Annual Report
and Accounts 2021
Filtronic plc – Stock code: FTC
filtronic.com
2
Welcome to
Filtronic
Filtronic plc is a designer and
manufacturer of advanced RF
communications products supplying
a number of market sectors, including
telecommunications infrastructure,
aerospace and defence and critical
communications.
Our objective is to grow profitably by being a trusted
supplier to our customers of technically advanced
products that deliver value to them. We focus on
markets where we have a deep understanding of the
sector and customer requirements and where we can
leverage our know-how and IP portfolio.
Our strategy to achieve this objective is:
• To nurture close working relationships with
our customers to understand their needs and
requirements;
• To develop class leading products in our core
technology areas of mmWave transceivers, filters,
and tower top amplifiers;
• To develop sub-systems and solutions that meet
customer specific and general market requirements;
• To expand our customer base within the markets we
serve; and
• To widen the number of markets we serve.
The rapid deployment of 5G mobile
telecommunications networks is leading to significant
investment in high speed / high capacity backhaul
infrastructure. Filtronic 5G backhaul transceivers are
being deployed in leading 5G networks.
Investment in better connected emergency services
around the world continues. The need for high
quality voice and data networks that are secure and
independent from commercial telecommunications
systems has never been greater. The critical
communications market demands high reliability
equipment for its mission critical networks and Filtronic
has become a trusted supplier to this sector.
Filtronic plc Annual Report and Accounts 2021
Advanced RF technologies are essential in
communication and radar systems utilised by
today’s defence forces. Filtronic offers design and
manufacturing services at our UK facilities that are
valued by leading defence contractors.
In addition to providing products and services to our
established markets, Filtronic is at the vanguard of
designing and supplying RF technology to emerging
markets ranging from 5G test equipment, ultra-low
latency RF connections for the financial services
industry, gigabit internet connections to high-speed rail
networks and long-range data links to high-altitude
pseudo satellites (“HAPS”).
Forward-looking statements
Certain statements in this Annual Report are forward-
looking. Where the Annual 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.
Filtronic plc Annual Report and Accounts 2021 01
What’s inside:
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Contents
Glossary
Strategic report
Financial highlights
Operational highlights
Chairman’s statement
Chief Executive’s review
Market review
Objective and strategy
Financial review
Key performance indicators
Risk management
Our people
Corporate social responsibility report
Governance report
Board of Directors
Governance report
Stakeholder engagement
Nominations Committee report
Audit Committee report
Directors’ remuneration report
Directors’ report
Financials
Independent auditors’ report to
the members of Filtronic plc
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated balance sheet
Consolidated statement of
changes in equity
Company statement of changes in equity
Consolidated cash flow statement
Company balance sheet
Company cash flow statement
Notes to the financial statements
Company information
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www.filtronic.com Stock Code: FTCChairman’s statementThere are clear signs of pent-up demand in our end markets, which we are well positioned to capitalise on given the recent investments we have made and the evolving market landscape.Chief Executive’s reviewI remain more convinced than ever regarding the strength of the business, the quality of the Filtronic brand, and our potential for growth by delivering innovative RF solutions.Objective and strategyWe focus on markets where we have a deep understanding of the sector and customer requirements and where we can leverage our design know-how and IP portfolio.Market reviewFiltronic’s unique approach has allowed us to create a differentiated offering that provides our clients with significant flexibility, cost and, crucially, time to market advantages.
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Glossary
4G:
5G:
5G NR:
4th Generation mobile networks
5th Generation mobile networks
5G New Radio is the global standard for a unified, more capable 5G wireless
air interface
Adjusted EBITDA: EBITDA before exceptional items
Backhaul:
CAGR:
CY:
D-band:
E-band:
EBITDA:
EMEA:
ETSI:
EW:
Fronthaul:
FY:
Gbps:
GHz:
Gigabit:
HAPS:
IP:
LEO:
LMR:
LTE:
MarCom:
Midhaul:
mmWave:
NRE:
NSA:
ODU:
OEM:
P25:
PoP:
Q-band:
RF:
Rx:
SA:
SiP:
STRAP:
TRM:
TTA:
Tx:
V-band:
VoC:
W-band:
XHaul:
The portion of a hierarchical telecommunications network that comprises the
intermediate links between the core network and the small subnetworks at
the edge of the network
Compound Average Growth Rate
Calendar year
130GHz to 175GHz
71GHz to 86GHz
Earnings Before Interest, Taxation, Depreciation and Amortisation
Europe, the Middle East and Africa
European Telecommunication Standards Institute
Electronic warfare represents the ability to use the electromagnetic
spectrum - signals such as radio, infrared or radar - to sense, protect and
communicate. At the same time, it can be used to deny adversaries the
ability to either disrupt or use these signals
The portion of a C-RAN telecommunications architecture that comprises the
intermediate links between the centralised radio controllers and the radio
heads at the edge of a cellular network
Financial year
Gigabits per second
Gigahertz: 10^9 Hertz
10^9 bits
High Altitude Pseudo-Satellites
Intellectual Property
Low Earth Orbit
Land Mobile Radio
Long-Term Evolution
Marketing communications
The link in a telecommunications network between the controller or the radio
head that feeds the next link in the network
Millimetre Wave
Non-recurring engineering
Non-Stand Alone. The non-standalone (NSA) mode of 5G that depends on
the control plane of an existing 4G LTE network for control functions
Outdoor Unit
Original Equipment Manufacturer
Project 25: a suite of standards for digital mobile radio communications
designed for use by public safety organisations
Point of presence is the point at which two or more different networks or
communication devices build a connection with each other
33GHz to 50GHz
Radio Frequency: a rate of oscillation in the range of around 3kHz to 300GHz
Receive
Stand Alone 5G: the deployment of 5G without relying on the 4G LTE network
System in package. This is a number of integrated circuits enclosed in one or
more chip carrier packages that may be stacked package on package
Strategic Planning Process
Transmit Receive Module
Tower Top Amplifier
Transmit
40GHz to 75GHz
Voice of the Customer
92GHz to 115GHz
The common flexible transport solution for future 5G networks, integrating
the fronthaul and backhaul networks with wired and wireless technologies in
a common packet based transport network
Filtronic plc Annual Report and Accounts 2021
Filtronic plc Annual Report and Accounts 2021 Strategic report
Financial highlights
Financial highlights
Revenue
£15.6m (-9%)
Adjusted EBITDA*
£1.8m (+50%)
Adjusted operating profit**
£0.6m (+50%)
* Adjusted EBITDA is earnings before interest,
Cash at bank
taxation, depreciation, amortisation and
exceptional items.
£2.9m (+45%)
** Adjusted operating profit is operating profit/(loss)
before exceptional items.
Net cash (net of all lease obligations
except right of use property lease)
£1.9m (+375%)
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Operational highlights
Financial highlights
Healthy cash position will be used to drive
further organic growth in our served markets
which are showing strong signs of recovery
from the pandemic with a stronger order book,
improved customer forecasts and increased
opportunities.
Financial highlights
Revenue
Awarded a contract to develop and supply
battlefield radio communications equipment
valued at £1.3m through a new channel to
market.
£15.6m (-9%)
Adjusted EBITDA*
Our “best-in-class” Tower Top Amplifier
supplied to the market leading Original
Equipment Manufacturer in critical
communications saw its first significant
revenue recognition in Q4 of the financial year.
£1.8m (+50%)
Expansion of our direct and indirect sales
channels in the USA, Europe and Asia through
a mix of agents and distributors to expand our
sales reach.
Adjusted operating profit**
Winner of the prestigious Queen’s Award for
£0.6m (+50%)
Enterprise in International Trade 2021.
Cash at bank
£2.9m (+45%)
Net cash (net of all lease obligations
except right of use property lease)
£1.9m (+375%)
Pictured: Wire bond pull test
04
Chairman’s statement
Dear fellow shareholder
Welcome to the Filtronic plc Annual Report for the year
ended 31 May 2021.
At the time of writing this report last year, we had just been
through our first lockdown, and I was able to report the
business had proved its resilience and met all customer
commitments with minimal disruption to operational
output. We entered FY2021 with cautious optimism,
confident we could develop the business despite the
global disruption from Covid-19. I am pleased to report
the business has continued to demonstrate a strong level
of robustness in the face of one of the most challenging
environments most of us have ever faced. I must therefore
take this opportunity to thank our employees for their
efforts, strength of character and commitment shown
over the last year. Whilst these strong character traits do
not appear on the balance sheet, they have proved to be
an invaluable asset to Filtronic as we have experienced
another year of progress with material growth in adjusted
earnings before interest, taxation, depreciation,
amortisation and exceptional items (“adjusted EBITDA”),
despite three periods of lockdown.
The key challenge presented by the pandemic has
been new customer acquisition, as traditional selling
channels have been constrained by travel restrictions.
We have worked hard to counter this during the year
by developing alternative methods to address the
market through expansion of our agent and distribution
network in a number of territories, revitalisation of the
Filtronic brand and corporate identity and increased
marketing communication to build brand awareness.
These initiatives will serve us well as we look to satisfy key
strategic objectives of revenue growth and on-boarding of
new customers in the coming year.
Richard Gibbs, appointed CEO last September, has
brought a renewed vigour and strategic vision to the
business and as a board we are delighted with his
progress to date. Under his leadership of the business,
we took the opportunity to realign our strategic plans
to exploit the strengths of our capability, technology
and market positions that we have developed since the
business was refocused in FY2020, following the sale of
the Telecoms Antenna Operation.
We are looking to support this realignment with the
recruitment of key engineering management to our
Senior Leadership Team, who have strong links to both
industry and research institutions in our served markets.
They will be tasked with further development of the
technology roadmap, expansion of the product portfolio
and, together with our commercial team, broadening our
customer base.
Financial performance summary
Group sales from continuing operations increased in the
second half of the year by 20% to £8.5m (H1 FY2021:
£7.1m) albeit sales for the full year reduced by 9% to
£15.6m (2020: £17.2m) following the softer trading in H1
due to the impact of Covid. Quality of earnings continued
to improve with an operating profit of £0.6m being
achieved (2020: £0.2m operating loss). Adjusted EBITDA
from continuing operations was £1.8m (2020: £1.2m) due
to a stronger sales mix.
The Group was able to close the year with £2.9m of cash
at bank (2020: £2.0m) giving healthy cash reserves in
addition to our undrawn working capital debt facilities
in the UK and USA which provide further headroom.
The cash position grew as a consequence of improved
operating cash generation from adjusted EBITDA. The
Group had net cash when including all debt except right
of use property leases, of £1.9m at the end of the financial
year (2020: £0.4m). Net cash including right of use
property leases was £0.8m (2020: £0.7m net debt).
Dividend
No dividend is proposed for the year (2020: £nil). The
Board continues to be of the opinion that shareholders
are better served by cash being retained in the business to
fund future business development.
Board composition
After 15 years as a Non-Executive Director, with the last
six years as Chairman, I have advised the Board of my
intention to step down and retire at the AGM in October
2021. The Company is now stronger and is well positioned
to continue to build and grow, and I feel the time is right
for me to retire from the Board in order to complete the
Board and Executive refresh process and make way for a
new Chairman bringing new perspectives. I have enjoyed
my time with Filtronic immensely and would like to extend
a deep personal thank-you to all staff and shareholders
for their support, especially during some of those more
difficult times, but I would especially like to thank my fellow
board members, for whom I have the greatest respect. I
wish you all every success for the future.
A process to appoint my successor is currently underway.
The Board will provide a further update once an
appointment has been made.
Filtronic plc Annual Report and Accounts 2021 Outlook
The Board is encouraged by the progress made in
developing the business over the course of the year
and, combined with the prospect of improved trading
conditions, we look forward with renewed confidence to
continuing our growth in both revenue and profitability.
There are clear signs of pent-up demand in our end
markets, which we are well positioned to capitalise on
given the recent investments we have made and the
evolving market landscape. The key short-term risk to
delivery will be the global semiconductor component
shortage which is affecting all sectors and companies
relying on embedded electronics components. It is already
proving disruptive with significantly increased supplier
lead times, but we will leverage our supply chain expertise,
our engineering capability and our operational agility to
minimise the impact of this.
Further investment is planned for new product
development including W-band technology which will
become a key frequency band in 5G telecoms and space
applications as capacity within E-band is progressively
consumed. These investments, along with further
development of our core process technologies and
channels to market will provide the building blocks for
sustained growth in future years.
Strategy on a page model
The strategy on a page model is a tool for
presenting Filtronic’s strategy in a simplified
format. At the centre of our strategy is our purpose,
vision, and mission which form the foundations
for all activities within the Group; why we exist, our
future direction and how we deliver repeatable
customer value.
This is enveloped by our three core values of
integrity, respect, and excellence which are
referenced in more detail on page 24. These
values drive the behaviours that enable the
execution of our strategic plan to develop and
manufacture high-performance technologies
across the RF spectrum.
Our core capabilities are transmitting, receiving,
and conditioning of radio signals at frequencies
between 300MHz and 300GHz whilst our
technologies are applied within complex markets
such as telecommunications infrastructure,
aerospace and defence, critical communications,
space, and adjacent markets. Our key skills
and technologies are increasingly relevant and
applicable as we adapt to global mega trends
such as big data, multipolarity, climate change
and social change.
05
Pictured: Tower Top Amplifier and TTA Controller Unit
We started the new year with increased optimism based
upon an improved opening order book over last year
and a growing opportunity pipeline across a widening
customer base.
Reg Gott
Chairman
2 August 2021
www.filtronic.com Stock Code: FTC
www.filtronic.com Stock Code: FTCStrategic report 06
Chief Executive’s review
I am delighted to have the opportunity to write my first
Chief Executive’s Review after nine months at Filtronic. I
have, of course, been aware of Filtronic throughout my
career in the electronics industry, and during previous
interactions with the Company I have always been
impressed by the breadth of Filtronic’s technology and the
integrity of the Filtronic employees, both past and present.
When presented with the chance to join the Filtronic team
in September last year, I did not have to think too long and
hard about taking up the opportunity. I am pleased to
report that there have been no hidden surprises to date,
and I remain more convinced than ever regarding the
strength of the business, the quality of the Filtronic brand
and our potential for growth by delivering innovative RF
solutions.
FY2021 was a year of first half consolidation, followed
by second half recovery and further adjusted EBITDA
growth. After a slow start in the wake of a challenging
market environment and the continuation of restrictions
imposed by the global Covid pandemic, we had a more
encouraging second half and finished the year with a
strong order book and signs of confidence returning to our
markets.
With the successful sale of the Telecom Antenna
Operation in January 2020, the FY2021 trading results
reveal the underlying strength and profitability of the
core Filtronic business. Revenue is down slightly by 9% on
prior year, mainly due to changes in customer schedules
and delayed execution of critical communications
programmes in the USA during the first half of the year.
Adjusted EBITDA grew year-on-year by 51% based on
increased operational efficiencies, coupled with consistent
demand for higher margin products and strong demand
for Filtronic engineering services.
The management team continue to ensure that Filtronic
remains fully operational despite numerous lockdowns
and disruption. We have modified our workspace and
developed work procedures to the point where we can
now accommodate all our employees back on site,
and we are already starting to see the benefits of a
strong collaborative team environment. This was in part,
enabled by expanding our operational footprint at our
largest site in Sedgefield which was key to maintaining a
covid-safe environment, but it is also an important step
to facilitate more space and capacity as we execute on
our growth plans with additional headcount and
increased operational capability. I would like to take
this opportunity to recognise the resilience of the
Filtronic team and thank them for their outstanding
commitment and support during the last twelve
months.
The most significant consequence of Covid-19 has
been the impediment to business development
and sales acquisition activities during the year. Our
business development teams have not had the
opportunity to visit customers, attend trade events, or
Pictured: HAPS mmWave Transceiver Module
host customer meetings at our facilities. To compensate,
we have made considerable efforts to connect with
customers via alternative channels. We have moved most
of our marketing efforts online and made considerable
enhancements to our website and social media presence.
In doing so we have managed to significantly raise the
profile of Filtronic in the market and improve the levels of
lead generation. Voice of the customer (“VoC”) feedback
conducted during the year confirmed the strength of
the Filtronic brand and our reputation for delivering
innovative RF solutions. With a minor refresh we feel there
is significant value in the Filtronic brand, and we will be
working hard to promote this in the coming year.
The recent investments made in manufacturing
automation in the facility at Sedgefield have resulted
in significant improvements in capacity, productivity
and quality, whilst offering enhanced capability to our
customers. With well-executed inventory management,
we have avoided supply chain issues and maintained
a steady rate of production throughout the year, with
excellent yields, and increasingly high levels of operational
efficiency. This has given us the opportunity to respond
quickly to fluctuating customer demand cycles and ensure
that we remain on schedule with delivery commitments.
We made appropriate use of the UK and US government
support schemes at various points throughout the year,
and this allowed us to balance our cost base during the
changing lockdown restrictions. Last financial year we
consolidated manufacturing of critical communication
products in the USA, to better support our customers
and respond to an increased preference for onshoring
and “buy America” products. This was well received by
customers and enabled us to respond quickly as the
critical communication market recovered, and federal
stimulus packages began to positively impact spending.
Filtronic plc Annual Report and Accounts 2021 07
There are signs that large organisations are looking
towards moving to western supply chains as geo-political
issues persist. The onshoring project has positioned us
well to be part of any early-stage movement on this if the
appetite to do so comes to fruition.
Customers and markets
Our customers in the critical communications market
have seen demand fluctuate over the last year. End users
revised deployment plans and our customers were unable
to make the expected progress with existing project
completions. New procurement decisions have been
delayed subject to revised spending plans. The impact of
this has been a fluctuating level of order intake throughout
the year, and a reluctance to commit to next generation
programmes and new product introductions.
By contrast, the aerospace and defence market has been
a strong and steady contributor this year. In July 2020 we
received a long awaited £4.9m defence contract, which
provides for a two-year manufacturing supply agreement,
and justifies the recent investments made in the advanced
hybrid manufacturing facility on the Sedgefield site.
Demand for our 5G transceiver products reached a peak
at the end of FY2020 as the major customer accumulated
inventory in readiness for the rollout of their backhaul
product portfolio. Deployment of 5G networks themselves
has proved challenging to forecast, due in part to the
slow rate at which governments around the world release
E-band licences, and the mix of backhaul solutions within
a proposed system configuration. We have worked
closely with our customers to align delivery schedules
and managed to level-load the production schedules for
FY2021 and FY2022.
We continue to see the High Altitude Pseudo-Satellites
(“HAPS”) and Low Earth Orbit (“LEO”) telecom
applications as an attractive market for our E-band
technology and we became full members of the HAPS
Alliance during the last year. Having undertaken several
successful engagements with US technology companies
that are pioneers in this field, we now believe that we have
a strong portfolio for both stratospheric and LEO space
platforms and will look to capitalise on this intellectual
property (“IP”) as the applications evolve.
We closed the year with the welcome news that we
had been awarded the prestigious Queen’s Award for
Enterprise 2021. This was a fitting recognition of the
efforts made to support the global telecoms market over
the last few years, and a testament to the reputation of
Filtronic as a flag carrier for British technology.
There have been several other notable achievements over
the last 12 months, all of which set the potential for future
revenues, to which end I would highlight the following:
• The award of two funded development contracts for
defence products associated with next generation radar
systems. An early indication of the UK Government’s
commitment to significant Electronic Warfare
(“EW”) platform upgrades and an opportunity for
Filtronic to influence the ultimate Original Equipment
Manufacturer (“OEM”) design.
• The award of a £1.3m defence contract for the design,
development, and low-rate production of battlefield
communication products. This represents our first
direct engagement with a defence agency, and it will
utilise the expertise of our Leeds design centre.
• We have started to see volume sales for our “best-in-
class” Tower Top Amplifier (“TTA”) product with design
wins for both system upgrades and new state-wide
installations in the USA.
• After successful conclusion of the trials associated with
our 10Gbps backhaul track to train transceiver product
in Asia, we have received enquiries for initial production
volumes and delivered transceiver units for the start of
UK trials.
• We successfully delivered high performance E-band
transceivers for use in two separate low latency private
network applications associated with high frequency
trading.
• We successfully transitioned from our Orpheus E-band
transceiver product to the next generation Morpheus
II product during Q2 FY2021. Shortly afterwards we
passed the milestone of 50,000 installations for our
market leading E-band modules.
Outlook
As the world emerges from the devastating impact of the
Covid-19 pandemic, we will inevitably face a period of
economic uncertainty, an example of this being the current
disruption to semiconductor supply chains. However, we
feel we have the resources and reserves necessary to
navigate these headwinds and we look forward positively
to the new trading period.
Filtronic’s core markets of telecommunications
infrastructure, critical communications and aerospace
and defence, represent industry segments that have
remained robust throughout the pandemic, and are well
positioned to benefit from economic recovery and efforts
to stimulate the economy. We can expect a renewed
commitment to the roll out of 5G networks worldwide, and
we believe that some of the delayed spending on critical
communications infrastructure will begin to materialise.
Aerospace and defence programmes are naturally
longer-term initiatives, but we see an increased appetite
by the governments in the UK, USA and Europe to
support investment in next generation EW technologies,
commercial space programs and sovereign telecom
supply chains, all of which plays to our strengths and
provides potential growth opportunities for Filtronic.
Business plans for FY2022 reflect the somewhat
unpredictable nature of the economic recovery, and
in support of this we have conducted a full Strategic
Planning Process (“STRAP”) to generate our technology
roadmaps and identify additional growth opportunities.
We have a culture that is proactive and highly motivated
to create sustainable growth and diversification of our
customer base, and we have put in place initiatives to
www.filtronic.com Stock Code: FTCStrategic report 08
further develop our capability and secure new business
opportunities including:
• Development of next generation MMIC designs that
will enable us to continue the evolution of our mobile
telecom backhaul solutions, from E-band into the
adjacent licence bands of V-band, W-band and
ultimately D-band.
• Continued investment in our marketing organisation
with an updated website platform and enhanced user
content, a refresh of the Filtronic brand and a renewed
commitment to respond to feedback from customers.
• Strengthening the sales organisation with the
deployment of additional direct sales and business
development resource in the UK and Western Europe.
• Establishing a Manufacturing Representative Network
across the USA and Europe to enhance our sales reach,
with a faster route to market through established sales
channels without the high overhead cost incurred from
enlarging our own sales team.
• Further investment in advanced equipment to continue
the extension of our engineering design and test
capability and incorporate higher-frequency higher-
performance technologies.
• Aligning our business processes and equipping our
facilities to achieve the accreditation necessary to
undertake a higher security level of UK Defence
programme work.
I am pleased with the progress we have made over the
past year and I am excited by the potential that exists
at Filtronic. We have come through the pandemic well,
and there is an increasing need globally for our high-
performance products and unique RF design capabilities.
We have identified the specific market segments that
we will pursue as the economy recovers and business
constraints are removed and as a result we approach the
new financial year with a renewed sense of optimism.
Richard Gibbs
Chief Executive Officer
2 August 2021
Our core markets
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Filtronic plc Annual Report and Accounts 2021
09
Market review
Filtronic serves several markets with advanced RF
communications equipment, the main applications being
telecommunications infrastructure (“XHaul”), critical
communications networks and aerospace & defence. In
addition to these markets, we have targeted adjacent
sectors where we can add value through leveraging our IP
and design expertise.
Telecommunications infrastructure (XHaul)
XHaul is a collective term that covers front, mid and
backhaul representing the various connections between
the edge of the network, base stations, remote radio
heads and the core fibre network. XHaul is achieved
through a combination of fibre and wireless links and
traditionally, backhaul has employed licensed microwave
bands (between 6GHz and 42GHz). However, as the data
demands on networks increases, the capacity of XHaul
links has had to adapt, by employing the significant extra
bandwidth available with the lightly licensed mmWave
bands, primarily E-band (71-76GHz / 81-86GHz) today
with W-band (92GHz to 114.5GHz) and D-band (130
– 175GHz) possible for future ultra-high bandwidth
requirements.
Mobile Network Operators have started to roll out their 5G
networks in many countries. Initial deployment has been
based on Non-Stand Alone (“NSA”) technology whereby
the existing 4G LTE network infrastructure is augmented
by increasing capacity through carrier aggregation
techniques, enabling the basic 5G New Radio (“5G NR”)
phase 1 performance requirements to be met. Later,
Stand Alone (“SA”) network rollouts are delivering full 5G
NR phase 2 performance.
The full range of 5G performance requires the use of
significantly higher capacity mmWave frequencies to the
user. Higher frequencies typically result in shorter wireless
link distances, and so more cell sites will be needed within
the network. Consequently, the overall market size for
wireless XHaul links connecting the cell sites back into the
network, will increase.
Microwave transport is a well-established backhaul
technology and has been used in mobile networks for
decades. To a large extent, LTE’s success has been built
on the capacity, flexibility and short roll-out times that
microwave links provide. The use of fibre optic links in
networks has increased in recent years as the use of
copper has declined, however, fibre and wireless have co-
existed in networks for many years and will continue to do
so as there are a number of factors to consider in deciding
whether to deploy fibre or wireless:
• Fibre is not ubiquitously available, especially in
suburban/rural areas. When a fibre Point of Presence
(“PoP”) is a few hundred metres away from the radio
access point, the cost of adding new fibre may be
significantly higher than adding a wireless link.
• In current mobile networks, wireless is used in more
than 50 percent of cell sites. Replacing existing lower
frequency wireless backhaul with fibre is not always
economically viable and therefore upgrading to
E-band microwave links is the most effective way to
increase capacity.
• Whilst the cost of fibre cable itself may be reducing,
this cost is a fraction of the cost to trench and install the
cable, whereas the cost to supply and install wireless
links continues to fall while performance continues to
improve.
• E-band backhaul technology links meet 5G’s current
capacity requirements and can offer lower latency
than that of a fibre cable of the same length, which
makes it a more attractive solution for latency-critical
applications.
Global backhaul media distribution
Fiber
Microwave
About 62% of all radio sites
will be connected by
microwave in 2025.
Source:
Ericsson Mobility Report
www.filtronic.com Stock Code: FTCStrategic report 10
Market review continued
Microwave links by frequency
100%
80%
60%
40%
20%
0%
2010
6-13GHz
15-23GHz
26-42GHz
60GHz
70/80GHz
W
D
E-band more
than 20% in 2025
Source:
Ericsson Mobility Report
2015
2020
2025
which more than doubles the linear Tx power, significantly
extending link range. Like Orpheus, Morpheus II
incorporates our own design MMIC chipsets to ensure cost
effective, class-leading module performance. However,
we remain device agnostic and have considerable
experience of working with clients to integrate their
preferred chipset solutions into appropriate, high yielding
module architectures.
Whilst some OEMs choose to develop their own in-house
design and manufacturing capabilities, Filtronic’s unique
approach has allowed us to create a differentiated
offering that provides our clients with significant
flexibility, cost and, crucially, time to market advantages.
Furthermore, our class-leading chipsets mean that our 5G
XHaul products continue to offer significant performance
advantages.
Critical communications networks
Critical communications networks are operated for the
benefit of emergency services, federal agencies, defence
installations and private security networks. Reliability,
availability, and security are critical attributes for these
services and for this reason they are normally provided
over separate infrastructure, independent of commercial
telecoms networks.
Filtronic has historically focussed on the North American
In summary, the deployment of 5G networks is a major
driver for the deployment of wireless, E-band XHaul
products. Current market estimates are that 65% of
installed base of backhaul links will be microwave by
2022. The majority of these links will be sub 42GHz
frequency, with the approximately 20% anticipated to be
E-band (71GHz-86GHz) frequency, typically deployed
in areas of high traffic density such as airport, sports
stadiums and city centres. The technical and economic
advantages of microwave over fibre in many situations will
underpin the continued growth of deployment of E-band
wireless links in backhaul applications, and our intent is
to become the independent “go to” partner of choice for
these demanding mmWave applications.
Filtronic’s approach to the 5G backhaul
market
Filtronic differentiates itself from other players in the
5G backhaul market by offering highly integrated, fully
calibrated transceiver modules which simply drop-in
between the baseband modem module and the antenna.
This plug and play architecture eliminates the need for
customers to develop in-house mmWave expertise,
enabling them to focus on their core competencies and
results in significantly reduced time to market, lower
overall development costs and minimised cost of quality
(due to extremely high radio level yield).
Filtronic’s new Morpheus II transceiver module, launched in
FY2020, is a further update on our class leading Orpheus
module which was introduced in 2016. Morpheus II has
the advantage of being backwards compatible with
Orpheus, enabling simple insertion, but is more compact,
lighter in weight, lower in cost and higher in performance
than Orpheus. Therefore, it offers customers a significant
upgrade to both new and legacy designs. In addition,
Morpheus II has an Enhanced Tx performance option
Filtronic plc Annual Report and Accounts 2021 11
market which deploys the “P25” network standard
and where market dynamics and the demand for
higher resilience and longer range have allowed us to
differentiate our products.
Overall expenditure on critical communications networks
continues to grow as emergency services look to expand
coverage, integrate services and continue to replace
legacy FM analogue networks. The global land mobile
radio (“LMR”) market is forecast to grow at 9% CAGR
between 2021-2025 based on an upgrade of analogue
to digital networks combined with the convergence of
LTE networks and LMR technology. Product life cycles
in this industry tend to be significantly longer than in
commercial mobile phone networks and therefore return
on investment cases are more attractive for Filtronic.
Critical communications networks have historically been
designed to supply high-quality, high-reliability voice
communication and so these networks have tended to
be narrowband. In recent years there has been a steady
increase in the desire to exploit technologies such as
body worn cameras to augment the on-scene voice
communications. The market is therefore progressively
developing hybrid solutions whereby the mission-
critical voice communications will continue to run over
the specialist critical communications networks whilst
non-critical data communications will be carried over
commercial grade mobile networks.
Filtronic’s approach to the critical
communications market
Filtronic has concentrated on supplying mission-critical
filters and combiners to the North American P25 market
and has established a strong relationship with the leading
OEM in this sector. We embarked on a programme to
expand our product offering to this sector and in FY2020
we launched a range of TTAs as the first of these new
products. Although our TTA products have been designed
to be OEM agnostic and will be marketed under our
own brand, our lead client in this market who is in turn
the USA P25 infrastructure market leader, has adopted
our TTA range and declared it to have “best-in-class”
performance. We are actively working with customers to
develop and qualify additional products to expand our
P25 network portfolio in the USA and launch solutions for
the more fragmented European market. These products
will be designed over the coming years recognising
that the cycle for accreditation, approval and adoption
associated with these products can be lengthy.
Filtronic took the decision in FY2020 to in-source and
on-shored the manufacturing of our P25 public safety
network products away from our Chinese subcontractor
and into our own facility in Salisbury, Maryland, USA. This
move was primarily designed to improve lead-times and
customer response times, but it has also positioned us well
as concerns increase relative to security of supply during
the realigning of trade agreements between China and
the USA.
The critical communications market continues to show
good levels of investment at both the city and state level
and private networks requiring secure communications
not found with the public telecoms network. Our solutions
are trusted, reliable and generally the product choice for
system designers planning new installations and network
upgrades. Filtronic’s strategic objective is to maximise
the opportunity in this sector by expanding our range of
products, deepening existing customer relationships and
building new ones by virtue of a nationwide network of
representatives that can influence the design of Filtronic
products into network proposals.
Aerospace and defence
Filtronic has long been a supplier of RF components and
sub-systems to the aerospace and defence industry. In
recent years we have significantly grown this part of the
business through multi-year contracts to supply transmit
and receive modules (“TRMs”) for latest generation
airborne radars. An attraction of this market is the
critical role that radar plays in delivering an effective EW
solution for the current range of fast jet programs. We
also have the chance to deploy our RF design expertise in
next generation radar systems as OEM’s make efforts to
maintain an “operational edge” and extend asset life-in-
service results via performance upgrades and wear & tear
replacement business.
Increasing geopolitical tensions are expected to lead to
increased defence spending over the coming years and
it is anticipated that the focus of this increased spending
will be to provide enhanced capability and interoperability
based on advanced radar systems utilising ever more
sophisticated RF solutions. In November 2020, the UK
government announced a £16.5bn spending increase
over and above the existing four-year manifesto
commitment. In March 2021, the Integrated Review
of Security, Defence and Foreign Policy included the
commitment to upgrading of the Typhoon radar system.
www.filtronic.com Stock Code: FTCStrategic report 12
Market review continued
Filtronic’s approach to the aerospace and
defence market
Filtronic’s target market in aerospace and defence is the
manufacture of TRMs, filters and other RF components
and sub-systems where our engineering, design and
highly specialised manufacturing capabilities can add
value. By focusing on TRMs and associated sub-systems
Filtronic can leverage its accumulated design expertise,
deep understanding of RF packaging and thermal
management know-how and sovereign manufacturing
capabilities.
This long-cycle business activity can involve up to several
years of collaborative development with the end client
before volume manufacturing commences. However,
once in the field, these programmes normally enjoy many
years of continuing supply and support revenues.
The UK aerospace and defence market relies on
indigenous design and manufacturing capabilities and
Filtronic have built a significant capability for the
manufacture of RF hybrids together with the policy, and
procedures necessary to support the defence industries
need for traceability and control.
Whilst the market for land-based and naval radars is
relatively small by comparison, they still require significant
numbers of TRMs per system and so represent an
attractive development market opportunity. Additionally,
opportunities are also being sought with missile system
manufacturers as these applications have similarly
attractive attributes.
Other growth markets
We continue to seek and develop opportunities in
other adjacent markets and in particular for mmWave
applications. These include low-latency private networks
for high-speed, high-capacity applications, track-to-train
gigabit wireless links, mmWave test systems and HAPS
systems.
Low-latency private networks
Filtronic has designed and supplied highly customised
versions of Orpheus and Morpheus E-band links to
customers supplying the financial services market.
Private low-latency microwave networks are becoming
recognised as an essential part in reducing transaction
times in automated, high-frequency, financial trading
systems. Other high power, low-latency applications under
consideration including plant safety controls, security
monitoring and autonomous vehicle controls.
mmWave test equipment
Increased usage of components operating at frequencies
up to 55GHz creates challenges for test equipment
manufacturers and offers an opportunity for Filtronic
to design and manufacture mmWave solutions for use
in automatic test equipment (“ATE”). In FY2020 we were
awarded a project to design and deliver a mmWave
sub-module as part of an “Over the Air” system for a
leading USA RF equipment company. The design phase
is due to complete in FY2022 with the supply of evaluation
samples. It is hoped that production supply will commence
in FY2023.
Track-to-train communication links
The provision of high-speed, high-capacity, high-
reliability internet connections on rail journeys has
become a strategic objective of both governments and
rail operators around the world. However, the provision
of such services on high-speed trains presents a number
of interesting technical and commercial challenges.
Filtronic has partnered with a few Out-Door Unit (“ODU”)
manufacturers to successfully complete demonstration
projects in both Europe and Asia. A follow-on project of
“Metro scale” is currently being planned for execution
in CY2022 and it is hoped that commercialisation of an
application nationwide will follow from CY2024 onward.
mmWave System in Package (“SiP”) modules
for proprietary high-frequency networks
Packaging expertise developed over ten years of
supplying high-frequency mmWave devices for E-band
transceiver has enabled Filtronic to develop a range of
highly integrated, small footprint SiP Tx/Rx modules for
third-party mmWave chip suppliers. Typically used in
proprietary point-to-point networks these modules can
optimise the performance of RF links and enable a rapid
migration from prototype to high volume production of
mmWave RF links.
High altitude pseudo-satellites (“HAPS”) and
low earth orbit satellites (“LEO”)
In recent years there has been considerable work
undertaken to develop airborne communications
networks that overcome the limitations of terrestrial
networks. A number of challenges exist in designing
these systems, one of which is the development of
communications transport links that deliver sufficient
bandwidth and range to provide comprehensive internet
services. There are currently over 40 HAPS programmes
at various stages of development around the world and
it is predicted that over 10,000 small satellites will be
launched during the decade commencing 2020. The
HAPS Alliance brings together technology providers
and the leading telecom service providers in support of
this emerging application. Filtronic was accepted as a
member of the HAPS Alliance organisation in FY2021.
Over the last four years, Filtronic has developed class-
leading power combining technologies at mmWave and
has supplied evaluation transceiver modules to a number
of companies actively exploring this market. Commercial
deployments of HAPS and LEO satellites for mobile
internet applications may be a few years away , but with
proven IP we are well positioned to participate in this
market segment as part of a future growth strategy.
Filtronic plc Annual Report and Accounts 2021 Objective and strategy
13
Filtronic is a designer and manufacturer of advanced RF communications products supplying several
different market sectors, including telecommunications infrastructure, aerospace and defence and critical
communications.
Our objective is to create value for our customers by
enabling the future of RF technology including microwave
and mmWave communications. We focus on markets
where we have a deep understanding of the sector and
customer requirements and where we can leverage our
design know-how and IP portfolio.
By being a trusted supplier of technically advanced
products in markets that place value on quality and
reliability we can deliver sustainable growth and a positive
return for our shareholders.
Our objectives within the strategy to achieve this are:
Objectives
Achievements in FY2021
Activities for FY2022
To nurture close working
relationships with our
customers to understand
their needs and
requirements
• Expanded our sales network including
• Cover 100% of USA and Europe with sales
engagement with two USA rep companies.
representatives.
• Completed Voice of the Customer (“VoC”)
• Expand the direct business development
exercise.
organisation.
• Developed relationships with our key
• Key engineering management recruitment
To develop class-leading
products in our core
technology areas and
to expand our areas of
expertise
To develop solutions to
address both customer-
specific and general
market requirements.
To grow our customer
base within the market
verticals we serve
To broaden the range of
markets we serve
customers resulting in several smaller initial
contract wins for next generation products.
process with a brief to expand our
relationships with technical leads in the
markets we operate.
• Build on our business processes to better serve
defence, space and aerospace customers.
• Expand our manufacturing capabilities to
serve defence, space and aerospace markets.
• Completed launch of critical communications
TTA product portfolio.
• Execute on the core technology roadmap
developed as part of STRAP programme.
• Morpheus E-band transceiver platform
released for adoption by our lead OEM
customer in telecoms XHaul.
• Completed full strategic planning process
(“STRAP”) to define opportunities for future
growth.
• Completed launch of critical communications
TTA product portfolio.
• Expand our capability to support the space
and defence market.
• Expand our capability to design System in
Package (“SiP”) solutions to reduce size,
weight, and power in key markets.
• Continue to develop our telecoms XHaul
product portfolio exploring W-band and
D-band frequencies.
• Expand capabilities associated with
design, qualification, test and manufacture
of emerging compound semiconductor
technology.
• Customer dependency remained flat in the
year as our plans to reduce this risk were
hampered by the pandemic.
• Focus on adjacent market applications that
have the potential for near-term growth.
• Expansion of the customer base in our existing
markets of interest.
• VoC exercise to understand customer
• Continue to expand our marketing
perception of Filtronic.
• Redesigned website to market to a more
diverse customer base.
communications activities and build our sales
channels.
• Refresh and relaunch the Filtronic brand and
promote our brand message to targeted
markets.
• Focus on building our position within the UK
defence market.
www.filtronic.com Stock Code: FTCStrategic report
14
Objective and strategy continued
Product and technology strategy
Filtronic designs, manufactures and supplies technically
advanced RF products that transmit, receive and
condition radio waves.
Our product range and wider technology capabilities
are rich in IP and know-how. Our aim is to be an applied
technology and capability leader in our markets but avoid
the risk of being a research pioneer.
Filter and combiner products
Filtronic’s filter products cover a range of product classes,
with solutions to support a variety of legacy, current
and future applications. Our filters and combiners are
designed to meet exacting operating specifications and
are designed for resilience in critical communications
applications.
mmWave 5G transceiver products
Filtronic’s mmWave transceiver products are based
around our class-leading, high-capacity, E-band
transceiver technology and have been optimised for
5G mobile backhaul and wireless link applications
such as track-to-train and HAPS/LEO ground-to-air
communication.
Tower Top Amplifiers
TTAs are used in many critical communications LMR
systems to enhance the received signal strength and
quality. This receive-only system consists of low-loss,
high-rejection filters coupled to low noise amplifiers with
a high level of built-in redundancy. Filtronic’s solution
employs a separate control unit that monitors overall
system performance and distributes the received signal to
multiple separate receivers.
Manufacturing process capability
The specialist manufacturing capability and know-how
Filtronic has developed over many years of manufacturing
its own products are highly valued by many companies
in our market. Clients also ask us to manufacture and test
their own, or third-party designed, products for them. This
is not only an additional and valuable source of revenue
and profit but it also provides an excellent vehicle for
continued process development and investment that we
can in turn apply to our own product portfolio.
Business ethos
Our aim is to be agile and responsive to customer
needs. To achieve this, we provide an environment to our
employees with a high degree of delegated authority
and empowerment. We have established a framework of
values and behaviours that guide our business ethos which
can be found in the ‘Our people’ section of this Annual
Report.
Organisational overview
Filtronic operates from three sites; Sedgefield and Leeds in
the UK and Salisbury, Maryland in the USA.
Sedgefield, UK
Transceiver and TRM manufacturing, microwave and
mmWave engineering, sales (EMEA) and central services.
Leeds, UK
Engineering and development of filters, TTAs and
associated RF systems and sub-systems.
Salisbury, MD, USA
North American sales, service, repair and manufacturing
of critical communications products.
CALIFORNIA
NEW YORK
SEDGEFIELD
SOUTH KOREA
LEEDS
GERMANY
TEXAS
MARYLAND
FRANCE
Filtronic sales and
manufacturing facility
Sales office
Filtronic plc Annual Report and Accounts 2021 Financial review
Improved second half trading delivered strong
adjusted EBITDA and a healthy cash position as the
markets we serve recover from the impacts of the
pandemic. The strength of the balance sheet will be
used to support investment in revenue growth.
Filtronic achieved material adjusted EBITDA growth within
the continuing operation for the third consecutive year
thanks to a strong sales mix and controlled overhead
spend. Adjusted EBITDA for the year rose to £1.8m
(2020: £1.2m) with £1.2m being generated in the second
half following an uplift in sales against the first half.
Consequently, the balance sheet strengthened and cash
generation of £1.0m (2020: £0.6m outflow) in the period
has given an excellent platform to develop the business
and invest in opportunities that offer a high rate of return
and provide the building blocks for future growth.
Revenue
Sales revenue for the Group decreased in the year by
9% to £15.6m (2020: £17.2m) because of delays to key
programmes in the first half and the impact of Covid on
one of our key markets. Despite this, it was encouraging
to see 20% revenue growth to £8.5m in the second half
of the year over the first half (H1 FY2021: £7.1m) as
markets recovered and spending on core communication
programmes increased having seen funds diverted to
sectors tackling the pandemic. Trading in the second half
gives optimism that companies are keen to progress their
deferred infrastructure projects, evidenced by the stronger
order book we carry into the new financial year and an
increase in the number of enquiries received.
5G XHaul sales decreased year-on-year as our lead
customer had built buffer stocks in the prior year to
capitalise on market opportunities as they arose.
Consequently, the reduction in demand was anticipated
but further exacerbated as the switch to the next
generation, Morpheus product, was delayed due to
technical challenges unrelated to our product. Sales
of XHaul derivatives to adjacent markets including
HAPS, ‘over-the-air’ equipment and trackside-to-train
applications were in line with those generated in the
prior year. However, several customer funded product
developments offer an opportunity to not only lower
customer dependency but are themselves significant
players in their respective markets.
Sales of defence products saw year-on-year growth
of 24% and we are now enjoying consistent output of
the products, helped by the substantial investments we
made in plant and machinery in the previous year. In
addition to this, we have been working on a number of
smaller engineering programmes as we seek to develop
further opportunities within our existing customer base.
Broadening our customer base has been a key strategic
objective of the business for some time and it is pleasing
to see conversion of numerous opportunities with other
defence contractors which, whilst small, and early-stage
15
developments, have the potential to grow into something
more significant if adopted into a defence programme.
Critical communication markets suffered during the
pandemic with reduced demand for product but sales in
the second half of the year increased by 41% to give 7%
growth year-on-year. Given order-flow and customer
forecasts it appears the pent-up demand in the market
is now flowing down the supply chain. It was especially
pleasing to see the first significant sales of the newly
launched TTA products in the final quarter of the year.
These sales are an important milestone for the product
as it gains prominence throughout the network of field
engineers, and we can position ourselves better to
participate in state-wide rollouts.
Operating costs and headcount
Operating costs increased in the year to £9.5m (2020:
£9.3m). The Group’s largest overhead is salary related
costs which increased by £0.2m following recruitment of
additional engineering resource and the reinstatement of
a marketing function to support revenue growth.
We were also able to fund part of this by naturally
reducing the size of our manufacturing team due to
efficiency and yield improvements from the capex
investment last year, which is now optimised.
Consequently, we have been able to reduce the total
number of employees which is reflected in the average
headcount for the year decreasing to 130 (2020: 141).
An analysis of the Group’s average continuing headcount
is presented below:
Manufacturing
Research and development
Sales and marketing
Administration
Total headcount
2021
86
24
5
15
130
2020
99
21
5
16
141
Costs have been managed tightly throughout the year
and have included some consequential cost savings from
the pandemic such as business travel and trade
exhibitions which are not expected to continue in the long
run. These are important expenses that facilitate customer
engagement so we will be looking to take advantage of
travel restrictions easing at the earliest opportunity.
We benefitted from the UK government’s furlough scheme
www.filtronic.com Stock Code: FTCStrategic report
16
Financial review continued
in the first half with £83k received following programme
delays to a couple of key projects which offset overhead
spend. This was offset against the salary cost in operating
costs. In the USA, we secured $237k (£192k) of financial
support through the Paycheck Protection Programme
(“PPP”) to retain staff during the pandemic. The loan was
forgiven for repayment by the US government in the year
and converted to a grant.
A large portion of our product development in the year
was customer funded which maintains a healthy flow of
cash during the project. Consequently, there was limited
capitalisation of development costs as the costs are
expensed in line with the revenue recognition. The impact
of this was £0.6m more engineering costs being expensed
than the prior year with only £0.1m capitalised (2020:
£0.7m). Further commentary can be seen in the ‘Research
and development costs’ section of this review.
Adjusted EBITDA and operating profit
The Group focuses on an alternative performance
measure (“APM”) to track performance of the business
and a GAAP measure of operating profit. The APM is
adjusted EBITDA as it measures the quality of earnings
without the impact of exceptional items and non-cash
expenses such as depreciation and amortisation.
Operating profit was £0.6m (2020: £0.2m operating loss)
whilst adjusted EBITDA was £1.8m (2020: £1.2m)
representing a 50% increase. This was possible as the
reduction in revenue was mitigated by a stronger sales
mix. Gross profit increased considerably thanks to
increased sales to the defence market where certain
components are free issued by the customer and reduced
sales into the telecommunications infrastructure market
which is more price sensitive. Lower manufacturing
overheads from reduced headcount and furlough
payments more than offset the increased depreciation
charge from the capital expenditure programme last year.
Given the operational gearing of our facility in the
USA, where critical communications products are
manufactured, increased volume enabled an uplift in the
profitability of that site.
The full year impact of investments made last year in
plant and machinery can be seen in the table below
from an increased depreciation charge. Impairment
of development costs previously capitalised was £45k
as we mothballed a development due to concerns over
successful commercialisation after further discussions
with the customer. Amortisation has increased as we
have started to amortise the Morpheus and TTA product
developments.
Reconciliation of adjusted
operating profit/EBITDA
Operating profit/(loss)
Exceptional items
Adjusted operating profit
Impairment of development costs
Depreciation
Amortisation
2021
£000
642
(64)
578
45
941
209
2020
£000
(188)
569
381
89
677
18
Adjusted EBITDA
1,773
1,165
Taxation
A tax charge of £0.2m (2020: £0.1m) has been recognised
for the year. This is a result of the deferred tax position
being reduced reflecting the usage in the year. This is a
non-cash entry so payments will not be made of this value.
It is highly likely that governments around the world will
increase their rates of corporation tax over the next few
years to help pay for the cost of economic support during
the pandemic. However, with substantial deferred tax
assets, including those not recognised on the balance
sheet, this is likely to have a minimal impact on cash.
Research and development costs (“R&D”)
Total R&D costs in the year before capitalisation and
amortisation of development costs were £1.7m (2020:
£1.7m). The Group has utilised most of the engineering
resource in the year on customer funded developments.
This ensures we generate near-term revenue whilst there is
an increased chance of commercialisation.
The Group remains committed to investment in R&D
for the future growth of the business and consequently
measures this as a KPI. Key areas of spend in the year
included product development for markets spanning 5G
XHaul, HAPS, ‘over-the-air’ mmWave equipment and
defence. In addition to these, our stronger balance sheet
gives us greater ability to invest in development of our
own strategic technology roadmap to build long-term
shareholder value in the years ahead.
The Group capitalises its development costs in line with
IAS 38 as set out in note 1 to the financial statements.
A reconciliation of R&D costs before capitalisation and
amortisation can be seen in the table below:
Reconciliation of R&D costs
R&D costs in income statement
Capitalisation of development costs
Impairment of development costs
2021
£000
1,845
52
(45)
Amortisation of development costs
(184)
2020
£000
1,152
678
(89)
-
R&D cash spent
1,668
1,741
Filtronic plc Annual Report and Accounts 2021
17
in the UK and a $4.0m invoice factoring facility with Wells
Fargo Bank in the USA. Both facilities were undrawn at 31
May 2021 (2020: undrawn).
Going concern
In assessing going concern, the Board have considered:
• The principal risks faced by the Group which are
discussed within the ‘Risk management’ section of the
Annual Report.
• The financial position of the Group including forecasts
and financial plans.
• The healthy cash position at 31 May 2021 of £2.9m
(2020: £2.0m) and the additional headroom available
through the undrawn invoice discounting facilities.
• The ongoing impact of Covid-19 as the business has
maintained its operational capability throughout the
pandemic and met all customer commitments. Whilst
travel restrictions impacted on new contract wins in
FY2021, the improvement in customer forecasts and
increased order-flow give confidence there is pent-up
demand in our markets and new opportunities are
starting to present themselves.
Therefore, the Directors are satisfied that the Group has
adequate financial resources to continue in operational
existence for a period of at least 12 months from the date
of this report. Accordingly, the going concern basis has
been adopted in the preparation of the Annual Report for
the year ended 31 May 2021.
Michael Tyerman
Chief Financial Officer
2 August 2021
Pictured: Hercules mmWave Transceiver Module
Capital expenditure and right of use assets
Capital expenditure was reduced in the year following
substantial investment in the prior year. The total amount
of capital committed was £0.4m (2020: £1.8m) mainly for
engineering equipment at our site in Sedgefield which will
be used to expand our capability at higher frequencies.
The assets externally financed through asset finance
agreements were subsequently classified as right of use
assets.
Inventory provision
Inventory is valued at the lower of cost and net realisable
value. It is the Group’s policy to regularly review the
carrying value of its inventories and to make a provision
for excess and obsolete inventory. As at 31 May 2021, the
inventory provision was £1.5m (2020: £1.5m).
Warranty provision
In line with industry practice, the Group provides
warranties to customers over the quality and performance
of the products it sells. The Group’s policy is to make a
provision, calculated as a percentage of cost of goods
sold, after reviewing costs associated with faulty products
returned. As at 31 May 2021, the warranty provision was
£0.3m (2020: £1.1m). The Group paid the final instalment
of a specific customer warranty settlement liability in the
year of $0.5m (£0.4m) drawing the matter to a close.
Funding and cash flow
The Group recorded an increase in cash and cash
equivalents to £2.9m (2020: £2.0m) at the year-end.
Cash generated from operating activities in the year
was £2.5m (2020: £2.6m outflow) as solid adjusted
EBITDA coupled with an unwind of the working capital
position drove strong cash generation. The inventory
position unwound in the second half following the
successful conclusion of the onshoring project of critical
communication products from China to the USA. It was
essential to hold higher levels of inventory during this
project whilst we developed and gained confidence in the
new supply chain whilst in the UK higher levels of inventory
were held as mitigation against any disruption from Brexit.
However, we are currently in the middle of a global
shortage of electronic components. Therefore, we plan to
increase our inventory position once again to ensure we
have material availability to fulfil orders and capitalise on
opportunities when our competitors are forced to extend
their lead times.
Net cash of all lease obligations when including all debt
except property leases at the end of the period was
£1.9m (2020: £0.4m) whilst overall net cash including
property leases was £0.8m (2020: £0.7m net debt). At a
time when many sectors are struggling with liquidity it is
very pleasing to move the business into a net cash position
demonstrating the resilience of the business during a very
difficult trading environment.
To provide additional cash headroom Filtronic has a
£3.0m invoice discounting facility with Barclays Bank plc
www.filtronic.com Stock Code: FTCStrategic report 18
Key performance indicators
The Group’s management team uses various Key Performance Indicators (“KPIs”) to monitor the
financial and non-financial performance of the business. Below are the measures and metrics
which the Board believes best indicate the performance of the Group’s continuing operations.
Revenue (£m)
Adjusted EBITDA (£m)
£15.6m
£1.8m
Adjusted EBITDA per
employee (£k)
£13.6k
.
6
1
2
.
9
5
1
.
2
7
1
.
.
9
6
5
5
1
1
6
3
.
2
1
.
7
0
.
8
1
.
7
0
.
.
5
7
3
3
8
.
7
.
6
3
1
7
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
The total amount the Group earns
from the sale of products and
services.
The Board recognises adjusted
EBITDA as a key metric of the
underlying health of the business.
Employees are a critical asset in
our business and we monitor the
adjusted EBITDA per employee to
measure productivity.
Research and
development costs (£m)
£1.7m
Cash generated from/(used in)
operating activities (£m)
£2.5m
7
1
.
7
1
.
2
1
.
.
7
2
1
1
.
8
1
.
0
0
.
5
2
.
2018
2019
2020
2021
2018
2019
2020
2021
)
6
2
(
.
The Board recognises that the
Group needs to invest in new
products, capabilities and
technologies to participate in a
technology-driven market and
measures the investment made in
research and development.
The Board recognises that cash
flow from operating activities
indicates whether the Group is
able to generate sufficient positive
cash flow to maintain and grow
its operations, or it may require
external funding for financing.
Filtronic plc Annual Report and Accounts 2021 Risk matrix
Risk matrix
HIGH
5
HIGH
5
y
t
i
l
i
b
a
b
o
r
P
y
t
i
l
i
b
a
b
o
r
P
4
3
2
1
4
3
2
1
Risk matrix
Risk matrix
19
Risk management
The Board recognises strong risk management is key to our success and achievement of our
strategic objectives. A rigorous assessment of the principal risks facing the Group is regularly
undertaken with quick and effective responses taken when needed. These principal risks carry
HIGH
financial, operational and compliance impacts including those that threaten the business model, strategy,
future performance, solvency and liquidity. They are identified based on the likelihood of occurrence
and the severity of impact on the Group that could result in damage to our reputation or business
performance.
Risk matrix
HIGH
5
5
4
The Board is ultimately responsible for the overall risk
management system and internal controls applied
throughout the Group to ensure a structured and
appropriate approach to risk is taken in line with
strategic priorities and risk appetite. The Audit
y
Committee has oversight of risk management and
t
i
reports to the Board with its findings. The directors
l
i
b
recognise that risk is inherent in any business so actively
a
b
manages rather than eliminates risk to achieve business
o
objectives which includes review of the effectiveness of
r
P
these controls.
2
3
Risk management within the Group is managed by
senior operational management including the
Executive Directors. The team is responsible for
identifying, evaluating, reporting and managing the
key risks in accordance with established processes
under the Group’s operational policies and controls.
This includes regular review of the Group’s risk register
considering existing and emerging risks, risk scores and
mitigation action plans prepared by risk owners to
manage and reduce the risk. Reporting within the
LOW
Group is structured so that key issues can be escalated
rapidly through the management team to the Board
where appropriate.
1
4
5
HIGH
y
t
i
l
i
b
a
b
o
r
P
4
3
y
t
i
l
i
b
a
b
o
r
P
3
2
2
1
1
LOW
LOW
LOW
LOW
LOW
Key:
1
1
1
2
Reliance on key customers
2
2
Impact
Impact
3
3
4
3
4
5
HIGH
4
Impact
Recruitment & retention
5
HIGH
5
HIGH
LOW
LOW
1
1
2
2
3
3
4
LOW
LOW
Impact
Impact
Risk
Risk description
4
5
HIGH
Manufacturing
Technology
Manufacturing
5
Technology
HIGH
Mitigation actions
Reliance on key customers
Covid-19
Reliance on key customers
Manufacturing
Covid-19
Technology
Covid-19
Supply chain
Recruitment & retention
Market requirements
Supply chain
Supply chain
Recruitment & retention
Market requirements
Market requirements
Change
in year
Reliance on key customers
Reliance on key customers
Covid-19
Covid-19
Manufacturing
Manufacturing
Technology
Technology
Recruitment & retention
Failure to
identify
market
requirements
Supply chain
With the rapid evolution of
product technology and other
Recruitment & retention
corporate decisions, the size of
our addressable market may
Supply chain
be affected. Failure to forecast
Market requirements
market movements correctly thus
missing opportunities or wrongly
predicting product longevity
could impact on long-term
revenue and profit.
Market requirements
In a market of rapid technology changes, it is imperative
the Group chooses opportunities that will yield a good
rate of return and have an extended product life. All new
opportunities are appraised to ensure there is a good
match between our capacity, capabilities and likely
adoption in a growing market with a good rate of return.
The appraisal process includes regular communication
with our customers including key members of our
engineering teams to ensure we are developing innovative
products that deliver the technical solutions needed by the
market. This process also assists in the formulation of the
technology roadmap to ensure it is aligned to the needs of
our customers which augments the work we undertake to
develop our own market intelligence.
www.filtronic.com Stock Code: FTCStrategic report Risk matrix
Risk matrix
HIGH
5
HIGH
5
Risk matrix
Risk matrix
HIGH
b
5
HIGH
b
5
Risk matrix
Risk matrix
Risk matrix
Risk matrix
4
3
2
4
1
3
20
Risk management continued
1
1
2
2
3
3
4
Risk description
Impact
Impact
Mitigation actions
4
5
HIGH
5
HIGH
Change
in year
LOW
2
Risk
5
y
t
i
l
i
a
b
o
r
P
y
t
i
l
i
b
a
LOW
b
o
r
P
LOW
HIGH
Reliance on key customers
Reliance on key customers
Inability
to meet
customer
demand
Manufacturing
Covid-19
1
4
Technology
Covid-19
Manufacturing
Technology
Most of the products in
production are demand-led
and customers may vary their
requirements at short notice
which requires flexibility in
capacity and effective inventory
management.
Supply chain
Recruitment & retention
We manufacture and assemble our products at our
Recruitment & retention
highly-automated facility at NETPark, Sedgefield, UK
except for our critical communications product offering
which is manufactured at our site in Salisbury, MD, USA,
based on our core competencies. Where appropriate, we
outsource non-core processes to suppliers who can offer
advantages over internal supply.
Market requirements
Supply chain
Market requirements
Investment in capital equipment and additional
headcount has increased production capacity and
capability enabling us to ramp existing customer projects
and win new business. Consequently, single point
dependency on key people and machinery has reduced.
LOW
LOW
1
3
LOW
LOW
1
2
2
3
Impact
Impact
y
t
i
l
i
b
a
b
o
r
P
Reliance on key customers
Competing
technology
and failure
Reliance on key customers
to deliver
projects on
time or to
specification
Covid-19
2
Manufacturing
Manufacturing
Covid-19
Technology
Technology
Our product competitiveness is
heavily influenced by technology
choices at product concept stage
and throughout the execution of
design to product launch.
The market is time-sensitive
and opportunities may be lost
if the technology we develop is
inappropriate or fails to achieve
customer specification or meet
the timescales required to match
market demand.
4
The supply chain throughout the Covid-19 pandemic
has been resilient with no material shortages. The
supply chain is regularly monitored whilst regular
5
3
communication with key suppliers ensures lead times are
managed.
HIGH
5
HIGH
Our ability to remain competitive in terms of
technology and product design is underpinned by
retaining key staff, talent acquisition and effective
Recruitment & retention
design methodologies.
Recruitment & retention
4
Supply chain
Market requirements
Supply chain
We work closely with our customers and suppliers
to gain a thorough knowledge of the technology
being developed in the marketplace. We are also
Market requirements
members of key forums such as The European
Telecommunications Standards Institute (ETSI), the
HAPS Alliance and the 5G Innovation Centre (5GIC).
By staying close to the market, we position ourselves to
react quickly to any technology changes that develop.
1
For products in the production
cycle, technology insertion is
often required as a means of
achieving price reductions, which
underpin sales.
When undertaking new product developments, we
follow a process which facilitates a thorough review
process of the engineering development at various
milestones throughout the project. This methodology is
designed to ensure the product has no design defects,
meets the required specification and is on time to
exploit the market opportunity. We have a project
management team to ensure compliance with our
engineering development process.
y
t
i
l
i
a
b
o
r
P
y
t
i
l
i
b
a
o
r
P
LOW
b
4
3
2
4
1
3
2
5
1
4
3
2
1
HIGH
5
HIGH
5
HIGH
y
t
i
l
i
b
a
b
o
r
P
y
t
i
l
i
b
a
b
o
r
P
y
t
i
l
i
b
a
b
o
r
P
4
3
2
1
4
3
2
1
1
1
2
LOW
LOW
Reliance on key customers
Manufacturing
Manufacturing
Technology
Technology
LOW
3
1
2
LOW
Impact
Impact
Global
electronic
component
Reliance on key customers
shortage
3
1
4
2
4
2
Impact
3
5
HIGH
There is currently a global electronic
component shortage impacting all
sectors and companies relying on
Recruitment & retention
embedded electronics components
due to reduced supply and increased
demand. An inability to source
components or extended supplier
Market requirements
lead times may prevent shipment of
products to fulfil orders.
Supply chain
In order to protect our intellectual property, we
maintain and apply for patents when appropriate and
5
actively encourage innovation in our engineering team
through a reward process.
HIGH
5
HIGH
5
3
HIGH
4
4
Impact
Recruitment & retention
We work closely with our suppliers to understand
key challenges as they present themselves. Our
knowledge of the supply chain and engineering
Recruitment & retention
expertise can be utilised to find alternative sources or
marginally different electronic product. Equally, strong
communication to our customers highlighting risks to
product lead times can trigger new sales orders from
Market requirements
our customers to provide material commitment and
availability ready for product supply when needed.
Supply chain
Market requirements
Supply chain
Manufacturing
Manufacturing
Market requirements
Technology
Technology
Reliance on key customers
Reliance on key customers
Recruitment & retention
Covid-19
Covid-19
Covid-19
Covid-19
Supply chain
LOW
LOW
LOW
LOW
Filtronic plc Annual Report and Accounts 2021 Risk matrix
Risk matrix
Risk matrix
Risk matrix
HIGH
5
HIGH
5
HIGH
5
HIGH
5
y
t
i
l
y
i
b
a
t
i
l
i
b
b
a
o
r
P
b
o
r
P
y
t
i
l
i
y
t
i
l
i
b
a
b
b
a
o
r
P
b
o
r
P
4
4
3
3
2
2
1
1
4
4
3
3
2
2
1
1
LOW
LOW
21
LOW
LOW
LOW
LOW
1
LOW
Risk
LOW
1
1
2
2
3
3
4
1
2
Risk description
2
3
Impact
3
4
Impact
Mitigation actions
4
4
5
5
HIGH
HIGH
5
5
HIGH
HIGH
Change
in year
Reliance
on key
customers
Reliance on key customers
Reliance on key customers
Covid-19
Covid-19
Reliance on key customers
Impact
We supply a range of products
to a small number of large OEM
Reliance on key customers
customers.
The loss of any of these
customers, material reduction in
orders from any such customer
or the timing of customer project
roll-outs may have a material
adverse effect upon Filtronic’s
financial condition.
Manufacturing
Technology
Manufacturing
Technology
Manufacturing
Covid-19
Manufacturing
Covid-19
Technology
Technology
Impact
Recruitment & retention
Supply chain
The Group seeks to mitigate this risk by working closely
with customers, at all levels, to ensure that we are
Recruitment & retention
Recruitment & retention
designed into their products at an early stage, enabling
us to develop products that meet their specifications and
Supply chain
Recruitment & retention
requirements.
Filtronic aims to provide customers with a well resourced
Market requirements
Market requirements
Supply chain
programme and a high level of service with a focus on
product quality and delivery. This gives an advantage
Market requirements
over our competitors that has facilitated new contract
wins. The Group monitors its competitive position with
regular competitor analysis and engagement with
customers.
Market requirements
Supply chain
1
1
2
2
3
3
Impact
Impact
Talent
retention and
acquisition
Reliance on key customers
Reliance on key customers
Covid-19
Covid-19
Manufacturing
Manufacturing
Technology
Technology
Recruitment & retention
Supply chain
Market requirements
4
4
5
HIGH
The Group is reliant on the key
skills and knowledge of its people
in a range of areas especially in
the engineering function which
Recruitment & retention
requires specialist skills.
Failure to recruit, develop and
Supply chain
retain an appropriate number of
suitably qualified people in critical
Market requirements
areas could affect our ability to
design new products, meet our
customers’ needs and execute on
our strategic growth plans.
We have also benefited from a
number of non-UK employees
filling key roles within the business.
Due to the highly technical nature
of our activities, these skills are not
always readily available within
the UK and any restrictions on
the employment of these people
could have an adverse effect on
the Group.
Covid-19 has made it more difficult to acquire new
business due to travel restrictions and cancellation of
trade exhibitions which have been one of our more
successful business development activities. To mitigate
this, the sales and marketing teams have been
strengthened in both direct and indirect channels to
expand our presence, reach and access to new
customers. We have also invested in marketing
communication to address the market in an alternative
way and have grown our rep network.
Our existing customers are very successful large players
in their respective markets, each with a long-established
relationship with Filtronic. This represents the best near-
term opportunity to win further contracts and our sales
and engineering teams continue to actively engage with
them on new opportunities.
5
HIGH
The Group has a competitive remuneration package
that is reflective of market conditions for key roles and
is under review as conditions change. The Group also
operates a long-term incentive plan for key employees
and SAYE schemes for all UK employees.
We continue to invest in our engineering teams to ensure
we have engineers with the right skills to execute our
strategy.
We provide regular communications to all employees
through communication meetings in each of our
business locations although social distancing restrictions
has meant face-to-face updates have not been possible.
The Board has recently refreshed its strategic plans
following the appointment of Richard Gibbs as CEO.
This was accomplished through an inclusive approach
involving all management of the company, in both the
UK and USA, to assist with the analysis, formulation and
development of the plan. By giving our employees an
understanding of our strategic direction and objectives,
we believe it enables them to make meaningful
contributions to the achievement of our goals and
successful execution of the plan.
Risk key
Increased risk
No change
Decreased risk
Risk matrix
Risk matrix
HIGH
5
HIGH
5
y
t
i
l
i
b
a
b
o
r
P
y
t
i
l
i
b
a
b
o
r
P
4
3
2
1
4
3
2
1
LOW
LOW
LOW
LOW
www.filtronic.com Stock Code: FTCStrategic report 22
Our people
We firmly believe that it is our people who drive the success of our business. We have a diverse, experienced,
and highly qualified team focused on delivering outstanding products and service to our customers.
Filtronic has a considerable depth of technology,
engineering and operational management skills across
its business operations. The Group operates in very
specialised technical markets and can only effectively
compete over the long term if it continually develops
these capabilities through a comprehensive talent
acquisition, development and retention strategy that
nurtures aspiration and rewards achievement. We enable
this by ensuring our ways of working are guided by
respect, consistent management, fair remuneration and
opportunities for growth.
Employee profile
Our headcount at 31 May 2021 was 117. The Group relies
on highly skilled employees, who are critical to driving
innovation, new technology and operational excellence.
Our teams are made up of highly trained employees
across all functions with strong educational backgrounds
and formal qualifications, as highlighted in the graphs
below.
Employee turnover
The total employee turnover rate was 3.0% in FY2021
(2020: 5.1%). Our turnover rates are low, which we
believe is due to a great working environment created
through challenging, but rewarding, work. This is further
demonstrated by our length of service data, which is, on
average, nine years.
Employee communication and engagement
We strive to maintain a healthy employee relations
environment in which dialogue between management
and our employees, both directly and indirectly, where
appropriate, is embedded in our work practices.
On a regular basis, management engages with our
employees through a range of formal and informal
channels, including briefings and memos from the Chief
Executive Officer, team meetings, 1-2-1’s, and online
publications via various social media outlets.
Additionally, we are in the process of defining an annual
employee survey to elicit further employee views. This will
be a recurring annual event as we strive to improve our
employees’ experience at work, measure commitment
and identify trends and develop actions to address any
gaps.
Employee engagement is especially important in
maintaining business delivery in times of change,
nevermore so acutely demonstrated than in this past
year whilst managing through the Covid-19 pandemic.
We have issued weekly bulletins, the Business Continuity
Current headcount metrics
Full time / Part time
Full time
Part time
Qualification
Level 1
Level 2
Level 3
%
98
2
%
51
2
9
Bachelors degree
21
Masters degree
PhD
9
7
Length of service
0-5
5-10
10-20
20 +
>25
Function
Manufacturing
R&D
%
50
9
35
5
1
%
65
20
Sales and marketing
5
Administration
10
Filtronic plc Annual Report and Accounts 2021 23
Team, primarily made up of members of the Senior
Leadership Team, have conducted weekly floor walks and
feedback mechanisms have been established, so that
any issues or areas of concern can be resolved in a timely
manner.
Recognition Policy. This policy aims to recognise and
reward innovative thinking and professional personal
development. It has been very well received and several
engineers have received achievement awards for patent
applications and technical publications.
Through our HR system we have also enabled surveys
covering key aspects of employment such as onboarding.
Voluntary leavers, are interviewed to provide an additional
means of expressing their views which allows us to analyse
data to address any issues or make improvements.
Equal opportunities, diversity and inclusion
Filtronic has equal opportunity policies to support our aim
of providing opportunities for all without discrimination.
These policies form part of the Group’s core values
which are expected of employees, suppliers and other
stakeholders. Our policies and practices emphasise the
importance of treating people in a non-discriminatory
manner across the full employment life cycle including
hiring, reward, development, promotions, mobility, and
departure. In the event that an employee becomes
disabled, the Group will make reasonable appropriate
adjustments, and so far, as is practicable, will continue to
provide employment.
All employees receive specific training on equality,
diversity and inclusion in the workplace, to ensure that no
individual is disadvantaged and to prevent discrimination
on the grounds of gender, religion, belief, race, creed,
age, disability, sexual orientation, ethnic origin, or marital
status.
Our intention is to sustain a diverse workforce and
inclusive environment, as we believe that diverse teams
led by inclusive leaders are more engaged, whilst also
allowing us to benefit from a wider external talent pool for
recruitment purposes.
Rewarding employees
Our compensation strategy aims to attract, retain talent
and promote and reward sustainable performance and
contributions at all levels of the organisation. The Board
and Remuneration Committee continually look to ensure
that our remuneration provisions support our strategy and
business objectives.
The market competitiveness of salaries across the
company is assessed at local or national market level,
dependent upon role, and reviewed annually. Whilst
we are under no obligation to produce a Gender Pay
Gap Report we are extremely mindful of equal pay, and
any discrepancies in the difference in average earnings
between women and men across the organisation are
addressed via the annual salary review process.
In addition to competitive salaries, we also offer a suite of
benefits including, but not limited to, employer matched
pension contributions plus 2% to a maximum of 8%, long
term incapacity benefit, 4 x base pay sum life assurance,
Employee Assistance Programme, childcare vouchers and
cycle to work.
In FY2021 we rolled out our Technology Leadership
Employee share plans
We have a number of share plans designed to align
employees’ interests with our performance through
share ownership. For information on the share-based
compensation plans for Executive Directors, see the
‘Directors’ remuneration report’.
Eligible employees of Filtronic plc in the UK have been
able to participate in the UK Sharesave Scheme. Options
have been granted over the Company’s shares at the
closing middle market price on the day before issue.
These options vest after completion of a three-year
savings period. The option price for the SAYE scheme
implemented on 1 June 2021 was at a discount of 20% to
market value giving an option price of 6.67p.
Culture and conduct
We have a responsibility to all of our stakeholders to act in
accordance with our Code of Ethics. The code is designed
to ensure that we conduct ourselves ethically and in
accordance with Filtronic’s policies and procedures as well
as the laws and regulations that apply to us.
As well as our Code of Ethics the company culture is
powered through our values and behaviours which are
instrumental to everything we do.
Values and behaviours
The key values and behaviours of Filtronic were reviewed
and refreshed this year following engagement with our
customers, past and present, to understand what it is that
they value from their relationship with Filtronic. The three
values recognised as being key to our success and integral
to the way we operate are:
• Act with integrity; being honest and fair, always
keeping our promises;
• Be respectful to all; it is the foundation of our culture;
and
• Always strive for excellence; it is what our clients and
colleagues expect and what we endeavour to deliver.
These three key values underpin everything we do,
throughout every area of the business, and are integral to
the way we do business and interact with our colleagues,
customers, suppliers and other stakeholders.
These values are fundamental to achieving the Group’s
vision of enabling the future of RF, microwave and
mmWave communication and our mission of creating
value for our clients though technology leadership.
In achieving these key values we expect our people to live
certain key behaviours which can be seen overleaf:
www.filtronic.com Stock Code: FTCStrategic report 24
Our people continued
Values and behaviours
Integrity
Respect
Excellence
Values
Act with integrity; being honest
and fair, always keeping our
promises.
Be respectful to all; it is the
foundation of our culture.
Strive for excellence; it is what
our clients and colleagues
expect and what we endeavour
to deliver.
Behaviours
Do the right thing, not the easy
thing, speak up if it’s not right.
Be inclusive, always respecting
and valuing others.
Perform to the highest
professional standards.
Deliver on your promises.
Act how you want to
be treated; being kind,
considerate and respectful of
others and their opinions.
Be innovative and pragmatic
with problem solving.
Be truthful, always being honest
and open.
Be supportive and positive in all
your working relationships.
Take pride in our work, paying
attention to detail.
Be fair and ethical in your work
and decision making.
Take responsibility for your own
actions, learn from mistakes
when they happen.
Value the importance of
equality, diversity and
inclusivity.
Be open-minded and upfront
with people.
Be agile and flexible in your
approach.
Be curious and challenge
constructively to improve how
we work.
We are committed to embedding these values and
behaviours through employee engagement and
communication as we look to live the values during
FY2022 and beyond.
Digital HR
The core component of our digital HR drive has been the
implementation of a cloud-based software platform for
HR services covering the entire employee lifecycle, from
onboarding and workflows to absence management and
performance. The new system was rolled out in FY2021
and continues to be optimised to lay the foundation for
future developments in line with changing business and
employee needs.
Employer brand and recruitment
We have refreshed our careers portal, social media
channels and recruitment campaigns, to focus more our
on employer offering and authentic storytelling. A cross
section of employees have shared their experiences and
career stories which will hopefully help to attract new
talent, by offering real life insight into the culture, work,
projects, and people.
Covid-19
Responding to the challenges of Covid-19 showed our
employees at their best; flexible, adaptable, and resilient,
switching to remote working, where possible, almost
overnight. Those staff who could not work from home
were exemplary in their commitment to all Covid-19
related health and safety requirements.
Looking to the future - training development
Filtronic continues to work towards future-proofing the
business to ensure we have the right skills to support
business growth. Equipping our leaders with the skills
to manage, lead and deliver on our growth strategy is
a key focus for the Group. In FY2022 we will roll out our
Leadership Academy; a bespoke programme offering a
portfolio of leadership development training designed to
provide the skills needed at each management tier within
the business.
We remain committed to the recruitment of graduates
to build our talent pool and will this year implement our
Graduate Career Framework to complement our existing,
broader, engineering framework.
What do you enjoy most about your job?
“Being part of a world class team based in the
North East of England that provides leading
technology solutions to some of the best known
multinationals around.”
Dan Rhodes
Director Of Business Development ‒
mmWave Technology
“It is easy to become normalised to the
technology the Filtronic team create, but if you
step back and look at the products we design
and manufacture and the customers we serve,
it’s difficult to think of any other company that
could offer such a cutting-edge adventure.”
Andy Tucker
Design Engineering Manager
Filtronic plc Annual Report and Accounts 2021
25
Corporate social responsibility report
We are committed to doing business ethically and sustainably in the interests of our stakeholders:
shareholders, employees, the environment, customers, suppliers and the communities in which we operate.
This report covers how we interact with our stakeholders, our approach to key issues and the aims for the
future.
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H U M A N R I G H T S (
Sustainability and the environment
The Group is committed to protecting the environment
through prevention of pollution and minimising our impact
on natural resources. As well as operating in compliance
with all relevant statutory and regulatory obligations, the
Group strives to implement environmental best practices
throughout our activities and continually improve our
environmental management system to enhance our
environmental performance.
During the year, as part of our activities and decision-
making process, we:
• Continued to integrate environmental concerns and
impacts into the design and manufacture of our
products;
• Promoted environmental awareness among our
employees, through gauging interest in our employees
in participating in the cycle to work scheme and
encouraging the use of the electric car recharging
stations at our NETPark site; and
• Continued to minimise waste through re-use and
recycling and promote efficient use of materials and
resources; and
• Strive to prevent pollution and to continually improve
our environmental performance.
The Group supports and trains its personnel to act
responsibly in matters relating to the environment. Our
principal manufacturing site in Sedgefield, County
Durham is certified under the ISO 14001 Environmental
Management Systems Requirement.
The Group takes account of relevant legislation and
regulations and analyses its practices, processes and
products to reduce their environmental impact, and
works with our customers and suppliers to achieve a high
standard of environmental stewardship. We look forward
www.filtronic.com Stock Code: FTCStrategic report
26
Corporate social responsibility report continued
to receiving and implementing the UK government’s flow
down to industry of its net-zero carbon target which will
involve measuring carbon emissions and implementing
policies for carbon reduction or off setting the carbon that
is released.
Our Sedgefield site is working towards SC21
accreditation. SC21 (Supply Chains for the 21st Century)
is an improvement programme designed to accelerate the
competitiveness of the aerospace and defence industry by
raising the performance of its supply chains.
The FY2021 Strategic report, has been reviewed and
approved by the Board of Directors on 2 August 2021 and
signed on its behalf by
Richard Gibbs
Chief Executive Officer
2 August 2021
Health and safety (“H&S”)
The Board is committed to ensuring the H&S of the
Group’s employees and applies high standards
throughout the Group in the control and management of
its operations. The Board regularly reviews the Group’s
arrangements for the planning, organisation and
control of H&S matters. Global H&S meetings are held
periodically with participants from each of the Group’s
three operational sites.
Human rights
Filtronic applies human rights considerations to the way
it does business, for example through ethical sourcing
and anti-bribery and anti-corruption policies, our code
of ethics, which is an integral part of our management
policies, our practices in relation to H&S, equal pay and
employees’ freedom to join trade unions. Filtronic is
committed to ensuring transparency in our approach to
tackling modern slavery through the flow down of our
Modern Slavery Policy throughout our supply chain.
Charitable and community support
Over the course of the year, Filtronic employees have
participated in and sponsored various events. The Group
provides paid leave of one day per annum for staff who
wish to undertake voluntary or charitable work.
Quality and supply chain management
The adoption of an advanced product life cycle
management software system has allowed for group-
wide management and control of our documentation
to include product design, suppliers and change
management as well as a module to address specific
quality processes. Supply chain management is working
to develop partnerships with our main suppliers to
ensure they have systems in place that focus on quality,
environment, corporate social responsibility and health
and safety. The Group has adopted a specific policy on
conflict minerals and works with our suppliers to ensure
implementation including reporting on the use of conflict
minerals throughout our supply chain.
The implementation of these management systems,
which are designed to monitor and control processes such
as quality, the environment and H&S, provide Filtronic
with the confidence that each and every product that is
delivered to our customers is at an appropriate level of
quality, and has been designed and manufactured in a
way that considers our impact on the environment and
the ultimate H&S of our employees and our broader
stakeholders who contribute to our success. We are
continuing with the roll-out of a customer relationship
management system in Filtronic that complements this
approach.
Filtronic plc Annual Report and Accounts 2021 Board of Directors
27
Executive Directors
Richard Gibbs (aged 62) : Chief Executive Officer
Appointed to the Board: 1 September 2020
Richard is an experienced director who has led a number of business operations
supplying semiconductor, RF and electronics subsystems to OEMs. Richard joined
Filtronic from Micross Components, where he was Managing Director. Prior to his time
at Micross, Richard spent nine years at E2V Technologies, where he was Group Sales &
Marketing Director and President of the RF Product and Hi-Reliability Semiconductors
Divisions, and 20 years with Honeywell, of which 10 years were spent managing
overseas operations.
Michael Tyerman (aged 42) : Chief Financial Officer
Appointed to the Board: 1 April 2016
Michael joined Filtronic in 2007 as Financial Controller of the Broadband business
and was promoted to the position of Group Financial Controller in 2009. He served
this position until his appointment to the Board. Prior to joining Filtronic, Michael held
various positions within Procter and Gamble, Huntsman and Komatsu which included
time working in the Benelux and Nordic regions. Michael is a Chartered Management
Accountant.
Non-Executive Directors
Reginald (Reg) Gott (aged 64) : Non-Executive Chairman
Appointed to the Board: 13 July 2006, Non-Executive Chairman since
27 November 2015
Committees:
A
N
R
Reg was Chief Executive of Resource Group Limited until early 2016. From 2002 to
2008, he was an Executive Director of FKI plc, an international diversified engineering
group, and from 2009 to 2012 he was Chief Executive of Nuaire Group. He has an
extensive background in the machinery, automation and controls segments of the
capital goods markets across Europe and North America.
Peter (Pete) Magowan (aged 53) : Senior Independent Non-Executive Director
Appointed to the Board: 19 November 2018
Committees:
N
A
R
Pete was previously an early employee and main board member of ARM Holdings,
an Executive at Fidelity International Ltd and General Partner at Alta Berkeley
Venture Partners. Pete’s early operational career was in sales and marketing at
leading technology companies. He received a BSc degree in Electrical and Electronic
Engineering from UMIST and has a Diploma in Marketing. He is also a Non-Executive
Director of Solid State Group plc.
John Behrendt (aged 60) : Independent Non-Executive Director
Appointed to the Board: 1 January 2021
Committees:
N
A
R
John was Head of Principal Investments with Eight Roads, part of the Fidelity network
of companies, from 2015 until 2020. John has also held a number of leadership and
operational roles, including CEO of Optegra, CEO/CFO of Frontier Silicon Limited,
CFO for Teraview Limited, and CFO for Alphamosaic Limited. John is a qualified
accountant with the Chartered Institute of Management Accountants (CIMA).
Committee Key:
Chairman of Committee
A
Audit
N
Nominations
R
Remuneration
Governance reportwww.filtronic.com Stock Code: FTC 28
Governance report
Dear Shareholder
On behalf of the Board, I am pleased to present the
Filtronic plc Governance report for the year ended 31 May
2021.
The Board recognises the value of good corporate
governance as the basis for promoting long-term growth
and sustainability of the business for the benefit of our
shareholders and stakeholders. As a business whose
shares are quoted on the AIM market of the London Stock
Exchange, we continue to apply the Quoted Companies
Alliance Corporate Governance Code 2018 (“The Code”).
With the exception of the period where I stepped in, on
a temporary basis, to act as Executive Chairman while
the Nominations Committee sought a replacement Chief
Executive Officer (“CEO”), the Company has complied with
the principles of the Code throughout the year. Richard
Gibbs was appointed as CEO on 1 September 2020 and I
reverted to being Non-Executive Chairman on 1 October
2020.
We keep our governance arrangements under constant
review. The Board is aware that the tone and culture set by
the Board will impact all aspects of the Group as a whole
and the way our employees behave. We have a number
of policies and procedures in place as well as initiatives
in play to ensure the values and culture the Board wants
to foster is embedded throughout the business. Our
Executive team is currently exploring the best ways to
communicate, implement and reward behaviours that
best reflect our values throughout the business. This year,
given our global reach and the increasing importance of
defence contracts to delivering our strategic plan, we have
refreshed our Export Control Policy and procedures to
ensure that there is an appreciation, across all functions, of
the importance of compliance with this policy.
Whilst there have been no significant corporate
governance challenges this year, Covid-19 has brought
operational challenges. However, the Group has worked
towards delivering its agreed strategy through increased
dialogue and consultation with its employees and
exemplary co-operation from all staff in maintaining
a Covid-safe environment. This increased focus on
communication has been achieved through regular
Business Continuity Team meetings composed of senior
management from various functions across the Group.
Additionally, we have provided regular updates to staff
through weekly or fortnightly bulletins that directly
addresses any staff concerns, inviting, receiving and
responding to feedback from all employees, the results
of which are frequently implemented immediately which
helps build trust in management. These measures and the
consciousness and dedication of our staff have allowed us
to keep operational throughout the pandemic.
Maintaining a skilled, well-balanced and experienced
board is of fundamental importance to the long-term
success of the business. During the year there were a
number of board changes referenced in the ‘Nominations
Committee report.’ A formal board evaluation exercise was
conducted again this year, the findings of which are being
implemented. We continue to consider the balance of skills
and experience on the Board to maximise the chances of
successfully executing our agreed strategy.
As explained in the ‘Chairman’s Statement’, after almost
15 years on the Board, including six as Chairman, I have
decided that I will step down at this year’s AGM. It has
been a pleasure to serve for the last six years, during which
period we have achieved a level of stability in the business
and a focused strategy for future growth together with
a strong Board and Senior Leadership Team capable of
implementing it. There is a process underway to appoint
my successor and an announcement will be made in due
course.
Reg Gott, Chairman
2 August 2021
Corporate governance statement
Introduction
In this statement we explain the fey features of the Group’s
corporate governance framework and how it complies
with the ten principles of the QCA Code.
Principle 1 – Delivering growth in the long-term
On his appointment in September 2020, Richard Gibbs
immediately undertook a strategic planning review for the
Group. Following the execution of a systematic planning
process, a strategy was agreed upon that focusses on four
key areas:
• Telecoms: defend our current position and target
new customers by developing the E-Band roadmap
to W-Band with premium performance high power
transceivers, active diplexer and SiP options based on
inhouse MMIC design;
• Defence: increasing defence project cover with major
customers requiring RF hybrid solutions;
• Radar: leveraging our current relationships to secure a
bigger role in next generation radar design; and
• Space: position Filtronic in space (HAPS/LEO) market
by virtue of our UK manufacturing capability and
Q-band PA design.
Information on our business model and how our agreed
strategy is underpinned by the corporate framework is
outlined below. Information on how it supports the delivery
of growth and value in the long-term for shareholders is
detailed within the strategic report.
Principle 2 - Seeking to understand and meet
shareholder needs and expectations
The Board places great value on maintaining open
relationships with shareholders and the primary point
of contact in the Company for this function is the CEO,
supported by the Chief Financial Officer (“CFO”). The
CEO and CFO undertake an extensive programme of
meetings with shareholders at least twice a year, following
the announcement of the financial results. The Chairman
is available to speak with shareholders at their request.
The Senior Independent Director is also available as an
Filtronic plc Annual Report and Accounts 2021 29
alternative communication channel for shareholders
who may wish to raise any concerns. Presentations are
also made to analysts to present the Group’s results. This
assists with the promotion of knowledge of the Group in
the investment marketplace and with shareholders and
also helps the directors to understand the needs and
expectations of shareholders. Please refer to the corporate
governance section of our website for more details: www.
filtronic.com/investors/corporate-governance.
Principle 3 - Take into account wider stakeholder and
social responsibilities and their implication for long
term success
Our stakeholder engagement recognises the materiality
and impact of our stakeholders on the achievement
of the Company’s strategy. Please refer to Section 172
(1) Statement within the Governance report and the
Corporate social responsibility report of the Strategic
report.
Principle 4 – Risk management and internal controls
The directors acknowledge that they have overall
responsibility for the Group’s system of internal controls,
which is designed to manage and mitigate rather than
eliminate risk, and to review and monitor its effectiveness.
The Group operates a series of controls which include
the annual strategic planning and business planning
process, short, medium and long-term cash monitoring.
Additionally, the Executive Directors and senior managers
provide monthly updates to the Board in the form of
function reports to the Board which include the principal
risks and controls across the group, as well as the roles and
responsibilities of key management in managing those
risks. These monthly reviews are augmented by quarterly
risk management reviews both at the senior management
level and at Board level. Please see the Risk management
section for further information.
Principle 5 – Maintain the board as a well-
functioning, balanced team led by the Chairman.
The Board is currently comprised of the Chairman (Reg
Gott), two Executive Directors (Richard Gibbs, CEO and
Michael Tyerman, CFO) and two Non-Executive Directors
(Pete Magowan and John Behrendt). Pete Magowan
is the Senior Independent Non-Executive Director and
he, together, with John Behrendt are regarded by the
Board as being independent Non-Executive Directors.
The Board is supported and assisted by the Company
Secretary and General Counsel (Maura Moynihan), who
attends, contributes to and minutes each board meeting.
All members of the Board have access to the advice and
services of the General Counsel and Company Secretary
and are able to take independent professional advice at
the Company’s expense in the discharge of their duties.
Following the resignation of the previous CEO in October
2019, Reg Gott agreed to act, on a temporary basis, as
Executive Chairman while the Nominations Committee
sought a replacement CEO. Richard Gibbs was appointed
as CEO on 1 September 2020 and Reg Gott reverted to
being Non-Executive Chairman on 1 October 2020. The
Company has procedures to deal with directors’ conflicts
of interest and the Board is satisfied that these procedures
operate effectively. There is a formal schedule of matters
reserved for the Board which is summarised below. To
enhance the Board’s communication with management
and achieve greater operational transparency the Chief
Commercial Officer, Chief Operations Officer and
Chief Technology Officer are regularly invited to the
performance review section of the board meeting to
present their reports to the Board.
Board meetings
The Board meets each month against a defined reporting
timetable and at times in between the scheduled meetings
when required. During the year, to comply with Covid-19
restrictions, the Board held most meetings remotely via
electronic means. However, under normal circumstances,
as far as is reasonably practical, board meetings are
held at the Company’s operational sites to enable local
management teams to present operational and strategic
programme progress to the Board. The Board believes
this arrangement fosters greater transparency and
enhanced relationships between the management and
the Board. Since April 2021, board meetings have taken
place in person at the Sedgefield site complying at all
times with the measures we have put in place to maintain
a Covid-safe environment.
Directors’ attendance FY2021
The Board normally schedules at least 10 meetings during
the year. Last year the Board met formally 10 times.
Reg Gott
Richard Gibbs1
Michael Tyerman
Michael Roller2
Pete Magowan
John Behrendt3
Meetings
attended
10
8/8
9/10
4/4
10
5/5
1 Richard Gibbs was appointed on 1 September 2020
2Michael Roller retired on 29 October 2020
3John Behrendt was appointed on 1 January 2021
Principle 6 – Ensure that between them directors
have the necessary up-to-date experience, skills
and capabilities.
At present, the Board believes that its overall size and
composition reflects an appropriate balance of sector,
financial and public markets skills and experience. The
composition of the Board is be reviewed at least annually
by the Nominations Committee, with a view to ensuring it
comprises the skills necessary for achieving the company’s
strategy.
Details of each director’s skills and experience can be
found in the directors’ biographies section on page 27.
The members of the Board bring a range of
complementary skills and experience from across
markets in which the Group operates.
Governance reportwww.filtronic.com Stock Code: FTC
30
Governance report continued
In September, the Board was delighted to welcome
Richard Gibbs who joined as CEO and brought with him
a wealth of relevant experience, as well as technology
and sector credentials to position him well to provide
the leadership required to deliver the next phase of our
strategy. In January, we welcomed John Behrendt to the
Board as a Non-Executive Director and as Chairman
of the Audit Committee. John is a highly experienced
finance specialist with considerable background in
business growth development. His skills, expertise and
insights will be of great benefit to the Company. Overall,
the Board is satisfied that, between the directors, it has an
effective and balance of skills and experience. Please see
the Nominations Committee report for further details on
how this principle is implemented.
Principle 7 - Performance and Performance
Evaluation
Each year, the Board carries out an evaluation of its own
performance at the end of the financial year, reviewing its
performance in that year.
The Chairman and the Company Secretary prepare an
evaluation questionnaire reflecting the considerations of
the Corporate Governance Code as well as significant
events over the year. The performance of the Board, its
Committees, and individual directors is assessed. Board
members are asked to provide feedback for assessment
by the Chairman in the first instance and to Pete
Magowan ,Senior Independent Non-Executive Director,
in respect of the Chairman. The combined feedback is
discussed by the Board and actions agreed and progress
on actions is monitored during the year. On joining, the
Company Secretary arranges an induction session
with each new director covering such matters as Group
structure and organisation, Filtronic’ s values and policies,
an introduction to the AIM Rules for Companies, the QCA
Code, Market Abuse Regulation (“MAR”) and the terms
of reference for the Board’s Committees among other
matters. Where specific training needs are identified,
including as a result of the Board evaluation process and
individual director appraisals, the Company will organise
the relevant training. The Company Secretary supports
the Chairman in addressing the training and development
needs of directors. This year it has been identified through
the evaluation process that further training on IFRS
standards and ESG considerations is desirable and a
programme will be devised to address this during the year.
Principle 8 – Promote a corporate culture that is
based on ethical values and behaviours.
At Filtronic, we believe in collaboration, we work with our
technology leadership clients to solve their complex RF,
Microwave and mmWave challenges. Our purpose and
reason for being is to advance global communication
through innovation. Innovation matters to us, we
want to push the boundaries of what is possible with
RF communication. Filtronic are long-term partners
in aerospace and defence, telecommunications
infrastructure and critical communications. These
effective partnerships have grown from having a strong
value-based culture, where all our employees are
encouraged and supported to:
• Behave responsibly, respectfully and with total integrity;
• Nurture talent and share success;
• Be open, empower and collaborate;
• Commit to quality in everything we do; and
• Be innovative and creative.
The Board monitors and promotes its corporate culture
assisted by its Senior Leadership Team (“SLT”). This
team plays a vital role in disseminating the Company’s
shared values with its employees. The SLT holds monthly
meetings and six of the seven members of the SLT are
invited to sections of the Board meetings which helps the
Board assess the Group’s culture on an ongoing basis.
Principle 9 - Maintain governance structures and
processes that are fit for purpose and support good
decision making by the Board
The Board is responsible for Group strategy, delivering
results, risk management and ultimately business
performance. The Board is run by the Chairman.
Remit of the Board
Whilst many day-to-day operational matters are
managed by the Executive Directors and SLT, other
matters, including those listed below, are reserved for the
Board:
• Strategy and oversight of the management of the
Group;
• Approval of the Company and consolidated financial
statements;
• Approval of major corporate transactions and
commitments;
• Succession planning (appointment/removal of
directors, PDMRs and the Company Secretary);
• Approval of all terms of reference for the committees of
the Board;
• Review of the Group’s overall corporate governance
arrangements including systems of internal controls
and risk management; and
• Approval of the delegation of authority to the CEO or
where appropriate to the relevant board committee.
Committees
The Board continues to operate with three committees:
The Audit Committee, the Remuneration Committee and
the Nominations Committee. Detailed written terms of
reference for each committee are maintained and are
available to view on the Company website. In addition
to formal meetings, the Nominations Committee and
Remuneration Committee meet informally during the
year to review and discuss board composition and
compensation.
Filtronic plc Annual Report and Accounts 2021 31
Principle 10 - Communicate how the Company
is governed and is performing by maintaining a
dialogue with shareholders and other relevant
stakeholders
The Company is committed to open communication with
all its shareholders. Communication with members is
driven primarily through the Company’s website and the
Annual General Meeting. All shareholders will receive a
copy of the Annual Report and Accounts (hard copy or
electronic depending on shareholder preference). The
half-year results are published on the Company’s website.
The Company reports on the activities and responsibilities
of the Audit Committee and the Remuneration Committee
each year in the Annual Report and Accounts. Copies of
historic annual reports and notices of general meetings for
the last five years are available on the website.
Engaging with our employees helps to ensure the values
and culture the Board wants to promote are embraced
throughout the Group. The Company encourages open
two-way communication to promote innovative and
collaborative working. Communications with employees
takes place ordinarily through communications sessions
at each of the Company’s sites, the HR system, team
meetings, health and safety meetings and training
sessions.
The longevity of our business can only be secured
through maintaining and expanding our customer
base. Communication with customers is a priority and
is mediated through dedicated commercial managers
and directors, overseen by the Chief Commercial Officer.
Customers are solicited for feedback on products and
business operations performance, market landscape and
demand trends.
Regular contact and an open-door policy are key to
maintaining good and stable relations with our supply
chain. The procurement department, aided by clear
website sections, ensures that Filtronic’s key policies and
values, or their equivalent, are adopted by the supply
chain including but not limited to its policies on bribery,
modern slavery and conflict minerals. Engagement with
suppliers is overseen by the Chief Operations Officer. The
group policies were reviewed by the Board during the year
and, as a priority for the business, were communicated,
via management cascade, to all employees.
Governance reportwww.filtronic.com Stock Code: FTC 32
Stakeholder engagement
Section 172 (1) Statement on the Discharge
of Directors’ Duties
In compliance with the Companies Act 2006, the Board
are required to act in accordance with a set of general
duties. During the year ending 31 May 2021, the Board
consider that they have individually and collectively acted
in a way they consider, in good faith, would be most likely
to promote the success of the Company for the benefit
of its shareholders as a whole having regard to the six
matters listed in s. 172 (1) (a) to (f) of the Companies Act
2006.
In order to achieve long term success for the benefit
of all shareholders, the Board recognises the
importance of building and maintaining relationships
with key stakeholders as well as considering the likely
consequences of its decisions in the long-term.
Regular updates from the Senior Leadership
Team (“SLT”)
Throughout the year, the SLT updated the Board with
information on important areas of business focus, in
particular those relating to our key stakeholders. Each
member of the SLT submit a report to the Board each
month providing comprehensive operational updates and
progress against strategic milestones. They are regularly
invited to board meetings to present this information and
update the Board on key points. This ensures the Board
have a good understanding of the priorities of each
stakeholder group to aid decision making.
Duty to promote the success of the Company
Filtronic’s objective is to grow profitably by being a trusted
supplier of technically advanced products that deliver
value to our customers. Matters that impacted our key
decisions and strategies towards meeting this objective
during the year, are set out in the Strategic report. The
Board’s long-term objective is to serve markets that
value our know-how, IPR, and culture of working in
partnership with stakeholders to create better technical
and commercial solutions that meet our customer
requirements to lead to long-term profitable growth.
Board considerations and decisions
Given the updates from the SLT, some of the topics
considered throughout the year are presented below
demonstrating how the Board discharged their duties:
Employees and culture
• Decision to include all management tiers within the
strategic planning process to ensure engagement and
inclusion of key management employees.
• Implementation of a new SAYE scheme to incentivise
and align the interests of employees with shareholders.
• Update on employee wellbeing during the Covid-19
pandemic and regular status updates of employees.
• Consideration of an employee wellbeing policy.
• Approval to develop a talent management strategy.
Strategy
• Approval of a revised strategic plan, initiated by
Richard Gibbs, setting new strategic objectives and
milestones and evaluation of the return on investment.
• Consideration of company performance against its
strategy.
• Consideration of the technology roadmap and
required investment.
• Update on new customer acquisition, strategic
milestones and consideration of shareholder value.
• Update on MarCom investment and initiatives as
well as agent network expansion to find alternative
methods of customer engagement and new business
acquisition.
• Consideration and approval of the FY2021 interim
report.
• Consideration of and approval of the FY2022 business
plan and long-range forecast.
Covid-19
• Consideration of Covid-19, the ability to meet
customer commitments and the impact on business
performance.
• Consideration of finding ways to engage with new
customers given travel restrictions.
• Update on measures taken to protect the health and
safety of our employees.
• Consideration to increase the operational footprint in
Sedgefield by approving the signing of a lease for more
space to facilitate both expansion of the business and
social distancing.
Governance
• Agreed on the appointment of Richard Gibbs as CEO.
• Agreed on the appointment of John Behrendt as Non-
Executive Director.
• Approval of group policies.
• Consideration of updated Export Control Policy and
procedures.
• Update from shareholders in relation to strategy and
remuneration matters.
Stakeholder engagement
The Board recognises its responsibility to take into
consideration the needs and concerns of Filtronic’s key
stakeholders as part of its decision-making process.
The table demonstrates how the Group engages with its
stakeholders and the outcomes of this during the year:
Filtronic plc Annual Report and Accounts 2021 33
Stakeholder
How we engage
Key outcomes
Customers
The Board receives feedback from its customer facing
teams. Each key account has dedicated account
management who act as “the voice of the customer”.
The Chief Commercial Officer briefs the Board each
month as to how we are performing with each of our
customers.
Increased level of engagement with customers at a
strategic level. We have strengthened key customer
relationships particularly as customers have worked
more closely with existing supply chains during the
pandemic. A greater understanding of both customer
and market trend requirements better informs the
development and refinement of our own strategy.
The Executive Directors, along with senior members of
the sales and engineering teams will attend meetings
with strategic-level influencers within our customer’s
organisation.
Board-level engagement with our customers helps
convey our commitment to understand and meet their
business needs. During FY2021, these interactions
have been limited to video conferencing, and whilst
not ideal as we favour a more personalised approach
and face-to-face meetings, the new technology has
facilitated ongoing engagement. This has proved
more challenging with new business acquisition as
face-to-face interaction helps to nurture business
relationships and site visits enables us to showcase our
state-of-the-art capability at our facility in Sedgefield.
We continually seek opportunities to collaborate at
a product and technology strategy level with our key
clients, but all collaborations are under Non-Disclosure
Agreement (“NDA”) and require director-level
approval
Disclosure of our product development and
technology roadmaps to customers increases
the opportunity to align our mutual interests and
demonstrate we are the ‘go-to company’ when it
comes to leading technology; the NDA protects our
intellectual property interests.
Customer feedback is regularly sought and collected
by the business through a wide range of channels. This
information is processed and analysed as part of our
business improvement initiatives.
We regularly participate in a wide range of trade
shows, conferences and symposia. They play an
important role in our business development planning.
Covid-19 prevented attendance at most events this
year, including Mobile World Congress, IMS, European
Microwave Week and APCO.
Listening to the customer enables us to be more
effective in pre-empting and meeting their evolving
requirements. We undertook a Voice of the Customer
(“VoC”) exercise during the year where the Marketing
Manager spoke to 35 existing and former customers
to gain an understanding of their customer
experience, the positives of working with Filtronic and
areas where we could improve. The information was
anonymised, collated and analysed to find trends
to identify consistent feedback. This exercise proved
invaluable enabling the Board to use the information
to shape the strategic plans and develop the areas of
the business where we are able to improve customer
satisfaction.
Trade show and conference attendance were,
unfortunately, converted into virtual events during
the pandemic and have not been as successful as
physically attended events. We attended our first
trade exhibition at the IMS Show in Atlanta in the USA
in June 2021 since the start of the pandemic. Whilst
attendance was not at full capacity our commercial
team had useful engagements with potential
customers. We will continue to attend shows now they
have re-opened to engage with new clients.
Governance reportwww.filtronic.com Stock Code: FTC
34
Stakeholder engagement continued
Stakeholder
How we engage
Key outcomes
Employees
The Executive Directors communicate with employees
through ‘communication sessions’ to update them on
the performance of the business and progress on key
initiatives. Employees are encouraged to ask questions
in a Q&A session at the end of the meetings.
The Group relies upon highly specialised skill sets
that are in increasingly short supply. We are therefore
actively developing a new talent management
strategy.
The Executive Directors are required to be actively
visible across our sites to take the pulse of the business
and offer an open-door policy to employees who
would like to ask a question or offer a view.
A Covid-19 Business Continuity Team (“BCT”) was
established early in 2020 to ensure the safety of
our employees as a principal objective during the
crisis. The BCT ensures that government guidance is
adopted across the company and provides a two-way
forum for ensuring staff concerns are heard and
addressed.
Participation in the Company Sharesave scheme.
Wider and deeper communication leads to greater
transparency throughout the business and facilitates
a more engaged, motivated and effective team.
Covid-19 made this more challenging, given
restrictions on gatherings and social distancing, in
FY2021 but alternative methods of engagement
have been implemented and employees encouraged
to submit questions with every question considered
and answered. This is done through a range of
communication channels including newsletters,
discussion groups with management flow down to
employees and informal factory floor-walks.
The Group aims to become an attractive employer
by providing a rewarding long-term personal
development opportunity environment, recognising
and rewarding those that have demonstrated strong
performance. We have also funded a number of
training initiatives to develop our employees and
enhance the skills in the business.
A better informed and consulted workforce is more
likely to be both better motivated and more effective.
A strategic planning process took place during the
year to formulate and embed a new strategic plan.
This process has set the business on a renewed path
and involved all the company’s management in
it’s formulation and decision-making process. This
inclusive approach, gave a large number of employees
the chance to shape the future direction of the
company and ‘buy-in’ to the plan having been involved.
We continue to maintain 24/7 operations during the
pandemic with minimal Covid-19 related sickness and
no deterioration in overall sickness and absenteeism.
We met all customer delivery targets. Employees
regularly ask questions of the BCT through a T-card
system. Comments are shared with the Board by the
Executive Directors to get a good sense of employee
feedback.
Share scheme participation has aligned the interests
of employees with shareholders giving staff the
opportunity to hold a stake in the company.
Investors
The Chief Executive Officer and Chief Financial Officer
hold analyst and investor meetings throughout the
year both on request and specifically following the
release of the annual and half year results. Feedback
from these meetings is shared with the Board. Major
shareholders are regularly engaged to hear their views
on a range of issues such as strategy, remuneration
and corporate governance.
A wide range of communication channels are used
to engage with investors during the year. Feedback
from investors has informed the Board’s discussions
and decisions on the Company’s strategy. All material
information that is worthy of investor announcement
is made available simultaneously to both shareholders
and potential shareholders. Meetings with
shareholders and potential investors were held by
video conference during the year.
The Annual General Meeting is our primary method
of engagement with private investors along with the
Annual Report. We encourage investors to attend
and ask questions they may have. At the end of the
meeting, the Board engage in an open and informal
forum with attendees.
We value the opportunity to meet with our
shareholders and engage in an exchange of views
and ideas and, post AGM, we review the feedback
we have received. Unfortunately, we were not
able to welcome investors at the 2020 AGM given
government restrictions.
Filtronic plc Annual Report and Accounts 2021
35
Stakeholder
How we engage
Key outcomes
Investors
(continued)
The Group’s Annual Report and Accounts is available
to shareholders in both hard copy form and online. All
announcements and presentations are available on
the Company’s website whilst we also engage on social
media platforms such as LinkedIn.
We respect that not everyone is “on-line” and continue
to provide shareholders with a choice to receive a hard
copy of the report.
The Company’s broker, finnCap, provides briefings
to the Board on shareholder opinions and
independent feedback from investor meetings. Their
views are sought on all market related matters or
announcements.
Suppliers
Meetings are held with key suppliers at both their
facilities and ours. This ensures a more intimate
knowledge of each other’s capabilities and objectives
and leads to closer alignment of values.
Regular and frequent interaction between the
Company and our broker ensures we receive regular
guidance and remain aligned on our engagement
with the investment community. A report collated by
finnCap, after the business results investor roadshow,
giving shareholders feedback from each meeting is
shared with the Board.
The Group’s supplier base is a key part of the
company’s ecosystem and effective relationships with
our suppliers are essential to the delivery of Group
performance. We engage with our suppliers through
our engineering and operations teams and we work
closely with key suppliers to ensure we take advantage
of innovative technical and commercial solutions
in the supply chain in order to secure a competitive
advantage. Unfortunately, meetings with our overseas
suppliers has not been possible in the year given travel
restrictions but we have been able to visit our UK
suppliers.
Our Group policies are flowed down to our supply
chain to ensure compliance with social responsibility
and good governance policies
We minimise our exposure to supplier related risks by
requiring them to adhere to our group policies and
for them to confirm they are not in conflict with these
policies before or during engagement.
Supply contracts of material significance to the Group
are subject to internal controls with a summary of the
key terms being provided to the Executive Directors for
approval.
Supplier gating processes ensure management is
kept abreast of supplier risks, opportunities and
governance matters and able to act promptly when
required. The Board receives regular updates, from
the Chief Operations Officer, regarding key supplier
performance metrics and any issues under review.
The Group aims to play fair with is suppliers and pay in
line with the contractual payment terms.
By playing fair with our suppliers we gain their respect,
support and commitment to meeting our own business
objectives.
is committed to identifying other means to drive further
positive impact through our products, processes and
foremost our people, all of which will contribute to the
success of the Company.
The Company’s engagement with key stakeholder groups
and the impact our business operations have on the local
community and the environment are considered within the
implementation of the Company’s objective and strategy
and the Corporate social responsibility report.
Standards of business conduct
The Board is committed to a culture of integrity and
openness and this year has adopted a set of ten Group
values that embody the essence of Filtronic’s ethos. These
values are being actively promoted amongst our staff.
The Board is confident that through our people, our
values, our policies and processes we are fostering the
right culture to make a positive impact on the business,
our employees, our customers, suppliers, the environment
and the communities in which we operate. The Board
Governance reportwww.filtronic.com Stock Code: FTC
36
Nominations Committee report
Membership
The members of the Nominations Committee and the
meetings attended in the year are:
Reg Gott (Chairman)
Pete Magowan
John Behrendt1
Michael Roller2
Meetings
attended
3/3
3/3
2/2
1/1
1John Behrendt was appointed on 1 January 2021.
2Michael Roller retired on 29 October 2020.
Roles and responsibilities
The Committee’s role and responsibilities are set out
in full in the terms of reference, which are available
on the Filtronic website and set out the Committee’s
responsibilities as follows:
• Ensure the balance of board members remains
appropriate as the Company implements its strategy
to ensure the business can compete effectively in the
marketplace;
• Identify and nominate candidates to fill board
vacancies as and when they arise;
• Before such appointments are made, evaluate the
overall balance and composition of the Board and in
the light of that evaluation, preparing a description
of the roles and capabilities required for the
appointment; and
• Ensure that each new appointee receives a formal and
customised induction to the Group via the Company
Secretary and other board members as appropriate.
Dear Shareholder
I am pleased to present the Nominations Committee
Report on behalf of the Board.
This year, the Nominations Committee has continued to
focus on board composition and succession planning,
including reviewing the skills, experience and personal
qualities required for robust and sustainable leadership
for the Board, its committees, and the wider management
team.
The composition of the Board evolved during the year. As
previously reported, we welcomed Richard Gibbs as Chief
Executive Officer on 1 September 2020. In October 2020,
at the AGM, Michael Roller stepped down as a Non-
Executive Director and as Chair of the Audit Committee.
He was replaced by John Behrendt who joined the Board
on 1 January 2021.
Following Michael Roller’s retirement, Pete Magowan is
the Senior Independent Non-Executive Director. Pete is
currently leading the process to appoint a replacement
Chair following the announcement that I will be retiring
from the Board and not seeking re-election at the AGM in
October 2021.
In identifying suitable candidates for board appointment,
the Committee uses the services of external advisers to
facilitate the search and considers candidates on merit
and against objective criteria. The Committee recognises
the value of a diverse board and will consider all
candidates with the necessary capabilities in accordance
with the Company’s policies including considerations of
equality and diversity. The Nominations Committee takes
account of the results of the annual board evaluations
exercise in its succession planning and the appointment of
new board members.
The Committee plays a key role in ensuring the
effectiveness of the Board and its ability to deliver long
term success for the Company, including having the
appropriate balance of knowledge, skills and experience
to reflect the changing needs of the business and prepare
for the future.
Reg Gott
Chairman, Nominations Committee
2 August 2021
Activities of the Nominations Committee during the year
The Nominations Committee discharged its responsibilities during the year by:
Area of review
Activities undertaken
Board
appointment
Governance
• Richard Gibbs appointed as CEO.
• John Behrendt appointed as a Non-Executive Director and Audit Committee Chairman.
• Pete Magowan acknowledged as the Senior Independent Director.
• Review of the Committee’s terms of reference.
• Considered the size and composition of the Board.
Filtronic plc Annual Report and Accounts 2021
37
Dear Shareholder
On behalf of the Board, I am pleased to present my first
report as Chairman of the Audit Committee following my
appointment as Committee Chairman replacing Michael
Roller who retired at the Company’s 2020 AGM.
The Audit Committee consists of the Non-Executive
Directors who the Board considers to be independent
and collectively have the skills and experience required
to discharge their duties effectively whilst the Chairman
of the Committee is required to have recent and relevant
financial, accounting and general business experience.
The Audit Committee meets at least three times a year
generally immediately prior to a board meeting to
facilitate immediate and efficient reporting to the Board,
with additional meetings where necessary. The Executive
Directors may attend the meeting by invitation, whilst the
Company Secretary is required to attend to act as the
Secretary to the Committee. The external auditors attend
when requested as do the internal audit providers.
The Company outsources its internal audit activity
to third parties as it is not deemed appropriate given
the size of the Company to have its own internal audit
function. However, the Audit Committee considers
annually whether there is a need for an in-house internal
audit function to be established and, were it to conclude
that this would be more appropriate than the current
arrangements, would recommend this to the Board.
The normal pattern of meetings follows the public
reporting and audit cycle, with meetings to consider the
external audit plan; the half year announcement together
with the external auditors’ review of those results; the full
year Annual Report and Accounts, again with the external
auditors’ observations and opinions; and the review of the
internal audit that has taken place in the year.
Outside of the public reporting cycle the Committee
meets to consider matters such as internal controls, risk
and governance matters.
As Chairman of the Committee, I maintain regular
dialogue with the Chief Financial Officer and have
direct access to PricewaterhouseCoopers LLP (“PwC”),
the Company’s external auditor. The Committee meets
separately at least once a year with the external auditors
without others being present to facilitate open discussion
and the opportunity to discuss any concerns.
The main activities of the Audit Committee in the year are
presented on the next page.
John Behrendt
Chairman, Audit Committee
2 August 2021
Audit Committee report
Membership
The members of the Audit Committee and the meetings
attended in the year are:
John Behrendt (Chairman)1
Reg Gott
Pete Magowan
Michael Roller2
Meetings
attended
2/2
3/3
3/3
1/1
1John Behrendt was appointed on 1 January 2021.
2Michael Roller retired from the Board on 29 October 2020.
Roles and responsibilities of the Audit
Committee
The Audit Committee operates within a framework of
approved terms of reference which are reviewed annually
along with its effectiveness with recommendations
made to the Board of any changes required from the
review. The terms of reference are available on the
Filtronic website, and include the following roles and
responsibilities:
• Monitor and make recommendations to the Board
in relation to the Company’s published financial
statements and other formal announcements relating
to the Company’s financial performance;
• Advise the Board on whether the Committee believes
the Annual Report and Accounts, taken as a whole,
are fair, balanced and understandable and provide
the information necessary for shareholders to assess
the Company’s performance, business model and
strategy;
• Monitor and make recommendations to the Board in
relation to the Company’s internal financial controls
and financial risk management systems;
• Consider the need for an internal audit function,
determine the scope of outsourced internal audit
activities, appoint a provider, agree fees and review the
results of these activities;
• Make recommendations to the Board in relation to
the appointment, re-appointment and removal of the
external auditor and approve the remuneration and
terms of engagement of the external auditor;
• Review and monitor the external auditor’s
independence and objectivity and the effectiveness
of the audit process, taking into consideration the
relevant UK professional and regulatory requirements;
• Monitor the extent to which the external auditor is
engaged to supply non-audit services; and
• Ensure that the Company has arrangements in place
for the investigation and follow-up of any concerns
raised confidentially by staff in relation to the propriety
of financial reporting or other matters.
Governance reportwww.filtronic.com Stock Code: FTC
38
Audit Committee report continued
Activities of the Audit Committee during the year
During the year, the Audit Committee discharged its responsibilities by:
Area of review
Activities undertaken
Financial
reporting
External auditors
• Review the Annual Report and Accounts, Interim Report and interim management statements
prior to board approval.
• Consideration of whether the Annual Report and Accounts is fair, balanced and
understandable.
• Review the external auditor’s detailed report to the Committee on the annual financial
statements.
• Review of accounting policies and significant accounting judgements and estimates.
• Review of changes in accounting standards and their impact.
• Review of the going concern basis of preparation of the financial statements.
• Review of the external auditor’s plan for the audit of the Group’s financial statements, including
the identification of key risks.
• Review and approval of the external auditor’s terms of engagement, remuneration and
independence.
• Review of the external auditors’ compliance with ethical and professional guidance on audit
partner rotation.
• Assessment of the effectiveness of the audit process.
• Recommendation regarding reappointment of the external auditors.
Risk management
and internal
controls
• Review of the Group’s internal financial controls operated in relation to the business and
assessment of the effectiveness of those controls in minimising the impact of key risks.
• Review the need for an internal audit function and determine what aspects of the Group’s
operations should be subject to outsourced internal audit scrutiny.
Governance
• Review of the Committee’s terms of reference.
Key accounting matters
The following key areas of risk and judgement have been
identified and considered by the Audit Committee in
relation to the business activities and financial statements
of the Group and Parent Company:
• Group - Going concern and cashflow
• Group – Inventory valuation; and
• Group - Goodwill impairment
• Parent Company – Carrying value of the investment in
the subsidiary.
These issues were discussed with management and the
auditor, in particular at the pre-year end audit planning
meeting and at the conclusion of the audit of the financial
statements.
Going concern and cashflow:
To assess the appropriateness of the going concern
assumption, the Committee has reviewed the Group’s cash
position and the availability of funding alongside the cash
requirements of the Group. The Group has demonstrated
resilience throughout the Covid-19 pandemic so the
likelihood of the business needing to close for any period
of time is very unlikely having maintained full operational
capability throughout numerous lockdowns in the UK and
USA. Therefore, the forecasts prepared by management
have not considered the impact of lockdown in any of the
downside scenario tests. However, economic uncertainty,
risk of programme curtailments and the impact of
delayed new business acquisition has been considered.
The base case forecast of future cash flows was prepared
for review by the Committee for a three-year period.
The paper set out the views and considerations in
support of preparing the financial statements on a going
concern basis which was based on the Group’s financial
and trading position, principal risks and uncertainties
and strategic plans. The viability was further tested by
applying some plausible downside scenarios along
with mitigating actions that could be implemented. The
Committee concluded the going concern basis should be
adopted.
A second paper was presented by management that
assessed an additional downside scenario where the
pandemic adversely affected forward-looking demand
to levels significantly lower than those initially modelled.
It stress-tested the model further by assuming the loss of
a key customer programme. The Committee concluded
that the Group still had sufficient cash and headroom
Filtronic plc Annual Report and Accounts 2021 39
Fair, balanced and understandable
The Company’s management and the auditor confirmed
to the Audit Committee that they were not aware of
any material misstatements. Having reviewed the
reports received from management and the auditor,
the Committee is satisfied that the key areas of risk and
judgement have been appropriately addressed in the
financial statements and that the significant assumptions
used in determining the value of assets and liabilities have
been properly appraised and are sufficiently robust.
After careful consideration of the advice of the Audit
Committee, the Board has concluded that the 2021
Annual Report and Accounts is fair, balanced and
understandable and provides the necessary information
for the Company’s shareholders to assess the Group’s risks,
performance, business model and strategy.
through debt facilities to agree with the management’s
recommendation to adopt a going concern basis of
preparation.
Inventory valuation
Filtronic operates in an industry where developments
in product technology and the highly customer specific
nature of some inventory may result in inventory becoming
slow-moving or obsolete. This in turn may mean that
inventory cannot be sold or sales prices for such inventory
are discounted to less than the relevant inventory’s book
value.
The Committee considered a paper from management
analysing this inventory by customer and looking at
projected future usage relative to current inventory on
hand. It reviewed the provision for excess and obsolete
inventory and noted that the level of provision and the
methodology applied were appropriate and consistent.
Carrying value of goodwill and the investment in
the subsidiary:
The Committee considered the judgements made in
relation to the value in use methodology adopted by
management and the model inputs used. These are set
out in notes 16 and 17 to the financial statements.
The Committee agreed with the judgements made by
management and concluded that no impairment of the
carrying value of the investment in the subsidiary in the
Parent Company accounts was necessary.
External auditor
The Committee considers that PwC has carried out its
duties as the auditor in a diligent and professional manner.
As part of the review of auditor independence, PwC has
confirmed that it is independent of the Company and
has complied with applicable auditing standards. PwC
has held office as auditor for three years and therefore
the Audit Partner is in accordance with professional
guidelines of serving no longer than five years to maintain
independence.
In assessing the auditor’s effectiveness, the Committee:
• Challenged the work done by the auditor to test
management’s assumptions and estimates in the key
risk areas;
• Reviewed reports received from the auditor on these
and other matters;
• Received and considered feedback from management;
and
• Held private meetings with the auditor that provided
the opportunity for open dialogue and feedback
between the Committee and the auditor without
management being present.
Having completed its review, the Audit Committee is
satisfied that PwC remained effective and independent
in carrying out its responsibilities up to the date of signing
this report.
Governance reportwww.filtronic.com Stock Code: FTC 40
Directors’ remuneration report
Membership
The members of the Remuneration Committee and the
number of meetings attended are:
Pete Magowan (Chairman)1
Reg Gott
John Behrendt1
Michael Roller2
Meetings
attended
3/3
3/3
2/2
1/1
1John Behrendt was appointed on 1 January 2021.
2Michael Roller retired from the Board on 29 October 2020.
The Remuneration Committee compromises the Non-
Executive Directors, including the Chairman.
Role of the Remuneration Committee
The Remuneration Committee’s role is to define and
make recommendations to the Board on the Group’s
remuneration policy and the employment terms of
Executive Directors and senior management along
with the effective implementation of that policy. The
Committee is also responsible for the review and
approval of pay increases, performance related pay
arrangements and share incentive plans along with the
associated performance targets. The Committee’s full
terms of reference are reviewed regularly and approved
by the Board.
Dear shareholder
On behalf of the Board, I am pleased to present the
Filtronic Directors’ remuneration report for the year
ended 31 May 2021. The report explains the work of the
Remuneration Committee during the year and sets out
the payments and awards made to directors.
The Company, being listed on AIM, is not required to
produce a comprehensive Directors’ remuneration report
or to submit a remuneration policy to a binding vote.
However, the Board does wish to maintain transparency
and demonstrate good governance so presents the
following remuneration report.
The Remuneration Committee is committed to structuring
the remuneration packages of Executive Directors and
senior management that are competitive and enable the
Group to attract, retain and motivate talented people
that can develop and execute the Group’s strategy. To
promote the long-term success of the Company, the
Executive Directors incentive benefits are performance-
based and earned only subject to the satisfaction of
performance conditions. These performance conditions
are aligned with the interests of the shareholders.
The main activities of the Committee in FY2021 are
set out in the table below which includes setting the
remuneration of Richard Gibbs following his appointment
as CEO in the year.
Pete Magowan
Chairman, Remuneration Committee
2 August 2021
Activities of the Remuneration Committee during the year
During the year, the Remuneration Committee discharged its responsibilities by:
Area of review
Activities undertaken
Executive
Directors’
and senior
management
remuneration
• Set the remuneration package and the terms of the employment contract for Richard Gibbs on
his appointment as CEO.
• Set the remuneration for the CFO and senior management as part of the annual pay review.
• Set the remuneration for John Behrendt on his appointment as a Non-Executive Director.
• Assessed the FY2021 bonus outcomes.
• Reviewed and approved the FY2022 bonus scheme.
• Approved the grant of share options under the Employee Share Option Plan (“ESOP”) for
Richard Gibbs.
Share incentive
plans
• Approved the grant of SAYE options, open to all employees.
• Reviewed employee share schemes.
• Approved the exit terms for a good leaver from senior management.
Governance
• Engaged with shareholders on the implementation of a new share ESOP plan.
• Considered and approved the Annual Report and Accounts on remuneration.
• Review of the Committee’s terms of reference.
Filtronic plc Annual Report and Accounts 2021
41
Details of the service contracts currently in place for directors are as follows:
Executive service agreement appointment date
Key current terms
Notice
Name
period
Richard Gibbs
Chief Executive
Officer
Appointed to the Board on 1 September 2020
Michael Tyerman Appointed to the Board on 1 April 2016
Chief Financial
Officer
Base salary £184,500
Car allowance
Annual bonus
Health insurance
Base salary £123,000
Car allowance
Annual bonus
Health insurance
Pension
6 months
6 months
Name
period
Reg Gott
Role
Non-Executive terms of appointment date
Fee
Notice
Chairman and Nominations Appointed to the Board on 13 July 2006
Committee Chairman
£60,000 6 months
Pete Magowan Remuneration Committee Appointed to the Board on 19 November 2018 £40,000 3 months
Chairman
John Behrendt Audit Committee Chairman Appointed to the Board on 1 January 2021
£40,000 3 months
Certain sections constitute the audited part of the reports of the remuneration report.
Total single figure of remuneration for directors - audited
The directors’ total remuneration in respect of the year under review is shown below and compared to the previous year.
Salary or fee
Bonus
Benefits
Long-term
incentive
Total remuneration
excluding pension
contributions
£000
FY2021 FY2020 FY2021 FY2020 FY2021 FY2020 FY2021 FY2020 FY2021 FY2020
Executive Directors
Richard Gibbs1
Michael Tyerman
Rob Smith
Non-Executive Directors
Reg Gott2
Pete Magowan
John Behrendt3
Michael Roller4
Total
135
120
-
100
40
17
17
429
-
102
246
133
40
-
40
561
42
38
-
14
-
-
-
94
-
76
52
71
-
-
-
199
15
8
-
-
-
-
-
23
-
8
15
-
-
-
-
23
7
-
-
-
-
-
-
7
-
19
-
-
-
-
-
19
199
166
-
-
205
313
114
40
17
17
553
204
40
-
40
802
1Richard Gibbs was appointed to the Board on 1 September 2020.
2Reg Gott served as Executive Chairman from 1 November 2019 to 30 September 2020, at which time he was paid an annual salary of
£180,000. Reg reverted to his role as Non-Executive Chairman on 1 October 2020.
3John Behrendt was appointed to the Board on 1 January 2021.
4Michael Roller retired on 29 October 2020.
Notes to the single figure table of remuneration for directors - audited
Taxable benefits
Taxable benefits in kind were unchanged in FY2021 and comprised car allowance and private health insurance. In
addition to these taxable benefits, the Executive Directors are provided with life assurance.
Incentive outcomes for FY2021
The Executive Directors were rewarded during the year, including Reg Gott during his time as an Executive Director, for
delivering profit targets aligned to the FY2021 business plan.
Governance reportwww.filtronic.com Stock Code: FTC
42
Directors’ remuneration report continued
Annual performance-related bonus plan
An annual performance-related bonus plan has been introduced for the year ending 31 May 2022 which will reward the
Executive Directors and key management cash bonuses for delivering stretching adjusted EBITDA profit targets aligned
to the FY2022 business plan and achievement of personal objectives that support the growth and development of the
business.
The Executive Director can earn up to a maximum of 50% of their base salary. Pay-out is determined by the
Remuneration Committee which has discretion to vary the bonus based on performance
Total single figure of pension benefits for directors - audited
The Executive Directors’ total pension benefits in respect of the year under review are shown below and are compared to
the previous year.
Pension contributions
FY2021 FY2020
£000
11
-
11
Michael Tyerman
Rob Smith
Total
8
5
13
Contributions were made to the Company’s defined contribution scheme. Richard Gibbs elected not to join the
Company’s pension scheme.
Directors’ and relevant senior management holdings of Filtronic shares - audited
Directors are not required but are expected to have holdings in the ordinary share capital of the Company.
The interests of the directors, who were serving as at 31 May 2021, in the Company’s ordinary shares, which excludes
interests under the share option schemes, are set out below:
2021
2020
Richard Gibbs
Michael Tyerman
Reg Gott
Pete Magowan
John Behrendt
Shares
225,000
339,478
455,369
750,000
60,000
1,829,847
%
0.1%
0.2%
0.2%
0.4%
0.0%
0.9%
Shares
-
339,478
455,369
750,000
-
1,544,847
%
-
0.2%
0.2%
0.4%
-
0.8%
The above shareholdings include holdings of directors’ connected parties.
Management share options scheme - audited
The Executive Directors who were serving at 31 May 2021 held the following options over the ordinary shares of the
Company:
Richard Gibbs
Michael Tyerman
Plan
ESOP
ESOP
Exercise period
Option price
2021
2020
25/09/2023—24/09/2030
01/03/2019—28/02/2026
8.00p
5.37p
750,000
300,000
1,050,000
-
300,000
300,000
The ESOP scheme awarded to Michael Tyerman and key management in 2016 awarded share options for delivering
a significant increase in the share price, this performance condition was met and the option vested. There are no
performance conditions attached to the ESOP options granted to Richard Gibbs other than remaining in employment
with Filtronic for three years. The Remuneration Committee is able to adjust the outcome at its discretion to ensure it is fair
and appropriate, taking into account the overall performance of the Group.
The closing middle market price on 31 May 2021 was 9p, and on 31 May 2020 it was 10p. The range of middle market
share prices during the year ended 31 May 2021 was 11p—7p.
There were no changes in directors’ interests between 31 May 2021 and 2 August 2021. The Company’s register of
directors’ interests, which is open to inspection at the Registered Office, contains full details of directors’ shareholdings.
Richard Gibbs and Michael Tyerman were granted further ESOP share options in June 2021 of 245,448 and 479,988
respectively at 11.12p with a vesting date in three years’ time against revenue growth performance criteria. The
Company also opened a seventh Sharesave Scheme (SAYE) in June 2021 for all UK employees which both Executive
Directors opted to partake with Richard Gibbs granted 35,622 options and Michael Tyerman 58,290 share options at an
exercise price of 6.67p in three years’ time.
Filtronic plc Annual Report and Accounts 2021
Directors’ report
The directors present their report together with the
audited consolidated financial statements for the year
ended 31 May 2021.
Going concern
The Group’s business, and the factors likely to affect its
future development, performance and position are set out
in the Strategic report.
The revenue, trading results and cash flows are explained
in the Financial review on page 15.
After a review of forecasts including projections of
profitability and cash flows for the year to 31 May 2022
and a further two years, the directors believe that the
Group has adequate resources to continue to operate
for the foreseeable future and that it is therefore
appropriate to continue to adopt the going concern basis
of accounting in the preparation of the consolidated and
Company financial statements. The basis of preparation,
in note 1, provides more detail on this. The Group
undertook a review of the potential impact of Covid-19
over a three year period by modelling a severe downside
scenario to form this view.
Directors and their interests
The directors of the Company during the year, and up to
the date of this report, were as follows:
Richard Gibbs (appointed 1 September 2020)
Michael Tyerman
Reg Gott
Michael Roller (retired 29 October 2020)
Pete Magowan
John Behrendt (appointed 1 January 2021)
Details of directors’ interests in the share capital of the
Company are set out in the remuneration report on page
42.
Reg Gott, having served on the Board for more than nine
years, retires by rotation and has decided not to offer
himself for re-election at the Annual General Meeting.
John Behrendt, having been appointed to the Board on
1 January 2021, offers himself for election at the Annual
General Meeting.
Directors’ indemnity
The Company has in place directors’ and officers’
liability insurance on behalf of its directors and officers
in accordance with the provisions of the Companies Act.
In addition, certain directors benefit from an indemnity
from the Company, to the extent not prohibited by law,
in respect of losses incurred as a result of the discharge
Top Investors
Investor
Rank
Mark and Diana Dixon
1
Canaccord Genuity Group Inc.
2
David and Monique Newlands
3
4
River and Mercantile Asset Management LLP
43
of their duties in the management or supervision of
any Company in the Group. The indemnity does not
automatically terminate when the indemnified person
ceases to be a director.
Directors’ conflicts of interest
There are no declarations to be made under Article 182 of
the Companies Act 2006.
Research and development expenditure
Research and development costs in the year before
capitalisation and amortisation relating to continuing
operations were £1.7m (2020: £1.7m), of which £0.1m
was capitalised (2020: £0.7m). Amortisation/impairment
of development costs in the year was £0.2m (2020: £0.1).
Financial results and dividend
The results for the year are set out in the income statement
on page 51. The position at the end of the year is shown in
the balance sheet on page 53.
The directors are not recommending payment of a
dividend (2020: £nil).
Significant events and future developments
There have been no significant events since the reporting
date. The Group’s future developments for FY2021 are
disclosed in the Strategic Report on pages 3 to 26.
Share capital
The Company’s share capital consists of 0.1p ordinary
shares. The rights and obligations attached to each share
are equal. Each share carries the right to one vote at the
Annual General Meeting of the Company and carries no
right to fixed income. There are no limitations on holding
or transfer of the shares. The Board has no powers to
issue or buy back the Company’s shares, other than those
approved by the shareholders at the Annual General
Meeting held in October 2020.
Substantial shareholdings
Up to 31 May 2021, the Company had been notified,
by shareholders, in accordance with chapter 5 of the
disclosure and transparency rules, of the voting rights
they held as shareholders of the Company. An analysis
of shareholders as at 31 May 2021 (as disclosed by
shareholders via TR1) is set out in the table below. As at
31 May 2021, the Company had issued share capital of
214,415,083 ordinary shares of 0.1p each.
31 May 2021
50,000,000
22,490,000
17,110,000
11,333,451
%
23.3
10.5
8.0
5.3
Governance reportwww.filtronic.com Stock Code: FTC 44
Directors’ report continued
Political and charitable contributions
No contributions were made for political purposes (2020:
£nil). The Group made charitable donations of £nil in the
year (2020: £404).
The directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that
the financial statements comply with the Companies Act
2006.
The directors are responsible for the maintenance
and integrity of the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
In the case of each director in office at the date the
directors’ report is approved:
• so far as the director is aware, there is no relevant
audit information of which the group’s and company’s
auditors are unaware; and
• they have taken all the steps that they ought to have
taken as a director in order to make themselves aware
of any relevant audit information and to establish that
the group’s and company’s auditors are aware of that
information.
Independent auditors
PricewaterhouseCoopers LLP has expressed a willingness
to continue in office as the auditor and a resolution to
reappoint PricewaterhouseCoopers LLP will be proposed
at the forthcoming Annual General Meeting.
By order of the Board
Maura Moynihan
Company Secretary
2 August 2021
Treasury policy
The Group’s treasury policy aims to manage the Group’s
financial risk and to minimise the adverse effects of
fluctuations in the financial markets on the value of
the Group’s financial assets and liabilities, on reported
profitability and on the cash flows of the Group. Note 38
sets out the particular risks to which the Group is exposed,
and how these are managed.
Annual General Meeting
The Annual General Meeting of the Company will be held
on 28 October 2021 at 11am at
Plexus,
Thomas Wright Way,
Netpark,
Sedgefield,
County Durham,
TS21 3FD.
Full details of the business to be transacted at the meeting
will be set out in the notice of the Annual General Meeting.
Statement of directors’ responsibilities in
respect of the financial statements
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the Group and the Company
financial statements in accordance with international
accounting standards in conformity with the requirements
of the Companies Act 2006.
Under company law, directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the directors
are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable international accounting
standards in conformity with the requirements of the
Companies Act 2006 have been followed, subject to
any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Company will continue in business.
Filtronic plc Annual Report and Accounts 2021 45
Independent auditors’ report
to the members of Filtronic plc
Opinion
In our opinion, Filtronic plc’s Group financial statements and Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 May 2021 and of the Group’s
profit and the Group’s and Company’s cash flows for the year then ended;
• have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which
comprise: the consolidated and company balance sheets as at 31 May 2021; the consolidated income statement
and consolidated statement of comprehensive income, the consolidated and company cash flow statements, and the
consolidated and company statements of changes in equity for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Audit scope
• Three full scope audit components have been identified alongside the Company. This approach provided 100%
coverage over the Group’s revenue.
• All full scope audits were performed by the Group engagement team.
• Analytical review procedures were performed by the Group engagement team over all out of scope components.
Key audit matters
• Carrying value of goodwill and non-current assets (Group)
• Going concern incorporating the impact of Covid-19 (Group and parent)
• Carrying value of investments (parent)
Materiality
• Overall Group materiality: £155,560 (2020: £171,810) based on 1% of revenue.
• Overall Company materiality: £141,700 (2020: £120,570) based on 1% of total assets.
• Performance materiality: £116,670 (Group) and £106,275 (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
This is not a complete list of all risks identified by our audit.
Governance reportwww.filtronic.com Stock Code: FTC 46
Independent auditors’ report
to the members of Filtronic plc continued
Discontinued operations, which was a key audit matter last year, is no longer included because of the completion, in the
prior year, of the disposal of the Telecoms Antenna operation. Otherwise, the key audit matters below are consistent with
last year.
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and non-current assets
(Group)
We focused on this area due to the material goodwill
balance held on the consolidated balance sheet and
the estimates and judgements required to determine
recoverable amount.
Going concern incorporating the impact of Covid-19
(Group and parent)
As explained in Note 1 to the financial statements, the
Covid-19 pandemic has not had a significant impact
on the Group’s profitability and cash flow for the 2021
financial year, but it has increased the level of uncertainty
in the market and future outlook of the business. In
considering going concern, it has been necessary for
management to consider the impact of a number of
uncertain future events, such as programme curtailment
and any further impact of the pandemic, on the Group’s
balance sheet, cash flows, liquidity and accordingly its
ability to continue as a going concern.
In order to conclude that it is appropriate for the financial
statements to be drawn up on a going concern basis,
management have prepared a detailed ‘base case’
We considered the carrying value of goodwill and
non-current assets by reference to the ‘value in use’
model prepared by management, which was based on
discounted cash flows.
We assessed management’s determination of CGUs
against technical guidance and considered whether
the impairment assessment was performed at the
appropriate level, considering management’s own
internal reporting for monitoring of goodwill.
We tested the inputs to the model to Board approved
budgets, which included growth rates and capital
expenditure forecasts. We also tested the integrity of the
model and its mathematical accuracy.
We determined that the calculations were most sensitive
to growth and discount rate assumptions and calculated
the degree to which these assumptions would need to
move before any impairment was required.
We engaged with our valuation experts in order to assess
the discount rate applied by reference to both the Group’s
weighted average cost of capital and a comparator
group. We assessed both the short term and long term
growth rate assumptions against available market data
for the telecommunications infrastructure sector.
We also read the disclosures provided in the financial
statements regarding goodwill impairment testing,
and the associated disclosure of the critical accounting
estimates, and found these to be appropriate.
Based on the procedures we performed we were able to
obtain sufficient audit evidence in respect of the carrying
value of goodwill and non-current assets.
We tested the mathematical accuracy and integrity of
management’s model and challenged management
on the key assumptions included in the scenarios, which
included short and long term growth rates, working
capital assumptions and the discount rate.
We evaluated the downside scenarios and found these
to be appropriately severe but plausible. We assessed
the mitigating actions included in the downside scenarios
and determined that these reflected actions within
management’s control. We also considered the levers
available to management to mitigate the impact on the
Group’s and Company’s liquidity should the severe but
plausible downside scenarios arise.
Filtronic plc Annual Report and Accounts 2021
Going concern incorporating the impact of Covid-19
(Group and parent) (continued)
cashflow model and applied various sensitivities in
order to model severe but plausible downside scenarios
given the continued uncertainty in the macroeconomic
environment.
Management have a reasonable expectation that the
Group and Company will have adequate resources to
continue in operation and have therefore adopted the
going concern basis of accounting in preparing the
financial statements.
Carrying value of investments (parent)
We focused on this area due to the material investments
balance held on the Company’s balance sheet and the
judgement required to determine whether or not there
has been an impairment trigger and, where there is an
impairment trigger, the estimates required to assess the
recoverable amount of investments.
The investment relates to the filter related business linked
to Filtronic Wireless Ltd and Filtronic Wireless Inc, as held
by Isotek (Holdings) Limited.
47
We have reviewed the trading results for the year to 31
May 2021 and for previous periods and ‘looked back’ to
compare them with management’s original budget, to
consider historical forecasting accuracy when assessing
forecast results for future periods.
We evaluated management’s disclosures in relation to
going concern and found them to be consistent with
the stress test scenarios performed and the accounting
framework.
Based on the procedures performed we found
management’s assessment of and conclusions over the
going concern basis of preparation to be appropriate.
We evaluated whether an impairment trigger was
present in accordance with the accounting framework
and concluded that it was appropriate for management
to prepare an impairment assessment to consider the
recoverable amount of investments.
We obtained management’s impairment assessment,
which was based on discounted cash flows related to the
filters business to determine value in use.
We tested the inputs to the model by assessing forecast
cash flows against recent performance of the filters
business and comparing to approved budgets. We also
tested the integrity of the model and its mathematical
accuracy.
We obtained and reviewed industry and analyst
commentary on the future filters-related market against
which to assess the reasonableness of management’s
assumptions.
We determined that the calculations were most sensitive
to growth and discount rate assumptions and calculated
the degree to which these assumptions would need to
move before any impairment was required.
As noted above, we engaged with our valuations
specialists to assess the discount rate applied in the
discounted cash flow model.
Based on the procedures we performed we were able to
obtain sufficient audit evidence in respect of the carrying
value of the investments balance.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and
controls, and the industry in which they operate.
There are three components which required a full scope audit of their financial information, due to their size and
contribution to the financial results of the Group. These were the trading entities within the UK, being Filtronic Broadband
Limited and Filtronic Wireless Limited, in addition to the trading entity in the US, Filtronic Wireless Inc.
Filtronic plc is also subject to a full scope audit of its financial information, due to the separate presentation of these
financial statements within this report. All audit work supporting the Group opinion was performed by the PwC UK
engagement team, with the exception of testing of physical inventory which was performed by a PwC team in the US.
Governance reportwww.filtronic.com Stock Code: FTC
48
Independent auditors’ report
to the members of Filtronic plc continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
Group financial statements
Company financial statements
£155,560 (2020: £171,810).
£141,700 (2020: £120,570).
1% of revenue
1% of total assets
Based upon the Group’s trading
performance in the year, revenue
is considered to be the most stable
and appropriate benchmark in
appraising financial performance,
and is a generally accepted
auditing benchmark.
We believe that as a holding
Company, the most appropriate
benchmark for materiality is total
assets which is a generally accepted
auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components was between £110,000 and £145,000. Certain
components were audited to a local statutory audit materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions
and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality,
amounting to £116,670 for the Group financial statements and £106,275 for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of
our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit
above £7,780 (Group audit) (2020: £8,600) and £7,085 (Company audit) (2020: £6,000) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going
concern basis of accounting included:
• Assessment of management’s base case and severe but plausible downside cash flow forecasts, as summarised in the
Key Audit Matters section included above; and
• Consideration of the disclosures provided in the financial statements with respect to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s
and the Company’s ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
Filtronic plc Annual Report and Accounts 2021 49
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement
of the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Directors’ Report for the year ended 31 May 2021 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of
the audit, we did not identify any material misstatements in the Strategic report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities in respect of the financial statements, the directors
are responsible for the preparation of the financial statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or
have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws
and regulations related to UK tax legislation, employment law and health and safety regulations, and we considered the
extent to which non-compliance might have a material effect on the financial statements. We also considered those laws
and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk
of override of controls), and determined that the principal risks were related to posting journal entries to manipulate
financial performance, management bias through judgements and assumptions in significant accounting estimates and
significant one-off or unusual transactions. Audit procedures performed by the engagement team included:
• discussions with management and those charged with governance, including consideration of known or suspected
instances of non-compliance with laws and regulations and fraud;
• evaluation of management’s controls designed to prevent and detect fraudulent financial reporting;
• testing accounting estimates that we deemed to present a risk of material misstatement, including assessing the data,
methods and assumptions applied by management in the development of each estimate;
• identifying and testing journal entries using a risk-based targeting approach for unexpected account combinations; and
• reviewing financial statement disclosures and testing to supporting documentation, where appropriate, to assess
compliance with applicable laws and regulations.
Governance reportwww.filtronic.com Stock Code: FTC 50
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing
complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In
other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is
selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions,
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Tom Yeates (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
2 August 2021
Filtronic plc Annual Report and Accounts 2021
Consolidated income statement
for the year ended 31 May 2021
Continuing operations
Revenue
Adjusted earnings before interest, taxation, depreciation, amortisation and
exceptional items
Amortisation
Impairment of development costs
Depreciation
Adjusted operating profit
Exceptional items
Operating profit/(loss)
Finance costs
Finance income
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year from continuing operations
Loss for the year from discontinued operations
Profit/(loss) for the year
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
51
Group
2021
£000
2020
£000
15,556
17,181
1,773
1,165
(209)
(45)
(941)
578
64
642
(431)
-
211
(151)
60
-
60
(18)
(89)
(677)
381
(569)
(188)
(277)
36
(429)
(89)
(518)
(1,437)
(1,955)
0.03p
0.03p
(0.93p)
(0.93p)
Note
17
17
18, 19
5
4
11
12
13
14
15
15
The profit for the year is attributable to the equity shareholders of the Parent Company, Filtronic plc.
The notes on pages 58 to 85 form part of these financial statements.
Financialswww.filtronic.com Stock Code: FTC
52
Consolidated statement of
comprehensive income
for the year ended 31 May 2021
Profit/(loss) for the year
Other comprehensive (expense)/income
Items that are or may be subsequently reclassified to profit and loss:
Transfer to income related to business disposal
Currency translation movement arising on consolidation
Total comprehensive expense for the year
Note
30
30
Group
2021
£000
2020
£000
60
(1,955)
-
(98)
(38)
117
(111)
(1,949)
The total comprehensive expense for the year is attributable to the equity shareholders of the Parent Company, Filtronic
plc.
All income recognised in the year was generated from continuing operations.
The notes on pages 58 to 85 form part of these financial statements.
Filtronic plc Annual Report and Accounts 2021 Consolidated balance sheet
as at 31 May 2021
Non-current assets
Goodwill and other intangible assets
Right of use assets
Property, plant and equipment
Deferred tax
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Provisions
Deferred income
Financial liabilities
Lease liabilities
Non-current liabilities
Deferred income
Financial liabilities
Lease liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Translation reserve
Retained earnings
Total equity
53
Group
Note
2021
£000
2020
£000
17
18
19
20
21
22
23
24
25
26
27
25
26
27
28
29
30
32
1,716
2,268
1,014
1,218
6,216
2,190
3,294
2,906
8,390
1,847
2,685
1,124
1,868
7,524
2,945
4,848
2,028
9,821
14,606
17,345
2,380
397
184
63
542
3,463
1,110
568
177
662
3,566
5,980
128
76
1,478
1,682
5,248
9,358
-
144
1,867
2,011
7,991
9,354
10,795
11,039
(650)
10,794
11,000
(552)
(11,826)
(11,888)
9,358
9,354
The total equity is attributable to the equity shareholders of the Parent Company, Filtronic plc.
Company number 2891064.
The notes on pages 58 to 85 form part of these financial statements. These financial statements have been approved by
the Board on 2 August 2021 and signed on its behalf by
Richard Gibbs
Chief Executive Officer
2 August 2021
Financialswww.filtronic.com Stock Code: FTC 54
Consolidated statement of
changes in equity
for the year ended 31 May 2021
Balance at 1 June 2019
Loss for the year
New shares issued
Currency translation movement arising on consolidation
Transfer to income related to business disposal
Balance at 31 May 2020
Profit for the year
New shares issued
Currency translation movement arising on consolidation
Share-based payments
Balance at 31 May 2021
Share
capital
£000
Share
premium
£000
Translation
reserve
£000
10,789
10,715
(558)
-
5
-
-
-
285
-
-
10,794
11,000
-
1
-
-
-
39
-
-
-
-
(111)
117
(552)
-
-
(98)
-
Retained
earnings
£000
(9,933)
(1,955)
-
-
-
(11,888)
60
-
-
2
Total
equity
£000
11,013
(1,955)
290
(111)
117
9,354
60
40
(98)
2
10,795
11,039
(650)
(11,826)
9,358
Company statement of
changes in equity
for the year ended 31 May 2021
Balance at 1 June 2019
Loss for the year
New shares issued
Balance at 31 May 2020
Loss for the year
New shares issued
Share-based payments
Balance at 31 May 2021
The notes on pages 58 to 85 form part of these financial statements.
Share
capital
£000
Share
premium
£000
10,789
10,715
-
5
-
285
Retained
earnings
£000
(5,001)
(5,440)
-
Total
equity
£000
16,503
(5,440)
290
10,794
11,000
(10,441)
11,353
-
1
-
-
39
-
(728)
(728)
-
2
40
2
10,795
11,039
(11,167)
10,667
Filtronic plc Annual Report and Accounts 2021 Consolidated cash flow statement
for the year ended 31 May 2021
Cash flows from operating activities
Profit/(loss) for the year from continuing operations
Loss for the year from discontinued operations
Gain on sale of the Telecoms Antenna Operation
Taxation
Finance income
Finance costs
Operating profit/(loss) including discontinued operations
Share-based payments
Depreciation
Amortisation of intangible assets
Impairment of intangible assets
Movement in inventories
Movement in trade and other receivables
Movement in trade and other payables
Movements in provisions
Change in deferred income
Tax received
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Capitalisation of development costs
Acquisition of other intangible assets
Acquisition of plant and equipment
Acquisition of right of use assets
Proceeds on sale of the Telecoms Antenna Operation - net of sale costs
Proceeds on sale of assets
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Interest paid
Proceeds from bank loans
Repayment of bank loans
Exercise of employee share options
Repayment of lease liabilities
Repayment of interest-bearing borrowings
Net cash used in financing activities
Movement in cash and cash equivalents
Currency exchange movement
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 58 to 85 form part of these financial statements.
55
Group
2021
£000
2020
£000
60
-
-
151
-
431
642
2
941
209
45
626
1,489
(1,026)
(712)
(255)
495
2,456
(52)
(69)
(177)
(106)
-
12
(518)
(1,437)
(671)
100
(36)
280
(2,282)
-
677
18
89
(731)
85
(1,054)
(1,155)
488
1,227
(2,638)
(678)
(27)
(384)
(154)
3,652
-
(392)
2,409
(225)
131
(209)
40
(666)
(104)
(1,033)
1,031
(153)
2,028
2,906
(258)
192
-
290
(375)
(202)
(353)
(582)
(15)
2,625
2,028
Financialswww.filtronic.com Stock Code: FTC 56
Company balance sheet
as at 31 May 2021
Non-current assets
Investments in subsidiaries
Intangible assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Loss for the year
Share based payments
Retained earnings
Total equity
Company number 2891064.
Company
2021
£000
6,551
58
6,609
7,403
158
7,561
2020
£000
6,551
28
6,579
5,286
192
5,478
14,170
12,057
3,503
3,503
704
704
10,667
11,353
10,795
11,039
(728)
2
(10,441)
10,667
10,794
11,000
(5,440)
-
(5,001)
11,353
Note
16
17
22
23
28
29
32
32
32
The notes on pages 58 to 85 form part of these financial statements. These financial statements have been approved
by the Board on 2 August 2021 and signed on its behalf by
Richard Gibbs
Chief Executive Officer
2 August 2021
Filtronic plc Annual Report and Accounts 2021 Company cash flow statement
for the year ended 31 May 2021
Cash flows from operating activities
Loss for the year
Finance costs
Operating loss
Amortisation of intangibles
Impairment of investments in subsidiaries
Share-based payments
Movement in trade and other receivables
Movement in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Acquisition of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from exercise of share options
Payment of lease liabilities
Interest paid
Net cash generated from financing activities
Movement in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 58 to 85 form part of these financial statements.
57
Company
2021
£000
2020
£000
(728)
(5,440)
1
60
(727)
(5,380)
19
-
2
(2,117)
2,812
(11)
(49)
(49)
40
(13)
(1)
26
(34)
192
158
12
4,013
-
862
289
(204)
(21)
(21)
290
(9)
(60)
221
(4)
196
192
Financialswww.filtronic.com Stock Code: FTC 58
Notes to the financial statements
for the year ended 31 May 2021
1
Accounting policies
Reporting entity
Filtronic plc is a public company limited by shares registered in England and Wales, domiciled in the United
Kingdom, and listed on AIM on the London Stock Exchange. The principal activity of the Company is design,
development and manufacture of high performance Radio Frequency (“RF”) technology.
Basis of preparation
The consolidated financial statements for the year ended 31 May 2021 have been prepared in accordance with
international accounting standards in conformity with the requirements of the Companies Act.
In accordance with corporate governance requirements and the statement of directors’ responsibilities, and
as disclosed in the Directors’ Report, 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.
At 31 May 2021, the Group had cash at bank of £2.9m and access to undrawn invoice discounting facilities of
£3.0m and $4.0m in the UK and US respectively. Details of these facilities can be found in note 38.
As referred to in the Strategic report, the business continuity plans implemented during the Covid-19 pandemic
have limited the adverse impact experienced by many other businesses. The Board recognises the uncertain
macroeconomic environment that the world faces and has reviewed the business outlook to reflect this uncertainty.
Cash flow forecasts have been prepared to model various scenarios over a three-year period based on the Group’s
financial and trading position, principal risks and uncertainties and strategic plans. A downside scenario was
modelled where programme curtailment may adversely affect forward-looking demand to levels lower than those
initially modelled in the base case scenario.
The scenarios modelled above demonstrate the Group has adequate cash and borrowing capacity for the next
twelve months. Therefore the directors continue to adopt the going concern basis to prepare the accounts.
The financial statements have been prepared under the historical cost convention except for forward foreign
exchange contracts that are accounted for on a fair value basis.
The accounting policies have been applied consistently throughout the Group.
Basis of consolidation and foreign currency translation
The financial statements consolidate the income statements, balance sheets and cash flow statements of the
Company and all of its subsidiaries.
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies.
Subsidiaries are consolidated from the date on which control is transferred to the Group, and are not consolidated
from the date that control ceases. Intragroup transactions and balances are eliminated on consolidation.
In publishing the Parent Company financial statements here together with the Group financial statements, the
Company has taken advantage of the exemptions in s408 of the Companies Act 2006 not to present its individual
income statement and related notes that form part of these approved financial statements.
On consolidation, the financial statements of subsidiaries with a functional currency other than sterling are
translated into sterling as follows:
• The assets and liabilities in their balance sheets plus any goodwill are translated at the rate of exchange ruling at
the balance sheet date; and
• The income statements and cash flow statements are translated at the average rate of exchange each month in
the period, which approximates the rate of exchange ruling at the date of the transactions.
Currency translation movements arising on the translation of the net investments in foreign subsidiaries are
recognised in the translation reserve, which is a separate component of equity.
The functional currency of each Group company is the currency of the primary economic environment in which
the Group company operates. The financial statements are presented in sterling which is the functional and
presentational currency of the Company.
Transactions denominated in foreign currencies are translated into the functional currency of each Group company
at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the rate of exchange ruling at the balance sheet date.
Foreign exchange gains and losses arising on the settlement of such transactions and translation of monetary assets
and liabilities are recognised in the income statement.
Filtronic plc Annual Report and Accounts 2021 59
1
Accounting policies (continued)
Discontinued operations
A discontinued operation is a component of the Group’s business, of which the operation and cash flows can be
clearly distinguished from the rest of the Group and which:
• Represents a separate major line of business; and
• Is part of a single co-ordinated plan to dispose of a separate major line of business.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria
to be classified as held-for-sale under IFRS 5. When an operation is classified as a discontinued operation, the
comparative income statement and other comprehensive income is re-presented as if the operation had been
discontinued from the start of the comparative year.
Revenue
IFRS 15 establishes principles for determining when and how revenue arising from contracts with customers should
be recognised. Filtronic recognises revenue when it transfers goods or services to a customer with an amount of
consideration expected to be received in exchange for fulfilling the performance obligation with the customer.
The Group reviews all income streams against the requirements of IFRS 15. Management undertakes an assessment
of all contracts and revenue streams across the business using the five-step approach specified by IFRS 15:
1) Identify the contract(s) with the customer;
2) Identify the performance obligations in the contract;
3) Determine the transaction price;
4) Allocate the transaction price to the performance obligations in the contract; and
5) Recognise revenue when (or as) a performance obligation is satisfied.
In determining the appropriate method of recognising revenue, management is required to make judgements
as to whether performance obligations are satisfied over a period of time or at a point in time. For performance
obligations that are satisfied over a period of time, judgements are made as to whether the output method or
the input method is more appropriate to measure progress towards complete satisfaction of the performance
obligation. If performance obligations are not satisfied over time, the Group recognises revenue at a point in time.
Revenue is measured at the fair value of consideration received or receivable for goods and services provided
or performed in the normal course of business net of value added tax or sales tax. The nature of our revenue is
disclosed below:
Revenue relating to finished goods product
Sales of finished goods product to customers are recognised when control of the product has transferred to the
customer and the performance obligation has been satisfied at a point in time. This is usually when title passes,
either on shipment or on receipt of goods depending on the delivery terms of the customer contract. The transaction
price is specified in the customer contract.
Revenue relating to consignment inventory
A customer was supported by holding inventory in a third-party location near to the customer’s production facility.
This arrangement ceased during the financial year as we leveraged our position as a domestic USA supplier.
Revenue was recognised when the goods were collected by the customer and a consumption advice was provided.
Revenue relating to non-recurring engineering (“NRE”)
NRE comprises contracts to provide engineering services, such as the design and development of a product,
funded by the customer. The transaction price of the contract is known from inception of the contract. Each contract
is reviewed to identify the number of distinct performance obligations and the transaction price is assigned
accordingly, usually by the value of work performed on an output method basis; outputs are typically milestones
within the development such as design reviews, reports and prototype products. Based on the performance of the
obligations in the contract being met, revenue is recognised over time. If relevant, an expected loss on a contract is
recognised immediately in the income statement.
Share-based payments
The Group operates equity settled share option schemes, under which share options are granted to certain
employees. The fair value of the share options at the date of grant was calculated using an option pricing model,
taking into account the terms and conditions applicable to the option grant. The fair value of the number of share
options expected to vest was expensed in the income statement on a straight-line basis over the expected vesting
period. At each reporting period, these vesting expectations were revised as appropriate. A credit is made to equity
equal to the share-based payment charge in the period.
Financialswww.filtronic.com Stock Code: FTC 60
Notes to the financial statements continued
for the year ended 31 May 2021
1
Accounting policies (continued)
Exceptional items
Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to
enable a full understanding of the financial results.
Investments in subsidiaries
Investments in subsidiaries are stated in the Company’s financial statements at cost less any accumulated
impairment losses. Investments in subsidiaries are tested for impairment when there is an indication of impairment.
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets is measured at cost less
accumulated impairment losses. Goodwill, which is allocated to cash-generating units, is tested for impairment
at least annually and when there is an indication of impairment. The goodwill carrying value is written down to its
recoverable amount. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
Internally-generated intangible assets
All research costs are expensed as incurred.
Development costs chargeable to the customer are recognised as an expense in the same period as the associated
customer revenue.
Development costs incurred on projects requiring product qualification tests to satisfy customer specifications
are generally expensed as incurred, reflecting the technical risks associated with meeting the resultant product
qualification test.
Development costs incurred on projects are capitalised where:
1) The technical feasibility can be tested against relevant milestones,
2) The probable revenue stream foreseen over the life of the resulting product can support the development, and
3) Sufficient resources are available to complete the development.
These capitalised costs are amortised on a straight-line basis over the expected life of the associated product.
Once a new product is in volume production, further development costs are expensed as they arise as they are
incurred in response to continual customer demand to enhance the product functionality or to reduce product cost.
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation is calculated over the cost of the asset less its residual value.
Amortisation is recognised in the income statement on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects
the expected pattern of consumption of the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
• Software licence
4 to 5 years
Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if
appropriate.
Impairment charges
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite
useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. For the purposes of impairment testing, assets that cannot be tested individually are grouped together
into the smallest group of assets that generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”). For the purpose of
goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which
impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes.
Filtronic plc Annual Report and Accounts 2021 61
1
Accounting policies (continued)
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of
CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce
the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect
of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Right of use assets and lease liabilities
The Group assesses whether a contract is a lease at inception of the contract. The Group recognises a right of use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for
short-term leases and leases of low value assets which includes the Group’s leased office equipment such as
printers. For these leases, the Group recognises the lease payment as an operating expense on a straight-line basis
over the term of the lease.
The lease is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or the incremental borrowing rate. This is the rate when
it is not possible to determine the interest rate in the lease and represents what we would have to pay for a loan of
a similar item and term of repayment. The lease liability is subsequently increased by the interest cost on the lease
and decreased by payments made. In the event of a change in future lease payments, the lease liability will be
remeasured and the difference recognised in the right of use asset.
The Group remeasures the lease liability and makes a corresponding adjustment to the right of use asset whenever
there has been a lease payment change, the lease contract is modified or any other significant event.
The right of use asset is initially measured at cost and subsequently at cost less accumulated depreciation and
impairment losses. The right of use asset is depreciated over the shorter of the period of the lease term and useful
life of the underlying asset. Where there is reasonable certainty the Group will purchase the asset at the end of the
lease, the asset is depreciated over the useful life. The depreciation starts at the commencement date of the lease.
Where property leases contain a break option the value of the lease liability and right of use asset recognised on
the balance sheet requires judgement to determine the lease term. The Group recognises the full term of the lease,
ignoring the break option, as invariably the option will not be exercised.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and less any accumulated
impairment losses.
Depreciation is provided on a straight-line basis over the estimated useful lives of the assets as follows:
• Fixtures and fittings
• Plant and equipment
• Computer hardware
2 to 10 years
3 to 10 years
2 to 4 years
Property, plant and equipment are tested for impairment when there is an indication of impairment. If impaired, the
carrying values of the assets are written down to their recoverable amounts.
The gain or loss arising on disposal or scrappage of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in income.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises the weighted average cost of
materials and components. Net realisable value is the estimated selling price less estimated costs of completion and
sale.
Trade and other receivables
Trade and other receivables are amounts due from customers for goods and services performed in the ordinary
course of business. They are initially recorded at the transaction price and thereafter measured at amortised cost
using the effective interest method, less an allowance for expected credit losses.
Cash and cash equivalents
For the purpose of the cash flow statement and statement of financial position, cash and cash equivalents comprise
cash at bank and short-term bank deposits with an original maturity of three months or less.
Financialswww.filtronic.com Stock Code: FTC 62
Notes to the financial statements continued
for the year ended 31 May 2021
1
Accounting policies (continued)
Defined contribution pension schemes
Defined contribution pension schemes are operated for employees. Contributions are recognised as an expense in
the income statement as incurred.
Financial liabilities
Financial liabilities comprise interest bearing borrowings and are initially recognised at fair value and subsequently
measured at amortised cost with any net gains or losses, including any interest expense, recognised in profit or loss.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the Consolidated Statement of Financial Position and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the statement of financial position liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the
initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised based on tax laws and rates that have been enacted or substantively enacted at the statement
of financial position date. Deferred tax is charged or credited in the income statement, except when it relates to
items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other
comprehensive income. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Grants
Capital-based grants, when present, are included within deferred income in the balance sheet and credited to the
profit and loss account over the estimated useful economic lives of the assets to which they relate.
Grants that compensate the Group for expenses incurred are recognised in the profit or loss account as other
operating income on a systematic basis in the same periods in which the expenses are recognised.
Warranty provision
A provision is recognised in the balance sheet when there is a present legal or constructive obligation as a result of
a past event, and it is probable that an outflow of resources will be required to settle the obligation and the amount
can be reliably estimated. A warranty provision is recognised when products are sold based on historical warranty
data. The level of warranty provision required is reviewed on a product-by-product basis and adjusted accordingly
in light of actual experience.
Dilapidations and onerous leases
A provision for dilapidations and onerous leases is recognised in the balance sheet on a lease-by-lease basis and is
based on the Group’s best estimates of the required cost to settle the relevant obligations.
Share capital
Ordinary shares issued are classified as share capital in equity.
Dividends
Interim dividends are recognised in equity in the period they are paid. Final dividends are recognised in equity in the
period they are approved by shareholders.
Forward currency contracts
Forward currency contracts are held at fair value. The gain or loss on re-measurement to fair value is recognised
immediately in the consolidated income statement.
Filtronic plc Annual Report and Accounts 2021 63
1
Accounting policies (continued)
Accounting developments and new standards
At the date of authorisation of these financial statements, new and revised standards issued but not yet effective
are set out below. It is anticipated the adoption of these standards and interpretations in future periods will have no
material impact on the financial statements of the Group. These have not been adopted in the Group’s accounting
policies.
New standards effective from 1 June 2020:
• Amendments to IAS 1 and IAS 8 Definition of Material;
• Amendments to IFRS 3 Definition of a Business;
• Amendments to IFRS 17, IFRS 9 and IAS 39 Interest Rate Benchmark Reform Revised Conceptual Framework for
Financial Reporting;
• UK IFRS departure from EU IFRS on Brexit; and
• Amendment to IFRS 16 Covid-19 - related rent concessions.
There are no new standards that have become effective in the year that affect the Group.
Financialswww.filtronic.com Stock Code: FTC 64
Notes to the financial statements continued
for the year ended 31 May 2021
2
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. They are based on historical experience and
other factors, including expectations and best estimates of the future, that are believed to be reasonable under the
circumstances. Actual results may differ from the expected results.
The estimates and judgements that have a significant effect on the financial statements are considered below.
Investments in subsidiaries
Investments in subsidiaries are tested for impairment by reference to the expected cash generated by the business
unit to which the investment relates. This is deemed to be the best approximation of value, but is subject to the same
uncertainties as the cash flow forecast being used.
The sensitivity analysis in respect of the recoverable amount is presented in note 16.
Goodwill and other intangibles—impairment
Goodwill and other intangibles are tested for impairment by reference to the expected cash generated by the cash
generating unit (“CGU”) or group of CGUs. This is deemed to be the best approximation of value, but is subject to
the same uncertainties as the cash flow forecast being used. The forecasts comprise forecasts of revenue, material
costs and overhead costs based on current and anticipated market conditions that have been considered and
approved by the Board. Whilst the Group is able to manage most of its costs, significant elements of the revenue
forecasts are inherently linked to global demand where uncertainty about both the timing and level of growth
remains which is a key sensitivity.
The sensitivity analysis in respect of the recoverable amount of goodwill is presented in note 17.
Capitalisation of development costs
Intangible assets include development cost assets which have been reviewed for impairment as at the reporting
date.
The recoverable amount of each technology development project has been determined based on value in use
calculations, using cash flow projections in line with the expected useful economic life of each asset. The value in use
calculations are based on management approved risk-adjusted cash flow forecasts for each project and have been
discounted using a discount rate of 12%.
The key assumptions used in the cash flow projections relate to revenue and gross profit margin for each technology
and are based on assumptions about expected customer demand which is inherently linked to the global demand
for the technology under development where the timing and level of demand is subject to uncertainty. The Group
has carried out a sensitivity analysis on the impairment tests of each of these projects, using various reasonably
possible scenarios and concluded there to be no impairment risk.
Deferred tax asset
The recognition of deferred tax assets relating to tax losses carried forward depends on forecasts of the future
taxable profits of the Company and its subsidiaries. The Group has assessed the recoverability of its deferred
tax assets by reference to Board approved budgets and cash flow forecasts. These forecasts require the use of
estimates and judgements about the future performance of the Company and its subsidiaries using the current
order book, forecasts and market knowledge.
Deferred tax assets have been recognised within a number of UK and USA trading subsidiaries so a change
to forecast customer demand in either of these subsidiaries would impact on the amount of deferred tax asset
recognised. A 10% forecast reduction in the profitability of these subsidiaries would see deferred tax asset
recognition reduce by an additional £107,000.
Filtronic plc Annual Report and Accounts 2021 65
3
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 87% of
revenue. This is split as follows:
• Customer A - 35% (2020: 27%)
• Customer B - 33% (2020: 44%)
• Customer C - 19% (2020: 16%)
Geographical information
In presenting information on the basis of geographical segments, segment revenue is based on the geographical
location of customers and the nature of revenue recognised. Segment assets are based on the geographical
location of the assets.
Continuing
operations
2021
£000
4,693
4,178
4,197
2,488
2020
£000
4,764
7,985
3,945
487
15,556
17,181
Revenue by destination
United Kingdom
Europe
Americas
Rest of the world
Split of non-current assets by location
United Kingdom
Americas
Discontinued
operations
2021
£000
2020
£000
-
-
65
991
-
-
-
-
-
Total
2021
£000
4,693
4,178
4,197
2,488
2020
£000
4,764
7,985
4,010
1,478
1,056
15,556
18,237
2021
£000
5,293
923
6,216
2020
£000
6,329
1,195
7,524
Non-current assets relate to property, plant and equipment, right of use assets, goodwill and other intangible assets
and deferred tax.
Financialswww.filtronic.com Stock Code: FTC 66
Notes to the financial statements continued
for the year ended 31 May 2021
4
Operating profit/(loss) from continuing operations
Revenue from goods and services
Revenue from non-recurring engineering (“NRE”) projects
Revenue
Material cost of goods sold
Wages and salaries
Social security costs
Pension costs
Share-based payments
Furlough payments received
Exceptional redundancy and resignation costs
Staff costs
Impairment of development costs
Amortisation
Depreciation
Depreciation, amortisation and impairment
Other operating income
Non-salary related exceptional items
Other expenses
Total operating costs
Operating profit/(loss)
2021
£000
2020
£000
14,375
16,954
1,181
227
15,556
17,181
5,462
5,576
543
280
2
(83)
-
8,079
5,325
518
276
-
-
417
6,318
6,536
45
209
941
1,195
(345)
(64)
2,348
9,452
642
89
18
677
784
(5)
152
1,823
9,290
(188)
Development costs of £52,000 were capitalised in the year (2020: £678,000).
5
Exceptional items
Exceptional items are costs that are separately disclosed due to their material and non-recurring nature in order to
reflect management’s view of the underlying business.
Operating costs are stated after (crediting)/charging exceptional items as follows:
Costs relating to the FTAO business disposal
Restructuring costs
Directors’ resignation
Historic claim
2021
£000
2020
£000
-
-
-
(64)
(64)
145
184
240
-
569
A provision relating to an historic claim is no longer required which has been credited to the income statement.
Filtronic plc Annual Report and Accounts 2021
6
Operating items
Operating profit/(loss) is stated after charging/(crediting):
Depreciation
Research and development costs in the income statement excluding amortisation
Amortisation of development costs (R&D)
Amortisation of other intangible assets
Foreign exchange losses/(gains)
67
2021
£000
2020
£000
941
1,663
182
27
205
677
1,152
-
18
(235)
7
Auditor’s remuneration
The Company’s auditor is PricewaterhouseCoopers LLP. The auditor’s remuneration was as follows:
Company auditor:
Audit of the Group and Company financial statements
Company auditor and their associates:
Audit of subsidiaries’ financial statements pursuant to legislation
Additional fees relating to prior year audit
Other services relating to taxation
2021
£000
2020
£000
28
75
15
1
119
25
49
-
17
91
8
Employees
The average number of employees comprised:
Manufacturing
Research and development
Sales
Administration
Continuing
operations
Discontinued
operations
Group
2021
Number
2020
Number
2021
Number
2020
Number
2021
Number
2020
Number
86
24
5
15
99
21
5
16
130
141
-
-
-
-
-
9
14
1
2
26
86
24
5
15
108
35
6
18
130
167
Financialswww.filtronic.com Stock Code: FTC 68
Notes to the financial statements continued
for the year ended 31 May 2021
9
Compensation of directors
Details of the remuneration, pension entitlements and share options of the individual directors are set out in the
Directors’ remuneration report on pages 40 to 42. The compensation of the directors was:
Salary or fees
Bonus
Benefits
Long term incentives
Total remuneration excluding pension contributions
Pension contributions
2021
£000
429
94
23
7
553
11
564
2020
£000
561
199
23
19
802
13
815
The Directors’ remuneration is paid through the Company.
The schedule 5 disclosure requirements are included in the Directors’ remuneration report in the table entitled ‘Total
single figure of remuneration for directors - audited’ and the table entitled ‘Total single figure of pension benefits for
directors - audited’. The elements that are audited are identified as such in that report.
10
Related party transactions
Identity of related parties
The Group has a related party relationship with its subsidiaries and with its directors.
Transactions with subsidiaries
The main transactions between the Company and its subsidiaries are management administration recharges to its
subsidiaries of £935,000 (2020: £432,000) and a royalty charge of 1% of filters product sales to Filtronic Wireless
Limited of £30,000 (2020: £40,000). These intercompany transactions are eliminated on consolidation.
The Company also acts as a central service to distribute money around the Group to ensure subsidiaries are
adequately funded to meet obligations and to invest funds from subsidiaries where surplus cash exists. The total
figures for these transactions along with the management and royalty charge can be seen in notes 22 and 23
through the movement in the Company’s intercompany receivables and payables.
Transactions with key management personnel
Key management personnel are considered to be the Executive Directors of the Company. The remuneration given
to these individuals is disclosed in the Directors’ remuneration report.
11
Finance costs
Interest expense on loans for plant and equipment
Interest expense for lease arrangements
Minimum service costs and interest charges on invoice discounting facilities
Revaluation of foreign currency denominated intercompany balance
2021
£000
6
136
82
207
431
2020
£000
18
118
125
16
277
Filtronic plc Annual Report and Accounts 2021 12
Finance income
Revaluation of foreign currency denominated intercompany balance
13
Taxation
Recognised in the income statement
Current tax charge/(credit)
Overseas taxation in the period
Adjustment in respect of prior year — R&D tax credit
R&D tax credit
Total current tax credit
Deferred tax charge
Origination and reversal of temporary differences
Total deferred tax charge
Income tax charge
Income tax charge is attributable to:
Continuing operations
Discontinued operations
The reconciliation of the effective tax rate is as follows:
Profit/(loss) before tax from continuing operations
Loss before tax from discontinued operations
Profit/(loss) before taxation
Profit/(loss) before taxation multiplied by standard rate of corporation tax
in the UK (19%)
Disallowable items
Deferred tax asset not recognised
Enhanced R&D tax credit
Adjustment in respect of prior year R&D tax credit
Foreign tax not at UK rate
Derecognition of deferred tax asset
Taxation
69
2020
£000
36
36
2020
£000
25
240
(310)
(45)
145
145
100
2020
£000
89
11
100
2020
£000
(429)
(2,097)
(2,526)
(480)
286
598
(630)
240
25
61
100
2021
£000
-
-
2021
£000
(15)
(371)
-
(386)
537
537
151
2021
£000
151
-
151
2021
£000
211
-
211
40
213
213
(176)
(371)
(15)
247
151
The main rate of UK corporation tax for the financial year was 19% whilst the US federal corporate tax rate is 21%.
The deferred tax assets recognised in the year have been calculated at the rates expected to be in existence in the
period of reversal.
On 3 March 2021, in the Budget, the UK Government announced that the corporation tax rate will increase to
25% for companies with profits above £250,000 with effect from 1 April 2023, as well as announcing several other
changes to allowances and treatment of losses. These changes were enacted on 24 May 2021.
Financialswww.filtronic.com Stock Code: FTC 70
Notes to the financial statements continued
for the year ended 31 May 2021
14
Discontinued operations
The Group sold the Filtronic Telecoms Antenna Operation (“FTAO”) for an initial consideration of $5.5m (£4.1m) to
Microdata Telecom Innovation Stockholm AB on 2 January 2020. This may rise based on contingent consideration
arising on an equal share of the gross profit that outperforms the mutually agreed gross profit targets of $3.0m in
the calendar year 2021. The directors have opted not to recognise a fair value for this consideration in the results
for the year. The gross profit target for 2020 was not met; the directors had not recognised a fair value for this
consideration.
Revenue
Material cost of goods sold
Wages and salaries
Social security costs
Pension costs
Staff costs
Exceptional items
Other expenses
Total operating costs
Operating loss
Finance costs
Loss before taxation
Taxation
Loss for the year from operating activities
Gain on sale of discontinued operations
Loss for the year from discontinued operations
Details of the gain on sale of discontinued operations
Consideration received
Carrying amount of net assets sold
Costs directly associated with the sale of FTAO
Currency translation adjustment
Gain on sale of discontinued operations
Cash flows generated from/(used in) discontinued operations
Net cash used in operating activities
Net cash generated from investing activities
Net cash used in financing activities
Net cash flows for the year
2021
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2020
£000
1,056
903
936
169
141
1,246
724
277
2,247
(2,094)
(3)
(2,097)
(11)
(2,108)
671
(1,437)
2021
£000
2020
£000
-
-
-
-
-
4,146
(2,864)
(494)
(117)
671
2021
£000
2020
£000
-
-
-
-
(1,937)
3,652
(3)
1,712
Filtronic plc Annual Report and Accounts 2021 71
15
Earnings/(loss) per share
Profit/(loss) for the year
Continuing
operations
2021
£000
60
2020
£000
(518)
Discontinued
operations
2021
£000
2020
£000
Total
Group
2021
£000
2020
£000
-
(1,437)
60
(1,955)
‘000
‘000
‘000
‘000
‘000
‘000
Basic weighted average number of shares
213,397
211,021
213,397
211,021
213,397
211,021
Dilution effect of share options
897
-
897
-
897
-
Diluted weighted average number of shares
214,294
211,021
214,294
211,021
214,294
211,021
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
0.03p
0.03p
(0.25p)
(0.25p)
-
-
(0.68p)
(0.68p)
0.03p
0.03p
(0.93p)
(0.93p)
16
Investments in subsidiaries
Cost
At 1 June 2019, 31 May 2020 and 31 May 2021
Impairment
At 1 June 2019
Impairment in the year
At 31 May 2020 and 31 May 2021
Carrying amount at 31 May 2020 and 31 May 2021
Company
investments in
subsidiaries
£000
21,110
(10,546)
(4,013)
(14,559)
6,551
Value in use was determined by discounting the future cash flows generated from the continuing use of the cash
generating unit (“CGU”) to which the investment relates. The calculation of the value in use was based on the
following key assumptions:
• Budgets incorporating post-tax cash flows have been prepared to 31 May 2022 based on past experience,
actual operating results, known future cash flows and estimates of future cash flows;
• Cash flows for a further four years have been prepared based on the long range plan, of the investment together
with cost inflation and additional overhead assumptions. A perpetuity factor has been applied based on the year
to 31 May 2026. A long-term growth factor of nil was applied to the perpetuity cash flows; and
• The Group’s discount rate of 12% (2020:12%) was applied in determining the recoverable amount of the
investment being the estimated weighted average cost of capital for the CGU.
The investments in subsidiaries are assessed annually to determine if there is any indication that any of the
investments might be impaired. The calculation used to determine the carrying value of the investment is based on
the model and assumptions referenced above. There is substantial headroom within the calculation that a material
change of any of the key estimates and judgements in the model would not impact a change in the carrying value.
Financialswww.filtronic.com Stock Code: FTC 72
Notes to the financial statements continued
for the year ended 31 May 2021
16
Investments in subsidiaries (continued)
The Company’s subsidiaries are related parties.
The subsidiaries at 31 May 2021, which were owned by Filtronic plc, were as follows:
Name of subsidiary
Country of
incorporation
Description of
equity held
Proportion
held
Activity
Filtronic Broadband Limited1
UK
1p ordinary shares
100%
Filtronic Holdings UK Limited1
Isotek (Holdings) Limited1
UK
UK
£1 ordinary shares
1p ordinary shares
100%
100%
Owned by Isotek (Holdings) Limited:
Filtronic Wireless Limited1
UK
1p ordinary shares
100%
Filtronic Wireless Inc.2
USA
US$1 ordinary shares
100%
Isotek Limited1*
UK
1p ordinary shares
100%
Design and manufacture
of microwave products for
telecommunication systems
Holding Company
Holding Company
Design and manufacture of
filters and related products for
telecommunication systems
Design and manufacture of
filters and related products for
telecommunication systems
Dormant Company
Owned by Filtronic Wireless Limited:
Isotek Hong Kong Holdings
Limited3
Hong Kong
HK$1 ordinary shares
100%
Holding Company
Owned by Isotek Hong Kong Holdings Limited:
Isotek Telecommunications
Suzhou Limited4
China
US$350,000
paid in share capital
100%
Design and manufacture
of filters and related products
for telecommunication systems
1 Filtronic House, 3 Airport West, Lancaster Way, Yeadon, Leeds, West Yorkshire, LS19 7ZA, UK
2 700 Marvel Road, Salisbury, Maryland, 21801, USA
3 RM 1501, C1 Grand Millennium Plaza (lower block), 181 Queen’s Road Central, Hong Kong
4 Suzhou Industrial Park, 199 Sinegang Street, Oriental Gate Building 2, Room 2201, Seat A172
* Isotek Limited was dissolved on 20 July 2021.
Filtronic plc Annual Report and Accounts 2021
73
17
Goodwill and other intangible assets
Goodwill
£000
Other intangibles
(core technology)
£000
Group
Software
costs
£000
Development
costs
£000
Company
Software
costs
£000
Total
£000
Cost
At 1 June 2019
Additions
Exchange differences
At 31 May 2020
Additions
Disposals
Exchange differences
At 31 May 2021
Amortisation
At 1 June 2019
Provided in the year
Impairment of intangible assets
Exchange differences
At 31 May 2020
Provided in the year
Disposals
Impairment of intangible assets
Exchange differences
At 31 May 2021
974
-
-
974
-
-
-
10,884
-
-
10,884
-
-
-
974
10,884
-
-
-
-
-
-
-
-
-
-
10,884
-
-
-
10,884
-
-
-
-
10,884
-
-
542
27
4
573
69
(305)
(14)
323
517
18
-
2
537
27
(305)
-
(16)
243
36
80
350
678
-
12,750
705
4
1,028
13,459
52
(65)
-
121
(370)
(14)
1,015
13,196
102
11,503
-
89
-
191
182
(65)
45
-
353
837
662
18
89
2
11,612
209
(370)
45
(16)
11,480
1,847
1,716
76
21
-
97
49
(19)
-
127
57
12
-
-
69
19
(19)
-
-
69
28
58
Carrying amount at 31 May 2020
Carrying amount at 31 May 2021
974
974
Goodwill and other intangibles relate to the acquisition of Isotek (Holdings) Limited. Goodwill is allocated to
the CGUs that were expected to benefit from the synergies of the combination and which represents the lowest
level within the Group at which the goodwill is monitored for internal management purposes. The Group tests
goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.
The carrying value of intangible assets and goodwill has been assessed for impairment by reference to its value
in use. Value in use was determined by discounting the future cash flows generated from the continuing use of the
CGUs. The calculation of the value in use was based on the following key assumptions:
• Budgets incorporating post-tax cash flows have been prepared to 31 May 2022 based on past experience,
actual operating results, known future cash flows and estimates of future cash flows;
• Cash flows for a further four years have been prepared based on the Company’s long range plan together with
cost inflation and additional overhead assumptions. A perpetuity factor has been applied based on the year to
31 May 2026. A long-term growth factor of nil was applied to the perpetuity cash flows; and
• The Group’s discount rate of 12% (2020:12%) was applied in determining the recoverable amount of the unit,
being the estimated weighted average cost of capital for the CGUs.
An impairment was made to a product development in the year of £45,000. Based on the testing above the
directors do not consider any of the remaining goodwill or intangible assets to be impaired, even allowing for a
reasonable degree of sensitivity to the underlying assumptions, including the discount rate.
Financialswww.filtronic.com Stock Code: FTC 74
Notes to the financial statements continued
for the year ended 31 May 2021
18
Right of use assets
Cost
Opening balance recognised on adoption of IFRS 16
Additions
Exchange differences
At 31 May 2020
Additions
Disposals
Exchange differences
At 31 May 2021
Depreciation
Provided in the year
At 31 May 2020
Provided in the year
Disposals
Exchange differences
At 31 May 2021
Carrying amount at 31 May 2020
Carrying amount at 31 May 2021
Property
leases
£000
Plant and
equipment
£000
1,327
-
6
1,333
330
-
(37)
1,626
226
226
285
-
(16)
495
1,107
1,131
-
1,727
-
1,727
233
(533)
(5)
1,422
149
149
393
(256)
(1)
285
1,578
1,137
Total
£000
1,327
1,727
6
3,060
563
(533)
(42)
3,048
375
375
678
(256)
(17)
780
2,685
2,268
The Group’s lease commitments are made up of property leases and plant and equipment. Plant and equipment
classified as a right of use asset is financed under asset finance agreements which usually require the Group to
make a deposit against the machinery of 20%.
The Group leases office premises at its sites in Sedgefield and Yeadon in the UK, Salisbury, Maryland in the USA
and a virtual office space in Suzhou, China. Leases remaining are between one and eight years.
Filtronic plc Annual Report and Accounts 2021
75
Company
Plant and
equipment
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Group
Fixtures
and fittings
£000
Plant and
equipment
£000
Computer
hardware
£000
191
27
-
2
220
98
(22)
(4)
292
129
20
-
-
149
25
(21)
(3)
150
71
142
6,101
357
(17)
17
6,458
79
(2,716)
(55)
3,766
5,230
258
(17)
7
5,478
218
(2,704)
(46)
2,946
980
820
304
-
(34)
-
270
-
(99)
(1)
170
207
24
(34)
-
197
20
(99)
-
118
73
52
Total
£000
6,596
384
(51)
19
6,948
177
(2,837)
(60)
4,228
5,566
302
(51)
7
5,824
263
(2,824)
(49)
3,214
1,124
1,014
Group
2021
£000
2020
£000
1,868
1,982
74
(290)
(322)
(112)
1,218
61
(206)
-
31
1,868
19
Property, plant and equipment
Cost
At 1 June 2019
Additions
Disposals
Exchange differences
At 31 May 2020
Additions
Disposals
Exchange differences
At 31 May 2021
Depreciation
At 1 June 2019
Depreciation
Disposals
Exchange differences
At 31 May 2020
Depreciation
Disposals
Exchange differences
At 31 May 2021
Carrying amount at 31 May 2020
Carrying amount at 31 May 2021
20
Deferred tax
Deferred tax assets
Opening balance
Tax losses recognised
Utilisation of tax losses
Derecognition of capital allowances
Exchange differences
Deferred tax assets within the UK and the USA have been recognised as the directors consider that future taxable
profits will be available against which they can be used. Future taxable profits are determined based on business
plans for individual subsidiaries in the Group and the reversal of temporary differences.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realised; such deductions are reversed when the probability of future taxable
profits improves.
Financialswww.filtronic.com Stock Code: FTC
76
Notes to the financial statements continued
for the year ended 31 May 2021
20
Deferred tax (continued)
Deferred tax assets which have not been recognised:
Depreciation in advance of capital allowances
Tax losses carried forward
Share options deferment
Group
Company
2021
£000
2020
£000
1,732
1,077
2021
£000
455
2020
£000
455
11,724
11,336
9,772
9,638
80
80
80
80
13,536
12,493
10,307
10,173
The deferred tax assets have not been recognised where the directors consider that it is unlikely that future taxable
profits will be available against which they can be used. There is no expiry date for these unrecognised deferred tax
assets which are reassessed at each reporting date.
21
Inventories
Raw materials
Work in progress
Finished goods
Inventory provision
Inventories are stated net of provision
Group
Company
2021
£000
3,126
480
133
3,739
2020
£000
2,851
1,038
513
4,402
(1,549)
(1,457)
2,190
2,945
2021
£000
2020
£000
-
-
-
-
-
-
-
-
-
-
-
-
Raw materials, consumables and changes in finished goods and work in progress recognised in cost of sales in the
year amounted to £5,129,000 (2020: £8,982,000).
The amount charged to the income statement in the year in respect of write-downs of inventories is £162,000
(2020: £358,000). The amount credited to the income statement in the year in respect of reversals of write-downs of
inventories is £56,000 (2020: £nil).
22
Trade and other receivables
Trade receivables
Group receivables
Other receivables and prepayments
Group
Company
2021
£000
2020
£000
2,737
4,147
2021
£000
-
2020
£000
-
-
557
-
701
7,372
5,221
31
65
3,294
4,848
7,403
5,286
There are no provisions for bad debt. The Group receivables in the Company were reviewed in the year for expected
credit losses in accordance with IFRS 9.
Amounts owed to Group undertakings are unsecured, interest-free and payable on demand.
23
Trade and other payables
Trade payables
Group payables
Other payables and accruals
Group
Company
2021
£000
2020
£000
1,299
1,562
-
1,081
2,380
-
1,901
3,463
2021
£000
70
2,784
649
3,503
2020
£000
33
-
671
704
Amounts owed to Group undertakings are unsecured, interest-free and payable on demand.
Filtronic plc Annual Report and Accounts 2021 24
Provisions
Warranty provision
Opening balance
Used during the year
Released unused during the year
Charge for the year
Exchange differences
77
Group
2021
£000
1,053
(526)
(116)
11
(80)
342
2020
£000
2,205
(1,188)
(274)
301
9
1,053
Company
2021
£000
2020
£000
-
-
-
-
-
-
-
-
-
-
-
-
The provision for warranty relates to the units sold during the last two financial years. The provision is based on
estimates made from historical warranty data.
Dilapidation provision
Opening balance
Released unused during the year
Exchange differences
Group
2021
£000
2020
£000
Company
2021
£000
2020
£000
57
-
(2)
55
60
(5)
2
57
-
-
-
-
-
-
-
-
The Group leases physical facilities at three sites in the UK and USA with each of these leases requiring the site to
be restored to its original condition. The dilapidation provision reflects management’s best estimates and ability to
measure the likely costs that may be incurred restoring the building to its original state.
Total provision
Warranty provision
Dilapidation provision
25
Deferred income
Contract liabilities
Capital grant
Total current deferred income
Contract liabilities
Capital grant
Total non-current deferred income
Total deferred income
Group
2021
£000
342
55
397
2020
£000
1,053
57
1,110
Company
2021
£000
2020
£000
-
-
-
-
-
-
Group
2021
£000
146
38
184
73
55
128
312
2020
£000
437
131
568
-
-
-
568
Company
2021
£000
2020
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Contract liabilities are invoices raised in advance of NRE work completed for customers that will be recognised as
income once the performance obligation of the contract has been met. The majority of NRE contracts are invoiced
with a proportion of the contract value upfront which is recognised as revenue, over time, across the life of contract
at each milestone based on the percentage of the overall contract value achieved at that performance obligation.
A capital grant was secured in the prior year to assist with the purchase of plant and machinery to support the
production ramp of our 5G XHaul products. The grant is being amortised over a period of four years with a
remaining life of 2.5 years.
Financialswww.filtronic.com Stock Code: FTC 78
Notes to the financial statements continued
for the year ended 31 May 2021
26
Financial liabilities
This note provides information about the contractual terms of the Group’s interest-bearing bank loans and
borrowings which are measured at amortised cost.
Group
Company
Bank loans—current
Obligations under finance agreements—current
Total current financial liabilities
Bank loans—non-current
Total non-current financial liabilities
Total financial liabilities
Terms and debt repayment schedule - Group
Bank loan
Bank loan
Bank loan
Total bank loans
Finance agreements
2021
£000
2020
£000
2021
£000
2020
£000
55
8
63
76
76
139
65
112
177
144
144
321
-
-
-
-
-
-
-
-
-
-
-
-
Nominal
interest
rate
Carrying
amount
2021
£000
Carrying
amount
2020
£000
Date of
maturity
Currency
GBP
USD
USD
7.6%
1.0%
1.0%
31 August 2020
31 December 2022
10 February 2026
GBP
4.1%
31 May 2021
-
-
131
131
8
139
17
192
-
209
112
321
The finance agreement with a date of maturity of 31 May 2021 was settled on 1 June 2021.
The bank loan with a maturity date of 31 December 2022 for $237,000 (£192,000) was a US Government loan
as part of the Paycheck Protection Programme (“PPP”) to secure jobs in the USA during the Covid-19 pandemic.
The Company successfully applied to have the loan forgiven which was settled by the US Government in the year,
recognised in Other Operating Income.
The Group secured another loan of $186,000 (£131,000) from the US Government as part of PPP ‘Round 2’ to
provide further security for jobs in the USA during the Covid-19 pandemic, is included in the table above as a
bank loan. Companies are required to start repaying the loan after 6 months for a two year period at a low rate of
interest. The US Government have indicated they may forgive repayment and turn the loan into a grant if recipients
retain their employees the funds were secured for.
Debt reconciliation - Group
Balance at 1 June 2019
Acquisition of finance agreements
Interest paid
Repayment of borrowings
Balance at 1 June 2020
Proceeds from bank loans
Repayment of borrowings
Repayment of PPP bank loan
Balance at 31 May 2021
Other banking facilities
Bank
loans
£000
Finance
agreements
£000
117
192
(12)
(88)
209
131
(17)
(192)
131
232
-
(6)
(114)
112
-
(104)
-
8
Total
£000
349
192
(18)
(202)
321
131
(121)
(192)
139
At 31 May 2021, the Group had an undrawn (2020: undrawn) invoice discount facility with Barclays Bank of £3.0m
which enables it to borrow up to 70% of the debtor book in the UK. In addition to the facility with Barclays Bank, the
Group has a facility with Wells Fargo Bank of $4.0m enabling it to borrow up to 85% of the US debtor book which
was undrawn (2020: undrawn).
Filtronic plc Annual Report and Accounts 2021 27
Lease liabilities
Opening lease liability
New leases entered into during the year
Payments made during the year
Disposal of lease
Exchange differences
Lease liability payable in less than a year
Current lease liabilities
Lease liability payable in one to five years
Lease liability payable in more than five years
Non-current lease liabilities
Total lease liabilities
79
Group
2021
£000
2,529
457
(666)
(279)
(21)
2,020
2021
£000
542
542
1,070
408
1,478
2,020
2020
£000
1,327
1,572
(375)
-
5
2,529
2020
£000
662
662
1,578
289
1,867
2,529
The Group entered into a new lease arrangement in the year to expand its operational footprint in Sedgefield to
execute on the Group’s growth plans whilst facilitating social distancing requirements throughout the pandemic in
the short term.
The Group opted not to exercise an extension of a lease for plant and machinery, which was treated as a disposal,
having previously been recognised over its full life.
28
Share capital
At 1 June 2019
Exercise of share options
At 31 May 2020
Exercise of share options
At 31 May 2021
Group and Company
ordinary shares of 0.1p each
Number
‘000
208,129
5,569
213,698
717
214,415
£000
10,789
5
10,794
1
10,795
All shares are allotted, called up and fully paid. 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.
29
Share premium
At 1 June 2019
Exercise of share options
At 31 May 2020
Exercise of share options
At 31 May 2021
Group and
Company
£000
10,715
285
11,000
39
11,039
Financialswww.filtronic.com Stock Code: FTC
80
Notes to the financial statements continued
for the year ended 31 May 2021
30
Translation reserve
At 1 June 2019
Transfer to income related to business disposal
Currency translation movement arising on consolidation
At 31 May 2020
Currency translation movement arising on consolidation
At 31 May 2021
The translation reserve comprises foreign currency differences arising from the translation of the financial
statements of foreign operations.
31
Dividends
The directors are not proposing to pay a dividend for the year ended 31 May 2021 (2020: £nil).
Group
£000
(558)
117
(111)
(552)
(98)
(650)
32
Retained earnings
At 1 June 2019
Loss for the year
At 31 May 2020
Profit/(loss) for the year
Share-based payments
At 31 May 2021
33
Share options
Sharesave plans
Group
£000
(9,933)
(1,955)
Company
£000
(5,001)
(5,440)
(11,888)
(10,441)
60
2
(728)
2
(11,826)
(11,167)
Seven sharesave plans have been offered to employees over the years, at the date of this report. The first six of the
schemes offered to employees have now closed. Under these plans employees who join the plan can save up to
£500 per month for three years. The members of the plans are granted a number of share options based on the
amount they would save over the three years. At the end of the three years, the members have a six-month period in
which they can exercise the share options. The scheme has an exercise price calculated by reference to the average
of the middle market closing price of the shares on AIM for the dealing day immediately prior to the plan offer date.
Sharesave Plan—Scheme 6
Outstanding at the beginning of the year
Exercised during the year
Cancelled during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average
exercise price 2021
Number of
options 2021
Weighted average
exercise price 2020
Number of
options 2020
5.2p
5.2p
5.2p
5.2p
5.2p
5.2p
-
-
-
-
-
-
5.2p
5,827,465
5.2p
(4,419,469)
5.2p
5.2p
5.2p
5.2p
(470,954)
(937,042)
-
-
The sixth sharesave scheme offered to employees in June 2016 is now closed.
Filtronic plc Annual Report and Accounts 2021 81
33
Share options (continued)
Sharesave Plan—Scheme 7
A seventh sharesave scheme was offered to employees on 1 June 2021 with options granted of 2,117,319 at an
exercise price of 6.67p.
Management incentive plans
The options granted in the year have no specific performance targets attached to them. The exercise price for an
option was the middle market closing price of Filtronic plc’s ordinary shares as derived from AIM on the dealing day
prior to issue.
The following options under this scheme were outstanding at 31 May 2021:
Ordinary shares of 0.1p
Date granted
1,633,334
300,000
200,000
200,000
750,000
3,083,334
01/03/2016
11/04/2016
28/03/2018
11/02/2020
24/09/2020
Earliest date
exercisable
01/03/2017
11/04/2017
28/03/2019
11/02/2021
24/09/2023
Latest date
exercisable
28/02/2026
10/04/2026
27/03/2028
11/02/2030
24/09/2030
Exercise price
5.4p
8.5p
9.0p
9.3p
8.0p
The weighted average price of options of the outstanding options under this scheme at 31 May 2021 was 6.80p
(2020: 6.82p)
Number of share
options 2021
Number of share
options 2020
Outstanding at the beginning of the year
Granted during the year
Cancelled during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
3,839,584
750,000
(789,583)
(716,667)
3,083,334
2,133,334
5,483,584
200,000
(694,000)
(1,150,000)
3,839,584
3,503,584
Financialswww.filtronic.com Stock Code: FTC 82
Notes to the financial statements continued
for the year ended 31 May 2021
34
Share-based payments
Share options expense
Group and
Company
2021
£000
2020
£000
2
2
-
-
The share options expense is the fair value of the share options at the date of grant spread over the expected vesting
period of the share options. The fair value of the share options at the date of grant was measured using the Black–
Scholes model.
The inputs to the Black–Scholes model and the weighted average fair value of the share options granted during the
year were as follows:
Number of share options granted
Weighted average share price
Expected volatility
Expected life
Risk-free interest rate
Weighted average fair value
Group and
Company
2021
2020
750,000
200,000
8.00p
50%
9.25p
50%
3.0 years
3.0 years
0.8%
2.2p
0.1%
3.1p
Expected volatility is the estimate of the volatility of the share price over the expected life of the share options.
35
Pension costs
Defined contribution schemes
36
Capital expenditure commitments
Group
Company
2021
£000
280
2020
£000
417
2021
£000
41
2020
£000
32
Group
2021
£000
2020
£000
Company
2021
£000
2020
£000
Capital expenditure contracted for at the balance sheet date
but not provided in the financial statements
147
9
-
-
37
Analysis of net cash/(debt)
Cash and cash equivalents
Bank loans
Lease liability - plant and machinery
Net cash when including all debt except property leases
Lease liability - property lease
1 June
2020
£000
2,028
(209)
(1,381)
73
411
438
1,543
(1,148)
255
(710)
1,798
Cash
flow
£000
Other
changes
£000
31 May
2021
£000
1,059
(181)
2,906
(131)
(835)
1,940
(1,185)
755
5
135
(41)
(292)
(333)
Filtronic plc Annual Report and Accounts 2021 37
Analysis of net cash/(debt) (continued)
Reconciliation of cash flow to movement in net cash/(debt)
Movement in cash and cash equivalents
Movement in bank loans
Movement in lease liability - plant and machinery
Movement in lease liability - property lease
Exchange differences
Movement in net cash/(debt)
Opening net (debt)/cash
Closing net cash/(debt)
83
2021
£000
1,059
78
546
(39)
(181)
1,463
(710)
753
2020
£000
(582)
(92)
(1,381)
(1,148)
(15)
(3,218)
2,508
(710)
Cash at bank earns interest at floating rates based on daily bank deposit rates. There are no restrictions on the
availability of the cash and cash equivalents at 31 May 2021 (2020: £nil)
IFRS 16 requires the recognition of property leases on the balance sheet which is classified as a debt item.
38
Financial instruments
Fair value
The carrying amount of all the financial assets and liabilities approximates to their fair value as described below.
Cash and cash equivalents comprise bank balances and bank deposits with a maturity of three months or less.
Trade and other receivables are all receivable in less than one year. Trade receivables are generally receivable within
90 days.
The Group has access to a £3.0m sales invoicing facility with Barclays Bank and a $4.0m invoice factoring facility
with Wells Fargo Bank.
Trade and other payables are all payable in less than one year. Trade payables are generally payable within 90
days.
Liquidity risk
The Group has cash at bank of £2.9m whilst the Company has cash at bank of £0.2m.
Cash is held on bank deposit for varying periods from overnight to six months to ensure all liabilities can be met as
they fall due.
The Group has access to a £3.0m sales invoicing facility with Barclays Bank and a $4.0m invoice factoring facility
with Wells Fargo Bank.
The sales invoicing facility with Barclays Bank allows the Company to borrow 70% of the UK entities’ debtors
denominated in US dollars and sterling up to a value of £3.0m. The facility is due its next formal review in September
2021, although this can be reviewed at Barclays discretion at any time.
The sales invoice factoring facility with Wells Fargo Bank allows the Company to borrow 85% of the US entities’
debtors denominated in US dollars up to a value of $4.0m. The facility matures on 12 July 2022 when it will be due
for renewal.
The amount of cash available to the Group and the headroom available on debt facilities results in a low liquidity risk.
Credit risk
The exposure to credit risk is limited to the carrying amount of cash and cash equivalents and trade and other
receivables in the balance sheet.
The credit risk related to cash and cash equivalents is considered to be low due to the cash being held at banks with
high credit ratings such as Barclays and Wells Fargo.
Financialswww.filtronic.com Stock Code: FTC 84
Notes to the financial statements continued
for the year ended 31 May 2021
38
Financial instruments (continued)
Credit risk is primarily related to trade receivables. The Group’s businesses are concentrated on long-term
relationships with a small number of large and long-established OEMs. Overdue receivables are regularly
monitored and appropriate action is taken to collect payment. The Group has historically incurred only low levels of
unrecoverable receivables. Therefore credit risk is considered to be low.
Trade receivables included the following amounts for the Group’s largest customers:
Customer one
Customer two
Customer three
Other customers
The age of trade receivables that have not been provided for was as follows:
Not past due
Past due less than three months
Past due more than three months
Group
2021
£000
979
902
629
227
2020
£000
2,293
1,415
286
153
2,737
4,147
Group
2021
£000
2020
£000
2,709
3,699
28
-
424
24
2,737
4,147
No trade receivables have been provided for in either FY2021 or FY2020.
The Company has no trade receivables.
Interest rate risk
Cash is generally held on short-term bank deposits which earn interest at variable money market deposit rates. At
31 May 2021, there was £nil held on short-term deposit. The remaining cash in the Group is held in very low interest
rate accounts. Sterling interest rates are very low and therefore interest rate risk is considered to be low.
The interest rate sensitivity of the expected annual interest income/(expense) assuming a balance on deposit or
loan of £1,000,000 is as follows:
1.5%
1.0%
0.5%
Expected
annual
interest
income
£000
Expected
annual
interest
expense
£000
15
10
5
(15)
(10)
(5)
Filtronic plc Annual Report and Accounts 2021 85
38
Financial instruments (continued)
Foreign currency risk
The Group’s and Company’s reporting currency is sterling, which is also the Company’s functional currency. The
functional currencies of the subsidiaries are sterling, US dollar and Chinese yuan.
The Group’s results and financial position are affected by fluctuations in foreign currency exchange rates.
The Group has generated a surplus of US dollars during the year due to an increasing number of projects being
supplied in US dollars. Whilst the Group aims to maintain a natural hedge, it is not adequate to offset the exposure
on currency risk. Therefore, the Group has used forward foreign exchange contracts to reduce the currency risk
from surplus US dollars. The nature of the Group’s businesses means there is limited visibility of the currency
required in US dollars. Therefore, when forward contracts are used to reduce currency risk, they are usually only for
short periods of no more than six months. If the US dollar were to weaken significantly, this could materially reduce
the Group’s revenue and operating profit. There were no forward contracts in place at 31 May 2021 (2020: £nil).
Cash is mainly held in sterling and US dollars.
The Group’s exposure to foreign currency risk for cash and cash equivalents, trade receivables and trade payables
was as follows:
Cash and cash equivalents
Trade receivables
Trade payables
Net exposure
EUR
£000
1
9
(54)
(44)
2021
RMB
£000
27
-
-
27
Group
USD
£000
1,148
1,738
(234)
2,652
EUR
£000
165
10
(400)
(225)
2020
RMB
£000
6
-
(54)
(48)
USD
£000
890
2,702
(253)
3,339
The sensitivity of the Group operating profit to the US dollar to sterling exchange rate, assuming all other variables
remain constant, is as follows:
If the US dollar had been 1% stronger/weaker against sterling throughout the year ended 31 May 2021, then the
Group operating profit would have been £60,000 higher/lower. The impact of other currencies is not material.
Capital management
The capital structure of the Group and Company consists of equity and debt. Equity comprises ordinary share
capital and retained earnings. Debt includes sales invoice financing facilities with large banks, asset finance and
lease liabilities.
The objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to
maximise future returns for shareholders.
Cash flow is controlled by ongoing justification, monitoring and reporting of capital expenditure and regular
monitoring and reporting of operational costs.
Financialswww.filtronic.com Stock Code: FTC 86
Company information
Registrars
Link Group
Enquiries regarding shareholdings, change
of address or similar particulars should be
directed in the first instance to our Registrars,
Link Group whose address is:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Tel: +44 (0)371 664 0300
(calls are charged at the standard geographic
rate and will vary by provider. Calls outside the
United Kingdom are charged at the applicable
international rate). Lines are open 9.00am
- 5.30pm Monday to Friday excluding bank
holidays in England and Wales.
Shareholder portal
You can register online to view your holdings
using the Signal Shares shareholder portal,
a service offered by Link Group at www.
signalshares.com. This is an online service
enabling you to quickly and easily access and
maintain your shareholding online – reducing
the need for paperwork and providing 24
hour access for your convenience. Through the
shareholder portal you can:
• Cast your proxy vote online
• View your holding balance and get an
indicative valuation
• View movements on your holding
• Update your address
• Elect to receive shareholder
communications electronically
• Access a wide range of shareholder
information including the ability to
download shareholder forms
Filtronic website
Shareholders are encouraged to visit our
website (www.filtronic.com) which has more
information about the Company.
Directors
(All at Filtronic House, 3 Airport West,
Lancaster Way, Yeadon, Leeds,
West Yorkshire, LS19 7ZA, UK)
Richard Gibbs - Chief Executive Officer
Michael Tyerman - Chief Financial Officer
Reg Gott - Non-Executive Chairman
Pete Magowan - Non-Executive Director
John Behrendt - Non-Executive Director
Company Secretary
Maura Moynihan
Company number
2891064
Registered office
Filtronic plc
Filtronic House
3 Airport West
Lancaster Way
Yeadon, Leeds
West Yorkshire
LS19 7ZA
Tel: 0113 220 0000
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory
Auditors
Central South Square
Orchard Street
Newcastle upon Tyne
NE1 3AZ
Bankers
Barclays Bank plc
10 Market Street
Bradford
BD1 1NR
Financial public relations
Walbrook PR Limited
4 Lombard Street
London
EC3V 9HD
Tel: 020 7933 8780
Nominated advisor and broker
finnCap Ltd
1 Bartholomew Close
London
EC1A 7BL
Tel: 020 7220 0500
Filtronic plc Annual Report and Accounts 2021 87
Financialswww.filtronic.com Stock Code: FTC Registered Office
Filtronic House, 3 Airport West,
Lancaster Way, Yeadon, Leeds,
West Yorkshire, LS19 7ZA
T: +44 (0) 113 220 0000
E: investor.relations@filtronic.com
filtronic.com