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Filtronic wins another major space contract

RF components and systems developer Filtronic (LON: FTC) has won another major contract and this has led to upgrades for the full year. Interims show modest growth in revenues and the order book points to be more significant growth in the second half. The share price jumped 15.7% to 29.5p

AIM-quoted Filtronic has won a £7.8m for ground station antenna amplifiers for a leading global supplier of LEO satellite communications equipment. This is the third order for Cerus32 solid state power amplifier modules and each one has been bigger than the previous one. There is also a development agreement for an E-band module.

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That takes LEO-related space contract wins to £16m. There is also a £3.2m contract with the European Space Agency. There are plenty of other opportunities.

It is not just space contracts that are being won. Recently Filtronic gained a £2m defence contract as preferred partner of radar subsystems supplied by QinetiQ – a new client. That is phase 1 of the contract and revenues will be recognised in 20224-25 and 2025-26. Aerospace, critical communications and telecoms are other important markets.

In the six months to November 2023, revenues were 1% ahead at £8.5m. The cost base has been increased to cope with future growth, so there was a swing from profit to loss. Cash in the bank is £4.1m, helped by an advance payment.  

Progress was held back by difficulties sourcing components for some products, but this is no longer a concern. 5G rollouts are still not gaining the anticipated momentum.

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There is enough production capacity for £25m of annual sales. Cash will continue to be generated to help fund any longer-term capital spending.

Cavendish has raised its full year revenues expectations from £20.5m to £23.5m and pre-tax profit estimate has more than trebled from £800,000 to £2.5m.

The orders won in recent month show that Filtronic has developed technology that is relevant to growth markets such as space and defence. The share price has risen sharply in recent months and is the highest it has been since 2018. The prospective multiple is 28. The current profit forecast for 2024-25 is £2.3m, but further contract wins would provide upside to this forecast.  

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