01740 618800 Richard Gibbs (Chief Executive Officer) Michael Tyerman (Chief Financial Officer) finnCap Ltd Tel. 020 7220 0500 Jonny Franklin-Adams / George Dollemore (Corporate Finance) Alice Lane / Sunila de Silva (ECM) Walbrook PR Ltd Tel. 020 7933 8780 Paul Vann / Joe Walker or filtronic@walbrookpr.com
Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation.
Forward-looking statements
The Chairman's statement and Chief Executive's review include statements that are forward looking in nature. These are made by the Directors in good faith based on the information available to them at the time of their approval of this report. Such statements are based on current expectations and are subject to a number of risks and uncertainties, including both economic and business risk factors that could cause actual events or results to differ materially from any expected future events referred to in these forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Chairman's statement
Dear fellow shareholder
I am pleased to report that good progress has been made in the year ended 31 May 2023, particularly with our market engagement, product development and improvement of operational capability.
We were optimistic about growing revenue in H2 FY2023 but shortages in the semiconductor supply chain prevented us from realising this important goal. Despite this, we delivered another successive year of profit generation with adjusted earnings before interest, taxation, depreciation, amortisation and exceptional items ("Adjusted EBITDA") of GBP1.3m (2022: GBP2.8m). This led to a strengthened balance sheet, which, coupled with a stronger order book and improved opportunity pipeline, provides a solid base from which to continue developing the business to deliver long-term shareholder value.
The Markets
The markets we operate in increasingly offer the potential for strong growth. The recent sizeable contract win, awarded by a leading player in the low earth orbit space market demonstrates the world-class capability of our business and validates our confidence in successfully penetrating this emerging and high growth sector. The market is currently led by a handful of well-known global players, where our technology is highly relevant to their chosen solutions, but there are numerous other disruptors with different mission objectives, serving a broad range of end customers and markets.
We continue to see exciting opportunities being developed in aerospace and defence particularly given the current geo-political landscape. Governments of western countries acknowledge they have underfunded defence spending in recent years but have reiterated a commitment to remedy this. The skills required to develop technology solutions utilising radio frequency ("RF") are in short supply and the major defence primes recognise that resourcing their key programmes will be a significant challenge. This creates opportunities for Filtronic to support and mitigate the skills gap that has developed.
In the telecommunications market, we note recent announcements by both Nokia and Ericsson following a slowdown in consumer spending impacting their telecoms sales. However, 5G networks are actively being rolled out around the world and the long-awaited licencing of E-band spectrum in India has been released for backhaul products. This is a market that has a high dependence on wireless technology given the well-established road and building infrastructure, making it difficult to offer cabled solutions. Given the scale of rollouts, pricing can be highly competitive as the original equipment manufacturers ("OEMs") compete for market share. As E-band spectrum bandwidth starts to fill, the focus will move to other frequency bands such as W-band and D-band. The telecommunications market has historically led technology waves so these technological developments will be a key focus of our own technology roadmaps.
Our relevance to new and prospective customers and the unique selling point we offer is our ability to design, develop and manufacture a turn-key solution to a high-quality standard. We ramp production quickly and in sufficiently large volumes bringing an ethos that fundamentally differentiates us from our competitors who do not have the heritage of rapid turnaround and large-scale manufacture.
Investing in the right areas of the business, to deliver this sustainable financial growth is a constant balancing act. To be successful in our chosen markets we need to be agile, recognising that we may need to adapt strategy in response to the fast-paced nature of the communications technology. The desire of our prospective customers in terrestrial and space communication to get, or stay, ahead of their competitors means we must be responsive in order to thrive. Therefore, building and developing the engineering organisation is critical as we seek to develop our technology roadmaps, undertake customer developments and service the opportunity pipeline. Rapid execution of product development with high quality products and solutions will remain a key focus for the Group.
Financial Performance Summary
Group sales decreased in the year by 5% to GBP16.3m (FY2022: GBP17.1m).
The reduction in sales and a weaker sales mix, with a higher concentration of revenue from price sensitive telecommunications infrastructure, led to an Adjusted operating profit of GBP0.2m (2022: GBP1.6m) and operating profit of GBP0.2m (2022: GBP2.0m).
The Group closed the year with GBP2.6m of cash at bank (2022: GBP4.0m) in addition to the availability of undrawn working capital debt facilities in the UK (GBP3.0m with Barclays) and the USA ($4.0m with Wells Fargo).
The Group's net cash position, including all debt except right of use property leases, was GBP1.6m at the end of the financial year (2022: GBP3.1m). Net cash including right of use property leases was GBP0.3m (2022: GBP2.2m).
Dividend
As with previous years, the Board continues to believe shareholders are better served by cash being retained in the business to fund future business development. Consequently, no dividend is proposed for the year (2022: GBPnil).
Environmental, Social and Governance ("ESG")
We are committed to building a sustainable business for the future, delivering consistent financial returns and long-term value for all our stakeholders. We formalised our ESG strategy in the year, which has been developed with an emphasis on supporting the wider corporate strategy. Key elements include building an organisation fit for the future by supporting STEM skills, continuing with our established graduate programme, augmented with a new apprenticeship initiative. We will also minimise our impact on the environment with lower energy consumption and waste. Full details of the ESG strategy and objectives can be found on the Filtronic website at https://filtronic.com/investors/esg-strategy/ .
Outlook
The markets we serve offer strong growth prospects and we remain confident, given the opportunities that are being generated, that we can execute against our strategic plans and build a business for all our stakeholders to be proud of. Key milestones have been met against our core objectives in the year, with stronger commercial engagement, innovative product solutions, well-aligned technology roadmaps and robust business systems, and we therefore look forward to FY2024 with enthusiasm and excitement.
Whilst the macro-economic environment remains uncertain, we are well equipped to navigate through it with a stronger business. We will further strengthen our sales and engineering organisations in the year to capitalise on near term market opportunities.
I would like to finish by thanking all our stakeholders for the ongoing support, and our talented employees who have continued to respond positively with exceptional commitment. It is with their dedication, hard work and skill that we will continue to drive the performance of the business.
Jonathan Neale
Chairman
31 July 2023
Chief Executive's review
I am pleased to present our full year results for FY2023, and with it a reflection on the last 12 months, during which we have made significant progress against the primary objective of creating sustainable growth in our strategic markets of aerospace and defence, space and terrestrial telecommunications infrastructure. Despite the faltering global economy, the trading environment for Filtronic throughout the last financial year has generally been favourable. It was only the availability of critical semiconductor products in Q3 and Q4 that limited our ability to maximise revenues prior to the financial year end. Notwithstanding the challenges imposed by the breakdown in the global semiconductor supply chain, we ended the year with revenues of GBP16.3m (FY2022: GBP17.1m), broadly in line with market expectations.
Confident of the potential for Filtronic technology in our chosen strategic markets we have continued to invest in our long-term future by strengthening our business development and engineering teams throughout the year. This increased investment is reflected in our Adjusted EBITDA of GBP1.3m (2022: GBP2.8m) and cash at bank of GBP2.6m (2022: GBP4.0m). The initial return on this investment is evidenced by the release of several new high-power telecommunication infrastructure and space products, for which we have already been successful in achieving initial customer order commitment. We end the year with a healthy number of new product developments in the engineering pipeline, and a well-defined technology roadmap aligned with customer and market requirements.
Over the last 12 months I have seen first-hand the strength of relationships with Filtronic's strategic accounts, who are amongst the market leaders in each of our addressable markets. I have been delighted with the development of our technology roadmaps and the progress made in strategic programmes that will yield products for the next generation of telecommunication backhaul communications and electronic warfare ("EW") solutions. I have also been pleased with the progress made in opening exciting new applications such as our breakthrough into the low earth orbit ("LEO") space market.
Radio frequency ("RF") design is a complex and fast developing engineering discipline. With our global reputation, combined with over 45 years of innovative IP development, we continue to see a growing number of prospective customers wanting to engage our services in the design and manufacture of next generation RF products. Our ability to undertake rapid cutting-edge RF design, and subsequently scale the manufacturing of mmWave products, enables customers to drive performance and accelerate time to market. This combination of technical competence and agility is a significant competitive advantage for customers in the telecommunication and LEO space markets.
A strong balance sheet has enabled us to continue to build on investments made at our Sedgefield manufacturing site. The addition of state-of-the-art equipment for rapid process and product development has significantly enhanced our ability to efficiently bring new products to market in line with customers' expectations. The ability to develop engineering prototypes and create new manufacturing processes without the need to disrupt the volume manufacturing lines has greatly improved delivery of engineering programmes and eased the transition from prototype to mass production.
Talented people remain at the heart of our ability to deliver leading edge products and future business growth. We have made significant efforts this year to find and recruit the key skills required to realise our growth ambitions. To further penetrate our strategic markets, we strengthened our business development team with the addition of seasoned industry experts with a strong track-record of sales delivery. We have also been successful in hiring high-calibre RF engineers for our new design office in Manchester and this team is now specifically engaged in addressing opportunities in the emerging space and telecommunication infrastructure market.
Customers and Markets
Our stated mission at Filtronic is to drive the future of RF, microwave and mmWave communications and we have aligned the business to focus efforts on four strategic vertical markets that we believe have good growth potential and a strong alignment with our RF capabilities. We have been careful to select applications where we could add significant value, drive sustainable margins, reuse existing IP, and leverage the investments in our existing hybrid manufacturing capability. We are also mindful to avoid commodity markets and consumer applications with low barriers to entry that offer little in the way of RF technology development.
Our selected strategic growth markets are aerospace & defence particularly EW and battlefield communications, terrestrial telecoms for 5G backhaul, and gateway connectivity for LEO space communications. All of the strategic markets have continued to invest in the development of RF technology over the year, with a consistent drive towards higher power, lower latency, and improved bandwidth applications where Filtronic can apply know-how and product development expertise.
The aerospace market has long been a steady revenue contributor to our business and this year we have expanded our footprint in the Active Electronically Scanned Array ("AESA") radar market by capturing several related filter design opportunities that position us well for strategic radar programmes that will come in the next five years. We have continued to make inroads into the UK defence market with several successful engagements with Defence Science Technology Laboratories ("DSTL") following successful delivery of our first battlefield communications product in FY2022. We were successful in winning an additional two DSTL programmes in FY2023 and both of these programmes align us closer with UK MoD's strategic requirements.
5G telecommunication infrastructure deployment continues around the world, and critical to true 5G performance is the quality and reliability of high frequency backhaul communications. Filtronic's E-band transceivers are designed to deliver cost-effective, multi-gigabit connectivity for mobile backhaul networks, in geographies where the E-band frequency has been licenced and individual countries make the E-band frequency available for use. India licenced E-band frequencies in 2022 as part of its long awaited 5G roll-out and Filtronic took benefit of stock orders from our lead customer to cover what is expected to be a sustained period of demand for backhaul products. Recent concerns associated with the solvency of the licenced telecom operators in India, together with surplus inventory from the stalled 5G roll-out in Russia will inevitably result in some order book demand to be rescheduled. However, the long-term potential in India remains significant. Recent orders for high-power high-frequency trading modules, private network E-band modules and custom power amplifier solutions suggest that there are several interesting adjacent market opportunities for Filtronic's core telecommunication technology.
The LEO space market is growing rapidly as the costs associated with the launch and deployment of satellite technology continues to fall. Well-funded, global corporations and ambitious regional start-up companies are racing to build constellations of satellites that will accelerate the delivery of broadband services across the globe. Ultimately these LEO networks will converge with the established terrestrial telecommunication networks to provide high-speed, low-latency ubiquitous broadband connectivity. Filtronic's reputation as a supplier of compact, highly integrated, and extremely reliable telecommunication backhaul solutions has positioned us well to respond to the aggressive timelines demanded by the leading players in the LEO space market. The ability to design and build scalable solid state power amplifiers ("SSPAs") at multiple frequency bands enabled Filtronic to win initial production orders for the deployment of the first LEO space E-band backhaul communication links during the year. We will look to build on this initial market success by strengthening customer relationships and focusing on the delivery of our technology roadmap over the next 24 months.
Achievements
There have been several notable achievements over the last year which set the potential for sustainable growth and future revenues, some of which are as follows:
-- Our first development of an E-band SSPA module for the market leader in LEO space communications.
-- Secured production orders and enabled the launch of the Morpheus X2 E-band transceiver that more than doubles the transmission range of current 5G backhaul radio links.
-- Taking advantage of new semiconductor process IP we launched a series of prototype chip developments in CY2023 with promising results
-- We secured our second and third DSTL programmes in FY2023 and continued to build our relationship as a supplier of turnkey RF solutions to the UK MoD.
-- Focusing on our filter design expertise we secured orders in EW, air and shipborne radar, battlefield communications and emerging quantum computing applications.
-- Secured three separate programmes for custom high-performance E-band transceivers in private network applications associated with private data communications and high-frequency trading platforms.
Outlook
We operate in a period of economic and geopolitical uncertainty, but one in which our technology is in demand, and the expertise we offer is in short supply. Our strategic markets are well positioned for growth and our lead customers continue to invest in next generation RF solutions. The disruption to semiconductor supply chains that impacted our business in FY2023 are improving, and we feel that we now have the resources and skills necessary to look forward with optimism to the new trading period.
Filtronic's core markets represent industry verticals that have a robust outlook and align well with the needs of the post-pandemic world. Public safety, mobile communications, a sovereign defence capability and the rapid development of LEO space networks, are well funded sectors that resonate with governments, investors, and the public at large.
Business plans for FY2024 reflect our confidence in the markets we serve to deliver long term sustainable growth. We have an open and honest culture that is proactive and highly motivated to deliver excellence in all aspects of our business. We will further develop our prospects over the next 12 months with a focus on the following activities:
-- Maximise the opportunity associated with the fast-growing LEO Space backhaul communications market, including both ground station and payload applications.
-- Development of next generation MMIC designs that will enable us to continue the evolution of our mobile telecom backhaul solutions.
-- Develop our scalable Cerus power amplifier platform to maximise the range of power options at selected frequency bands required for LEO space communication links.
-- Champion the UK Government National Semiconductor Strategy and position Filtronic as a trusted sovereign supplier of advanced RF packaging solutions.
-- Develop our manufacturing capability to add plastic encapsulated devices to our portfolio of hybrids and SiP solutions.
-- Selectively target funding from agencies and UK Government initiatives that support and underpin the delivery of the Filtronic technology roadmap.
-- Continued investment in our marketing activities including enhanced web content and strategic use of social media platforms for targeted marketing.
-- Strengthen the sales organisation with the deployment of direct sales and business development resource in the UK and Western Europe and expand indirect channels in the USA and Europe through distribution and representative networks.
-- Consolidate the return on the investment in capital equipment by winning outsourced assembly and test ("OSAT") opportunities with customers who require specialist hybrid and plastic QFN packaging capability.
-- Continue to align our business processes and equip our facilities to achieve the accreditation necessary to undertake a higher level of UK defence programmes.
I am pleased with the progress that the business has made in the last financial year and remain excited by the potential that exists at Filtronic. There is an increasing demand for our high-performance products and unique RF design capabilities, and based on our investments in FY2023, I believe we are building the IP portfolio, resources, and expertise necessary to scale the business. The specific market segments that we have identified for growth continue to develop at pace and as we embark on a new financial year, I believe we are well placed to deliver long term shareholder value.
Richard Gibbs
Chief Executive Officer
31 July 2023
Financial review
Notwithstanding a heavy focus on top-line growth, another successive year of profit generation enabled further investment to achieve key strategic objectives, despite macro-economic headwinds and well documented industry-wide semiconductor shortages.
Good progress continues to be made by the Group with Adjusted EBITDA generation delivering GBP1.3m (2022: GBP2.8m) for the year, in line with market expectations. We maintained investment into the business, particularly in the areas that will drive growth as we capitalise on the opportunities within our core markets. We are in the fortunate position of continuing to see growth prospects in our core sectors, when many markets are struggling with well documented economic and political uncertainty. Given the elevated pipeline of new business, we will maintain our focus on those that offer a high rate of return and deliver shareholder value in the coming year.
Revenue
Had it not been for the widely publicised global semiconductor component shortages, this report would have been heralding another year of revenue growth. Having navigated the global semiconductor component shortage crisis exceptionally well since the issue first surfaced a couple of years ago, it was frustrating that a couple of niche component parts brought output of a core product offering to a halt in Q3 of the financial year. This was a direct result of the semiconductor supplier prioritising output of more widely consumed parts to other markets, resulting in reschedules from the supplier that could not be mitigated. The consequence of this was an annual revenue decrease of 5% to GBP16.3m (2022: GBP17.1m). During the year, sales into the telecommunications infrastructure market performed particularly well whilst we were delighted to receive an order from a market leading player in the LEO space market, of which a substantial amount was realised in FY2023.
We are pleased that the pipeline continues to build, particularly in aerospace and defence and the emerging market of space. A key strategic objective of the business has been to broaden our customer base, and this is evidenced in the year by the decrease in the revenue concentration of our three largest customers to 73% (2022: 81%), whilst we now have four (2022: three) customers each generating over 10% of our revenue and in total 85%.
Sales to the telecommunications infrastructure market were particularly strong this year as the pace of 5G backhaul rollouts accelerated, thanks in part to the release of E-band spectrum by governments around the world. This led to sales to this sector increasing year-on-year by 40%. This stronger demand can, in some part, be apportioned to inventory stocking at our lead customer to enable them to flex to demand requirements if they are successful in the Indian market where E-band has recently been licenced.
Sales of Xhaul products to other markets, including the space market, were up 57% on the prior year mainly due to the new customer win in the LEO space market. The contract win enabled us to deliver further growth within our E-band and derivative technology products. This is an exciting and emerging market for us, where our technology and expertise is highly relevant. The initial contract from a major LEO player, valued at GBP2.3m, to undergo a trial in the ground station using E-band technology, demonstrates the attractiveness of our capability. Our ability to ramp and manufacture rapidly to keep the pace with this fast-moving market gives us a competitive advantage relative to traditional suppliers to the space industry.
Sales of aerospace & defence products saw a year-on-year reduction of 41%, partly as a result of supply issues pushing shipments into FY2024, but mainly due to a hiatus in supply of an established programme that ended in the previous financial year. This market remains critical to our growth plans, and despite the reduction, we continue to see contract wins for development work. DSTL is the MoD's framework to engage with SMEs, and we were delighted to win two new contracts in the year on this platform with revenue from both programmes recognised in the year.
The legacy products supplied into the critical communications market were impacted by upstream component issues within the system-level product. This resulted in a decrease of revenue to this market of 20%. This trend is expected to reverse in FY2024, with demand restored to normalised levels, which we anticipate will provide an uplift in revenue in the next financial year. The TTA product continued to perform well, having exceeded our expectations in the prior year. We won more market share in the year and grew our brand profile with key customer teams. We also won a number of other contracts to this market outside of our lead customer, through both our direct and indirect sales channels.
Operating costs and headcount
Operating costs increased by 6% in the year to GBP10.0m (2022: GBP9.4m) as overheads were controlled tightly in the administrative areas of the business to enable us to continue investing in engineering and sales and marketing resource which will drive business growth.
The Group's largest overhead is salary-related costs, representing nearly 70% of the operational cost base, which increased by GBP0.4m (7%). Whilst maintaining headcount at a similar level to the prior year we did change the mix of employees during the year with recruitment of employees in revenue generating functions such as engineering and business development that generally attract a higher salary. These increases were partly offset by improvements in manufacturing efficiencies and further automation of operating processes.
The recruitment of business development resource strengthens our direct channel to market and is key to capitalising on opportunities in the high growth markets we operate within. Continuing the investment into engineering is critical and it was pleasing to see that we not only increased the number of engineers, but they bring valuable expertise and experience, which has significantly upskilled the team. This enables us to service a larger opportunity pipeline, increase the number of product developments for customers and expand our technology roadmap to position us well to execute our strategic plans.
Given this shift, there was a slight increase in the total number of employees in the Group during the year which is reflected in the average headcount increasing to 125 (2022: 124). An analysis of the Group's average headcount is presented below:
Number 2023 2022 -------------------------- ----- ----- Manufacturing 74 78 Research and development 31 26 Sales and marketing 7 5 Administration 13 15 Total headcount 125 124 -------------------------- ----- -----
We are planning to add further business development resource in FY2024, to augment our direct access to market, whilst we also plan to bring in additional engineering resource to deliver scheduled programmes and accelerate new product delivery. Investment in our engineering teams is critical to sustainable financial growth and we plan to maintain this spend at around 12% or more of revenue. This will ensure we have the resource in place to capitalise on growth opportunities and keep ahead of our competitors with the latest technology.
Other costs were managed tightly throughout the year with cost savings of GBP0.2m realised in administrative functions.
The Group has also been highly active in grant funding channels to further support growth initiatives and investment. Whilst other operating income reduced against the prior year, as we previously received Covid business support from the US government, we have had a number of successes over recent years with capital grants towards key pieces of machinery. Looking forward, we are putting increased effort into securing revenue grants to help fund our technology roadmaps.
A large portion of our product development in the year was customer funded which maintained a healthy flow of cash during the development phase of the engineering projects. However, we also invested our own money in developing products as part of our technology roadmap, particularly to develop solutions for the space market as well as Morpheus X2 to give our customers higher power in telecommunications infrastructure. Consequently, we capitalised GBP0.5m of development costs in the year. Further commentary on these capitalised development costs can be seen in the Research and Development section of this review.
Adjusted EBITDA
The Group utilises an alternative performance measure ("APM") to track performance of the business. This APM is Adjusted EBITDA as it measures the quality of earnings without the impact of exceptional items and non-cash expenses such as depreciation and amortisation. Adjusted EBITDA for the year was GBP1.3m (2022: GBP2.8m) representing a 55% decrease whilst Adjusted operating profit was GBP0.2m (2022: GBP1.6m) representing an 85% decrease. This was the result of weaker gross profit from lower revenue, and a weaker sales mix due to lower representation of high margin aerospace and defence revenue and higher representation of 5G telecommunications equipment which is a price sensitive market.
The table below shows the reconciliation of operating profit delivered at GBP0.2m (2022: GBP2.0m) and to Adjusted EBITDA.
2023 2022 Reconciliation of operating profit GBP000 GBP000 to Adjusted EBITDA ------------------------------------ ------- ------- Operating profit 237 1,975 Exceptional items - (391) ------------------------------------ ------- ------- Adjusted operating profit 237 1,584 Depreciation 780 945 Amortisation 253 278 ------------------------------------ ------- ------- Adjusted EBITDA 1,270 2,807 ------------------------------------ ------- -------
Taxation
A tax credit of GBP0.4m (2022: tax charge of GBP0.4m) was recognised in the year as a previously unrecognised deferred tax asset was realised given the directors expect to utilise more of the deferred tax asset in future periods. The Group also benefits from R&D tax credits given the development of new technology which lowers the amount of taxable profit.
With substantial deferred tax assets, including those not recognised on the balance sheet, the Group will continue to benefit from not having a tax liability for the foreseeable future.
Research and development costs ("R&D")
Total R&D costs in the year before capitalisation and amortisation of development costs were GBP2.0m (2022: GBP1.7m). The Group incurred engineering costs on a mixture of customer funded developments and development of our own technology roadmap.
The Group remains committed to investing in R&D for future growth and consequently measures R&D spend as a KPI. Key areas of spend in the year included product development for each of our key growth markets spanning telecommunications infrastructure, aerospace and defence, space and development of capability at new frequency bands including Q, V and W-band. The year ahead will see us continue to invest in the development of our own strategic technology roadmap and proprietary IP enabling us to build long-term shareholder value in the years ahead.
Recruitment of RF engineers has been an industry-wide issue for some time, but we are pleased with recent successes in attracting new talent to the business at each of our three UK engineering development sites. We will augment this by building an organisation fit for the future, maintaining our graduate recruitment scheme and adding a new apprenticeship programme.
The Group capitalises its development costs in line with IAS 38 as set out in note 1 to the financial statements. A reconciliation of R&D costs before capitalisation and amortisation can be seen in the table below:
2023 2022 Reconciliation of R&D costs GBP000 GBP000 ----------------------------------- ------- ------- R&D costs in income statement 1,776 1,937 Capitalisation of development 481 - costs Amortisation of development costs (222) (259) ----------------------------------- ------- ------- R&D cash spend 2,034 1,678 ----------------------------------- ------- -------
Capital expenditure and right of use assets
Capital expenditure increased significantly in the year, with a large element of investment occurring in Q4 of the financial year. The total amount of capital purchased was GBP1.5m (2022: GBP0.6m) with investment made into QFN plastic packaging equipment and engineering test systems suitable for operating at frequency bands important for space applications utilising Q and V-band.
Warranty provision
In line with industry practice, the Group provides warranties to customers over the quality and performance of the products it sells. Reflecting a full risk analysis of current commercial contracts at 31 May 2023, the warranty provision was GBP0.3m (2022: GBP0.1m).
Funding and cash flow
The Group recorded a decrease in cash and cash equivalents to GBP2.6m (2022: GBP4.0m) at the year-end. Cash generated from operating activities in the year was GBP1.0m (2022: GBP2.3m) as Adjusted EBITDA performance drove cash generation offset by increased working capital requirements.
Net cash, when including all debt except property leases at the end of the period, was GBP1.6m (2022: GBP3.1m), whilst overall net cash including property leases was GBP0.3m (2022: GBP2.2m).
We also have additional cash headroom available through a GBP3.0m invoice discounting facility with Barclays Bank plc in the UK and a $4.0m invoice factoring facility with Wells Fargo Bank in the USA. Both facilities were undrawn at 31 May 2023 (2022: undrawn) and will need renewing within 12 months of the date of signing the Annual Report.
Going concern
In assessing going concern, the Board have considered:
-- The principal risks faced by the Group which are discussed within the 'Risk management' section of the Annual Report;
-- The financial position of the Group including forecasts and financial plans;
-- The healthy cash position at 31 May 2023 of GBP2.6m (2022: GBP4.0m) and the additional headroom available through the undrawn invoice discounting facilities and overdraft (2022: undrawn);
-- Global semiconductor component shortages impacting supply chains and the potential for customer orders to remain unfulfilled for prolonged periods; and
-- The economic headwinds the world is facing with the potential for customers to reassess their priorities, with opportunities postponed or curtailed.
Following the above considerations, the Directors are satisfied that the Group has adequate financial resources to continue in operational existence for a period of at least 12 months from the date of this report. Accordingly, the going concern basis has been adopted in the preparation of the Annual Report for the year ended 31 May 2023.
Michael Tyerman
Chief Financial Officer
31 July 2023
The Board
The directors that served during the year ended 31 May 2023, and to the date of this announcement, and their respective roles are set out below:
Jonathan Neale (Non-Executive Chairman)
Richard Gibbs (Chief Executive Officer)
Michael Tyerman (Chief Financial Officer)
Pete Magowan (Non-Executive Director)
John Behrendt (Non-Executive Director)
Consolidated Income Statement
for the year ended 31 May 2023
2023 2022 Note GBP000 GBP000 Revenue 2 16,268 17,052 ====== ====== Adjusted Earnings before interest, taxation, depreciation, amortisation and exceptional items 1,270 2,807 Amortisation of intangible assets (253) (278) Depreciation of property, plant and equipment and right of use assets (780) (945) ---------- ---------- Adjusted operating profit 237 1,584 Exceptional items - 391 ---------- ---------- Operating profit 237 1,975 Finance costs 3 (231) (194) Finance income 58 111 ---------- ---------- Profit before taxation 64 1,892 Taxation 5 400 (424) ---------- ---------- Profit for the year 464 1,468 ====== ====== ---------- ---------- Basic earnings per share 4 0.22p 0.68p Diluted earnings per share 4 0.21p 0.68p ====== ======
The profit for the year is attributable to the equity shareholders of the parent company, Filtronic plc.
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2023
2023 2022 GBP000 GBP000 Profit for the year 464 1,468 ---------- ---------- Other comprehensive income Items that are or may be subsequently reclassified to profit and loss: Currency translation movement arising on consolidation (1) 179 ---------- ---------- Total comprehensive income for the year 463 1,647 ====== ======
The total comprehensive income for the year is attributable to the equity shareholders of the parent company Filtronic plc.
All income recognised in the year was generated from continuing operations.
Consolidated Balance Sheet
at 31 May 2023
2023 2022 Note GBP000 GBP000 Non-current assets Goodwill and other intangible assets 1,774 1,495 Right of use assets 2,889 2,293 Property, plant and equipment 1,446 701 Deferred tax 1,254 868 ---------- ---------- 7,363 5,357 ---------- ---------- Current assets Inventories 2,778 2,598 Trade and other receivables 5,335 4,479 Cash and cash equivalents 2,610 4,006 ---------- ---------- 10,723 11,083 ---------- ---------- ---------- ---------- Total assets 18,086 16,440 ---------- ---------- Current liabilities Trade and other payables 3,673 2,993 Provisions 364 282 Deferred income 164 172 Lease liabilities 617 540 ---------- ---------- 4,818 3,987 ---------- ---------- Non-current liabilities Deferred Income 29 130 Lease liabilities 1,698 1,280 ---------- ---------- 1,727 1,410 ---------- ---------- ---------- ---------- Total liabilities 6,545 5,397 ---------- ---------- ---------- ---------- Net assets 11,541 11,043 ---------- ---------- Equity Share capital 6 10,796 10,796 Share Premium 7 11,077 11,060 Translation Reserve (470) (471) Retained earnings (9,862) (10,342) --------- ---------- Total equity 11,541 11,043 ====== ======
The total equity is attributable to the equity shareholders of the parent company Filtronic plc.
Company number 2891064
Richard Gibbs
Chief Executive Officer
Consolidated Statement of Changes in Equity
for the year ended 31 May 2023
Share Share premium Translation Retained Total capital reserve earnings equity GBP000 GBP000 GBP000 GBP000 GBP000 Balance at 1 June 2021 10,795 11,039 (650) (11,826) 9,358 Profit for the year - - - 1,468 1,468 New shares issued 1 21 - - 22 Currency translation movement arising on consolidation - - 179 - 179 Share-based payments - - - 16 16 ---------- ---------- ---------- ---------- ---------- Balance at 31 May 2022 10,796 11,060 (471) (10,342) 11,043
Profit for the year - - - 464 464 New shares issued - 17 - - 17 Currency translation movement arising on consolidation - - 1 - 1 Share-based payments - - - 16 16 ---------- ---------- ---------- ----------- ---------- Balance at 31 May 2023 10,796 11,077 (470) (9,862) 11,541 ====== ====== ====== ======= ======
Consolidated Cash Flow Statement
for the year ended 31 May 2023
2023 2022 GBP000 GBP000 Cash flows from operating activities Profit for the year 464 1,468 Taxation (400) 424 Finance income (58) (111) Finance costs 231 194 ---------- ---------- Operating profit 237 1,975 Share-based payments 16 16 Depreciation of property, plant and equipment and right of use assets 780 945 Amortisation of intangible assets 253 278 Movement in inventories (157) (273) Movement in trade and other receivables (833) (1,100) Movement in trade and other payables 665 550 Movement in provisions 82 (115) Change in deferred income (109) (10) Tax received 16 19 ---------- ---------- Net cash generated from operating activities 950 2,285 ---------- ---------- Cash flows from investing activities Capitalisation of development costs (481) - Acquisition of other intangible assets (51) (57) Acquisition of plant and equipment (946) (61) Acquisition of right of use assets (53) (132) Interest received 9 - ---------- ---------- Net cash used in investing activities (1,522) (250) ---------- ---------- Cash flows from financing activities Interest paid (231) (194) Repayment of bank loans - (131) Exercise of employee share options 17 22 Repayment of principle element of lease liabilities (626) (653) Repayment of interest-bearing borrowings - (8) ---------- ---------- Net cash used in financing activities (840) (964) ---------- ---------- Movement in cash and cash equivalents (1,412) 1,071 Currency exchange movement 16 29 Opening cash and cash equivalents 4,006 2,906 ---------- ---------- Closing cash and cash equivalents 2,610 4,006 ====== ======
Notes to the Preliminary Financial Information
for the year ended 31 May 2023
1 Basis of Preparation
These preliminary results have been prepared on the basis of the accounting policies which are to be set out in Filtronic plc's Annual Report and financial statements for the year ended 31 May 2023.
Whilst the information included in this preliminary announcement has been prepared on the basis of International Accounting Standards in conformity of the requirements of the Companies Act 2006 as applicable to companies reporting under those standards, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements within two months of this announcement.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 May 2023 or 31 May 2022. The financial information for 2022 is derived from the statutory accounts for 2022 which have been delivered to the registrar of companies. The auditor has reported on the 2023 accounts; their report was:
(i) unqualified
(ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for FY2023 were finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.
Going Concern
In accordance with corporate governance requirements and the statement of directors' responsibilities, and
as disclosed in the Directors' Report, the directors have undertaken a review of forecasts and the Group's cash requirements to consider whether it is appropriate that the Group continues to adopt the going concern assumption.
At 31 May 2023, the Group had cash at bank of GBP2.6m and access to undrawn invoice discounting facilities of
GBP3.0m and $4.0m in the UK and US respectively. The Board recognises the uncertain economic and political environment that the world faces and has reviewed the business outlook to reflect this uncertainty. Cash flow forecasts have been prepared to model various scenarios over a three-year period based on the Group's financial and trading position, principal risks and uncertainties and strategic plans.
A downside scenario was modelled, to stress-test the business, where programme curtailment and/or delays may adversely affect forward-looking demand to levels lower than those initially modelled in the base case scenario including reduced demand from a major customer. A severe but plausible scenario was also modelled that took the downside scenario and removed a significant contract win that the Group expected to convert from the outlook period.
The scenarios modelled including the severe but plausible model, demonstrate the Group has adequate cash for the next twelve months. Therefore, the directors continue to adopt the going concern basis to prepare the financial statements.
New Accounting Standards
There are a number of new standards, including, amendments to standards and interpretations that are effective for financial statements after this reporting period, but the Group has not adopted them early. None of these are expected to have a material impact on the results or financial position of the Group.
Notes to the Preliminary Financial Information
for the year ended 31 May 2023
2 Segmental analysis
IFRS 8 requires consideration of the identity of the chief operating decision maker ('CODM') within the Group. In line with the Group's internal reporting framework and management structure, the key strategic and operating decisions are made by the Chief Executive Officer who reviews internal monthly management reports, budget and forecast information as part of this. Accordingly, the Chief Executive Officer is deemed to be the CODM.
The CODM has identified one operating segment within the Group as defined under IFRS 8. In turn, this is the only reportable segment of the Group as the entities in the Group have similar products and services, production processes and economic characteristics. Therefore, there is no allocation of operating expenses, profit measures or assets and liabilities to specific commercial markets.
Accordingly, the CODM assesses the performance of the operating segment on financial information which is measured and presented in a manner consistent with those in the financial statements by reference to Group results against budget.
The Group profit measures are adjusted operating profit and adjusted EBITDA, both disclosed on the face of the consolidated income statement. No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial statements.
The Group has four customers representing individually over 10% of revenue each and in aggregate 85% of revenue. This is split as follows:
-- Customer A - 34 % (2022: 36%)
-- Customer B - 22 % (2022: 23%)
-- Customer C - 17 % (2022: 22%)
-- Customer D - 12 % (2022: 0%)
Revenue by destination Total 2023 2022 GBP000 GBP000 United Kingdom 4,762 7,489 Europe 2,600 3,421 Americas 5,711 5,313 Rest of the World 3,195 829 ---------- ---------- 16,268 17,052 ====== ====== Split of non-current assets by location 2023 2022 GBP000 GBP000 United Kingdom 6,925 5,109 Americas 438 248 --------- --------- 7,363 5,357 ====== ======
Non-current assets relate to property, plant and equipment, right of use assets, goodwill and other intangible assets and deferred tax.
Notes to the Preliminary Financial Information
for the year ended 31 May 2023
3 Finance costs Year Year Ended Ended 31 May 31 May 2023 2022 GBP000 GBP000 Interest expense for lease agreements 139 127 Minimum service costs and interest charges on invoice discounting facilities 92 67 ---------- ---------- 231 194 ====== ====== 4 Earnings per share Total Group 2023 2022 GBP000 GBP000 Profit for the year 464 1,468 ====== ====== '000 '000 Basic weighted average number of shares 215,121 214,726 Dilution effect of share options 1,358 868 ---------- ---------- Diluted weighted average number of shares 216,479 215,594 ---------- ---------- Basic earnings per share 0.22p 0.68p Diluted earnings per share 0.21p 0.68p ====== ======
Notes to the Preliminary Financial Information
for the year ended 31 May 2023
5 Taxation
The reconciliation of the effective tax rate is as follows:
2023 2022 GBP000 GBP000 Profit before taxation 64 1,892 ====== ====== 2023 2022 GBP000 GBP000 Profit before taxation multiplied by the average standard rate of corporation tax in the UK - 20% (2022: 19%) 13 359 Disallowable items 46 155 Deferred tax asset not recognised 30 194 Enhanced R&D tax credit (89) (270) Adjustment in respect of prior year - R&D tax credit (32) (24) Foreign tax not at UK rate 18 15 (Recognition)/derecognition of deferred tax asset (386) 104 Rate change of deferred tax - (109) --------- --------- Taxation (400) 424 ====== ======
The main rate of UK corporation tax was 19% for the first 10 months of the year, although the corporation tax rate increased to 25% on 1 April 2023 for companies with profits above GBP250,000. Consequently, the average rate of corporation tax for the year was 20%. The US federal corporate tax rate is 21%.
The deferred tax assets recognised in the year have been calculated at the rates expected to be in existence in the period of reversal.
Notes to the Preliminary Financial Information
for the year ended 31 May 2023
6 Share Capital Deferred shares Ordinary shares of 10p each of 0.1p each issued and fully paid Number '000 Number '000 GBP000 At 1 June 2021 106,877 214,415 10,795 Exercise of share options - 383 1 ------------ -------------- --------- At 31 May 2022 106,877 214,798 10,796 Exercise of share options - 323 - ------------ ------------ ----------- At 31 May 2023 106,877 215,121 10,796 ======== ======== ======
All shares are allotted, called up and fully paid. Holders of the ordinary shares are entitled to receive dividends when declared and are entitled to one vote per share at meetings of the Company.
The deferred shares have no rights to vote or receive dividends.
7 Share Premium GBP000 At 1 June 2021 11,039 ------------ Exercise of share options 21 ------------ ----------- --- ------------ At 31 May 2022 11,060 ------------ Exercise of share options 17 ------------ ----------- ------------ At 31 May 2023 11,077 ------------ ======= --- ------------ 8 Dividends
The directors are not proposing to pay a dividend for the year ended 31 May 2023 (2022: GBPnil).
Notes to the Preliminary Financial Information
for the year ended 31 May 2023
9 Analysis of net cash 31 May Cash Other movements 31 May 2022 Flow 2023 GBP000 GBP000 GBP000 GBP000 ---------- ---------- ---------------- ---------- Cash and cash equivalents 4,006 (1,412) 16 2,610 ---------- ---------- ---------------- ---------- Lease liabilities - plant and equipment (863) 419 (576) (1,020) ---------- ---------- ---------------- ---------- --------- --------- --------- --------- ---------- ---------- ---------------- ---------- Net cash when including all debt except property leases 3,143 (993) (560) 1,590 ---------- ---------- ---------------- ---------- Lease liabilities - property leases (957) 346 (684) (1,295) ---------- ---------- ---------------- ---------- --------- --------- --------- --------- ---------- ---------- ---------------- ---------- Net cash 2,186 (647) (1,244) 295 ---------- ---------- ---------------- ---------- ====== ====== ====== ====== ---------- ---------- ---------------- ----------
Reconciliation of cash flow to movement in net cash
2023 2022 GBP000 GBP000 Movement in cash and cash equivalents (1,412) 1,071 Movement in bank loans - 131 Movement in lease liabilities - plant and machinery (157) (28) Movement in lease liabilities - property lease (338) 228 Effect of exchange rate fluctuations 16 29 ---------- ---------- Movement in net cash (1,891) 1,431 Net opening cash 2,186 755 ---------- ---------- Net closing cash 295 2,186 ====== ======
Cash at bank earns interest at floating rates based on daily bank deposit rates. There are no restrictions on the availability of the cash and cash equivalents at 31 May 2023 (2022: GBPnil).
IFRS 16 requires the recognition of property leases on the balance sheet which is classified as a debt item.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
FR DGGDRXDXDGXB
(END) Dow Jones Newswires
August 01, 2023 02:00 ET (06:00 GMT)
1 Year Filtronic Chart |
1 Month Filtronic Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions