FILTRONIC LOOKS SET FOR A STELLAR FUTURE - 07/08/25

Eighteen months ago, I took a close look here at Filtronic (FTC), the shares then sitting at 29.5p where it appeared to be on the cusp of serious growth and further share price appreciation.

As it transpired, the company has certainly lived up to that potential, the shares now standing at a significantly higher £1.40p, thus rewarding investors handsomely.

Back then, in February 2024 I caught up with CEO Richard Gibbs prior to his stepping down along with CFO Michael Tyerman, both of whom sounded bullish on prospects for the business.

Despite having something of a chequered past, where the shares had resided in the penny basement league, there was much to warm to, particularly given that the companies technology prowess had never really been in doubt.

Having recently delivered very positive results for full year 2025, I have once again caught up with management, with Michael Tyerman on hand, alongside the more recently appointed CEO Nat Edington.

Nat was formerly at Dukosi, an Edinburgh based deep technology company, whilst he also sits on the board as a NED of another company I cover here and hold, that being Concurrent Technologies.

In my previous piece on FTC, I ran over the basics of the company, so I won’t repeat too much on that, other than to say that the company specialises in high-frequency, radio-frequency and millimeter-wave communication solutions.

This sees it at the forefront in helping shape and delivering future high-speed wireless communications.  

Most recently, news and significant revenues have been driven by its servicing major clients across the space arena, which has seen contracts delivered specifically for and with SpaceX’s Starlink programme alongside the European Space Agency.

As a result of a succession of significant contract wins, FTC delivered revenue growth of 121% at £56.3m, which in turn saw adjusted pre-tax profits of £15.1m for the full year.

On the back of that, net cash swelled from £5.2m to £12.3m, despite ongoing investment into the wider business, which sees the company in a solid and exciting position for further growth.

Although the shares did see a high of £1.73p over the last few months and have subsequently eased to the current price, largely due to next year's numbers forecasting a reduction to PBT, for those taking a medium to longer term view there could well be further significant gains in due course.

The business is now in a very sweet spot, where alongside the previously mentioned space growth market, defence also now features as an increasing opportunity.

Speaking with both the CEO and CFO there is clearly a positive level of confidence and a potent concentration on ensuring that FTC is well positioned to extend both its geographic and market reach in the coming years.

As part of the strategy, Nat informed me that they had brought in new people across the business, including a Chief Commercial Officer along with a lot of experience within the space and defence markets.

“We recently announced a big defence contract” he added, “and it is something we have been working on for a while, that being with a prime defence contractor.”

The CEO also added that they expect this year to double their defence revenues, where although a lot of that is driven by a key prime customer, there are other contracts and customers too.

Recent order wins also give confidence for a more significant increase in the defence outlook.

“We see that defence side of the business growing very nicely over the next few years and so we are making sure that we are focusing on some key programmes across that.”

He also pointed out that a close look at some of the technologies FTC is busy developing, provides a clear overlap across both defence and space markets, which further positions the company for ongoing and extended growth.

Here, I was told that many technologies developed for space applications have dual-use potential, meaning they can be adapted for both civilian and military purposes, fostering innovation and collaboration between sectors.

Whilst like others operating in the same areas, FTC does experience time lags from the commencement of discussions to securing contracts and delivery, but it now appears to be in a solid position on which to further increase its footprint with management looking well beyond the near term.

Nat further stressed that they have invested a lot in the last twelve months, particularly across engineering to drive growth and have put in place the structure to accelerate and grow the business over the next five years.

As part of that ongoing investment programme, FTC has very recently opened an operation on my doorstep here in Cambridge, which joins its new state-of-the-art facility in County Durham alongside other locations such as Manchester.

This latest initiative is located on the Cambridge Science Park, so I was eager to hear a little more on what is happening on this aspect of the business.

The CEO explained to me that they had recruited engineers from the likes of tech leader Cambridge Consultants along with digital software designers where the focus will be supporting the Sedgefield operation, particularly around the core chip.

He added that the mission in Cambridge will be to enable the building of larger systems, which should further cement the business across the markets it serves and targets.

Gaining access to the services of such extremely highly skilled engineers is a key reasoning behind the Cambridge opening, as it is very much a case that such individual services are in high demand and they are therefore rarely open to a relocation proposition.

Additionally, Nat himself is very familiar with Cambridge and recognises the importance of a location in such a vibrant and innovative tech cluster.

Engineering, technology and wider business development are all key to driving the business forwards, the CEO said, adding that one other important aspect they have achieved is to scale up and run multiple projects.

This is clearly key to further building and expanding the operations and delivery, whilst in turn, it increases the company’s profile and regard in the wider blue chip business community.

One point I was keen to get some clarification on was that of satellites in the context of their operational life and how that fits with the business.

Nat explained to me that there is a technical life of about seven years for a LEO satellite, others such as medium earth orbit (MEO) can be up to twelve years. 

After that, they are brought back down to earth and subsequently replaced, which should ensure ongoing business for the likes of FTC.

Although organic growth is very much the driving force behind the business, I was interested to hear if specific acquisitions may also feature to further assist in future years.

Nat stressed that whilst any acquisition is not off the table, organic growth remains the focus and that anything that may be added to the business would likely be something that would add to or enhance their own capabilities.

With a comfortable net cash position and a banking facility to tap into, FTC looks well placed should an opportunity arise.  

Of course, management has invested significantly into its new facility in Sedgefield where it has already installed two new dual-head production lines. Commenting further on this, the CEO said that it is well under way and that by mid-September the production lines should be up and running. Staff movement will be staged and they are comfortable in managing it around the existing business without disruption.

To conclude, Nat said that there is now an aggressive five-year plan in place with ambitious goals on which to strive for, where he added the market opportunities are huge.

This embraces both space and defence whilst the CEO stresses a confidence in delivery with openings into new markets not served also supporting and driving growth.

Although the numbers will dip in the current financial year as the company previously cited and explained, next year should see a step up to a resumption of growth.

Broker Cavendish is expecting full year 2027 revenue of £60m with adjusted pre-tax profit at £10m and net cash at a comfortable £15.8m.

Whilst the EPS figure for next year puts it on a PER of 35 where at the current price it arguably suggests that the shares are now at the top end of the market, those taking a two-four-year view may well see it as an opportunity.

Successful tech companies frequently demand superior ratings and in many cases, go on to continue the trend and justify confidence.

FTC has come a long way in the last two years and within that time has secured significant contracts and increased its presence, which also saw its major customer SpaceX subscribe for warrants in the company.

These were part of the partnership that had been undertaken and the warrants struck at 33p and 93p, which provided SpaceX with the right to acquire up to 10% of FTC’s shares in due course.  

Given the positive outlook and increasing growth opportunities in the markets it serves, FTC looks set to continue on the growth path, albeit for now, the shares may be pausing for breath.