Filtronic makes loss, restructuring on track - Embedded.com

Filtronic makes loss, restructuring on track

LONDON — For the financial year to the end of May Filtronic plc made an operating loss from continuing operations of £4.2million compared with a profit of £5.6million in 2005. Revenue from continuing operations was £221.0million (£212.9million in 2005).

The company's continuing operations cover wireless infrastructure providing 78 percent of sales, defense electronics with 14 percent and compound semiconductors chipping in 8 percent.

The company sold its handset products division in September 2005 to Pulse Electronics (Singapore) PTE Ltd, a subsidiary of Technitrol Inc., for £45.4million plus earn-out of £11.3million, due in August 2006.

The operating profit in the wireless infrastructure division was £5.5million (2005 £17.5m), reflecting principally pricing pressure that was not able to be fully compensated by product redesign, and a slower than planned move of production on high volume product lines from Finland to Hungary and from the U.S. to China.

On May 5 the company entered into exclusive negotiations with Powerwave Technologies, Inc. for the sale of the major activities within its wireless infrastructure division, resulting in the formal agreement of this transaction which was announced on 12 June 12. Powerwave is due to pay $150million (approximately £81million) cash and 20.7million shares of Powerwave’s common stock. A shareholder circular for this transaction is in preparation, with completion of the sale due by September 30. The company is retaining the point to point radio backhaul activity which is showing strong growth.

The cash proceeds from the sale to Powerwave will be used to repay outstanding bank debt and to fund continuing investment in the company's Newton Aycliffe semiconductor facility, along with other corporate working capital requirements. The net proceeds from the sale of the Powerwave shares are expected to be returned to shareholders as cash, once they are sold.

Revenue in the wireless infrastructure division is expected to increase by more than 25% compared with the preceding half year for the first half of the current financial year.

The defense electronics activities opened a new manufacturing facility in New Hampshire, U.S. in September 2005 which provides the base for medium term growth.

In the past twelve months, the compound semiconductors facility at Newton Aycliffe has been undergoing a transition from its prior position as a modest producer of Gallium Arsenide (GaAs) pHEMT wafers to being a volume producer of these products.

Revenue in the compound semis division year grew 142 percent (2005 £8.6million to 2006 £20.8million) and the sequential growth rate in revenue comparing half year on half year during the financial year was 45 percent. Operating losses reduced from £11.7million in 2005 to £5.1million in 2006.

Compound semiconductors reached its targeted financial performance of an operating break even run rate over the fourth quarter of the financial year and his was after absorbing the cost increases associated with commissioning a further capacity in the second half of the year.

Filtronic is also to receive £2.7million due to the renegotiation of arrangements on past government grants connected to the Newton Aycliffe facility.

At the end of May the group employed 3,353 people in its continuing operations, an increase of 20 per cent since May 2005, primarily in wireless infrastructure’s manufacturing operations in China and Hungary.

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