REG - Filtronic PLC - Interim Results
07/02/2023 07:00
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RNS Number : 0876P Filtronic PLC 07 February 2023
7 February 2023
FILTRONIC PLC
("Filtronic", the "Company" or the "Group")
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2022
Filtronic plc (AIM: FTC), the designer and manufacturer of products and
sub-systems for the aerospace, defence, telecoms infrastructure, space and
critical communications markets, announces its half year results for the six
months ended 30 November 2022 ("H1 2023").
Financial
Highlights
H1 2023 H1 2022
Revenue £8.4m £8.0m
Adjusted EBITDA¹ £1.0m £1.1m
Adjusted operating profit² £0.5m £0.6m
Operating profit £0.5m £0.7m
Profit for the period £0.5m £0.7m
Basic profit per share 0.22p 0.32p
Diluted profit per share 0.21p 0.31p
Cash (used in)/generated from operating activities (£0.2m) £0.6m
At 30 Nov 2022 At 31 May 2022
Net cash when including right of use property leases £1.0m £1.1m
Net cash when excluding right of use property leases £2.4m £2.2m
¹ Adjusted EBITDA is earnings before interest, taxation, depreciation,
amortisation and exceptional items.
² Adjusted operating profit is operating profit before exceptional items.
Operational Highlights
· Post-period end, awarded a $2.8m (£2.3m) contract with a leading
global provider of low earth orbit ("LEO") satellite communications equipment
expanding our presence in the new space market.
· Increased the level of engagement with key strategic target customers
in the aerospace & defence and space markets in addition to space agencies
following recent investment in our direct sales channels and engineering
management.
· E-band spectrum India was licenced in H1 in addition to high demand
and a robust order book for 5G backhaul products. Whilst global semiconductor
shortages may impact short term fulfilment schedules, the customer
requirements over the lifetime of the product remains strong.
· Implementation of new engineering and manufacturing capability to
provide plastic encapsulation technology; a grant of £150k has been secured
towards the capital expenditure. This provides a new process and technology to
support UK defence primes as well as multiple other sectors.
· Achieved IASME Cyber Assurance accreditation improving our cyber
security credentials. This is a key enabler to satisfy the strategic objective
of winning further aerospace & defence work.
· New site officially opened in Manchester which increases engineering
capacity with the addition of a highly skilled and experienced team.
Commenting on the outlook, Jonathan Neale, Chairman, said: "Global spending on
aerospace & defence, telecommunications infrastructure and low earth orbit
("LEO") commercial space applications is increasing, underpinned by exciting
technological advancements. We have also seen governments re-evaluate critical
infrastructure supply with an emphasis on security and national
resilience.
"As a result of our continuing investment, we are seeing greater evidence of
awareness and consideration of our products in our key markets from both
existing and new customers. Our contract wins and successful project
deliveries through 2022 in high technology microwave and millimetre wave
sub-systems demonstrate our belief that we have a world class technical
capability. Our main objective remains the development of scale and value
growth. We are also investing in important capital equipment to support
engineering and new production capability for existing and emerging
applications in these growth markets.
"Longer term we are confident that the key markets we serve are the right ones
and that our value proposition and capability is both relevant and
compelling."
Enquiries
Filtronic plc www.filtronic.com (http://www.filtronic.com)
Richard Gibbs, CEO 01740 618800 or investor.relations@filtronic.com
Michael Tyerman, CFO
finnCap Ltd 020 7220 0500
Jonny Franklin-Adams/George Dollemore (Corporate Finance)
Alice Lane/Sunila de Silva (ECM)
Walbrook PR Limited 020 7933 8780 or filtronic@walbrookpr.com
Paul Vann/Nick Rome/Joe Walker
Walbrook PR Limited
020 7933 8780 or filtronic@walbrookpr.com
Paul Vann/Nick Rome/Joe Walker
Notes:
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014.
Forward-looking statements
Certain statements in this half-yearly financial report are forward-looking.
Where the half-yearly financial report includes forward-looking statements,
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 or results 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
I am pleased to present our half year results for FY2023.
The Group has continued to build momentum in our key strategic markets. In my
last statement I signalled that we would invest in the deployment of our
strategic plan and technology roadmap. I am pleased with the results to date,
with some notable successes, including the delivery of Morpheus X2 and Hades;
two new backhaul transceiver products. We also developed the Cerus Solid State
Power Amplifier ("SSPA") range which post period end enabled the win of a
significant new customer in the low earth orbit ("LEO") space market with an
initial order of $2.8m (£2.3m). We also initiated our next generation E-band
and W-band chipset development programme with encouraging results. In parallel
we have continued to build our engineering bench strength with the opening of
the Manchester engineering design office and new manufacturing capability, as
we add plastic encapsulation and wedge bonding to our manufacturing process
capability.
Financial Performance Summary
Group revenue for the first half of FY2023 was 5% up on prior year with sales
of £8.4m (H1 2022: £8.0m), in line with forecasts. An adverse first half
sales mix, offset by brief advantage from strong US dollar sales, and a higher
cost base following investment into sales channels and engineering has
contributed to a lower operating profit of £0.5m (H1 2022: £0.7m) and an
adjusted EBITDA of £1.0m (H1 2022: £1.1m).
At 30 November 2022, the Group recorded cash in the bank of £3.0m (31 May
2022: £4.0m), net cash of £2.4m when excluding the right of use property
leases (31 May 2022: £2.2m) and net cash including right of use property
leases of £1.0m (31 May 2022: £1.1m).
The Markets
The telecommunications infrastructure market has continued the deployment of
5G backhaul networks with spectrum opening in new geographies, most notably
India, who finally approved the release of E-band and V-band licences in
August 2022. Four network providers secured operating licenses and initial
demand from the Original Equipment Manufacturer ("OEM") has boosted our open
orderbook. We anticipate that there will be opportunities to secure further
demand as additional supply contracts are negotiated between the OEMs and the
local telecoms companies.
The aerospace & defence market, specifically electronic warfare ("EW") and
battlefield communications, is an area where Filtronic has added significant
value and expertise. We now have a growing opportunity pipeline with numerous
defence primes, and several opportunities as a result of a need to offset an
acknowledged shortage of in-house Radio Frequency ("RF") design and
manufacturing capability. We started the year with a second Defence Science
and Technology Laboratory ("DSTL") programme win for a secure field portable
RF test platform and have accumulated a consistent flow of switched filterbank
design wins. Major strategic design and supply chain decisions are being made
regarding the future of EW platforms and Filtronic now features prominently on
this roadmap.
The LEO Space market became a target of Filtronic a number of years ago when
we engaged with leading west coast US technology companies experimenting with
high altitude pseudo-satellites ("HAPS"), proving we could adapt proprietary
E-band technology for both payload and ground-based communication. This early
work has enabled us to target the fast-growing LEO space market where
disruptive players are being sought to redefine the telecommunications
landscape. We have been encouraged by the speed at which this commercial new
space market has developed and pleased that our offering of innovative design,
commercial pricing and rapid scale-up are valued and gives us a competitive
advantage.
Outlook:
Notwithstanding a strong orderbook and signs that our target markets remain
robust, the outlook for the current financial year continues to be shaped by
global supply chain challenges as announced on 31 January 2023. The
semiconductor shortages originating during the pandemic are showing signs of
recovery but supplies of specific components are still inconsistent and prone
to schedule change. The impact of this global issue not only disrupts
manufacturing at Filtronic, but it also impacts our customers' ability to
complete their own manufacturing cycle. The team at Filtronic are adept at
component sourcing and fortunate that we can rely on our ability to make rapid
design changes to accommodate alternative components and use our in-house
manufacturing resources to react quickly to changes in material availability.
Whilst we deal with the frustration of the continuing component shortages, we
have focused our efforts on driving forward our strategic operational targets,
and therefore remain confident in our ability to deliver growth in FY2024 and
beyond. Looking further ahead, our strategic markets continue to benefit from
strong growth drivers and significant inward investment. The LEO space market
is developing faster than originally estimated and we have multiple project
opportunities that look promising for E-band technology. The importance of
defence spending on EW and battlefield communications is more pronounced than
ever, following the events in Ukraine, with governments acknowledging that
spending needs to increase to protect its population and the deployment of 5G
network infrastructure continues at pace with the insatiable demand for
bandwidth driving people toward E-band frequencies.
Jonathan Neale
Chairman, 6 February 2023
Condensed Consolidated Interim Income Statement
For the period ended 30 November 2022
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
Continuing operations Note £000 £000 £000
Revenue 5 8,368 8,004 17,052
====== ====== ======
Adjusted EBITDA¹ 952 1,124 2,807
Depreciation (392) (364) (945)
Amortisation (77) (152) (278)
---------- ---------- ----------
Adjusted operating profit² 483 608 1,584
Exceptional items - 113 391
---------- ---------- ----------
Operating profit 483 721 1,975
Finance costs 6 (125) (104) (194)
Finance income 7 82 68 111
---------- ---------- ----------
Profit before taxation 440 685 1,892
Taxation 24 (8) (424)
---------- ---------- ----------
Profit for the period 464 677 1,468
====== ====== ======
Basic and diluted earnings per share (pence)
Basic earnings per share 8 0.22p 0.32p 0.68p
Diluted earnings per share 8 0.21p 0.31p 0.68p
====== ====== ======
1 Adjusted EBITDA is defined as profit before
interest, taxation, depreciation, amortisation and exceptional items which is
a non-GAAP metric used by management and is not an IFRS disclosure.
2 Adjusted operating profit is defined as operating
profit before exceptional items which is a non-GAAP metric used by management
and is not an IFRS disclosure.
Condensed Consolidated Interim Statement of Comprehensive Income
For the period ended 30 November 2022
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Profit for the period 464 677 1,468
---------- ---------- ----------
Items that are or may be subsequently reclassified to profit and loss:
Currency translation arising on consolidation 62 101 179
---------- ---------- ----------
Total comprehensive income for the period 526 778 1,647
====== ====== ======
The total comprehensive income for the period is attributable to the equity
shareholders of the parent company Filtronic plc.
Condensed Consolidated Interim Balance Sheet
At 30 November 2022
Note 30 November 30 November 31 May
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Non-current assets
Goodwill and other intangible assets 1,595 1,597 1,495
Right of use assets 2,606 2,057 2,293
Property, plant and equipment 795 978 701
Deferred tax 875 1,272 868
---------- ---------- ----------
5,871 5,904 5,357
---------- ---------- ----------
Current assets
Inventories 2,685 2,371 2,598
Trade and other receivables 4,809 4,118 4,479
Cash and cash equivalents 3,062 3,044 4,006
---------- ---------- ----------
10,556 9,533 11,083
---------- ---------- ----------
---------- ---------- ----------
Total assets 16,427 15,437 16,440
---------- ---------- ----------
Current liabilities
Trade and other payables 2,190 2,790 2,993
Provisions 314 275 282
Deferred Income 198 265 172
Financial liabilities - 71 -
Lease liabilities 616 538 540
---------- ---------- ----------
3,318 3,939 3,987
---------- ---------- ----------
Long term liabilities
Deferred income 31 44 130
Financial liabilities - 71 -
Lease liabilities 1,484 1,229 1,280
---------- ---------- ----------
1,515 1,344 1,410
---------- ---------- ----------
---------- ---------- ----------
Total liabilities 4,833 5,283 5,397
---------- ---------- ----------
---------- ---------- ----------
Net assets 11,594 10,154 11,043
====== ====== ======
Equity
Share capital 9 10,796 10,795 10,796
Share premium 10 11,077 11,050 11,060
Translation reserve (409) (549) (471)
Retained earnings (9,870) (11,142) (10,342)
---------- ---------- ----------
Total equity 11,594 10,154 11,043
====== ====== ======
The total equity is attributable to the equity shareholders of the parent
company Filtronic plc.
Company number 2891064
Condensed Consolidated Interim Statement of Changes in Equity
For the period ended 30 November 2022
Share capital Share premium Translation reserve Retained earnings Total equity
£000 £000 £000 £000 £000
Balance at 30 November 2021 10,795 11,050 (549) (11,142) 10,154
Profit for the period - - - 791 791
New shares issued (net of issue costs) 1 10 - - 11
Currency translation movement arising on consolidation - - 78 - 78
Share-based payments - - - 9 9
---------- ---------- ---------- ---------- ----------
Balance at 31 May 2022 10,796 11,060 (471) (10,342) 11,043
Profit for the period - - - 464 464
New shares issued (net of issue costs) - 17 - - 17
Currency translation movement arising on consolidation - - 62 - 62
Share-based payments - - - 8 8
---------- ---------- ---------- ---------- ----------
Balance at 30 November 2022 10,796 11,077 (409) (9,870) 11,594
====== ====== ====== ====== ======
Condensed Consolidated Interim Cash Flow Statement
For the period ended 30 November 2022
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Cash flows from operating activities
Profit for the period 464 677 1,468
Taxation (24) 8 424
Finance income (82) (68) (111)
Finance costs 125 104 194
---------- ---------- ----------
Operating profit 483 721 1,975
Tax received/(paid) 24 (8) 19
Share-based payments 8 7 16
Depreciation 392 364 945
Amortisation of intangible assets 77 152 278
Movement in inventories (11) (118) (273)
Movement in trade and other receivables (282) (755) (1,100)
Movement in trade and other payables (838) 368 550
Movement in provisions 33 (122) (115)
Change in deferred income (72) (5) (10)
---------- ---------- ----------
Net cash (used in)/generated from operating activities (186) 604 2,285
---------- ---------- ----------
Cash flows from investing activities
Acquisition of plant and equipment (193) (80) (61)
Acquisition of intangible assets (16) (33) (57)
Acquisition of right of use assets - (18) (132)
Capitalisation of development costs (160) - -
---------- ---------- ----------
Net cash used in investing activities (369) (131) (250)
---------- ---------- ----------
Cash flows from financing activities
Interest paid (125) (105) (194)
Repayment of bank loans - (8) (131)
Repayment of lease liabilities (323) (259) (653)
Repayment of interest-bearing borrowings - - (8)
Proceeds from new shares (net of issue costs) 17 11 22
---------- ---------- ----------
Net cash used in financing activities (431) (361) (964)
---------- ---------- ----------
Movement in cash and cash equivalents (986) 112 1,071
Currency exchange movements 42 26 29
Opening cash and cash equivalents 4,006 2,906 2,906
---------- ---------- ----------
Closing cash and cash equivalents 3,062 3,044 4,006
====== ====== ======
Notes to the Condensed Financial Statements
1 Company information
Filtronic plc is a company registered and domiciled in the United
Kingdom and is listed on the AIM market of the London Stock Exchange. The
Company's registered number is 2891064. The address of the Company's
registered office is Filtronic plc, Filtronic House, Unit 3, Airport West,
Lancaster Way, Yeadon, West Yorkshire, LS19 7ZA.
Copies of the Company's Annual Report and interim financial report are
available from the Company's registered office or the Company's website at
www.filtronic.com.
2 Basis of preparation
Whilst the financial information included in this preliminary
statement has been prepared on the basis of the requirements of IFRSs in
issue, this statement does not itself contain sufficient information to comply
with IFRS.
These financial results for the six months ended 30 November 2022
do not comprise statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The interim report should be read in conjunction with the
Annual Report 2022, which includes annual financial statements for the year
ended 31 May 2022. Those accounts have been reported on by the Company's
auditor and delivered to the registrar of companies. The report of the auditor
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 condensed consolidated financial statements for the six months
ended 30 November 2022 consolidate the financial statements of the Company and
all of its subsidiaries (together referred to as the "Group"). Transactions
between Group companies, which are related parties, have been eliminated upon
consolidation and therefore do not require disclosure.
he condensed consolidated financial statements for the six months ended
30 November 2022 and comparative period have not been audited. The interim
financial report for the six months ended 30 November 2022 was approved by the
Board on 6 February 2023.
3 Going Concern
In accordance with corporate governance requirements 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.
The directors have reviewed the projected cash flow and other relevant
information, including a 'severe but plausible' scenario and have a reasonable
expectation that the Group has adequate resources to continue in operational
existence and therefore it remains appropriate to adopt the going concern
basis in preparing the interim financial report for the six months ended 30
November 2022.
4 Accounting estimates and judgements
The preparation of the financial statements requires the use of
accounting estimates and judgements that affect the application of accounting
policies and reported amounts of assets and liabilities, income and expenses.
The accounting estimates and judgements are continually evaluated and are
based on historical experience and other factors, including expectations of
the future that are believed to be reasonable under the circumstances. Actual
results may differ from the expected results. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods. The
accounting estimates and judgements that have a significant effect on the
financial statements are considered in the Filtronic plc Annual Report for the
year ended 31 May 2022 which can be found on the Filtronic website. Unless
stated below there is no material change to those judgements from the Annual
Report in the basis of calculation.
5 Segmental Analysis
Operating Segments
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 three customers representing individually over 10% of revenue
each and in aggregate 82% of revenue. This is split as follows:
· Customer A - 41% (2022: 21%)
· Customer B - 24% (2022: 38%)
· Customer C - 17% (2022: 29%)
Revenue by Destination
The revenue presented is based on the geographic location of customers
receiving the product/service from the continuing operations.
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
£000 £000 £000
Revenue
United Kingdom 2,647 3,662 7,489
Europe 1,258 1,294 3,421
Americas 2,323 2,573 5,313
Rest of the world 2,140 475 829
---------- ---------- ----------
8,368 8,004 17,052
====== ====== ======
Revenue from sales
The revenue presented is based on the Group deriving revenue from product
sales and those received from Non-Recurring Engineering ("NRE") at a point in
time when the performance obligation is satisfied.
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
£000 £000 £000
Revenue
Sales of product 7,927 7,428 16,580
NRE - point in time 441 576 472
---------- ---------- ----------
8,368 8,004 17,052
====== ====== ======
6 Finance costs
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
£000 £000 £000
Interest expense for lease arrangements 70 65 127
Minimum service costs and interest charges on invoice discounting facilities 55 39 67
---------- ---------- ----------
125 104 194
====== ====== ======
7 Finance income
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
£000 £000 £000
Revaluation of foreign currency denominated intercompany balance 82 68 111
---------- ---------- ----------
82 68 111
====== ====== ======
8 Basic and diluted earnings per share
6 months 6 months Year
Ended Ended Ended
30 November 30 November 31 May
2022 2021 2022
£000 £000 £000
Profit for the period 464 677 1,468
====== ====== ======
'000 '000 '000
Basic weighted average number of shares 215,119 214,493 214,726
Dilution effect of share options 1,189 812 868
----------- ----------- ----------
Diluted weighted average number of shares 216,308 215,305 215,594
======= ====== ======
Basic earnings per share (pence) 0.22p 0.32p 0.68p
Diluted earnings per share (pence) 0.21p 0.31p 0.68p
====== ====== ======
9 Share Capital
Ordinary shares of 0.1p each issued and fully paid
Number '000 £000
At 30 November 2021 214,615 10,795
Exercise of employee share options 183 1
-------------- ---------
At 31 May 2022 214,798 10,796
Exercise of employee share options 323 -
------------ ------------
At 30 November 2022 215,121 10,796
======== ======
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.
10 Share Premium
£000
At 30 November 2021 11,050
Exercise of employee share options 10
-----------
At 31 May 2022 11,060
Exercise of employee share options 17
-----------
At 30 November 2022 11,077
=======
11 Analysis of net cash/(debt)
1 June 2022 Cash Flow Other movements 30 Nov 2022
£000 £000 £000 £000
Cash and cash equivalents 4,006 (986) 42 3,062
Lease liability - plant and equipment (863) 183 2 (678)
--------- --------- --------- ---------
Net cash when including all debt except property leases 3,143 (803) 44 2,384
Lease liability - property lease (957) 140 (605) (1,422)
--------- --------- --------- ---------
Net cash 2,186 (663) (561) 962
====== ====== ====== ======
Cash at bank earns interest at floating rates based on daily bank deposit
rates.
At 30 November 2022, the Company had a £3.0m invoice discounting
facility in place with Barclays Bank plc against the UK debtor book and a
$4.0m factoring facility with Wells Fargo against the US debtor book. There
were no drawings on either of the facilities at 30 November 2022 (31 May 2022:
undrawn).
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