Last close As at 05/08/2026
GBP2.42
▲ 9.00 (3.86%)
Market capitalisation
GBP533m
Research: TMT
Filtronic’s post-close trading update notes that FY22 revenues will be broadly in line with market expectations, rising by 10% y-o-y to £17.1m. In addition, adjusted EBITDA will be materially ahead of market expectations at over £2.7m, mainly reflecting a higher-than-expected proportion of defence revenues. We adjust our FY22 estimates accordingly and leave our FY23 estimates unchanged.
Written by
Filtronic |
Recovery continues throughout H222 |
Trading update |
Tech hardware and equipment |
20 June 2022 |
Share price performance
Business description
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Analysts
Filtronic is a research client of Edison Investment Research Limited |
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Filtronic’s post-close trading update notes that FY22 revenues will be broadly in line with market expectations, rising by 10% y-o-y to £17.1m. In addition, adjusted EBITDA will be materially ahead of market expectations at over £2.7m, mainly reflecting a higher-than-expected proportion of defence revenues. We adjust our FY22 estimates accordingly and leave our FY23 estimates unchanged.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
05/20 |
17.2 |
1.2 |
0.1 |
0.05 |
0.00 |
188.8 |
05/21 |
15.6 |
1.8 |
0.1 |
0.14 |
0.00 |
67.4 |
05/22e |
17.1 |
2.7 |
1.5 |
0.67 |
0.00 |
14.1 |
05/23e |
19.0 |
2.1 |
0.9 |
0.42 |
0.00 |
22.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Recovery in customer demand sustained
Filtronic’s 5G XHaul transceiver sales picked up in Q222 when the supply chain issue was resolved, and remained at a higher level throughout H222. Demand from the aerospace and defence market was resilient, with Filtronic benefitting from follow-on orders for development programme wins secured during FY21. However, while end-user demand for critical communications equipment remained strong, Filtronic’s customer was adversely affected by supply chain issues, which restricted its ability to build complete solutions, resulting in some orderbook rescheduling.
Investing for further growth in FY24 and FY25
Our FY23 estimates are underpinned by a growing orderbook for 5G XHaul transceivers, and we leave them unchanged. Since gross margins are likely to be lower year-on-year in FY23 because of the lower proportion of defence orders and overheads are likely to be higher reflecting the investment in radio frequency (RF) engineering and direct sales during FY22, we model a year-on-year drop in EBITDA (but an increase versus FY21), although revenue growth is modelled at 11%. Management intends that this investment will result in stronger revenue and profit growth during FY24 and FY25 as the group diversifies into adjacent markets such as 5G test equipment, private low-latency links and broadband communications networks based on networks of multiple high altitude platform stations and low earth orbit satellites.
Valuation: Premium for stronger growth
Comparing Filtronic’s multiples with those of its specialist RF peers, we note it is trading broadly in line with the sample mean for prospective EV/sales and EV/EBITDA and at a premium for P/E multiples. However, our estimates show Filtronic’s revenues growing more quickly than those for most of the companies in this sample during FY22 and FY23. This gives it a growth trajectory closer to the companies in our sample offering a highly differentiated technology, which trade on higher multiples, suggesting a premium may be justified.
Changes to estimates
We summarise our revised estimates in Exhibit 1.
Exhibit 1: Revised estimates
Year end May (£m unless stated) |
FY21 |
FY22e |
FY23 |
|||||
Actual |
Old |
New |
Change |
Old |
New |
Change |
||
Revenues |
15.6 |
17.4 |
17.1 |
-1.8% |
19.0 |
19.0 |
0.0% |
|
EBITDA |
1.8 |
2.0 |
2.7 |
35.3% |
2.1 |
2.1 |
0.0% |
|
EBITDA margin (%) |
11.4% |
11.6% |
15.9% |
37.8% |
11.0% |
11.0% |
0.0% |
|
Normalised PBT |
0.1 |
0.8 |
1.5 |
85.5% |
0.9 |
0.9 |
0.0% |
|
Normalised basic EPS (p) |
0.14 |
0.40 |
0.67 |
67.8% |
0.42 |
0.42 |
0.0% |
|
Dividend per share (p) |
0.00 |
0.00 |
0.00 |
N/A |
0.00 |
0.00 |
N/A |
|
Net debt/(cash) |
(1.9) |
(2.3) |
(3.1) |
32.7% |
(2.7) |
(3.4) |
26.4% |
|
Source: Edison Investment Research
Valuation
There are very few other listed companies specialising in high-power mmWave (30–300GHz) communications products, not just in the UK but also across mainland Europe, Israel and North America. While this emphasises the uniqueness of Filtronic’s skill set, it makes it more difficult to create a sample of peers to use as the basis of a peer multiples comparison. We have therefore created two sample sets. The first consists of companies that, like Filtronic, offer niche products used for transmitting data at mmWave frequencies. The second is a sample set of European companies that, like Filtronic, offer a highly differentiated technology based on hard-to-find skill sets.
Exhibit 2: Peer multiples
Name |
Market cap (£m) |
EV/Sales 1FY (x) |
EV/Sales 2FY (x) |
EV/EBITDA 1FY (x) |
EV/EBITDA 2FY (x) |
PE 1FY (x) |
PE 2FY (x) |
CAGR* (%) |
Aviat Networks |
237 |
0.9 |
0.8 |
6.8 |
6.4 |
9.5 |
8.9 |
6.6% |
Baylin Technologies |
27 |
0.6 |
0.6 |
(190.1) |
8.8 |
(2.4) |
(4.2) |
12.3% |
CommScope Holding Company |
1,300 |
1.3 |
1.3 |
9.9 |
8.3 |
5.0 |
3.4 |
4.5% |
Comtech Telecommunications |
204 |
0.9 |
0.8 |
9.9 |
7.6 |
(6.9) |
17.4 |
-4.1% |
Mean of RF specialists |
0.9 |
0.9 |
8.9 |
7.8 |
9.5 |
13.1 |
||
CML Microsystems |
56.6 |
2.2 |
2.0 |
8.5 |
7.5 |
34.2 |
28.0 |
18.7% |
Kromek Group |
45.1 |
3.6 |
2.6 |
(67.0) |
128.0 |
(10.6) |
(12.3) |
31.9% |
Mynaric |
125.3 |
6.3 |
1.2 |
(2.7) |
(13.0) |
(5.4) |
19.0 |
525.5% |
Sivers Semiconductors |
205.5 |
13.9 |
4.6 |
(30.9) |
27.3 |
(19.4) |
(100.0) |
141.3% |
Trackwise Designs |
21.6 |
2.7 |
1.0 |
25.6 |
5.4 |
(35.9) |
17.7 |
88.0% |
Mean of companies with highly differentiated technology |
5.8 |
2.3 |
17.1 |
13.4 |
34.2 |
21.6 |
||
Filtronic |
20 |
1.1 |
1.0 |
6.7 |
8.7 |
14.1 |
22.5 |
10.5% |
Source: Refinitiv, Edison Investment Research. Note: Priced at 16 June 2022. *FY0 to FY2. Grey shading indicates exclusion from mean.
Comparing Filtronic’s multiples with those of its RF specialist peers, we note it is trading broadly in line with the mean of the sample on prospective EV/sales and EV/EBITDA and at a premium to the mean on P/E multiples. Since several of the companies in the second sample set are not profitable yet, the data are limited. However, consensus estimates show companies in this sample growing substantially more quickly than those in the first, thus commanding higher multiples. Our estimates show Filtronic also growing more quickly than most of the companies in the first sample set, suggesting a premium to the multiples of this sample is justified.
Exhibit 3: Financial summary
31-May |
£m |
2020 |
2021 |
2022e |
2023e |
|
INCOME STATEMENT |
||||||
Revenue |
|
|
17.2 |
15.6 |
17.1 |
19.0 |
EBITDA |
|
|
1.2 |
1.8 |
2.7 |
2.1 |
Operating profit (before amort. and excepts.) |
|
0.4 |
0.6 |
1.7 |
1.1 |
|
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.6) |
0.1 |
0.0 |
0.0 |
||
Reported operating profit |
(0.2) |
0.6 |
1.7 |
1.1 |
||
Net Interest |
(0.2) |
(0.4) |
(0.2) |
(0.2) |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
0.1 |
0.1 |
1.5 |
0.9 |
Profit Before Tax (reported) |
|
|
(0.4) |
0.2 |
1.5 |
0.9 |
Reported tax |
(0.1) |
(0.2) |
0.2 |
0.2 |
||
Profit After Tax (norm) |
0.1 |
0.3 |
1.4 |
0.9 |
||
Profit After Tax (reported) |
(0.5) |
0.1 |
1.7 |
1.1 |
||
Discontinued operations |
(1.4) |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
0.1 |
0.3 |
1.4 |
0.9 |
||
Net income (reported) |
(2.0) |
0.1 |
1.7 |
1.1 |
||
Average Number of Shares Outstanding (m) |
211 |
213 |
215 |
215 |
||
EPS - normalised (p) |
|
|
0.05 |
0.14 |
0.67 |
0.42 |
EPS - diluted normalised (p) |
|
|
0.05 |
0.14 |
0.66 |
0.42 |
EPS - basic reported (p) |
|
|
(0.25) |
0.03 |
0.80 |
0.51 |
Dividend (p) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
7.8% |
-9.5% |
10.0% |
11.1% |
||
EBITDA Margin (%) |
6.8 |
11.4 |
15.9 |
11.0 |
||
Normalised Operating Margin |
2.2 |
3.7 |
9.9 |
5.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
7.5 |
6.2 |
5.9 |
5.6 |
Intangible Assets |
1.8 |
1.7 |
1.9 |
2.0 |
||
Tangible Assets |
3.8 |
3.3 |
3.1 |
2.8 |
||
Investments & other |
1.9 |
1.2 |
0.9 |
0.7 |
||
Current Assets |
|
|
9.8 |
8.4 |
9.9 |
10.8 |
Stocks |
2.9 |
2.2 |
2.5 |
2.9 |
||
Debtors |
4.8 |
3.3 |
3.3 |
3.5 |
||
Cash & cash equivalents |
2.0 |
2.9 |
4.1 |
4.4 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(6.0) |
(3.6) |
(3.3) |
(3.0) |
Creditors |
(3.5) |
(2.4) |
(2.1) |
(1.8) |
||
Short term borrowings including lease liabilities |
(0.7) |
(0.6) |
(0.6) |
(0.6) |
||
Other |
(1.8) |
(0.6) |
(0.6) |
(0.6) |
||
Long Term Liabilities |
|
|
(2.0) |
(1.7) |
(1.7) |
(1.7) |
Long term borrowings |
(2.0) |
(1.6) |
(1.6) |
(1.6) |
||
Other long term liabilities |
0.0 |
(0.1) |
(0.1) |
(0.1) |
||
Net Assets |
|
|
9.4 |
9.4 |
10.8 |
11.7 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
9.4 |
9.4 |
10.8 |
11.7 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
1.2 |
1.8 |
2.7 |
2.1 |
||
Working capital |
(2.4) |
1.1 |
(0.6) |
(0.8) |
||
Exceptional & other |
(2.7) |
(1.0) |
0.0 |
0.0 |
||
Tax |
1.2 |
0.5 |
0.2 |
0.2 |
||
Operating Cash Flow |
|
|
(2.6) |
2.5 |
2.3 |
1.5 |
Capex (including capitalised R&D) |
(1.2) |
(0.4) |
(1.0) |
(1.0) |
||
Acquisitions/disposals |
3.7 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(0.3) |
(0.2) |
(0.2) |
(0.2) |
||
Equity financing |
0.3 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
(0.2) |
1.9 |
1.2 |
0.3 |
||
Opening net debt/(cash) |
|
|
(2.5) |
0.7 |
(0.8) |
(1.9) |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
(3.0) |
(0.4) |
(0.0) |
(0.0) |
||
Closing net debt/(cash) including lease liabilities |
|
0.7 |
(0.8) |
(1.9) |
(2.2) |
|
Property lease liabilities |
1.1 |
1.2 |
1.2 |
1.2 |
||
Closing net debt/(cash) |
|
|
(0.4) |
(1.9) |
(3.1) |
(3.4) |
Source: Edison Investment Research
|
|
Research: TMT
EQS is in a strong position to build its client base as the EU whistleblowing directive comes into force across Europe. Delays in adoption of formal legislation are a frustration but do not detract from the strength of the underlying proposition. EQS retains its ambition to be the leading European cloud provider for global investor relations and corporate compliance solutions by 2025. The €45m raised in March will help fund the repayment of short-term bank and vendor loans during Q222. We see management’s targets of €130m of group revenues and EBITDA margins of at least 30% for FY25 as demanding but achievable.