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Research: TMT
Filtronic’s year-end trading update confirms that FY23 results are tracking in line with expectations, with supply constraints easing in the final quarter. Encouragingly, management’s investment in product development and sales and marketing now appears to be translating into a growing opportunity pipeline, particularly in the low Earth orbit (LEO) satellite space. We maintain our FY24 estimates, which call for a bounce back in growth (to 27%), while the growing pipeline and order book provide encouraging signs for further growth and margin expansion further out.
Filtronic |
Diversification drives growing pipeline |
FY23 trading update |
Tech hardware and equipment |
23 June 2023 |
Share price performance
Business description
Analysts
Filtronic is a research client of Edison Investment Research Limited |
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Filtronic’s year-end trading update confirms that FY23 results are tracking in line with expectations, with supply constraints easing in the final quarter. Encouragingly, management’s investment in product development and sales and marketing now appears to be translating into a growing opportunity pipeline, particularly in the low Earth orbit (LEO) satellite space. We maintain our FY24 estimates, which call for a bounce back in growth (to 27%), while the growing pipeline and order book provide encouraging signs for further growth and margin expansion further out.
Year end |
Revenue |
EBITDA* |
PBT* |
Dil. EPS* |
DPS |
P/E |
05/21 |
15.6 |
1.8 |
0.1 |
0.14 |
0.00 |
100.0 |
05/22 |
17.1 |
2.8 |
1.5 |
0.53 |
0.00 |
26.4 |
05/23e |
16.6 |
1.3 |
0.1 |
0.13 |
0.00 |
107.6 |
05/24e |
20.7 |
2.1 |
0.9 |
0.41 |
0.00 |
34.1 |
Note: *EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Filtronic expects to report FY23 revenue of £16.3m (our forecast: £16.6m) and EBITDA of £1.3m (in line with our forecast). Cash at year-end was £2.6m and net cash (excluding property leases) was £1.9m. While demand remained robust across all segments, trading was affected from late CY22 to spring this year by supply chain constraints, mainly for specific chips, which prompted a halt in production of certain 5G products. These constraints eased in the final quarter of the year and Filtronic was able to quickly ramp-up production. Having launched three new telecommunications products in FY23 (Morpheus X2, Hades X2 and Hercules X2), the company secured advanced production orders for all three for delivery in FY24. Filtronic is keen to exploit opportunities in areas adjacent to its core telecoms infrastructure and post-period end, it won two contracts worth £0.5m each for private telecommunications networks, due for delivery in 2024.
The company noted that opportunities in the LEO satellite market exceeded its expectations, in terms of both size and speed of deployment. In H223, Filtronic secured its first production order from a market leader for E-band ground station solid state power amplifiers and has exceeded expectations in terms of delivery and technical performance. The company is also seeing increasing demand for development contracts in the electronic warfare market.
We maintain our forecasts pending FY23 results on 1 August.
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Research: Metals & Mining
Lithium Power International (LPI) has entered into a binding agreement to sell its 100%-owned Australian lithium tenements to Albemarle. This is an all-cash transaction that will see LPI receive A$29m on completion, which is expected in early July 2023. The company will use the proceeds to further advance its flagship Maricunga lithium project in Chile. The deal is positive in our view in that it allows LPI to significantly extend its cash runway without further diluting its shareholders.