Filtronic Results

1
Interim Results 2006
2
Key Points

• Handset Products Division sale completed in
  September 2005 for initial net consideration of
  45.5m, with revenue earn-out in H2.
• Continuing operations show
• 7 revenue growth over comparable period.
• Underlying operations near break-even (0.4m
  loss) for the half-year.
• Non-recurring costs in H1 of 2.5m against
  closures in Australia and USA and inventory
  provisions in Sage (USA).
• US defence operations, Sage and Sigtek merged
  into Filtronic Signal Solutions under new
  management team.
• Large-scale wafer production established at our
  semiconductor foundry, in line with our revenue
  plan.
• Net debt of 12m, with cash inflow in December
  2005 of 4m on overdue debt.

3
Profit and Loss Account
4
Segmental Performance
5
Balance Sheet
Working capital facilities revolving credit of
18m and overdraft of 2m
6
Market trends

• Wireless Infrastructure
• Core business in Base-Station Transmit/Receive
  filter modules is currently flat but retaining
  market share.
• New programs for major customers with production
  in the second half of 2006/7.
• Significant opportunities with OEMs for Power
  Amplifiers, starting development.
• New OEM requirements for Remote Radio Heads with
  optical interface
• All 3G bands plus expansion bands
• WiMAX at both 3.5GHz and 2.5GHz.
• Continued strength and outsourcing by OEMs for
  backhaul radio products.

7
Market trends

• Compound Semiconductors
• Continuing and increasing demand for handset
  switches with existing and new customers.
• Defence Electronics
• First production orders from SELEX SAS for
  chip-sets for E-Scan radar export contract.
• Defence continues to be slow. Restructuring of
  US business designed to enhance prospects for new
  business leading to production in 07/08.

8
Wireless Infrastructure Positioning -
Addressable Market - 3.5 billion
Source Filtronic Analysis of April 2005
9
Wireless Infrastructure Positioning -
Addressable Market - 3.5 billion

• Three OEM customers.
• New frequencies.
• Moving to low-cost manufacture.

• Existing product with masthead amplifiers and
  bias Ts.

• Dominant market share being maintained at (28).
• Containing price pressure through low-cost
  manufacture and high volumes with filters
  maintaining operating margin above 10 of
  turnover.
• New products for both 2G and 3G.

• Established volume production of integrated power
  amplifier.
• Product development for PAs to further OEMs.
• Remote radio heads for 3G and WiMAX.

10
Compound Semiconductors and Defence Electronics

• Compound Semiconductors
• Foundry ramp-up progressing in line with revenue
  plan.
• Operational challenges remain as capacity
  expansion continues faster than originally
  planned to meet demand.
• Demand remains strong underpinning our volume
  outlook.
• Capacity expansion from 17.5k to 27k wafers
  underway to meet demand with an additional 4m
  capex committed.
• Defence Electronics
• Growth platform is new management team in the US
  and investment in new facility.

11
Outlook

• Wireless Infrastructure
• Wireless Infrastructure is experiencing a flat
  market in H2, with revenue growth awaiting some
  delayed contracts and new OEM platforms to move
  into production.
• Market-driven approach to Power Amplifiers is
  gaining traction and will be a growth mechanism
  in 06/07.
• New products in Remote Radio Heads for 3G and
  WiMAX at prototype stage will give growth in 07.
• Compound Semiconductors
• Foundry loading increasing with additional
  customers, more customers expected.
• Foundry ramp-up supports reaching run-rate
  break-even at end H2.
• Defence Electronics
• Consolidation in US positioning the business
  favourably with old and new customers.
• Completion of large contracts will reduce revenue
  in the next financial year as lead-time to
  production on sizeable new opportunities is 12 to
  18 months.
• Reducing net debt
• Net cash flow for the coming half year is neutral
  after additional capex without the benefit of
  4m collected from overdue debtors.
• Handset Products earn-out expected to be around
  10m (7m) due to be received in August 2006.