Filtronic Plc Annual Report 2023

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FY2023 Annual Report · Filtronic Plc

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Registered Office

Plexus 1, NET Park,

Thomas Wright Way, Sedgefield,

County Durham, TS21 3FD

T: +44 (0) 1740 618800

E: investor.relations@filtronic.com

Annual Report
and Accounts 2023

Filtronic plc – Stock code: FTC

filtronic.com

Our strategy:

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Aerospace & d e f e n c e

Our values:

Integrity

Respect

Excellence

Act with integrity; being
honest, always keeping our
promises.

Be respectful to all; it is the
foundation of our culture.

Strive for excellence; it is
what our customers and
colleagues expect and what
we endeavour to deliver.

Our purpose

Our vision

Our mission

To be the trusted provider of
innovative RF solutions.

Enabling the future of RF,
Microwave and mmWave
communication.

Creating value for our
customers through
technology leadership.

Filtronic plc Annual Report and Accounts 2023

Filtronic plc Annual Report and Accounts 202301

What’s inside:
04

Contents

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

Sustainability report

Governance report

Board of Directors

Governance report

Stakeholder engagement

Nominations Committee report

Audit and Risk 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

Glossary

www.filtronic.com Stock Code: FTCChairman’s statement“The markets we serve offer strong growth prospects and we remain confident, given the opportunities that are being generated, that we can execute against our strategic plans and build a business for all our stakeholders to be proud of.”Chief Executive’s review“There is an increasing demand for our high-performance products and unique RF design capabilities, and based on our investments in FY2023, I believe we are building the IP portfolio, resources, and expertise necessary to scale the business.”Objective and strategy“Filtronic have been at the forefront of RF technology for over 45 years, and we create value for our clients by enabling the future of RF, microwave and mmWave communications.”Financial review“Notwithstanding a heavy focus on top-line growth, another successive year of profit generation enabled further investment to achieve key strategic objectives.”
02

History of Innovation

1970

1980

1990

2000

2010

2020

1977

1977
Company founded
by Professor David
Rhodes at Leeds
University.

1979

First employees
recruited.

1989

Filtronic
Company founded
components
by Professor David
receive a
Rhodes at Leeds
Queens award
University.
for technology.
Wireless
infrastructure
business
established.

First employees
recruited.

Filtronic
components
receive a
Queens award
for technology.
1994
Wireless
infrastructure
business
established.

1979

1992

2002

1992
Filtronic Comtek
established to focus
on 2G – global
systems for (GSM).

Filtronic Comtek
established to focus
on 2G – global
systems for (GSM).

2011

2002
Triton chipset,
transmit and
receive multi-
function MMICs
developed for
mobile backhaul.

Triton chipset,
transmit and
receive multi-
function MMICs
developed for
mobile backhaul.

Development
Development
of mmWave
of mmWave
capabilities,
capabilities,
including Theseus,
including Theseus,
Orpheus and
Orpheus and
Morpheus II.
Morpheus II.

1994

2020

2020
Launched
Launched
Morpheus II,
Morpheus II,
market leading
market leading
transceiver
transceiver
product and Tower
product and Tower
Top Amplifier
Top Amplifier
range.
range.

Filtronic Comtek
plc listed on the UK
stock exchange.

2003

2013

1999

Acquisition of
Fujitsu Silicon
plant in Newton
Aycliffe to produce
GaAs (Gallium
arsenide) wafers.

Company
reorganises into
three divisions:
Wireless
Infrastructure,
Handset Products
and Integrated
Products.

Company
reorganises into
three divisions:
Wireless
Infrastructure,
Handset Products
and Integrated
2015
Products.

Headquarters
Headquarters
relocate to
relocate to
NETPark science
NETPark science
park in Sedgefield,
park in Sedgefield,
County Durham.
County Durham.

2021

2021
Awarded
Awarded
Queens Award
Queens Award
for Enterprise:
for Enterprise:
International
International
Trade.
Trade.

2015
Company listing
moves to the AIM
stock market.

Company listing
moves to the AIM
stock market.

2022

Launched Hades
E-band Active
Diplexer and
extended range of
Cerus high-power
amplifiers.

2017

2017
Launch of contract
Launch of contract
manufacturing
manufacturing
services,
services,
principally for
principally for
aerospace and
aerospace and
defence.
defence.

2023

2023
Launched
Launched
Morpheus X2,
Morpheus X2,
Taurus and Hades
Taurus and Hades
X2
X2

Evolution of E-band transceivers

A journey of high-performance and innovation.

2012
Proteus

2016
Orpheus

2022
2022
Morpheus X2
Morpheus X2

Component
rationalisation

21dBm

Better
integration

Increasing
Link Budget

16dBm

Improved
Size, Weight &
Power (SWaP)

24dBm

2014
Theseus

2020
Morpheus II

Performance compared
to Proteus

33% of the build cost

25% of the test time

25% of the test time
10% of the development time

10% of the development time

www.filtronic.

1500% more units per month

Filtronic plc Annual Report and Accounts 202303

Operational Highlights
Operational Highlights

Financial highlights

Financial highlights
Financial highlights

Operational highlights

Revenue
Revenue

£16.3m (5%)
£17.1m (10%)

Adjusted EBITDA*
Adjusted EBITDA*

£1.3m
£2.8m (58%)

(55%)

£0.2m
£1.6m (174%)

(85%)

Cash at bank
Cash at bank

£2.6m
£4.0m

(38%)

(35%)

Another year of profitable trading despite the
headwinds from the global semiconductor
shortages, geo-political uncertainty and a
challenging economic environment.

First contract win in the low earth orbit space
sector, valued at £2.3m, to a market leader.

Launched the Morpheus X2 E-band
transceiver and secured production orders
valued at £0.9m, that more than doubles the
transmission range of current 5G backhaul
radio links.

Two new defence contract wins with the MoD
through the DSTL framework.

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£2m

Series of recent contract wins totalling
over £2.0m across a diverse range of new
telecommunication and private network
customers, demonstrating the execution of
our objective to broaden the customer base.

Net cash (net of all lease obligations
Net cash (net of all lease obligations
except right of use property lease)
except right of use property lease)

£1.6m
£3.1m (62%)

(49%)

* Adjusted EBITDA is earnings before interest,
taxation, depreciation, amortisation and
exceptional items.

** Adjusted operating profit is operating profit

before exceptional items.

Further developed the opportunity pipeline,
having improved our direct and indirect sales
channels improving customer engagement,
as well as strengthening the engineering team
to facilitate revenue growth.

Achieved IASME Governance Gold to
augment our cyber security, positioning us
well to win more sensitive work.

Eight new products launched during the year,
spanning high-power versions of standard
telecom products, new filter designs for
defence and quantum computing and a
range of solid state power amplifiers for
space and ground station applications.

www.filtronic.com

Chairman’s statement

Dear fellow shareholder

I am pleased to report that good progress has been
made in the year ended 31 May 2023, particularly with
our market engagement, product development and
improvement of operational capability.

We were optimistic about growing revenue in H2
FY2023 but shortages in the semiconductor supply
chain prevented us from realising this important goal.
Despite this, we delivered another successive year of
profit generation with adjusted earnings before interest,
taxation, depreciation, amortisation and exceptional
items (“Adjusted EBITDA”) of £1.3m (2022: £2.8m). This
led to a strengthened balance sheet, which, coupled with
a stronger order book and improved opportunity pipeline,
provides a solid base from which to continue developing
the business to deliver long-term shareholder value.

The Markets
The markets we operate in increasingly offer the potential
for strong growth. The recent sizeable contract win,
awarded by a leading player in the low earth orbit space
market demonstrates the world-class capability of our
business and validates our confidence in successfully
penetrating this emerging and high growth sector. The
market is currently led by a handful of well-known global
players, where our technology is highly relevant to their
chosen solutions, but there are numerous other disruptors
with different mission objectives, serving a broad range of
end customers and markets.

We continue to see exciting opportunities being
developed in aerospace and defence particularly given
the current geo-political landscape. Governments of
western countries acknowledge they have underfunded
defence spending in recent years but have reiterated a
commitment to remedy this. The skills required to develop
technology solutions utilising radio frequency (“RF”) are
in short supply and the major defence primes recognise
that resourcing their key programmes will be a significant
challenge. This creates opportunities for Filtronic to
support and mitigate the skills gap that has developed.

In the telecommunications market, we note recent
announcements by both Nokia and Ericsson following a
slowdown in consumer spending impacting their telecoms
sales. However, 5G networks are actively being rolled
out around the world and the long-awaited licencing of
E-band spectrum in India has been released for backhaul
products. This is a market that has a high dependence on
wireless technology given the well-established road and
building infrastructure, making it difficult to offer cabled
solutions. Given the scale of rollouts, pricing can be highly
competitive as the original equipment manufacturers
(“OEMs”) compete for market share. As E-band
spectrum bandwidth starts to fill, the focus will move to
other frequency bands such as W-band and D-band.
The telecommunications market has historically led
technology waves so these technological developments
will be a key focus of our own technology roadmaps.

Our relevance to new and prospective customers and
the unique selling point we offer is our ability to design,
develop and manufacture a turn-key solution to a
high-quality standard. We ramp production quickly
and in sufficiently large volumes bringing an ethos that
fundamentally differentiates us from our competitors who
do not have the heritage of rapid turnaround and large-
scale manufacture.

Investing in the right areas of the business, to deliver this
sustainable financial growth is a constant balancing act.
To be successful in our chosen markets we need to be
agile, recognising that we may need to adapt strategy in
response to the fast-paced nature of the communications
technology. The desire of our prospective customers
in terrestrial and space communication to get, or stay,
ahead of their competitors means we must be responsive
in order to thrive. Therefore, building and developing
the engineering organisation is critical as we seek to
develop our technology roadmaps, undertake customer
developments and service the opportunity pipeline. Rapid
execution of product development with high quality
products and solutions will remain a key focus for the
Group.

Financial performance summary
Group sales decreased in the year by 5% to £16.3m
(FY2022: £17.1m).

The reduction in sales and a weaker sales mix, with a
higher concentration of revenue from price sensitive
telecommunications infrastructure, led to an Adjusted
operating profit of £0.2m (2022: £1.6m) and operating
profit of £0.2m (2022: £2.0m).

The Group closed the year with £2.6m of cash at bank
(2022: £4.0m) in addition to the availability of undrawn
working capital debt facilities in the UK (£3.0m with
Barclays) and the USA ($4.0m with Wells Fargo).

The Group’s net cash position, including all debt except
right of use property leases, was £1.6m at the end of the
financial year (2022: £3.1m). Net cash including right of
use property leases was £0.3m (2022: £2.2m).

Dividend
As with previous years, the Board continues to believe
shareholders are better served by cash being retained
in the business to fund future business development.
Consequently, no dividend is proposed for the year (2022:
£nil).

Filtronic plc Annual Report and Accounts 202305

Environmental, Social and Governance
(“ESG”)
We are committed to building a sustainable business for
the future, delivering consistent financial returns and long-
term value for all our stakeholders. We formalised our
ESG strategy in the year, which has been developed with
an emphasis on supporting the wider corporate strategy.
Key elements include building an organisation fit for the
future by supporting STEM skills, continuing with our
established graduate programme, augmented with a new
apprenticeship initiative. We will also minimise our impact
on the environment with lower energy consumption and
waste. Full details of the ESG strategy and objectives can
be found on the Filtronic website at https://filtronic.com/
investors/esg-strategy/.

Outlook
The markets we serve offer strong growth prospects
and we remain confident, given the opportunities that
are being generated, that we can execute against
our strategic plans and build a business for all our
stakeholders to be proud of. Key milestones have been
met against our core objectives in the year, with stronger
commercial engagement, innovative product solutions,
well-aligned technology roadmaps and robust business
systems, and we therefore look forward to FY2024 with
enthusiasm and excitement.

Whilst the macro-economic environment remains
uncertain, we are well equipped to navigate through
it with a stronger business. We will further strengthen
our sales and engineering organisations in the year to
capitalise on near term market opportunities.

Pictured: Morpheus X2 - High power E-band transceiver

I would like to finish by thanking all our stakeholders for
the ongoing support, and our talented employees who
have continued to respond positively with exceptional
commitment. It is with their dedication, hard work and
skill that we will continue to drive the performance of the
business.

Jonathan Neale
Chairman
31 July 2023

What we specialise in:

What we specialise in:
What we specialise in:

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www.filtronic.com Stock Code: FTC

www.filtronic.com

www.filtronic.com Stock Code: FTCStrategic report06

Chief Executive’s review

I am pleased to present our full year results for FY2023,
and with it a reflection on the last 12 months, during
which we have made significant progress against the
primary objective of creating sustainable growth in our
strategic markets of aerospace and defence, space and
terrestrial telecommunications infrastructure. Despite the
faltering global economy, the trading environment for
Filtronic throughout the last financial year has generally
been favourable. It was only the availability of critical
semiconductor products in Q3 and Q4 that limited our
ability to maximise revenues prior to the financial year
end. Notwithstanding the challenges imposed by the
breakdown in the global semiconductor supply chain,
we ended the year with revenues of £16.3m (FY2022:
£17.1m), broadly in line with market expectations.

Confident of the potential for Filtronic technology in our
chosen strategic markets we have continued to invest
in our long-term future by strengthening our business
development and engineering teams throughout the year.
This increased investment is reflected in our Adjusted
EBITDA of £1.3m (2022: £2.8m) and cash at bank of
£2.6m (2022: £4.0m). The initial return on this investment
is evidenced by the release of several new high-power
telecommunication infrastructure and space products,
for which we have already been successful in achieving
initial customer order commitment. We end the year
with a healthy number of new product developments
in the engineering pipeline, and a well-defined
technology roadmap aligned with customer and market
requirements.

Over the last 12 months I have seen first-hand the
strength of relationships with Filtronic’s strategic accounts,
who are amongst the market leaders in each of our
addressable markets. I have been delighted with the
development of our technology roadmaps and the
progress made in strategic programmes that will yield
products for the next generation of telecommunication
backhaul communications and electronic warfare (“EW”)
solutions. I have also been pleased with the progress
made in opening exciting new applications such as our
breakthrough into the low earth orbit (“LEO”) space
market.

Radio frequency (“RF”) design is a complex and fast
developing engineering discipline. With our global
reputation, combined with over 45 years of innovative IP
development, we continue to see a growing number of
prospective customers wanting to engage our services
in the design and manufacture of next generation RF
products. Our ability to undertake rapid cutting-edge
RF design, and subsequently scale the manufacturing
of mmWave products, enables customers to drive
performance and accelerate time to market. This
combination of technical competence and agility is a
significant competitive advantage for customers in the
telecommunication and LEO space markets.

A strong balance sheet has enabled us to continue to build
on investments made at our Sedgefield manufacturing
site. The addition of state-of-the-art equipment for rapid
process and product development has significantly
enhanced our ability to efficiently bring new products to
market in line with customers’ expectations. The ability
to develop engineering prototypes and create new
manufacturing processes without the need to disrupt the
volume manufacturing lines has greatly improved delivery
of engineering programmes and eased the transition
from prototype to mass production.

Talented people remain at the heart of our ability to
deliver leading edge products and future business
growth. We have made significant efforts this year to find
and recruit the key skills required to realise our growth
ambitions. To further penetrate our strategic markets, we
strengthened our business development team with the
addition of seasoned industry experts with a strong track-
record of sales delivery. We have also been successful in
hiring high-calibre RF engineers for our new design office
in Manchester and this team is now specifically engaged
in addressing opportunities in the emerging space and
telecommunication infrastructure market.

Customers and Markets
Our stated mission at Filtronic is to drive the future of
RF, microwave and mmWave communications and
we have aligned the business to focus efforts on four
strategic vertical markets that we believe have good
growth potential and a strong alignment with our RF
capabilities. We have been careful to select applications

Pictured: Taurus - High performance E-band solid state power amplifier

Filtronic plc Annual Report and Accounts 202307

where we could add significant value, drive sustainable
margins, reuse existing IP, and leverage the investments
in our existing hybrid manufacturing capability. We are
also mindful to avoid commodity markets and consumer
applications with low barriers to entry that offer little in the
way of RF technology development.

Our selected strategic growth markets are aerospace &
defence particularly EW and battlefield communications,
terrestrial telecoms for 5G backhaul, and gateway
connectivity for LEO space communications. All of
the strategic markets have continued to invest in the
development of RF technology over the year, with a
consistent drive towards higher power, lower latency, and
improved bandwidth applications where Filtronic can
apply know-how and product development expertise.

The aerospace market has long been a steady revenue
contributor to our business and this year we have
expanded our footprint in the Active Electronically
Scanned Array (“AESA”) radar market by capturing
several related filter design opportunities that position
us well for strategic radar programmes that will come in
the next five years. We have continued to make inroads
into the UK defence market with several successful
engagements with Defence Science Technology
Laboratories (“DSTL”) following successful delivery of
our first battlefield communications product in FY2022.
We were successful in winning an additional two DSTL
programmes in FY2023 and both of these programmes
align us closer with UK MoD’s strategic requirements.

5G telecommunication infrastructure deployment
continues around the world, and critical to true 5G
performance is the quality and reliability of high
frequency backhaul communications. Filtronic’s E-band
transceivers are designed to deliver cost-effective,
multi-gigabit connectivity for mobile backhaul networks,
in geographies where the E-band frequency has been
licenced and individual countries make the E-band
frequency available for use. India licenced E-band
frequencies in 2022 as part of its long awaited 5G roll-out
and Filtronic took benefit of stock orders from our lead
customer to cover what is expected to be a sustained
period of demand for backhaul products. Recent
concerns associated with the solvency of the licenced
telecom operators in India, together with surplus inventory
from the stalled 5G roll-out in Russia will inevitably result
in some order book demand to be rescheduled. However,
the long-term potential in India remains significant.
Recent orders for high-power high-frequency trading
modules, private network E-band modules and custom
power amplifier solutions suggest that there are several
interesting adjacent market opportunities for Filtronic’s
core telecommunication technology.

The LEO space market is growing rapidly as the costs
associated with the launch and deployment of satellite
technology continues to fall. Well-funded, global
corporations and ambitious regional start-up companies
are racing to build constellations of satellites that will
accelerate the delivery of broadband services across

the globe. Ultimately these LEO networks will converge
with the established terrestrial telecommunication
networks to provide high-speed, low-latency ubiquitous
broadband connectivity. Filtronic’s reputation as a supplier
of compact, highly integrated, and extremely reliable
telecommunication backhaul solutions has positioned us
well to respond to the aggressive timelines demanded by
the leading players in the LEO space market. The ability
to design and build scalable solid state power amplifiers
(“SSPAs”) at multiple frequency bands enabled Filtronic to
win initial production orders for the deployment of the first
LEO space E-band backhaul communication links during
the year. We will look to build on this initial market success
by strengthening customer relationships and focusing on
the delivery of our technology roadmap over the next 24
months.

Achievements
There have been several notable achievements over the
last year which set the potential for sustainable growth
and future revenues, some of which are as follows:

• Our first development of an E-band SSPA module for
the market leader in LEO space communications.

• Secured production orders and enabled the launch of
the Morpheus X2 E-band transceiver that more than
doubles the transmission range of current 5G backhaul
radio links.

• Taking advantage of new semiconductor process IP we
launched a series of prototype chip developments in
CY2023 with promising results

• We secured our second and third DSTL programmes
in FY2023 and continued to build our relationship as a
supplier of turnkey RF solutions to the UK MoD.

• Focusing on our filter design expertise we secured
orders in EW, air and shipborne radar, battlefield
communications and emerging quantum computing
applications.

• Secured three separate programmes for custom
high-performance E-band transceivers in private
network applications associated with private data
communications and high-frequency trading
platforms.

Outlook
We operate in a period of economic and geopolitical
uncertainty, but one in which our technology is in demand,
and the expertise we offer is in short supply. Our strategic
markets are well positioned for growth and our lead
customers continue to invest in next generation RF
solutions. The disruption to semiconductor supply chains
that impacted our business in FY2023 are improving,
and we feel that we now have the resources and skills
necessary to look forward with optimism to the new
trading period.

Filtronic’s core markets represent industry verticals that
have a robust outlook and align well with the needs
of the post-pandemic world. Public safety, mobile
communications, a sovereign defence capability and

www.filtronic.com Stock Code: FTCStrategic reportMarket review

Aerospace & defence

Chief Executive’s review continued
Our markets

Critical communications

Telecommunications infrastructure

• Consolidate the return on the investment in capital

Space

equipment by winning outsourced assembly and test
(“OSAT”) opportunities with customers who require
specialist hybrid and plastic QFN packaging capability.

• Continue to align our business processes and equip

our facilities to achieve the accreditation necessary to
undertake a higher level of UK defence programmes.

I am pleased with the progress that the business has
made in the last financial year and remain excited by the
potential that exists at Filtronic. There is an increasing
demand for our high-performance products and unique
RF design capabilities, and based on our investments
in FY2023, I believe we are building the IP portfolio,
resources, and expertise necessary to scale the business.
The specific market segments that we have identified for
growth continue to develop at pace and as we embark on
a new financial year, I believe we are well placed to deliver
long term shareholder value.

Richard Gibbs
Chief Executive Officer
31 July 2023

the rapid development of LEO space networks, are well
funded sectors that resonate with governments, investors,
and the public at large.

Business plans for FY2024 reflect our confidence in the
markets we serve to deliver long term sustainable growth.
We have an open and honest culture that is proactive and
highly motivated to deliver excellence in all aspects of our
business. We will further develop our prospects over the
next 12 months with a focus on the following activities:

• Maximise the opportunity associated with the fast-
growing LEO Space backhaul communications
market, including both ground station and payload
applications.

• Development of next generation MMIC designs that
will enable us to continue the evolution of our mobile
telecom backhaul solutions.

• Develop our scalable Cerus power amplifier

platform to maximise the range of power options at
selected frequency bands required for LEO space
communication links.

• Champion the UK Government National

Semiconductor Strategy and position Filtronic as a
trusted sovereign supplier of advanced RF packaging
solutions.

• Develop our manufacturing capability to add plastic
encapsulated devices to our portfolio of hybrids and
SiP solutions.

• Selectively target funding from agencies and UK

Government initiatives that support and underpin the
delivery of the Filtronic technology roadmap.

• Continued investment in our marketing activities

including enhanced web content and strategic use of
social media platforms for targeted marketing.

• Strengthen the sales organisation with the deployment
of direct sales and business development resource
in the UK and Western Europe and expand indirect
channels in the USA and Europe through distribution
and representative networks.

Our core markets

Market review

www.filtronic.com

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Filtronic plc Annual Report and Accounts 2023
Market review

Filtronic’s mission is to enable the future of microwave and mmWave communications by providing
advanced radio frequency (“RF”) communications equipment incorporating specialist RF design and state-
of-the art manufacturing. Filtronic have targeted three strategic markets that are forecasting significant
investment in RF technology and have the capability to deliver sustainable business growth. These markets
include telecommunications infrastructure, aerospace & defence (radar and electronic warfare (“EW”)
applications) and stratospheric and low earth orbit (“LEO”) space applications. In addition, Filtronic serves
the critical communications market in North America where it has worked for the leading original equipment
manufacturer (“OEM”) for over 20 years.

TELECOMMUNICATIONS
INFRASTRUCTURE

Filtronic has a long heritage
of supplying Xhaul products
into the telecommunications
infrastructure market. Xhaul
is a collective term that covers
front, mid and backhaul,
representing the various
connections between the edge
of the telecoms network, base
stations, remote radio heads
and the core fibre optic network.

• As data demands on telecommunication

• Market estimates predict that by 2027,

networks increase, the capacity of Xhaul links
has to adapt.

• The significant extra bandwidth available with
the lightly licensed mmWave bands, primarily
E-band (71-76GHz / 81-86GHz). W-band
(92-114.5GHz) and D-band (130-175GHz)
are important for future ultra-high bandwidth
requirements.

• The roll out of true 5G networks is a major

driver for the deployment of wireless, E-band
Xhaul products.

microwave will account for 65% of the installed
base of backhaul connections, and with 11%
CAGR, at least 30% of these wireless links will
be high frequency mmWave.

• Our intent is to become the independent “go
to” partner of choice for these demanding
mmWave product designs.

XHaul for telecommunications infrastructure

• Transceivers
• Amplifiers
• Filters
• Multiplexers

www.filtronic.com Stock Code: FTCStrategic report10

Market review continued

AEROSPACE
& DEFENCE

Filtronic has been a
supplier of sub-systems
and RF components to the
aerospace and defence
industry for several years,
in particular the delivery of
filters, switch filter banks
and electronic modules for
successive generations of
air and shipborne radar
systems.

• The next generation of Active Electronically
Steered Array (“AESA”) phased array radar
currently in development, requires ever more
complex and densely packed RF electronics to
be integrated into the fighter jet airframe.

• Battlefield communications and interoperability
with drones, HAPS, LEO space, and terrestrial
communication networks is an important factor
of modern-day warfare.

• Filtronic is well placed to support this area
of future defence spending with critical
communications and telecommunications
design expertise and sovereign manufacturing.

• Increasing geopolitical tensions are expected

to lead to increased defence spending over the
next decade.

• It is anticipated that the focus of this increased

spending will be to provide enhanced capability
and battlefield connectivity utilising ever more
sophisticated radar and EW solutions across air,
sea, and land.

• The UK aerospace and defence market

relies on sovereign design and accredited UK
manufacturing capabilities.

• Filtronic will continue to develop a more direct

relationship to UK MoD through alignment with
the Department of Science and Technology
Leadership (“DSTL”).

RF subs-systems for:

• AESA radar
• Electronic warfare
• Unmanned systems
• Ultra-wide band digital systems

Filtronic plc Annual Report and Accounts 202311

LOW EARTH ORBIT
(“LEO”) SPACE

Filtronic recently won a major
contract with the market leader
within the ground station
application. This is an emerging
market where our technology is
highly relevant and our capabilities
well-aligned. In recent years there
has been a considerable global
effort to design, develop and
deploy high altitude communication
networks, or non-terrestrial
networks (“NTNs”), that both
compliment and overcome the
limitations of conventional terrestrial
telecom infrastructure, to deliver
true 5G bandwidth and services over
wide geographical areas.

• The challenge of providing ubiquitous, cost-

• It is predicted that during the decade

effective broadband-connectivity has seen the
emergence of two specific NTN solutions.

• High Altitude Pseudo-Satellite (“HAPS”)

networks operate within the outer limits of the
stratosphere 20km above the earth.

• In parallel, there are Low Earth Orbit (“LEO”)
space satellites, orbiting the earth in the lower
levels of space between 250km and 2,000km
above the earth’s surface.

• There are currently over 40 HAPS programmes

at various stages of development around
the world.

commencing 2020, over 60,000 LEO satellites
will be launched as part of the race to develop
constellations of private satellite networks.

• The links between LEO satellites, and the

corresponding high frequency links to and
from the ground-based distribution centres,
represents a significant opportunity for the
development of high reliability RF sub-systems.

• We will continue to collaborate with leading
well-funded US tech companies driving a
development roadmap in support of the
emerging HAPS and LEO opportunities.

Off-the-shelf RF components for Low Earth Orbit
and High-Altitude Pseudo Satellites

• Experts in mmWave (Ka, Ku, Q, V, E, & W)
• Low weight, high power, improved integration
• SSPAs and transceivers for ground-based terminals

www.filtronic.com Stock Code: FTCStrategic report12

Market review continued

CRITICAL
COMMUNICATIONS

Filtronic has supplied into the
market leader for over 20 years,
supplying a range of sub-systems
and RF conditioning products.
Critical communication 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 been a supplier of mission-critical
filters and combiners to the North American
P25 Land Mobile Radio (“LMR”) network
market for many years and have established a
strong relationship with the leading American
OEM in this sector.

• Filtronics tower top amplifier ( TTA ) range

“

”

continues to perform well in the market. It has
been adopted by the market leader as the
leading TTA.

• Whilst there is limited scope to further develop
technology for LMR applications. Expenditure

on critical communication networks will
continue to grow modestly as emergency
services expand coverage, integrate services,
and replace legacy FM analogue networks.
• This market is a legacy market for Filtronic,
we work for the largest OEM and have an
extended range of customer-specific filters and
combiners. According to recent data the global
LMR market is forecast to grow at a 5.9%
CAGR between 2022-2029, driven primarily by
integration between the LMR system and the
LTE network.

Proven performance in high-performance,
high-reliability RF

• Tower top amplifiers
• Diplexers and multiplexers
• Filters
• Combiners

Filtronic will continue to seek and develop opportunities
in adjacent markets where we can leverage existing
technology and capability, particularly those applications
associated with the licenced frequency ranges of Q / V/ E/

W and D-band. Current adjacent applications of interest
include low-latency and high-performance private
networks, high-speed track-to-train networks, mmWave
test systems, and quantum computing applications.

Filtronic plc Annual Report and Accounts 202313

Objective and strategy

Objective and Strategy
Filtronic is a designer and manufacturer of advanced RF communications products supporting strategically
important market sectors including telecommunications infrastructure, space, aerospace and defence and
the legacy market of critical communications.

Speed to market

Lower whole
life costs

Customisation

Higher
performance

Agile culture

Filtronic have been at the forefront of RF technology
for over 45 years, and we create value for our clients
by enabling the future of RF, microwave and mmWave
communications. We focus on markets where we have
a deep understanding of the sector and the customer’s
application. We can leverage our world class design
expertise and extensive IP portfolio to create innovative
products and sustainable revenue streams.

Being a trusted supplier of technically advanced products
in markets that place high value on quality and reliability,
enables us to differentiate ourselves from competition
and deliver profitable growth and a positive return for our
shareholders.

Our strategy is focused on providing high performance
RF solutions from 300MHz to 300GHz focused on three
distinct primary growth markets.

Strategic markets

Telecommunications infrastructure
Build on our existing E-band technology to offer
a complete product family of high power and
low latency transceiver options in a selection of
packaging styles that facilitate easy integration
into Xhaul radio designs. Expand our frequency
band offering to include W-band and D-band
transceivers that incorporate our own best-in-
class MMIC designs.

Space
Leverage the IP and manufacturing capability
developed for the terrestrial telecommunication
market to position Filtronic in the emerging LEO
space and HAPS market.

To deliver the business strategy we set demanding
goals for the organisation. We cascade, measure
and reward achievement of these goals via our
management objectives and annual appraisal
process.

Aerospace and defence

Aerospace
Build on our existing aerospace customer
relationships to secure design wins for the next
generation of AESA radar and future
manufacturing volumes of OSAT hybrid
manufacturing.

Defence
Use our considerable design expertise in
filters and RF sub-system for critical wireless
communication products to pursue opportunities
for turnkey RF design solutions for the UK defence
industry.

www.filtronic.com

www.filtronic.com Stock Code: FTCStrategic report14

Objective and strategy continued

Product & technology strategy
Data is universal and drives everything from laptops
to cars. Moving that data around is tricky, especially as
the requirements increase. Filtronic’s expertise enables
seamless connection with increased bandwidth, reduced
latency and improved connectivity. We work with global
technology leaders because we provide a level of
expertise they cannot get elsewhere.

Brand strategy
Filtronic has a strong brand and reputation for innovation,
quality, collaboration and world class design and
manufacturing across the RF spectrum. We recognise
the value of a strong brand and have invested in the
marketing tools to promote and build the Filtronic brand
across our high-growth sectors.

Organisational overview
Filtronic currently operates from four sites, Sedgefield,
Leeds and Manchester in the UK and Salisbury, Maryland
in the USA.

Sedgefield, UK
mmWave design, manufacture and test

Leeds, UK
RF design and assembly for aerospace and defence and
critical communications

Manchester, UK
SatCom design centre

Salisbury, USA
RF assembly and test for critical communications

Sustainable revenue growth

Key progress in FY2023

Objectives for FY2024

• First significant contract win in the LEO Space market.
• Two new contract wins with DSTL to develop solutions for

the UK defence market.

• First Morpheus orders secured for the roll-out of 5G

telecommunications in India.

• Increased our direct and indirect channels to market.
• First production order from the quantum computing

market with custom cryogenic filters.

• 11 trade exhibitions completed in FY2023.

• Drive revenue growth in FY2024.
• Capitalise on further contract wins in LEO space market.
• Continue to develop the DSTL relationship and push to
secure follow on contracts from the initial development
programmes.

• Expand outsourced semiconductor assembly and test

(“OSAT”) capability to adjacent hi-reliability markets in oil
& gas and telecoms.

• Support the UK Government National Semiconductor
Strategy and position Filtronic as a contributor to the
sovereign supply chain.

• Expand indirect channels to market for RF subsystems in
the USA and selected European and Asian countries.

• 15 trade shows planned with a focus on expanding

presence and building brand awareness in our strategic
markets.

Sustainable financial growth

Key progress in FY2023

Objectives for FY2024

• Results in line with market expectations.
• Another year of profitable trading and strengthened

balance sheet.

• Stronger order book and opportunity pipeline.
• Reduced the customer dependency with four customers now

• Continue to build good momentum for future growth in

existing and emerging markets.

• Continue to invest in R&D and sales and marketing.
• Continue to invest in new technology and broaden our

product offering.

over 10% of revenue (2022 : Three).

• Develop our operational capability to offer new services

to new and existing customers.

Filtronic plc Annual Report and Accounts 202315

Technology and innovation

Key progress in FY2023

Objectives for FY2024

• Project launched to develop concept solutions for Ka, Q/V

• Develop SSPA concept for the LEO ground station

and W-band in LEO space market.

applications.

• Plastic encapsulation concept established, manufacturing

• Productisation of next generation MMICs with a

equipment specified and received.

production mask set.

• Launched the X2 version of Hades and Morpheus and

• Complete qualification of plastic quad flat no-lead

secured new OEM wins with both products.

package (“QFN”) with lead customer.

• Successful first mmic wafer run for new E-band and W-band

• Capitalise on the tuneable filter programme to identify

chipsets.

lead OEM customer.

• Manchester team fully deployed and additional resources

added in support of LEO space opportunities.

• Added wedge bonding capability in Sedgefield operations.
• Developed detailed technology roadmap by market and

• Develop high power (x2) transceiver and SSPA product
family based on Filtronic power combining concept.
• Develop X2 range with Hercules for low latency private

networks.

application.

Develop business systems

Key progress in FY2023

Objectives for FY2024

• Secured IASME Governance Gold cyber security

accreditation at first attempt.

• Revamped website to be more product focused.
• Significant increase in direct marketing, social media

presence and thought leadership papers and technical
publications.

• Further investment in the CRM system to augment lead

generation and targeted marketing campaigns.

• Upskilling of our management teams with the Filtronic

Leadership Academy.

• Target Space Agency and UK Government funding to

underwrite core IP development activity of Ka, Q/V and
W-band modules for LEO payload applications.

• Continue the use of direct marketing techniques to build
the Filtronic brand awareness within our chosen vertical
markets.

• Implement a new MRP system as part of our

procurement strategy.

• Embed the ESG strategy into the business.
• Create a high performance culture within the operation.
• Adopt the new apprenticeship programme to build for

the future.

ESG

Key progress in FY2023

Objectives for FY2024

• Identified the key ESG issues that are a priority.
• Formalised our ESG strategy and set the key objectives.
• Set targets based on the priorities identified.
• Published the ESG strategy in a glossy brochure and on the

website.

• Invested in new more energy efficient machinery.
• Developed an apprenticeship programme.

• Reduce energy consumption and minimise waste.
• Build skills for the future and promote STEM in the local

community.

• Remove single waste plastics from our site.
• Actively promote equality, diversity and inclusion in the

business.

• Create a learning and development culture.
• Improve communication to our employees.
• Scope and plan for ISO27001.

www.filtronic.com Stock Code: FTCStrategic report16

Objective and strategy continued

Frequency table

Where we operate within the RF Spectrum

Aerospace & Defence 1MHz - 90GHz

Telecommunications Infrastructure 800MHz - 175GHz

Track to Train 40GHz - 86GHz

Space 1GHz - 86GHz

Critical Comms 700, 800 & 900MHz

Test & Measurement 18GHz - 175GHz

Quantum Computing 1GHz - 30GHz

Private Networks 800MHz to 114GHz

1MHz

1GHz

2GHz

4GHz

8GHz

12GHz

18GHz

27GHz

40GHz

75GHz

110GHz

170GHz

300GHz

www.filtronic.

Filtronic plc Annual Report and Accounts 2023Financial review

Notwithstanding a heavy focus on top-line growth,
another successive year of profit generation
enabled further investment to achieve key strategic
objectives, despite macro-economic headwinds
and well documented industry-wide semiconductor
shortages.

Good progress continues to be made by the Group with
Adjusted EBITDA generation delivering £1.3m (2022:
£2.8m) for the year, in line with market expectations. We
maintained investment into the business, particularly in
the areas that will drive growth as we capitalise on the
opportunities within our core markets. We are in the
fortunate position of continuing to see growth prospects
in our core sectors, when many markets are struggling
with well documented economic and political uncertainty.
Given the elevated pipeline of new business, we will
maintain our focus on those that offer a high rate of return
and deliver shareholder value in the coming year.

Revenue
Had it not been for the widely publicised global
semiconductor component shortages, this report would
have been heralding another year of revenue growth.
Having navigated the global semiconductor component
shortage crisis exceptionally well since the issue first
surfaced a couple of years ago, it was frustrating that
a couple of niche component parts brought output of
a core product offering to a halt in Q3 of the financial
year. This was a direct result of the semiconductor
supplier prioritising output of more widely consumed
parts to other markets, resulting in reschedules from the
supplier that could not be mitigated. The consequence
of this was an annual revenue decrease of 5% to
£16.3m (2022: £17.1m). During the year, sales into the
telecommunications infrastructure market performed
particularly well whilst we were delighted to receive an
order from a market leading player in the LEO space
market, of which a substantial amount was realised in
FY2023.

We are pleased that the pipeline continues to build,
particularly in aerospace and defence and the emerging
market of space. A key strategic objective of the business
has been to broaden our customer base, and this is
evidenced in the year by the decrease in the revenue
concentration of our three largest customers to 73%
(2022: 81%), whilst we now have four (2022: three)
customers each generating over 10% of our revenue and
in total 85%.

Sales to the telecommunications infrastructure market
were particularly strong this year as the pace of 5G
backhaul rollouts accelerated, thanks in part to the release
of E-band spectrum by governments around the world.
This led to sales to this sector increasing year-on-year
by 40%. This stronger demand can, in some part, be
apportioned to inventory stocking at our lead customer
to enable them to flex to demand requirements if they are

successful in the Indian market where E-band has recently
been licenced.

Sales of Xhaul products to other markets, including the
space market, were up 57% on the prior year mainly due
to the new customer win in the LEO space market. The
contract win enabled us to deliver further growth within
our E-band and derivative technology products. This
is an exciting and emerging market for us, where our
technology and expertise is highly relevant. The initial
contract from a major LEO player, valued at £2.3m,
to undergo a trial in the ground station using E-band
technology, demonstrates the attractiveness of our
capability. Our ability to ramp and manufacture rapidly
to keep the pace with this fast-moving market gives us a
competitive advantage relative to traditional suppliers to
the space industry.

Sales of aerospace & defence products saw a year-on-
year reduction of 41%, partly as a result of supply issues
pushing shipments into FY2024, but mainly due to a hiatus
in supply of an established programme that ended in the
previous financial year. This market remains critical to
our growth plans, and despite the reduction, we continue
to see contract wins for development work. DSTL is the
MoD’s framework to engage with SMEs, and we were
delighted to win two new contracts in the year on this
platform with revenue from both programmes recognised
in the year.

The legacy products supplied into the critical
communications market were impacted by upstream
component issues within the system-level product. This
resulted in a decrease of revenue to this market of 20%.
This trend is expected to reverse in FY2024, with demand
restored to normalised levels, which we anticipate will
provide an uplift in revenue in the next financial year. The
TTA product continued to perform well, having exceeded
our expectations in the prior year. We won more market
share in the year and grew our brand profile with key
customer teams. We also won a number of other contracts
to this market outside of our lead customer, through both
our direct and indirect sales channels.

Operating costs and headcount
Operating costs increased by 6% in the year to £10.0m
(2022: £9.4m) as overheads were controlled tightly in
the administrative areas of the business to enable us to
continue investing in engineering and sales and marketing
resource which will drive business growth.

www.filtronic.com Stock Code: FTCStrategic report18

Financial review continued

The Group’s largest overhead is salary-related costs,
representing nearly 70% of the operational cost base,
which increased by £0.4m (7%). Whilst maintaining
headcount at a similar level to the prior year we did
change the mix of employees during the year with
recruitment of employees in revenue generating functions
such as engineering and business development that
generally attract a higher salary. These increases
were partly offset by improvements in manufacturing
efficiencies and further automation of operating
processes.

The recruitment of business development resource
strengthens our direct channel to market and is key to
capitalising on opportunities in the high growth markets
we operate within. Continuing the investment into
engineering is critical and it was pleasing to see that we
not only increased the number of engineers, but they bring
valuable expertise and experience, which has significantly
upskilled the team. This enables us to service a larger
opportunity pipeline, increase the number of product
developments for customers and expand our technology
roadmap to position us well to execute our strategic plans.

Given this shift, there was a slight increase in the total
number of employees in the Group during the year
which is reflected in the average headcount increasing
to 125 (2022: 124). An analysis of the Group’s average
headcount is presented below:

Employee Number
Manufacturing

Research and development

Sales and marketing

Administration

Total headcount

2023
74

2022
78

125

124

We are planning to add further business development
resource in FY2024, to augment our direct access
to market, whilst we also plan to bring in additional
engineering resource to deliver scheduled programmes
and accelerate new product delivery. Investment in our
engineering teams is critical to sustainable financial
growth and we plan to maintain this spend at around 12%
or more of revenue. This will ensure we have the resource
in place to capitalise on growth opportunities and keep
ahead of our competitors with the latest technology.

Other costs were managed tightly throughout the year
with cost savings of £0.2m realised in administrative
functions.

The Group has also been highly active in grant funding
channels to further support growth initiatives and
investment. Whilst other operating income reduced
against the prior year, as we previously received Covid
business support from the US government, we have had a
number of successes over recent years with capital grants
towards key pieces of machinery. Looking forward, we are
putting increased effort into securing revenue grants to

help fund our technology roadmaps.

A large portion of our product development in the year
was customer funded which maintained a healthy flow of
cash during the development phase of the engineering
projects. However, we also invested our own money in
developing products as part of our technology roadmap,
particularly to develop solutions for the space market as
well as Morpheus X2 to give our customers higher power
in telecommunications infrastructure. Consequently,
we capitalised £0.5m of development costs in the year.
Further commentary on these capitalised development
costs can be seen in the Research and Development
section of this review.

Adjusted EBITDA
The Group utilises an alternative performance measure
(“APM”) to track performance of the business. This 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.
Adjusted EBITDA for the year was £1.3m (2022: £2.8m)
representing a 55% decrease whilst Adjusted operating
profit was £0.2m (2022: £1.6m) representing an 85%
decrease. This was the result of weaker gross profit
from lower revenue, and a weaker sales mix due to
lower representation of high margin aerospace and
defence revenue and higher representation of 5G
telecommunications equipment which is a price sensitive
market.

The table below shows the reconciliation of operating
profit delivered at £0.2m (2022: £2.0m) and to Adjusted
EBITDA.

Reconciliation of operating
profit to Adjusted EBITDA

Operating profit

Exceptional items

Adjusted operating profit

Depreciation

Amortisation

2023
£000

237

780

253

2022
£000

1,975

(391)

1,584

945

278

Adjusted EBITDA

1,270

2,807

Taxation
A tax credit of £0.4m (2022: tax charge of £0.4m) was
recognised in the year as a previously unrecognised
deferred tax asset was realised given the directors expect
to utilise more of the deferred tax asset in future periods.
The Group also benefits from R&D tax credits given the
development of new technology which lowers the amount
of taxable profit.

With substantial deferred tax assets, including those
not recognised on the balance sheet, the Group will
continue to benefit from not having a tax liability for the
foreseeable future.

Filtronic plc Annual Report and Accounts 202319

Research and development costs (“R&D”)
Total R&D costs in the year before capitalisation
and amortisation of development costs were £2.0m
(2022: £1.7m). The Group incurred engineering costs
on a mixture of customer funded developments and
development of our own technology roadmap.

The Group remains committed to investing in R&D for
future growth and consequently measures R&D spend
as a KPI. Key areas of spend in the year included product
development for each of our key growth markets
spanning telecommunications infrastructure, aerospace
and defence, space and development of capability at new
frequency bands including Q, V and W-band. The year
ahead will see us continue to invest in the development of
our own strategic technology roadmap and proprietary
IP enabling us to build long-term shareholder value in the
years ahead.

Recruitment of RF engineers has been an industry-wide
issue for some time, but we are pleased with recent
successes in attracting new talent to the business at each
of our three UK engineering development sites. We will
augment this by building an organisation fit for the future,
maintaining our graduate recruitment scheme and
adding a new apprenticeship programme.

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

2023
£000

2022
£000

R&D costs in income statement

1,776

1,937

Capitalisation of development costs

481

Amortisation of development costs

(222)

R&D cash spent

2,034

(259)

1,678

Capital expenditure and right of use assets
Capital expenditure increased significantly in the year,
with a large element of investment occurring in Q4 of the
financial year. The total amount of capital purchased
was £1.5m (2022: £0.6m) with investment made into
QFN plastic packaging equipment and engineering
test systems suitable for operating at frequency bands
important for space applications utilising Q and V-band.

Warranty provision
In line with industry practice, the Group provides
warranties to customers over the quality and performance
of the products it sells. Reflecting a full risk analysis
of current commercial contracts at 31 May 2023, the
warranty provision was £0.3m (2022: £0.1m).

Funding and cash flow
The Group recorded a decrease in cash and cash
equivalents to £2.6m (2022: £4.0m) at the year-end.
Cash generated from operating activities in the year was
£1.0m (2022: £2.3m) as Adjusted EBITDA performance
drove cash generation offset by increased working capital
requirements.

Net cash, when including all debt except property leases
at the end of the period, was £1.6m (2022: £3.1m), whilst
overall net cash including property leases was £0.3m
(2022: £2.2m).

We also have additional cash headroom available
through a £3.0m invoice discounting facility with Barclays
Bank plc in the UK and a $4.0m invoice factoring facility
with Wells Fargo Bank in the USA. Both facilities were
undrawn at 31 May 2023 (2022: undrawn) and will need
renewing within 12 months of the date of signing the
Annual Report.

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 2023 of £2.6m

(2022: £4.0m) and the additional headroom available
through the undrawn invoice discounting facilities and
overdraft (2022: undrawn);

• Global semiconductor component shortages impacting
supply chains and the potential for customer orders to
remain unfulfilled for prolonged periods; and

• The economic headwinds the world is facing with the

potential for customers to reassess their priorities, with
opportunities postponed or curtailed.

Following the above considerations, 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 2023.

Michael Tyerman
Chief Financial Officer
31 July 2023

www.filtronic.com Stock Code: FTCStrategic report
20

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 financial performance of the Group’s continuing
operations.

Revenue (£m)

Adjusted EBITDA (£m)

£16.3m

£1.3m

Cash generated from/(used in)
operating activities (£m)
£1.0m

1
7
1

3
6
1

2
7
1

6
5
1

9
5
1

8
2

3
1

2
1

8
1

7
0

5
2

3
2

0
1

2020

2021

2022

2023

2020

2021

2022

2023

2020

2021

2022

2023

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.

)
6
2
(

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.

R&D costs (£m)
£2.0m

7
1

0
2

R&D costs as percentage
of revenue (%)
13%

3
1

1
0 1
1

0
1

2
1

2020

2021

2022

2023

2020

2021

2022

2023

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.

Filtronic plc Annual Report and Accounts 2023Risk matrix

Risk matrix

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

Approach to managing risk
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 and
Risk Committee has oversight of risk management
b
a
and reports to the Board with its findings. The directors
b
recognise that risk is inherent in any business so actively
o
r
manages rather than eliminates risk to achieve business
P
2
objectives which includes review of the effectiveness of
these controls.

y
t
i
l
i

Risk management within the Group is managed by the
Risk Management Committee made up predominantly
of the Senior Leadership Team including the Executive
Directors.
1

The team is responsible for:

• Identifying the risk and the negative and positive risk

circumstances;

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

1
1

LOW

Board of Directors

Reliance on key customers

2
Impact
Impact

3
3

4
3

5
HIGH

Impact

Recruitment & retention

5
HIGH

HIGH

LOW
LOW
Key:

Reliance on key customers

Market requirements

Manufacturing
Reliance on key customers
Technology
Manufacturing

Manufacturing

Technology

Technology
Technology
Supply chain

Supply chain
Recruitment & retention
Reliance of key customers
Market requirements
Supply chain
Cost inflation

Supply chain

Recruitment & retention

Market requirements

Cyber risk

Audit and Risk
Committee
(Independent
review and
challenge)

Outsourced
internal audit
(Independent,
objective review
function)

Risk Management
Committee
(Review and input)

Functional
risk registers

• Assessing and evaluating the likelihood and impact

of those risks;

• Reporting the risk; and

• Managing the key risks in accordance with

established processes under the Group’s operational
policies and controls.

This process includes a 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 Group is structured so that key issues can be
escalated rapidly through the management team to
the Board where appropriate.

www.filtronic.com Stock Code: FTCStrategic reportRisk matrix

Risk management continued

Managing new emerging risks
We monitor new and emerging risks closely. In the
year, we have not added any new risks to our risk
register, but we have downgraded the risk relating
to talent retention and acquisition as the competitive
environment for skilled employees with experience
relevant to Filtronic has eased. Therefore, we have
removed the risk from principal risks and uncertainties.

Risks also present opportunities as well as potential
downside; the global electronic component shortage
created opportunity when our competitors within the
critical communications market were unable to supply

Our principal risks and uncertainties

product as they encountered material shortages. We
capitalised on this opportunity as we had mitigated
material shortages to this market by leveraging our
balance sheet to buy additional components over and
above our own requirements.

We have mitigating plans to cover each of the risks we
are managing.

In the year ahead, our priorities will focus on ensuring
we meet our engineering project timelines given the
volume of programmes we are actively managing to
support customers and develop our own technology
roadmap.

Risk

Risk description

Mitigation actions

Change
in year

Failure
to deliver
projects on
time or to
specification

The markets we supply into are
time-sensitive and opportunities
may be lost if we fail to achieve
customer specification or meet
the timescales required to match
market demand. This may also
impact on future revenue.
For products in the production
cycle, technology insertion is often
required as a means of achieving
cost reductions to improve
product margins.
Our product competitiveness is
heavily influenced by technology
choices at product concept stage
and throughout the execution
of design to product launch. If
the technology we develop is
inappropriate this could result in
missed opportunities.

LOW

Impact

Our ability to remain competitive in terms of technology
and product design is underpinned by retaining key
employees, talent acquisition and effective design
methodologies.
We work closely with our customers and suppliers to gain
a thorough knowledge of the technology being developed
in the marketplace. We are also members of key forums
such as The European Telecommunications Standards
Institute (ETSI). By staying close to the market, we position
ourselves to react quickly to any technology changes that
develop.
When undertaking new product developments, we
follow a process which facilitates a thorough review
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 and have plans to further strengthen this function
in FY2024.
In order to protect our intellectual property, we maintain
and apply for patents when appropriate and actively
encourage innovation in our engineering team through a
reward process.

5
HIGH

HIGH

Failure to
Reliance on key customers
identify
market
Manufacturing
requirements

Technology

With the rapid evolution of
product technology and other
corporate decisions, the size of
our addressable market may
be affected. Failure to forecast
market movements correctly thus
missing opportunities or wrongly
predicting product longevity
could impact on long-term
revenue and profit.

Recruitment & retention

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.

Market requirements

Supply chain

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.

Filtronic plc Annual Report and Accounts 2023Risk matrix

Risk matrix

HIGH

LOW

Risk

Risk description
1
2

Mitigation actions
3
4

LOW

Reliance
on key
customers

Our revenue is currently weighted
towards our four largest
customers.

Impact

Reliance on key customers

Manufacturing

Technology

The loss of any of these
customers, material reduction in
orders from any such customer or
the timing of customer projects
may have a material adverse
effect upon Filtronic’s financial
condition.

5
HIGH

Our largest customers are very successful in their
respective markets, and each has a long-established
relationship with Filtronic. We continue to win further
contracts with our existing customers and have good
outlook visibility as well as being actively engaged with
Recruitment & retention
Recruitment & retention
them on new opportunities.
Supply chain

The Group has strong account management strategies
and mitigates this risk by working closely with
Market requirements
customers, at all levels, to ensure that we are designed
into their new products at an early stage, enabling us
to develop products that meet their specifications and
requirements.

Market requirements

Supply chain

Change
in year

We provide customers with a well-resourced
programme and a high level of service with a focus
on product quality and delivery which enables high
customer retention rates.

To broaden the customer base, we have won several
contracts with new customers in the year across
several different markets that may lead to significant
business in the future.

Having strengthened the business development
function in FY2023, we are looking to strengthen
further in FY2024 in both he direct and indirect
channels, giving confidence this risk can be reduced.

We work closely with our suppliers to understand key
challenges as they present themselves. Our knowledge
of the supply chain and engineering expertise can
be utilised to find alternative sources or marginally
different electronic product.

With good communication to our customers,
highlighting the risks to product lead times, we have
been able to secure sales orders and commit purchase
orders into the supply chain.

We have also utilised the strength of the balance
sheet to secure inventory early, ensuring availability of
components to fulfil customer orders.

We can control some of these inflationary factors, such as
passing costs on to customers, but some factors such as
economic and political ones are beyond our control.

Ensuring our pricing models are updated so we are
quoting for new business with the latest cost base and
reducing our energy consumption are some of the
measures we have in place to protect our margins.

Global
electronic
component
shortage

There is a global electronic
component shortage impacting all
sectors and companies relying on
embedded electronic components
due to reduced supply and
increased demand. An inability to
source components or extended
supplier lead times may prevent
shipment of products to fulfil
orders.

Cost inflation
and margin
pressure

Inflation in the UK, as measured
by the Consumer Price Index is at
elevated levels, driven by broad-
based cost increases. This could
create a business environment
in which customers redirect their
spending from new projects to
more pressing needs and cost
management.

Wage inflation, increased energy
costs and rising component prices
could have a direct impact on
our underlying cost base and
profitability.

www.filtronic.com Stock Code: FTCStrategic reportRisk matrix

Risk matrix

HIGH

Risk management continued

LOW

Risk

1
Cyber
security
and data
integrity

Risk description
2
1
2
There is a risk to the Group if
Impact
there is unauthorised access
to, or integrity issues with, our
data systems. This could cause
significant reputational damage
as well as service disruptions
and potential impact on orders,
revenue and profit.

Reliance on key customers

Manufacturing

Technology

Impact

Mitigation actions
3
4

5
As a supplier to the defence industry the Group has strong
HIGH
cyber security credentials including IASME Governance
Gold, Cyber Essentials Plus and DART accreditation.
We have also worked with a third party to undertake
penetration tests of our system to ensure the integrity of
Recruitment & retention
Recruitment & retention
all our defensive systems.

5
HIGH

Supply chain

Market requirements

Supply chain

Regular reviews are undertaken of the network security
arrangements and training is provided regularly to users
Market requirements
on cyber threats and other data loss/integrity risks.
The Group also limits access to data and access is only
provided to those users with a genuine business need.
Data shared externally is conducted under contractual
arrangements.

Change
in year

Risk key

Increased risk

No change

Decreased risk

Filtronic plc Annual Report and Accounts 2023Our people

We are extremely proud of our people and their contribution in supporting organisational performance
and strategy.

Key performance indicators
Key performance indicators
Please see below for a snapshot of key engagement
indicators from the Employee Survey:

81%
81%

of employees would recommend
Filtronic as a good place to work.
of employees would recommend
Filtronic as a good place to work.

75%
75%

of employees feel they are a a
valued member of the team.
of employees feel they are a a
valued member of the team.

85%
85%

of employees are proud to
work for Filtronic.
of employees are proud to
work for Filtronic.

83%
83%

of employees are satisfied with the
company as a place of work.
of employees are satisfied with the
company as a place of work.

held by males and we have therefore set ourselves an
internal target to increase female representation across
technical, managerial and leadership positions. This is a
challenging target as the engineering sector is still very
much male dominated with only 22% of engineers being
female but we have so far adopted the following in an
attempt to redress the balance:

www.filtronic.com

• established focus/support groups for female
employees;

www.filtronic.com

• improvements to communication and recruitment;

• refresh of the careers section on the Filtronic website;

• more diverse interview panels;

• supporting wider STEM initiatives; and

• closely monitoring the career progression and
promotions of women and utilising supported stretch
assignments to unleash the potential.

We are additionally hopeful that our partnership with
the local University Technical College, UTC Durham, that
augments our already established graduate programme,
will enable us to reach female STEM students at a much
earlier point and offer them work experience and T level
placements to engage and inspire.

Exceptional people allow us to create exceptional
products and solutions for our customers, and the markets
we serve. We are proud to have employees who are just
that. Our Engineering and Operations teams are very
highly regarded by both domestic and international
customers and other stakeholders alike.

Despite a very buoyant recruitment market for the last
18 months, our workforce remains very stable; we have
an average length of service of over 10 years and an
employee turnover rate of less than2%.

Employee Communication and Engagement

Last year we ran our first Employee Survey with an 82%
respondent completion rate, which yielded very positive
results, which we believe, demonstrates robust employee
engagement. The process was managed by an external
consultant to encourage open and honest feedback from
our employees in an anonymous environment.

The results highlighted some areas for improvement,
mainly relating to communication, and we have taken
a number of actions, in an attempt to address any gaps
and we will continue to listen to our employees and act
accordingly.

On a regular basis, management engages with our
employees through a range of formal and informal
channels, including briefings and memos from the
Executive Directors, team meetings, 1-2-1’s, and online
publications via various social media outlets.

Through our HR system we have also enabled surveys
covering key aspects of employment such as onboarding
and equality, diversity and inclusion. Voluntary leavers are
interviewed to provide an additional means of expressing
their views enabling us to analyse data to address any
retention issues or implement suggested improvements.

Equality, Diversity and Inclusion (“EDI”)

EDI is embedded in our culture; procedurally and
behaviourally from recruitment, employee development,
succession planning through to pay audits. We want to
reflect the local communities in which we operate and the
diversity in our workforce is largely representative of this.

Filtronic has equal opportunity policies which form part
of the Group’s core values and which are expected of
employees, suppliers and other stakeholders. Our policies
and practices emphasise the importance of treating
people in a non-discriminatory and inclusive manner
across the full employment life cycle.

This year we conducted a full equal pay audit (gender and
minority groups) and are extremely satisfied that we are
an equal pay employer.

Our workforce gender split is, female 37%: male: 63%.
The majority of technical and managerial positions are

www.filtronic.com Stock Code: FTCStrategic report

Our people continued

Employee Remuneration

Employee Share Plans

Our compensation strategy aims to attract and retain
talent whilst promoting and rewarding sustainable
performance and contributions at all levels of the
organisation. The Board and the 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 is reviewed annually.

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,
childcare vouchers and a cycle to work scheme.

We love to encourage innovation within our business, the
Technology Leadership Recognition policy aims to do
this by recognising and rewarding innovative thinking
and professional personal development. A number of
awards were made in the year, under this scheme, for new
patent applications and grants as well white papers and
technical presentations. To complement this, we have also
introduced a ‘Bright Ideas’ scheme managed through our
T-card system, to broaden the reward scope for new ideas
and continuous improvement suggestions. Vouchers are
presented quarterly to employees with the best ideas.

We also like to reward loyalty and offer an additional
days’ holiday every five years to a maximum of 15 years.
After this, we gift a long service award to our employees
recognising their commitment to the Company.

Current headcount metrics

We have share option plans designed to align employees’
interests with the Group’s performance and the interest
of our shareholders. For information on the share-based
compensation plans please see note 31.

UK-based employees of Filtronic are eligible to participate
in the Save As You Earn (“SAYE”) Scheme. Options are
granted at the closing middle market price on the day
before issue and vest after completion of a three-year
savings period.

Wellbeing

We are committed to supporting our employees,
particularly through the cost-of-living crisis, and the
additional pressure this has presented for many.
Therefore, we have expanded our Employee Assistance
Programme, WeCare, to include additional mental
health and financial advice for employees, as well as their
families. Employees have 24/7 access to an online GP,
mental health counselling as well as legal, financial, and
nutritional advice.

We have introduced increased flexibility in our working
practices to further support:

• employee wellbeing;

• hybrid working;

• flexible working hours; and

• choice of operational site to work from.

All formal flexible working requests have also been
approved this year to aide work-life balance, family
support (parent and carer) and pre-retirement scale
down.

Length
of service

0-5

5-10

10-20

20+

>25

FY2023 FY2022

Function

FY2023 FY2022

Manufacturing

R&D

Sales & marketing 5

Administration

Gender

FY2023 FY2022

Nationality

FY2023 FY2022

Male

Female

American

British

Other

Filtronic plc Annual Report and Accounts 2023

Our first cohort of engineering apprentices will join in
September 2023 alongside our annual intake of
graduates. Embedding the apprenticeship programme to
a successful outcome will be one of our key objectives for
FY2024, alongside further investment in supporting STEM
activities.

Clare Atherton
Lead Operator

How long have you worked at Filtronic?

Clare Atherton
Lead Operator

I have worked at Filtronic for over 20 years.

How long have you worked at Filtronic?

What's the best thing about your job?
Clare Atherton
Lead Operator

I have worked at Filtronic for over 20 years.
Being part of a great team that always works
well together, whether it is seeing new products
What's the best thing about your job?
from development to full production or
How long have you worked at Filtronic?
meeting tight customer deadlines, I always feel
Being part of a great team that always works
the team pulls together and provides support
well together, whether it is seeing new products
I have worked at Filtronic for over 20 years.
from all levels.
from development to full production or
meeting tight customer deadlines, I always feel
the team pulls together and provides support
from all levels.

What's the best thing about your job?

Being part of a great team that always works
well together, whether it is seeing new products
from development to full production or
meeting tight customer deadlines, I always feel
the team pulls together and provides support
from all levels.

Our people
Looking to the Future - FY2024 Priorities

Our people

Filtronic continues to work towards future-proofing the
business to ensure we have the talent to support current
and future needs. This year we established a partnership
with the University Technical College (“UTC”) Newton
Aycliffe who run an alternative mainstream school
Our people
curriculum, focussing solely on STEM subjects.
Esther Sui
What do you love most about your job?
Software Development Engineer

Esther Sui
Software Development Engineer

What do you love most about your job?

I have always had a passion for working on latest
technology, as I love learning new things. My job allows
me to find creative ways to make it smarter, faster and
more cost-effective.

Esther Sui
Software Development Engineer
Why were you attracted to Filtronic?

I have always had a passion for working on latest
technology, as I love learning new things. My job allows
me to find creative ways to make it smarter, faster and
more cost-effective.

What do you love most about your job?

Why were you attracted to Filtronic?

Filtronic is an innovative leader in RF, a well-respected
company whose technology directly impacts the daily
I have always had a passion for working on latest
lives of millions of people who indirectly rely on their
technology, as I love learning new things. My job allows
technology. Filtronic’s mission and values are also well
Filtronic is an innovative leader in RF, a well-respected
me to find creative ways to make it smarter, faster and
aligned with my personal attitudes and goals in life.
company whose technology directly impacts the daily
more cost-effective.
lives of millions of people who indirectly rely on their
I wanted to work for an organisation that’s leading the
technology. Filtronic’s mission and values are also well
future of it's industry, one that doesn’t stand still.
aligned with my personal attitudes and goals in life.

Why were you attracted to Filtronic?

Filtronic is an innovative leader in RF, a well-respected
I wanted to work for an organisation that’s leading the
company whose technology directly impacts the daily
future of it's industry, one that doesn’t stand still.
lives of millions of people who indirectly rely on their
technology. Filtronic’s mission and values are also well
aligned with my personal attitudes and goals in life.

I wanted to work for an organisation that’s leading the
future of it's industry, one that doesn’t stand still.

Tim Hargreaves
Management Accountant

What do you love most about your job?

Tim Hargreaves
Management Accountant

Working with the other departments and stakeholders. Everyone at Filtronic is extremely
helpful and willing to go that extra mile.

What do you love most about your job?

Tim Hargreaves
What's a typical day look like?
Management Accountant

Working with the other departments and stakeholders. Everyone at Filtronic is extremely
helpful and willing to go that extra mile.

Working in Finance, you rarely have two days that are the same. The morning will start with
replying to emails from the US, resolving any questions.

What's a typical day look like?

What do you love most about your job?

I will then usually have a range of ERP development and support, key analysis of current or
Working in Finance, you rarely have two days that are the same. The morning will start with
Working with the other departments and stakeholders. Everyone at Filtronic is extremely
historic financial data to identify trends or project work combining multiple sets of data into a
replying to emails from the US, resolving any questions.
helpful and willing to go that extra mile.
presentation for key stakeholders.

What's a typical day look like?

I will then usually have a range of ERP development and support, key analysis of current or
historic financial data to identify trends or project work combining multiple sets of data into a
presentation for key stakeholders.

Between these tasks, there will usually be some ad hoc requests from other departments
which depending on the complexity, will also be completed during the day.
Working in Finance, you rarely have two days that are the same. The morning will start with
replying to emails from the US, resolving any questions.
Filtronic was really supportive in helping me become a qualified accountant, funding the
exams and offering flexibility in my working hours to fit around the course requirements.
I will then usually have a range of ERP development and support, key analysis of current or
historic financial data to identify trends or project work combining multiple sets of data into a
Filtronic was really supportive in helping me become a qualified accountant, funding the
presentation for key stakeholders.
exams and offering flexibility in my working hours to fit around the course requirements.

Between these tasks, there will usually be some ad hoc requests from other departments
which depending on the complexity, will also be completed during the day.

www.filtronic.

Filtronic was really supportive in helping me become a qualified accountant, funding the

exams and offering flexibility in my working hours to fit around the course requirements.

www.filtronic.

Thomas Manklow

RF Engineer

Thomas Manklow

Why you were attracted to RF

RF Engineer

I studied a general engineering course at Durham University, specialising in electronics part way through.

The two topics I found most interesting were Communications and Microwave engineering, both in

regard to the theory and operation but also the practical applications in how critical they are in modern

Why you were attracted to RF

society. It is a field which is constantly changing and evolving, providing new challenges.

I studied a general engineering course at Durham University, specialising in electronics part way through.

Thomas Manklow

The two topics I found most interesting were Communications and Microwave engineering, both in

RF Engineer

What do you love most about your job

regard to the theory and operation but also the practical applications in how critical they are in modern

society. It is a field which is constantly changing and evolving, providing new challenges.

I really enjoy the practical work, including testing the products. For most of my first year I have been

Why you were attracted to RF

heavily involved in build and testing to meet both internal and external delivery requirements, an

I studied a general engineering course at Durham University, specialising in electronics part way through.

What do you love most about your job

experience I have both enjoyed and found rewarding.

The two topics I found most interesting were Communications and Microwave engineering, both in

regard to the theory and operation but also the practical applications in how critical they are in modern

I really enjoy the practical work, including testing the products. For most of my first year I have been

society. It is a field which is constantly changing and evolving, providing new challenges.

heavily involved in build and testing to meet both internal and external delivery requirements, an

experience I have both enjoyed and found rewarding.

What do you love most about your job

I really enjoy the practical work, including testing the products. For most of my first year I have been

heavily involved in build and testing to meet both internal and external delivery requirements, an

experience I have both enjoyed and found rewarding.

Adele Pliscott

SiP Packaging Engineer

Adele Pliscott

Why RF, what attracted you to this industry?

SiP Packaging Engineer

RF engineering offers unique challenges, for

example, in order to support the electrical

Why RF, what attracted you to this industry?

designs, the selection of materials and

Adele Pliscott

processes is critical.

SiP Packaging Engineer

RF engineering offers unique challenges, for

example, in order to support the electrical

Another aspect is that further technology

designs, the selection of materials and

advancements for RF create interesting

Why RF, what attracted you to this industry?

processes is critical.

challenges for which I enjoy overcoming

these technical boundaries.

Another aspect is that further technology

RF engineering offers unique challenges, for

Why Filtronic?

advancements for RF create interesting

example, in order to support the electrical

challenges for which I enjoy overcoming

designs, the selection of materials and

these technical boundaries.

processes is critical.

Filtronic is highly recognised for its RF

abilities, from the initial telephone calls I had

Another aspect is that further technology

Why Filtronic?

prior to my employment I was extremely

advancements for RF create interesting

happy with the discussions for technical,

challenges for which I enjoy overcoming

Filtronic is highly recognised for its RF

business, and future vision for Filtronic.

these technical boundaries.

abilities, from the initial telephone calls I had

Why Filtronic?

prior to my employment I was extremely

The leadership was inspiring and strong

happy with the discussions for technical,

whilst also offering my inclusion. The

business, and future vision for Filtronic.

marketing was active and the brand was

Filtronic is highly recognised for its RF

exciting and pushed the standards compared

The leadership was inspiring and strong

abilities, from the initial telephone calls I had

to our competitors.

whilst also offering my inclusion. The

prior to my employment I was extremely

marketing was active and the brand was

happy with the discussions for technical,

exciting and pushed the standards compared

business, and future vision for Filtronic.

to our competitors.

The leadership was inspiring and strong

whilst also offering my inclusion. The

marketing was active and the brand was

exciting and pushed the standards compared

to our competitors.

Our values

Act with integrity; being

honest and fair, always

keeping our promises.

Act with integrity; being

Do the right thing, not the easy

honest and fair, always

thing, speak up if it’s not right.

keeping our promises.

Deliver on your promises.

Do the right thing, not the easy

thing, speak up if it’s not right.

Act with integrity; being

honest and fair, always

keeping our promises.

Be truthful, always being

Deliver on your promises.

honest and open.

Do the right thing, not the easy

Be fair and ethical in your work

thing, speak up if it’s not right.

Be truthful, always being

and decision making.

honest and open.

Deliver on your promises.

Take responsibility for your

mistakes when they happen.

and decision making.

Be truthful, always being

honest and open.

Take responsibility for your

own actions, learn from

mistakes when they happen.

Be fair and ethical in your work

and decision making.

Take responsibility for your

own actions, learn from

mistakes when they happen.

Be respectful to all; it is the

foundation of culture.

Be inclusive, always respecting

Be respectful to all; it is the

and valuing others.

foundation of culture.

Act how you want to

be treated; being kind,

considerate and respectful of

Be inclusive, always respecting

others and their opinions.

and valuing others.

Be respectful to all; it is the

Act how you want to

Be supportive and positive in

foundation of culture.

all your working relationships.

be treated; being kind,

considerate and respectful of

others and their opinions.

and valuing others.

of equality, diversity

Be supportive and positive in

and inclusivity.

all your working relationships.

Act how you want to

be treated; being kind,

Be open-minded and upfront

Value the importance

considerate and respectful of

with people.

others and their opinions.

of equality, diversity

and inclusivity.

Be supportive and positive in

all your working relationships.

Be open-minded and upfront

with people.

Be open-minded and upfront

with people.

own actions, learn from

Be fair and ethical in your work

Be inclusive, always respecting

Value the importance

Strive for excellence; it is what

our clients and colleagues

expect and what we

endeavour to deliver.

Strive for excellence; it is what

our clients and colleagues

Perform to the highest

expect and what we

professional standards.

endeavour to deliver.

Be innovative and pragmatic

Perform to the highest

with problem solving.

professional standards.

Strive for excellence; it is what

our clients and colleagues

expect and what we

Take pride in our work, paying

endeavour to deliver.

Be innovative and pragmatic

attention to detail.

with problem solving.

Perform to the highest

professional standards.

Be agile and flexible

Take pride in our work, paying

in your approach.

attention to detail.

Be innovative and pragmatic

Be curious and challenge

with problem solving.

constructively to improve how

Be agile and flexible

we work.

in your approach.

Take pride in our work, paying

attention to detail.

Be curious and challenge

constructively to improve how

we work.

Be agile and flexible

in your approach.

Value the importance

of equality, diversity

and inclusivity.

Be curious and challenge

constructively to improve how

we work.

www.filtronic.com Stock Code: FTCStrategic report

Our people continued

Thomas Manklow
RF Engineer

Why you were attracted to RF

Thomas Manklow
RF Engineer

I studied a general engineering course at Durham University, specialising in electronics part way through.
The two topics I found most interesting were Communications and Microwave engineering, both in
regard to the theory and operation but also the practical applications in how critical they are in modern
society. It is a field which is constantly changing and evolving, providing new challenges.

Why you were attracted to RF

What do you love most about your job

I really enjoy the practical work, including testing the products. For most of my first year I have been
heavily involved in build and testing to meet both internal and external delivery requirements, an
experience I have both enjoyed and found rewarding.

What do you love most about your job

Clare Atherton

Lead Operator

How long have you worked at Filtronic?

Clare Atherton

Lead Operator

I have worked at Filtronic for over 20 years.

What's the best thing about your job?

How long have you worked at Filtronic?

Being part of a great team that always

works well together, whether it is seeing new

I have worked at Filtronic for over 20 years.

products from development to full production

or meeting tight customer deadlines, I always

What's the best thing about your job?

feel the team pulls together and provides

support from all levels.

Being part of a great team that always

works well together, whether it is seeing new

products from development to full production

or meeting tight customer deadlines, I always

feel the team pulls together and provides

support from all levels.

Adele Pliscott
SiP Packaging Engineer

Why RF, what attracted you to this industry?

Adele Pliscott
SiP Packaging Engineer

RF engineering offers unique challenges, for
example, in order to support the electrical
designs, the selection of materials and
processes is critical.
Why RF, what attracted you to this industry?

Another aspect is that further technology
RF engineering offers unique challenges, for
advancements for RF create interesting
example, in order to support the electrical
challenges for which I enjoy overcoming
designs, the selection of materials and
these technical boundaries.
processes is critical.

Our values

Integrity

Why Filtronic?

Another aspect is that further technology
advancements for RF create interesting
challenges for which I enjoy overcoming
these technical boundaries.

Filtronic is highly recognised for its RF
abilities, from the initial telephone calls I
had prior to my employment I was extremely
happy with the discussions for technical,
business, and future vision for Filtronic.

Why Filtronic?

The leadership was inspiring and strong
whilst also offering my inclusion. The
marketing was active and the brand was
exciting and pushed the standards compared
to our competitors.

s
e
u
a
V

s
r
u
o
i
v
a
h
e
B

s
e
u
Integrity
a
V

Act with integrity; being
honest and fair, always
keeping our promises.

Excellence

Respect

Excellence

Strive for excellence; it is what
our clients and colleagues
expect and what we
endeavour to deliver.

Do the right thing, not the easy
thing, speak up if it’s not right.

Act with integrity; being
honest and fair, always
keeping our promises.

Deliver on your promises.

Be respectful to all; it is the
foundation of culture.

Respect

Perform to the highest
professional standards.

Strive for excellence; it is what
our clients and colleagues
expect and what we
endeavour to deliver.

Be inclusive, always respecting
and valuing others.

Be innovative and pragmatic
with problem solving.

Do the right thing, not the easy
thing, speak up if it’s not right.

Be truthful, always being
honest and open.

Deliver on your promises.

s
r
u
o
i
v
a
h
e
B

Be respectful to all; it is the
foundation of culture.

Act how you want to
be treated; being kind,
considerate and respectful of
others and their opinions.

Perform to the highest
professional standards.

Take pride in our work, paying
attention to detail.

Be fair and ethical in your work
and decision making.

Be inclusive, always respecting
and valuing others.

Be supportive and positive in
all your working relationships.

Be innovative and pragmatic
with problem solving.

Be agile and flexible
in your approach.

Be truthful, always being
honest and open.

Take responsibility for your
own actions, learn from
mistakes when they happen.

Act how you want to
be treated; being kind,
considerate and respectful of
others and their opinions.

Value the importance
of equality, diversity
and inclusivity.

Take pride in our work, paying
attention to detail.

Be curious and challenge
constructively to improve how
we work.

Be fair and ethical in your work
and decision making.

Take responsibility for your
own actions, learn from
mistakes when they happen.

Be supportive and positive in
all your working relationships.

Be open-minded and upfront
with people.

Be agile and flexible
in your approach.

Value the importance
of equality, diversity
and inclusivity.

Be curious and challenge
constructively to improve how
we work.

Be open-minded and upfront
with people.

Our people

Esther Sui

Software Development Engineer

What do you love most about your job?

Esther Sui

I have always had a passion for working on latest

Software Development Engineer

technology, as I love learning new things. My job allows

me to find creative ways to make it smarter, faster and

more cost-effective.

What do you love most about your job?

Why were you attracted to Filtronic?

I have always had a passion for working on latest

technology, as I love learning new things. My job allows

Filtronic is an innovative leader in RF, a well-respected

me to find creative ways to make it smarter, faster and

company whose technology directly impacts the daily

more cost-effective.

lives of millions of people who indirectly rely on their

technology. Filtronic’s mission and values are also well

Why were you attracted to Filtronic?

aligned with my personal attitudes and goals in life.

Filtronic is an innovative leader in RF, a well-respected

I wanted to work for an organisation that’s leading the

company whose technology directly impacts the daily

future of it's industry, one that doesn’t stand still.

lives of millions of people who indirectly rely on their

technology. Filtronic’s mission and values are also well

aligned with my personal attitudes and goals in life.

I wanted to work for an organisation that’s leading the

future of it's industry, one that doesn’t stand still.

Tim Hargreaves

Assistant Management Accountant

What do you love most about your job?

Tim Hargreaves

Assistant Management Accountant

helpful and willing to go that extra mile.

What's a typical day look like?

What do you love most about your job?

Working with the other departments and stakeholders. Everyone at Filtronic is extremely

Working in Finance, you rarely have two days that are the same. The morning will start with

Working with the other departments and stakeholders. Everyone at Filtronic is extremely

replying to emails from the US, resolving any questions.

helpful and willing to go that extra mile.

I will then usually have a range of ERP development and support, key analysis of current or

What's a typical day look like?

historic financial data to identify trends or project work combining multiple sets of data into

a presentation for key stakeholders.

Working in Finance, you rarely have two days that are the same. The morning will start with

replying to emails from the US, resolving any questions.

Between these tasks, there will usually be some ad hoc requests from other departments

which depending on the complexity, will also be completed during the day.

I will then usually have a range of ERP development and support, key analysis of current or

historic financial data to identify trends or project work combining multiple sets of data into

On an evening after work, I will usually be studying at home to complete my CIMA

a presentation for key stakeholders.

qualification to become a qualified accountant. Filtronic has been rally supportive in helping

me work towards this goal through funding the exams and offering flexibility in my working

Between these tasks, there will usually be some ad hoc requests from other departments

hours to fit around the course requirements.

which depending on the complexity, will also be completed during the day.

On an evening after work, I will usually be studying at home to complete my CIMA

www.filtronic.com

qualification to become a qualified accountant. Filtronic has been rally supportive in helping

me work towards this goal through funding the exams and offering flexibility in my working

hours to fit around the course requirements.

www.filtronic.com

Filtronic plc Annual Report and Accounts 2023

Sustainability report
Environmental Social Governance

At Filtronic we have developed an ESG and sustainability strategy that works in unison with our
At Filtronic we have developed an ESG and sustainability strategy that works in unison with our corporate
corporate goal to create value for our customers through technology leadership.
goal to create value for our customers through technology leadership. The aim of the strategy is simple. We
will focus on deliverable ESG goals aligned with our corporate strategic targets.
The aim of the strategy is simple. Filtronic will focus on deliverable ESG goals aligned with our
corporate strategic targets.

Key Objectives

ENVIRONMENTAL

SOCIAL

GOVERNANCE

1. Minimise the environmental
impacts of our own activities
and reduce our energy usage
per £ of revenue generated
(reducing carbon intensity
whilst supporting growth)

2. Improve our use of sustainable
resources by operational site

3. Reduce paper and
packaging waste

4. Focus on our work to meet
Scope 1 and 2 Greenhouse
Gas (“GHG”) Emissions
of Net Zero

1. Equality, diversity and inclusion
(“EDI”) in the workplace and
encourage greater gender
power balance

2. Provide a great place to
work for our employees
enabling them to learn and
develop, creating professional
opportunities

3. Engage with our employees,
keep them informed and pay
fair salaries

4. Support STEM initiatives

in the local community and
provide quality employment
for young people through
apprenticeships and
graduate recruitment

1. Provide a robust cyber security
framework protecting the data
we hold

2. Comply with export control

requirements

3. Maintain strong and enforced
policies and procedures and
promote a strong code of
conduct and ethical behaviour
in our business

We are committed to enhancing our impact on the world
with a robust and clear ESG strategy. Within each area
we’ve highlighted clear objectives which aim to focus
our efforts and ensure that we are able to maximise
our impact by focusing on the key areas where we can
engage and influence our stakeholders. Our objectives

are thought through, aligned to our corporate strategy
and aligned to the UN Global Goals, so we can best
position our skills and experience to work towards
building prosperity for all. We have a clear roadmap
ahead of us and we look forward to delivering on our
commitments to these goals.

www.filtronic.

www.filtronic.com Stock Code: FTCStrategic report

Sustainability report continued

Operating our business in a way that cares for the environment and people has never been more important
than it is today. The world is facing significant environmental and social challenges with climate change,
environmental destruction, energy availability and increased costs of living.

As a designer and manufacturer of RF technology
equipment we are proud of our role in enabling wireless
communications. This has provided the world with many
benefits including reduced travel needs and enabling
remote working whilst providing social benefits of
improved communications with our family and friends.
However, we recognise that we have a part to play in
helping to tackle the challenges facing the planet and its
people today.

Filtronic take this responsibility seriously and are working
to create a sustainable business fit for the future, delivering
consistent financial returns and long-term value to our
employees, customers, suppliers, shareholders alike. A
business that embraces its environmental obligations,
provides opportunities for its employees to learn and
develop whilst maintaining a healthy and safe environment
and promotes STEM skills in the local community offering
opportunities to its people.

Filtronic takes these ESG responsibilities to the heart of
its business operations. In addition to complying with
the Quoted Companies Alliance (“QCA”) Governance
Code, Filtronic has in place international trademarks
and recognised accreditations for Information Security
(IASME Governance Gold and Cyber Essentials Plus),
Quality Management (ISO9001), Environmental
Quality Management (ISO14001) and defence industry
compliance such as JOSCAR. Together, these systems
embed a strong culture of sound, ethical values and
behaviour within the Group. Never complacent, we are
always striving to do more and continually improve.

Filtronic has made significant progress over the last year
in terms of its ESG agenda. Whilst we have been actively
operating within a strong ESG framework, we had not
formally documented and published our ESG strategy
or set a baseline from which to measure and manage
performance, nor had we put in the public domain the key
objectives that matter to us and our stakeholders.

During the year, we undertook a review to inform our
formalised ESG strategy. This included an identification
phase of the key issues we wanted to form our objectives
of the strategy and a baseline measurement from which to
gauge performance.

In identifying our objectives, we were clear our framework
would have at its core:

A sustainable business plan
A sustainable organisation plan
A sustainable climate and waste plan
An ethical and values-based approach to conduct,
governance, regulation and the rule of law

Identification of ESG issues
To identify the key environmental, social and governance
issues that are a priority for Filtronic we undertook an
exercise to identify the ESG issues of significance to our
Group, stakeholders and industry. This resulted in 61 issues
identified and categorised as follows:
• Environmental (23)
• Social (22)
• Governance (16)

Prioritisation
This list was condensed, following a review by the Senior
Leadership Team of the Group, focussing on the issues that
mattered to Filtronic, aligned to our corporate strategy and
focused on areas where we could make an impact. The list
of 11 priority items emerged and these in turn were linked
to the UN Sustainable Development Goals to ensure we
were focussed on the issues that were of global relevance
for sustainable development. These strategic objectives
can be seen below along with a plan for the next financial
year to continually improve our impact on the environment
and society.

The ESG strategy has now been published and a new
dedicated section of the Filtronic website has been created.
We would encourage our stakeholders to look at both the
website and the brochure to understand our vision of how
we intend to support sustainability. The brochure sets out
Filtronic’s approach to ESG including our strategy and
key objectives. The web address is www.filtronic.com/
investors/esg-strategy/.

Environmental, Social and
Governance (ESG) Strategy
Filtronic’s vision and commitment on ESG

filtronic.com

that delivers growth for shareholders and has purpose

that is future focussed on how we deliver

that is for all and has a positive impact in a broad sense

that demands integrity and ethical behaviour

Filtronic plc Annual Report and Accounts 2023
Identification of ESG issues

Identification of ESG issues

To identify the key environmental, social and governance issues that are a priority for Filtronic we

undertook an exercise to identify the ESG issues of significance to our Group, stakeholders and

To identify the key environmental, social and governance issues that are a priority for Filtronic we

undertook an exercise to identify the ESG issues of significance to our Group, stakeholders and

industry. This resulted in 61 issues identified and categorised as follows:

undertook an exercise to identify the ESG issues of significance to our Group, stakeholders and

industry. This resulted in 61 issues identified and categorised as follows:

• Environmental (23)

• Social (22)

• Environmental (23)

• Social (22)

• Governance (16)

• Social (22)

• Governance (16)

Prioritisation

This list was condensed, following a review by the senior leadership team of the Group, focussing

on the issues that mattered to Filtronic, aligned to our corporate strategy and focused on areas

This list was condensed, following a review by the senior leadership team of the Group, focussing

on the issues that mattered to Filtronic, aligned to our corporate strategy and focused on areas

where we could make an impact. The list of 11 priority items emerged and these in turn were

on the issues that mattered to Filtronic, aligned to our corporate strategy and focused on areas

where we could make an impact. The list of 11 priority items emerged and these in turn were

linked to the UN Sustainable Development Goals to ensure we were focussed on the issues that

where we could make an impact. The list of 11 priority items emerged and these in turn were

linked to the UN Sustainable Development Goals to ensure we were focussed on the issues that

were global relevance for sustainable development. These strategic objectives can be seen below

along with a plan for the next financial year to continually improve our impact on the

environment and society.

Environmental

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
minimising our impact on natural resources. As well as operating in compliance with all relevant
minimising our impact on natural resources. As well as operating in compliance with all relevant
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
statutory and regulatory obligations, the Group strives to implement environmental best practices
statutory and regulatory obligations, the Group strives to implement environmental best practices
statutory and regulatory obligations, the Group strives to implement environmental best practices
throughout our activities and continually improve our environmental management system to
throughout our activities and continually improve our environmental management system to
throughout our activities and continually improve our environmental management system to
throughout our activities and continually improve our environmental management system to
enhance our environmental performance.
enhance our environmental performance.
enhance our environmental performance.
enhance our environmental performance.
The Group supports, trains and encourages its employees to act responsibly in all matters relating to
The Group supports, trains and encourages its employees to act responsibly in all matters relating to
The Group supports, trains and encourages its employees to act responsibly in all matters relating to
The Group supports, trains and encourages its employees to act responsibly in all matters relating to
the environment.
the environment.
the environment.
the environment.
The Group takes account of relevant legislation and regulations and analyses its practices, processes
The Group takes account of relevant legislation and regulations and analyses its practices, processes
The Group takes account of relevant legislation and regulations and analyses its practices, processes
The Group takes account of relevant legislation and regulations and analyses its practices, processes
and products to reduce their environmental impact. We also work with our customers and suppliers
and products to reduce their environmental impact. We also work with our customers and suppliers
and products to reduce their environmental impact. We also work with our customers and suppliers
and products to reduce their environmental impact. We also work with our customers and suppliers
to achieve a high standard of environmental stewardship. Filtronic looks forward to receiving and
to achieve a high standard of environmental stewardship. Filtronic looks forward to receiving and
to achieve a high standard of environmental stewardship. Filtronic looks forward to receiving and
to achieve a high standard of environmental stewardship. Filtronic looks forward to receiving and
implementing the UK government’s flow down to industry of its net-zero carbon target which will
implementing the UK government’s flow down to industry of its net-zero carbon target which will
implementing the UK government’s flow down to industry of its net-zero carbon target which will
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 offsetting the
involve measuring carbon emissions and implementing policies for carbon reduction or offsetting the
involve measuring carbon emissions and implementing policies for carbon reduction or offsetting the
involve measuring carbon emissions and implementing policies for carbon reduction or offsetting the
carbon that is released.
carbon that is released.
carbon that is released.
carbon that is released.

Environmental Core Objectives
Environmental Core Objectives
Environmental Objectives
Environmental Core Objectives
Environmental Core Objectives

The Group supports, trains and encourages its
employees to act responsibly in all matters relating to the
1) We will actively encourage our employees to reduce our energy usage. We will do this by
1) We will actively encourage our employees to reduce our energy usage. We will do this by
1) We will actively encourage our employees to reduce our energy usage. We will do this by
1) We will actively encourage our employees to reduce our energy usage. We will do this by
environment.
conserving energy, water and natural resources through increased business efficiencies
conserving energy, water and natural resources through increased business efficiencies
conserving energy, water and natural resources through increased business efficiencies
conserving energy, water and natural resources through increased business efficiencies
and employee awareness schemes. As a manufacturing and engineering company with
and employee awareness schemes. As a manufacturing and engineering company with
and employee awareness schemes. As a manufacturing and engineering company with
and employee awareness schemes. As a manufacturing and engineering company with
plans for business growth, it is likely our energy consumption will increase as output
plans for business growth, it is likely our energy consumption will increase as output
plans for business growth, it is likely our energy consumption will increase as output
plans for business growth, it is likely our energy consumption will increase as output
increases, but we can manage this by focussing on the amount of energy consumption
increases, but we can manage this by focussing on the amount of energy consumption
increases, but we can manage this by focussing on the amount of energy consumption
increases, but we can manage this by focussing on the amount of energy consumption
we have per £ of revenue.
we have per £ of revenue.
we have per £ of revenue.
we have per £ of revenue.

The Group is committed to protecting the environment
Our environmental strategy focuses on four key areas:
Our environmental strategy focuses on four key areas:
Our environmental strategy focuses on four key areas:
Our environmental strategy focuses on four key areas:
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. As we have now formally
documented our ESG strategy, we have collected baseline
data of our current performance to enable us to track and
monitor progress improvements.

The Group takes account of relevant legislation and
regulations and analyses its practices, processes and
products to reduce their environmental impact. We
also work with our customers and suppliers to achieve
a high standard of environmental stewardship. Filtronic
looks forward 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 offsetting
the carbon that is released.

What we do

What we’ll do next

Reduce our
energy usage

• Metering and monitoring in place at a room

level

• Motion sensors on all our lighting
• Invested in newer more-efficient machinery

• Implement LED lighting
• Energy saving equipment
• Education sessions in high-energy

consumption areas

Sustainable
resources

• NetPark and Manchester supplied with

• Convert our Leeds site to 100% sustainable

100% sustainable energy

• Cycle-to-work scheme in place
• Electric vehicle charging points
• Adopted a hybrid working policy

energy in line with our Sedgefield and
Manchester sites

• Seek opportunities to create renewable

power

• Open an electric car scheme for employees
• Switch to recycled materials removing single

use resources where possible

Reduce
paper and
packaging
waste

• Removed foam from our shipping

• Identification of key waste driving activities

packaging; replaced with cardboard

by site

• Implemented docuSign to reduce our need

• Remove single use plastics from our

to print documents to sign

operations

• Implemented digital systems with workflow
for HR processes, expense management
and timesheets

• Move business processes to digital including
document signature, accounts payable
processing etc

www.filtronic.com Stock Code: FTCStrategic report

Sustainability report continued

Social objectives
Social objectives
Social objectives
Social objectives
Social objectives
Social objectives

Our core values of integrity, honesty and respect,
Our core values of integrity, honesty and respect, combined with a strong culture and an agreed
Our core values of integrity, honesty and respect, combined with a strong culture and an agreed
Our core values of integrity, honesty and respect, combined with a strong culture and an agreed
Our core values of integrity, honesty and respect, combined with a strong culture and an agreed
Our core values of integrity, honesty and respect, combined with a strong culture and an agreed
combined with a strong culture and an agreed set of
set of behaviours are critical to our future development. The ‘Our People’ section of this Annual
set of behaviours are critical to our future development. The ‘Our People’ section of this Annual
set of behaviours are critical to our future development. The ‘Our People’ section of this Annual
set of behaviours are critical to our future development. The ‘Our People’ section of this Annual
set of behaviours are critical to our future development. The ‘Our People’ section of this Annual
Report and Accounts sets out how we engage with our employees, providing opportunities and
Report and Accounts sets out how we engage with our employees, providing opportunities and
Report and Accounts sets out how we engage with our employees, providing opportunities and
Report and Accounts sets out how we engage with our employees, providing opportunities and
Report and Accounts sets out how we engage with our employees, providing opportunities and
behaviours are critical to our future development. The
an environment to flourish with everyone given an equal opportunity. It also covers key social
an environment to flourish with everyone given an equal opportunity. It also covers key social
an environment to flourish with everyone given an equal opportunity. It also covers key social
an environment to flourish with everyone given an equal opportunity. It also covers key social
an environment to flourish with everyone given an equal opportunity. It also covers key social
‘Our People’ section of this Annual Report and Accounts
points such as employee rewards, behaviours, culture and conduct.
points such as employee rewards, behaviours, culture and conduct.
points such as employee rewards, behaviours, culture and conduct.
points such as employee rewards, behaviours, culture and conduct.
points such as employee rewards, behaviours, culture and conduct.
sets out how we engage with our employees, providing
Filtronic recognises that it not only makes a difference to its own employees but also the wider
Filtronic recognises that it not only makes a difference to its own employees but also the wider
Filtronic recognises that it not only makes a difference to its own employees but also the wider
Filtronic recognises that it not only makes a difference to its own employees but also the wider
Filtronic recognises that it not only makes a difference to its own employees but also the wider
opportunities and an environment to flourish with
community. This latter point is particularly pertinent to our ESG strategy as we can provide
community. This latter point is particularly pertinent to our ESG strategy as we can provide
community. This latter point is particularly pertinent to our ESG strategy as we can provide
community. This latter point is particularly pertinent to our ESG strategy as we can provide
community. This latter point is particularly pertinent to our ESG strategy as we can provide
everyone given an equal opportunity. It also covers key
quality education, training and employment within the local community as well as supporting
quality education, training and employment within the local community as well as supporting
quality education, training and employment within the local community as well as supporting
quality education, training and employment within the local community as well as supporting
quality education, training and employment within the local community as well as supporting
social points such as employee rewards, behaviours,
local charities and foundations to help build a sustainable society.
local charities and foundations to help build a sustainable society.
local charities and foundations to help build a sustainable society.
local charities and foundations to help build a sustainable society.
local charities and foundations to help build a sustainable society.
culture and conduct.
The social objectives within our strategy are set out below:
The social objectives within our strategy are set out below:
The social objectives within our strategy are set out below:
The social objectives within our strategy are set out below:
The social objectives within our strategy are set out below:

Filtronic recognises that it not only makes a difference
to its own employees but also the wider community.
This latter point is particularly pertinent to our ESG
strategy as we can provide quality education, training
and employment within the local community as well as
supporting local charities and foundations to help build a
sustainable society.

1) Actively promote equality, diversity and inclusion (“EDI”) in the workplace and
1) Actively promote equality, diversity and inclusion (“EDI”) in the workplace and
1) Actively promote equality, diversity and inclusion (“EDI”) in the workplace and
1) Actively promote equality, diversity and inclusion (“EDI”) in the workplace and
1) Actively promote equality, diversity and inclusion (“EDI”) in the workplace and

encourage greater gender power balance.
encourage greater gender power balance.
encourage greater gender power balance.
encourage greater gender power balance.
encourage greater gender power balance.

What we’ll do next

• Develop a clear EDI strategy and

• Promote Filtronic as a female-friendly

communicate it

workplace

• Promote females in STEM disciplines
• Promote diversity
• EDI surveys
• Positive actions to increase the ratio of female

managers and engineers

• Apprenticeships
• Create a knowledge sharing environment
• Continue to upskill our employees
• Utilise supported stretch assignments

to facilitate personal development and
progression

What we do

In our approach to building the talent pool and workforce we do so by ensuring equal
In our approach to building the talent pool and workforce we do so by ensuring equal
In our approach to building the talent pool and workforce we do so by ensuring equal
In our approach to building the talent pool and workforce we do so by ensuring equal
In our approach to building the talent pool and workforce we do so by ensuring equal
opportunities for all and actively promote a diverse workforce. We recognise that
opportunities for all and actively promote a diverse workforce. We recognise that
opportunities for all and actively promote a diverse workforce. We recognise that
opportunities for all and actively promote a diverse workforce. We recognise that
opportunities for all and actively promote a diverse workforce. We recognise that
Actively
females in STEM roles and engineering disciplines are under-represented nationally in the
females in STEM roles and engineering disciplines are under-represented nationally in the
females in STEM roles and engineering disciplines are under-represented nationally in the
females in STEM roles and engineering disciplines are under-represented nationally in the
females in STEM roles and engineering disciplines are under-represented nationally in the
• Regular analysis of workforce demographics
UK. We are actively promoting a female-friendly workplace to encourage more women
UK. We are actively promoting a female-friendly workplace to encourage more women
UK. We are actively promoting a female-friendly workplace to encourage more women
UK. We are actively promoting a female-friendly workplace to encourage more women
UK. We are actively promoting a female-friendly workplace to encourage more women
promote
• EDI training
into engineering at Filtronic and offer the same opportunities to everyone regardless of
into engineering at Filtronic and offer the same opportunities to everyone regardless of
into engineering at Filtronic and offer the same opportunities to everyone regardless of
into engineering at Filtronic and offer the same opportunities to everyone regardless of
into engineering at Filtronic and offer the same opportunities to everyone regardless of
equality,
• Non-discriminatory working practices and
gender.
gender.
gender.
gender.
gender.
diversity and
Improve awareness of EDI issues in the workplace;
o
Improve awareness of EDI issues in the workplace;
Improve awareness of EDI issues in the workplace;
Improve awareness of EDI issues in the workplace;
o
o
o
Improve awareness of EDI issues in the workplace;
o
inclusion
• Value the individual
o Promote diversity and inclusion in the workplace;
o Promote diversity and inclusion in the workplace;
o Promote diversity and inclusion in the workplace;
o Promote diversity and inclusion in the workplace;
o Promote diversity and inclusion in the workplace;
(“EDI”) in the
o Ensure our business environment and opportunities are inclusive for everyone to
o Ensure our business environment and opportunities are inclusive for everyone to
o Ensure our business environment and opportunities are inclusive for everyone to
o Ensure our business environment and opportunities are inclusive for everyone to
• Female-to-male ratio in our engineering
o Ensure our business environment and opportunities are inclusive for everyone to
workplace
function is above the national average

best achieve their potential;
best achieve their potential;
best achieve their potential;
best achieve their potential;
best achieve their potential;

o Recruiting and managing based on competence and performance regardless of
o Recruiting and managing based on competence and performance regardless of
o Recruiting and managing based on competence and performance regardless of
o Recruiting and managing based on competence and performance regardless of
o Recruiting and managing based on competence and performance regardless of

policies

age, ethnicity, gender or cultural background;
age, ethnicity, gender or cultural background;
age, ethnicity, gender or cultural background;
age, ethnicity, gender or cultural background;
age, ethnicity, gender or cultural background;

Learning and
development
culture

o Fostering a culture of EDI;
o Fostering a culture of EDI;
o Fostering a culture of EDI;
o Fostering a culture of EDI;
o Fostering a culture of EDI;
o Providing training and career development opportunities which is inclusive and
o Providing training and career development opportunities which is inclusive and
o Providing training and career development opportunities which is inclusive and
o Providing training and career development opportunities which is inclusive and
o Providing training and career development opportunities which is inclusive and
• Career development and guidance for

based on merit;
based on merit;
based on merit;
based on merit;
based on merit;

o Build an inclusive community, creating a safe and open environment for
o Build an inclusive community, creating a safe and open environment for
o Build an inclusive community, creating a safe and open environment for
o Build an inclusive community, creating a safe and open environment for
o Build an inclusive community, creating a safe and open environment for
everyone to talk, share ideas and have a sense of belonging; and
everyone to talk, share ideas and have a sense of belonging; and
everyone to talk, share ideas and have a sense of belonging; and
everyone to talk, share ideas and have a sense of belonging; and
everyone to talk, share ideas and have a sense of belonging; and

everyone

o Promote inclusive behaviour.
o Promote inclusive behaviour.
o Promote inclusive behaviour.
o Promote inclusive behaviour.
o Promote inclusive behaviour.

• Provide training and development
programmes for all colleagues
2) As a technology business with a significant reliance on engineering talent and STEM skills
2) As a technology business with a significant reliance on engineering talent and STEM skills
2) As a technology business with a significant reliance on engineering talent and STEM skills
2) As a technology business with a significant reliance on engineering talent and STEM skills
2) As a technology business with a significant reliance on engineering talent and STEM skills
• Filtronic Leadership Academy
we place a heavy emphasis on quality education. We recognise that our employees are
we place a heavy emphasis on quality education. We recognise that our employees are
we place a heavy emphasis on quality education. We recognise that our employees are
we place a heavy emphasis on quality education. We recognise that our employees are
we place a heavy emphasis on quality education. We recognise that our employees are
• Regulatory and mandatory training
essential to the successful delivery of our business strategy and to sustain our long-term
essential to the successful delivery of our business strategy and to sustain our long-term
essential to the successful delivery of our business strategy and to sustain our long-term
essential to the successful delivery of our business strategy and to sustain our long-term
essential to the successful delivery of our business strategy and to sustain our long-term
performance we will build skills for the future and foster a culture of high performance.
• Expert speakers
performance we will build skills for the future and foster a culture of high performance.
performance we will build skills for the future and foster a culture of high performance.
performance we will build skills for the future and foster a culture of high performance.
performance we will build skills for the future and foster a culture of high performance.
This includes offering opportunities for our people to learn and develop with initiatives
This includes offering opportunities for our people to learn and develop with initiatives
This includes offering opportunities for our people to learn and develop with initiatives
This includes offering opportunities for our people to learn and develop with initiatives
This includes offering opportunities for our people to learn and develop with initiatives
• Technology Leadership Awards for patents,
including the upskilling of our managers and the future leaders of our business through
including the upskilling of our managers and the future leaders of our business through
including the upskilling of our managers and the future leaders of our business through
including the upskilling of our managers and the future leaders of our business through
including the upskilling of our managers and the future leaders of our business through
the Filtronic Leadership Academy and promotion of continuous improvement throughout
the Filtronic Leadership Academy and promotion of continuous improvement throughout
the Filtronic Leadership Academy and promotion of continuous improvement throughout
the Filtronic Leadership Academy and promotion of continuous improvement throughout
the Filtronic Leadership Academy and promotion of continuous improvement throughout
the business.
the business.
the business.
the business.
the business.

conference papers and peer reviewed
publications

• Detailed training needs analysis from

appraisal process

• Assign an Executive sponsor to all graduate

recruits

• Encourage networking and industry event

attendance

• Comprehensive induction process, for all new

starters

Filtronic plc Annual Report and Accounts 2023

Social objectives (continued)

What we do

What we’ll do next

• Fair pay and reward structure with regular

benchmarking

• Excellent benefits package including access

to wellbeing support

• Flexible working available
• Celebrate long-term service with awards
• New values embedded in the business
• Town hall meetings and team meetings
• T-card system for continuous improvement

and worker participation

• Employee engagement surveys

• 1 day paid leave given to all employees

undertaking charitable work

• Graduate recruitment

Engage
with our
employees
and pay fair
salaries

Support STEM
initiatives
in the local
community
and provide
quality
employment
for young
people

• Increase frequency of communication
• Assess current benefits suite, for ongoing

competitiveness and flexibility for individual
choices

• Implement the improvement actions from the

employee engagement survey

• Provide opportunities for local young people
• Build relationships with local learning

institutions

• Implement a structured graduate career

framework

• Support local organisations like the North-

East STEM Foundation

www.filtronic.com Stock Code: FTCStrategic reportEngage with our

Engage with our

employees and pay

fair salaries

• Increase frequency of communication

• Assess current benefits suite, for ongoing

competitiveness and flexibility for

individual choices

• Implement the improvement actions from

the employee engagement survey

What we do

What we’ll do next

• Assign an Executive sponsor to all

graduate recruits

• Encourage networking and industry

event attendance

• Comprehensive induction process,

for all new starters

• Fair pay and reward structure with

regular benchmarking

• Excellent benefits package including

access to wellbeing support

• Flexible working available

• Celebrate long-term service with

• New values embedded in the

• Town hall meetings and team

awards

business

meetings

• T-card system for continuous
• T-card system for continuous
improvement and worker
improvement and worker
participation
participation
• Employee engagement surveys
• Employee engagement surveys

34
Support STEM
Support STEM
initiatives in the local
initiatives in the local
community and
community and
provide quality
provide quality
employment for
employment for
young people
young people

• 1 day paid leave given to all
• 1 day paid leave given to all
employees undertaking charitable
employees undertaking charitable
work
work
• Graduate recruitment
• Graduate recruitment

Sustainability report continued

• Provide opportunities for local young
• Provide opportunities for local young
people
people
• Build relationships with local learning
• Build relationships with local learning
institutions
institutions
• Implement a structured graduate career
• Implement a structured graduate career
framework
framework
• Support local organisations like the North-
• Support local organisations like the North-
East STEM Foundation
East STEM Foundation

Governance objectives
Governance Objectives
Governance Objectives

The Board and our management team will drive the ESG
Filtronic have always believed that sound governance is
Filtronic have always believed that sound governance is fundamental to the long-term success of
Filtronic have always believed that sound governance is fundamental to the long-term success of
agenda. We recognise that good governance will be key
fundamental to the long-term success of the Company
the Company and we follow the Quoted Companies Alliance (“QCA”) Corporate Governance Code
the Company and we follow the Quoted Companies Alliance (“QCA”) Corporate Governance Code
to ensuring the changes are embedded throughout the
and we follow the QCA Corporate Governance Code
which gives a firm foundation for our governance structure. Having been listed on the London
which gives a firm foundation for our governance structure. Having been listed on the London
business.
Stock Exchange since 1994, the business has a robust approach to governance, but we can always
Stock Exchange since 1994, the business has a robust approach to governance, but we can always
which gives a firm foundation for our governance
strive for improvement.
strive for improvement.
structure. Having been listed on the London Stock
Exchange since 1994, the business has a robust approach
The Board and our management team will drive the ESG agenda. We recognise that good
The Board and our management team will drive the ESG agenda. We recognise that good
to governance, but we can always strive for improvement.
governance will be key to ensuring the changes are embedded throughout the business.
governance will be key to ensuring the changes are embedded throughout the business.

Compliance is critical to our operation, particularly as
we supply into sensitive markets such as aerospace and
defence , and therefore strong governance is at the heart
of how we conduct business.

Cyber
security

Export
Control

Strong and
enforced
policies and
procedures

What we do

What we’ll do next

• Cyber Essentials Plus
• Defence Assurance Risk Tool (“DART”)
• IASME Governance Gold

• Robust internal control framework
• Trained personnel
• Regular communication with an export

control expert

• Gain IASME Cyber Assurance Level 2
• Scope and plan for ISO27001

• Training courses for those with export control

responsibility

• Review our controls and continually improve

• Strong Boards and Committees providing

• Review and approve our policies and

procedures annually

• Develop the ESG strategy further
• Ensure employees are suitably trained on
policies and conduct which are enforced
throughout the organisation

strategic oversight and governance support
• Adherence to QCA Corporate Governance

Code

• Strong suite of Group policies and internal

controls annually reviewed

• Clearly defined and strong company vision

and culture

• Maintenance of appropriate accreditations

and internal audits

• Robust internal branding and document

control

• Annual Report published each year reporting
strategic, governance and financial progress

The FY2023 Strategic report has been reviewed and approved by the Board of Directors on 31 July 2023 and signed
on its behalf by

Michael Tyerman
Chief Financial Officer
31 July 2023

Filtronic plc Annual Report and Accounts 2023

Board of Directors

Executive Directors
Richard Gibbs (aged 64) : 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 44) : 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
Jonathan Neale (aged 60) : Non-Executive Chairman
Appointed to the Board: 15 November 2021
Committees:

Jonathan is Chair and Non-Executive Director of Filtronic. He also serves as a Non-
Executive Director for the engineering services business Contechs Holdings Ltd and is a
Trustee of the incorporated charity The Foundation for Science and Technology. Prior
to joining Filtronic, he spent seven years in defence electronics and electronic warfare,
10 years in commercial and defence aerospace with BAE systems and 20 years with
McLaren Group Ltd in executive positions across Formula 1, Automotive and Applied
Technology.

Peter (Pete) Magowan (aged 55) : Senior Independent Non-Executive Director
Appointed to the Board: 19 November 2018
Committees:

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 62) : Independent Non-Executive Director
Appointed to the Board: 1 January 2021
Committees:

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

Audit

Nominations

Remuneration

Governance reportwww.filtronic.com Stock Code: FTC36

Governance report

Dear Shareholder

I am pleased to present the Filtronic plc Governance report
for the year ended 31 May 2023.

The Board recognises the value of good corporate
governance as the basis for promoting the long-term
growth and sustainability of the business. Governance
arrangements are reviewed on an ongoing basis to
ensure they are fit for purpose and the Board continues to
consider that the Quoted Companies Alliance Corporate
Governance Code 2018 (“The Code”) provides the most
appropriate framework for governance for the Company’s
size and complexity. Throughout the year, we complied
with all principles of the Code except for the separation of
the Company Secretary role which is currently undertaken
by the Chief Financial Officer.

The Governance report includes the Corporate
governance statement, the Audit and Risk Committee
report, the Nominations Committee report and the
Directors’ remuneration report and describes how Filtronic
has applied the main principles of the Code during the
year. Further information on compliance can be found on
the Filtronic website at www.filtronic.com/investors.

I am aware that it is my responsibility to ensure that
Filtronic has the governance arrangements in place to
support effective leadership and promote the long-term
success of the Company and that these arrangements are
followed in practice.

Jonathan Neale,
Chairman
31 July 2023

Corporate governance statement
Introduction
The Board acknowledges the role that the ten QCA
Code principles has in providing structure to the Group’s
corporate governance framework. This section explains
how we have adopted the QCA Code, including those
provisions where we do not currently comply.

Principle 1 – Establish a strategy and business model
which promotes long-term value for shareholders
As explained fully within the strategic report of the Annual
Report, our strategy is focussed around four core areas:

• Telecommunications infrastructure: defending

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 coverage with
major customers requiring RF hybrid solutions;

• Aerospace: 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;

Notwithstanding the challenges posed by the
macroeconomic backdrop including inflationary
pressures, electronic component shortage and extended
lead-times during the year, the delivery of the strategy
continues and remains, front and centre, as the focus of
the Board’s attention. Our objective through the execution
of the strategy is to deliver shareholder value and medium-
long term growth. As a Board, we will ensure that we
continue to challenge ourselves and regularly consider
whether we are effective in delivering this objective.

Our business model and execution of the strategy is
underpinned by the governance framework outlined in this
section.

Principle 2 - Seek to understand and meet
shareholder needs and expectations
Great value is taken from maintaining open relationships
with our shareholders and the primary point of contact
in the Company for this function is the Chief Executive
Officer (“CEO”), supported by the Chief Financial Officer
(“CFO”) and the Chairman.

The CEO and CFO undertake an extensive programme
of individual meetings with shareholders at least twice a
year. Additionally, the Chairman is available to speak with
shareholders at their request. The Senior Independent
Director is also available as an 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 also helps the directors to understand the needs and
expectations of shareholders. The Group’s website has
a dedicated investor section to assist all shareholders.
Investors are welcome to send any questions or queries to
investor.relations@filtronic.com.

Principle 3 - Take into account wider stakeholder and
social responsibilities and their implication for long-
term success
The Group takes its corporate social responsibility
very seriously and is focussed on maintaining and
strengthening effective working relationships across
a wide range of stakeholders including shareholders,
employees, customers and suppliers.

Our stakeholder engagement recognises the materiality
and impact of our stakeholders on the achievement of the
Company’s strategy. The Section 172 (1) Statement and
Stakeholder engagement sections within the Governance
report provide more information on this.

The success of the Group’s strategy is part built upon the
maintenance of internal and external relationships and
good communication with stakeholders.

Filtronic plc Annual Report and Accounts 202337

Principle 4 – Embedded objective risk management
considering both opportunities and targets
throughout the organisation
The Group faces challenges in the execution of its business
strategy. The Board acknowledges that it has 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 Audit and Risk Committee have been delegated
responsibility to oversee risk management, and
undertakes regular reviews of the Group’s risk register
with a view to:

(i) ensuring the risk register is complete, appropriate

and up to date;

(ii) ensuring adequate processes are in place to detect

new or emerging risks;

(iii) reviewing risk exposures and any changes to the

status of risks in the risk register;

(iv) reviewing risk management assessment and

processes;

(v) reviewing risk mitigation measures and the
appropriateness of responses to risks;

(vi) reporting its findings to the Board.

Risk management, together with a robust set of systems
and internal controls are well established within the
business. The Risk Management Committee, made up
of the Senior Leadership Team in the business, meet on a
regular basis to maintain and review the risk register.

A comprehensive business planning process is also
completed on an annual basis including the long-range
plan which are reviewed and approved by the Board. This
ensures the resources in the Group are correctly aligned
with the business strategy. In addition, the Group conducts
regularly re-forecasts to ensure resources are aligned to
the ongoing needs of the business. During the year, the
Group’s results are compared against the business plan
which is reported monthly and discussed at each meeting
of the Board.

Principle 5 – Maintain the board as a well-
functioning, balanced team led by the Chairman
The Board is currently comprised of:

• the Non-Executive Chairman;

• two Executive Directors; and

• two Non-Executive Directors

The Non-Executive Directors are regarded by the Board
as being independent Non-Executive Directors.

The role of Company Secretary is currently undertaken
by the CFO. In compliance with the Code, the Board is
mindful of the need to develop plans to separate the roles
of CFO and Company Secretary at an appropriate time.

Board members are also able to take independent
professional advice at the Company’s expense in the
discharge of their duties.

There is a formal schedule of matters reserved for the

Board. To enhance the Board’s communication
with management and achieve greater operational
transparency, senior management from the sales and
marketing, operational and engineering organisations are
periodically invited to the board meeting to present their
key projects and deliverables.

Board meetings
The Board meets each month against a defined reporting
timetable and at times in between the scheduled meetings
when required. Board meetings are held at the Group’s
operational sites to enable local management teams to
present operational and strategic programme progress
to the Board. The Board believes this arrangement
gives greater transparency and enhanced relationships
between the management and the Board. During the
year, board meetings have been held in person at the
Sedgefield, Yeadon and Manchester sites.

Directors’ attendance FY2023
The Board normally schedules at least 10 meetings during
the year. Last year the Board met formally 10 times.

Jonathan Neale
Richard Gibbs
Michael Tyerman
Pete Magowan
John Behrendt

Meetings
attended

10/10
10/10
10/10
10/10
10/10

Principle 6 – Ensure that between them directors
have the necessary up-to-date experience, skills and
capabilities
At present, the Board is satisfied 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 reviewed at least annually
by the Nominations Committee, with a view to ensuring
it comprises the skills necessary for executing the
Company’s strategy.

Details of each director’s skills and experience can be
found in the directors’ biographies section. The members
of the Board bring a range of complementary skills and
experience from across markets in which the Group
operates.

Each member of the Board takes responsibility for
maintaining their skill set, which includes formal training
and seminars. The directors have also received briefings
and training in respect of AIM rules compliance and
Market Abuse Regulations.

When necessary, external advice is sought, on legal, HR,
financial and governance matters. The primary sources
are the Company’s Nomad and the Company’s lawyers.

Governance reportwww.filtronic.com Stock Code: FTC

Governance report continued

Principle 7 - Evaluate board performance based on
clear and relevant objectives, seeking continuous
improvements
The Board carries out an evaluation of its own
performance at the end of each 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 the Senior Independent Non-
Executive Director, in respect of the Chairman. The
combined feedback is discussed by the Board and actions
agreed with progress updates during the year.

As part of the Director’s induction process the Company
Secretary arranges an induction session with each new
director covering such matters as:

• Group and organisation structure,

• Filtronic’s values and group policies,

The Board monitors and promotes its corporate culture
assisted by the SLT, which includes the Head of HR. This
team plays a vital role in disseminating the Company’s
shared values with its employees. The SLT holds monthly
meetings, and its members are frequently invited to attend
sections of the board meeting 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, led by the Chairman, is committed to a high
standard of corporate governance across the Group,
recognising its importance in protecting shareholders
interests and long term success of the Group.

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;

• Review of business performance and delivery of

• an introduction to the AIM Rules for Companies,

results;

• the QCA Code,

• Market Abuse Regulation (“MAR”) and the terms of

reference for the Board’s committees.

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.

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 be the trusted
provider of innovative RF solutions. 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 and have formed partnerships in the
emerging market of space. These effective partnerships
have grown from having a strong value-based culture,
where all our employees are encouraged and supported
to:

• Act with integrity; being honest, 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.

• 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 distribution of authority.

Committees
The Board is supported by three committees:

• Audit and Risk Committee;

• Remuneration Committee; and

• 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 also meet
informally during the year to review and discuss board
composition and compensation.

Filtronic plc Annual Report and Accounts 202339

Principle 10 - Communicate how the Group is
governed and is performing by maintaining a
dialogue with shareholders and other relevant
stakeholders
The Company is committed to open communication
with all of its stakeholders. Communication with
shareholders is driven primarily through:

• the regulatory news service (“RNS”),

• the Filtronic website;

• the Annual General Meeting; and

• meetings after the Group’s interim and full year

preliminary accounts.

All shareholders receive a copy of the Annual Report
and Accounts either as hard copy or electronically
depending on shareholder preference. Copies of
historic annual reports and notices of general meetings
for the last five years are available on the Filtronic
website, as are the half-year results.

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. Communication
with employees takes place ordinarily through town

hall meetings 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 with all suppliers issued with the Filtronic
Supplier Code of Conduct which includes, but is not
limited to, its policies on issues such as 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: FTC40

Stakeholder engagement

The Board carefully considers stakeholder interests when making decisions on strategically important
matters as the directors discharge their duties in alignment with Section 172.

Section 172 (1) Statement
UK Companies Act 2006
In compliance with the
Companies Act 2006, the Board
are required to act in accordance
with a set of general duties. 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.

To achieve long term success,
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 executive 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.
The SLT is made up of the Chief
Executive Officer, Chief Financial
Officer, Chief Commercial Officer,
Chief Operating Officer, Head
of HR, Director of Programmes
and the Director of Technology).
They each submit a report 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 at board level.

Direct engagement of
Board members
The Executive Directors are in
daily contact with employees from
across the business to understand
key topics involving employees,
customers and suppliers which
are regularly shared with the
Board. Regular reporting of
customer engagement keeps the
Board up to date on customer
trends and feedback. A number
of board members had meetings
with shareholders during the year
to discuss strategy and business
performance.

• Consideration and approval of the FY2023 interim

report.

• Consideration and approval of the FY2024 business

plan and long-range forecast.

Governance
• Approval of the updated Group Policies including a

new Business Continuity policy and Conflict of Interest
policy as well as a revised Social Media policy.

• Approval of the ESG strategy, consulting with

shareholders.

• Endorsed a full suite of penetration tests of our cyber

environment.

• Update from shareholders in relation to strategy and

remuneration matters.

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
• Consideration and approval of an employee

engagement survey to get the views of our employees
on a range of key issues.

• Requested and considered a diversity and inclusion
report of the Group with the decision to have regular
updates given at board level in future.

• Considered succession planning at senior levels of the

business.

Strategy
• Considered the importance of ESG to the long-term

success of the Group and approved the newly devised
ESG strategy.

• Considered company performance against its strategy.

• Considered the technology roadmap and required

investment to undertake the developments.

• Update on new customer acquisition, strategic

milestones and consideration of shareholder value.

Filtronic plc Annual Report and Accounts 202341

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:

Stakeholder

How we engage

Key outcomes

Customers

The Board receives feedback from its customer facing
teams. Each key account has a dedicated account
management who acts 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.

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.

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.

We regularly participate in a wide range of trade
shows, conferences and symposia. They play an
important role in our business development planning.

Employees

The Executive Directors communicate with employees
through communication sessions and town hall
meetings 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.

Increased levels of engagement with customers at
a strategic level. A greater understanding of both
customer and market trend requirements better
informs the development and refinement of our own
strategy and technology roadmap to ensure we
support our customers to the best of our ability and
invest in the right capability to meet their needs.

Board-level engagement with our customers helps
convey our commitment to understand and meet their
business needs. Having customers onsite enables
them to see our capability and production facilities
demonstrating our credibility as a leading technology
company.

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.

Attendance at trade exhibitions and conferences has
materially increased over the last year as we have
added more events to our roster to actively promote
the business. This has facilitated key engagement,
not only with prospective customers, but also having
useful discussions with our existing clients.

Broad ranging and meaningful communication leads
to greater transparency throughout the business and
facilitates a more engaged, motivated and effective
team. This is done through a range of communication
channels including newsletters, emails to all employees
and discussion groups with management flow down
to employees and informal factory floor-walks.

The Group is an attractive employer, 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 including the newly introduced Filtronic
Leadership Academy to upskill all staff who have
managerial responsibility.

A better informed and consulted workforce is more
likely to be both better motivated and more effective.
The Group also operates a T-card system where
employees can offer ideas for business improvements
which are shared with the Executive Directors with the
aim of offering feedback to those that have taking the
time to share their views and a quarterly prize for the
best idea. The Board have also approved an annual
employee engagement survey to gain insight into
employees’ thoughts and attitudes towards their work
and overall environment.

Governance reportwww.filtronic.com Stock Code: FTC
42

Stakeholder engagement continued

Stakeholder

How we engage

Key outcomes

Employees
(continued)

Investors

Participation in the Company Sharesave scheme.

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.

Share scheme participation aligns the interests
of employees with shareholders giving staff the
opportunity to hold a stake in the company. The
Company has an active SAYE scheme in place which is
open to all employees.

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 during
the year with meetings offered both in person and
virtually.

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.
We were delighted to welcome shareholders back for
the 2022 AGM which was physically held in Sedgefield
with private investors encouraged to attend.

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. There is also
a regular newsletters which is sent to those individuals
that signup on the company website.

The Company’s broker, finnCap Ltd (“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.

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.

Suppliers

Our Supplier Code of Conduct is flowed down to
our supply chain to ensure compliance with social
responsibility and good governance policies.

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.

The Group aims to play fair with is suppliers and pay in
line with the contractual payment terms.

We respect that not everyone is “on-line” and continue
to provide shareholders with a choice to receive a hard
copy of the report.

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 team 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. We have enjoyed meetings at a number
of suppliers’ sites in the year, both nationally and
internationally.

We minimise our exposure to supplier related risks
by requiring them to adhere to our Supplier Code
of Conduct and group policies. They are required
to confirm they are not in conflict with these policies
before or during engagement.

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.

By playing fair with our suppliers we gain their respect,
support and commitment to meeting our own business
objectives.

Filtronic plc Annual Report and Accounts 202343

The Group’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 Sustainability report.

Standards of business conduct
The Board is committed to a culture of integrity and
openness. 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
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 business.

Governance reportwww.filtronic.com Stock Code: FTC44

Nominations Committee report

Membership
The members of the Nominations Committee and the
meetings attended in the year are:

Jonathan Neale (Chairman)
Pete Magowan
John Behrendt

Meetings
attended

3/3
3/3
3/3

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.

For terms of reference go to www.filtronic.com/investors/
aim-rule-26/

Dear Shareholder

I am pleased to present the Nominations Committee
Report for FY2023. This year the Committee continued
its focus on 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 Committee also took account of the results from
the annual board performance evaluation exercise
conducted in June 2022. The Committee plays a key role
in ensuring the effectiveness of the Board and its ability
to deliver long term success for the Company. As the
Chairman of the Committee, I review the results of this
exercise and share the feedback with the members of
the Board both individually to personalise the feedback
and as a collective. Nothing significant was raised as part
of this evaluation but some improvement actions were
identified which are highlighted below:

• A greater emphasis on the role of diversity and
inclusion and the important role it plays in high
performance organisations;

• The director induction process was too focussed on
directors’ duties. In future it will be more company-
specific, with emphasis on the strategy and business
plan;

• Succession planning improvements; and

• Keeping under review the combined role of the CFO
and Company Secretary with a plan to decouple the
role at the appropriate time.

As a result of this process, the Committee commissioned
a report from the Group’s Head of HR to review key
metrics to help the Board establish greater emphasis
on high performance culture in teams, driving talent
development through diversity and inclusion. This topic
is now on the regular committee agenda as we track
progress and see how the findings are being addressed
and implemented.

In the year ahead, the Committee will continue to work
on succession plans for the Board and key management
and to oversee any actions coming out of the board
effectiveness questionnaires that took place in June 2023
to ensure they are effectively implemented.

Jonathan Neale
Chairman, Nominations Committee
31 July 2023

Filtronic plc Annual Report and Accounts 2023

Activities of the Nominations Committee during the year

The Nominations Committee discharged its responsibilities during the year by:

Area of review

Activities undertaken

Board
appointments

• Reviewed the dual role of the Chief Financial Officer and Company Secretary in line with the

guidelines of the QCA code.

• Undertook a succession planning review of the Board and Senior Leadership Team.

Board performance
evaluation

Governance

• Conducted a rigorous board performance evaluation exercise and fed the results back as a

group and individually.

• Agreed the board effectiveness review strategy.

• Assessed the size and composition of the Board.
• Reviewed and approved the Committee’s terms of reference.
• Commissioned and considered a diversity and inclusion report.
• Reviewed compliance with the QCA code.

Diversity and inclusion
The Committee recognises the importance of a diverse
Board and is mindful of the issue of board diversity in
its succession plans. Company policy ensures that the
selection of directors and, in a wider context, employees
throughout the Group, as well as opportunities to progress
and develop will be based upon a range of factors
including skills, experience, qualifications, background
and values. There will be no discrimination or less
favourable treatment of employees or job applicants in
respect of age, race, religion, gender, sexual orientation,
pregnancy, disability or marital status.

Board evaluation
The Nominations Committee undertakes an annual
evaluation of the Board’s performance and effectiveness.
The results of the evaluation exercise are shared with
board members and any recommendations are discussed
and implemented if deemed to be an improvement.

New appointments and induction of directors
When identifying suitable candidates for board and
senior executive appointments, the Committee uses the
services of external advisers to facilitate the recruitment
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.

When a new director joins the Board a full and formal
induction process is undertaken including a briefing
session on AIM rules with our Nomad. The Company
Secretary is tasked with providing the new director with:

•

information about the Group including board and
committee minutes along with board papers from at
least the last six months;

• the Group’s policies, procedures and governance

information;

• analysis of the Company’s key shareholders and

share capital;

• guidance for directors on their legal and regulatory

responsibilities in an AIM-quoted company;

• guidance on corporate governance and board

effectiveness; and

• relevant information about the markets we operate.

As part of the induction process, the new director also:

• Attends a business briefing with the CEO and CFO;

• Has meetings with the other members of the Senior

Leadership Team; and

• Attends meetings with any other employees they

would like to see.

Governance reportwww.filtronic.com Stock Code: FTC46

Audit and Risk Committee report

Membership
The members of the Audit and Risk Committee and the
meetings attended in the year are:

John Behrendt (Chairman)
Jonathan Neale
Pete Magowan

Meetings
attended

4/4
4/4
4/4

Roles and responsibilities of the Audit and
Risk Committee
The Audit and Risk Committee operates within a
framework of approved terms of reference which
are reviewed annually along with its effectiveness;
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.

• Review the company’s risk management systems and
processes to ensure their adequacy and regularly
review the risk register to ensure it is complete and up
to date with appropriate risk mitigation measures in
place where required.

For terms of reference go to www.filtronic.com/investors/
aim-rule-26/

Dear Shareholder

I am pleased to present the report of the Audit and Risk
Committee.

The Audit and Risk Committee continues to fulfil a vital
role in the Group’s governance framework, providing
independent challenge and oversight of the accounting,
financial reporting and internal control processes,
risk management, the internal audit activity and the
relationship with the external auditor. This report outlines
how the Audit and Risk Committee has discharged its
responsibilities during the year and the key issues it has
considered in the year.

Meetings are generally held 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 external auditors attend when requested, as do
the outsourced 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 and Risk 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.

This year, the Committee focussed on controls relating to
cyber security and engaged a third-party to undertake
a series of penetration tests including, but not limited
to, external and internal pen tests, a phishing exercise,
website security and wi-fi vulnerabilities. The outcome
was very positive with only a small number of minor issues
to remedy, demonstrating the robust system we have put
in place.

The normal pattern of meetings follows the public
reporting and audit cycle, with meetings to consider the
external audit plan; the half year announcement and
the full year Annual Report and Accounts, the latter with
the external auditors’ observations and opinions. There
are at least two additional meeting in the year to review
the internal audit that has taken place in the year and
consider the key risks within the Group, how they are
managed and review the adequacy of the arrangements
to mitigate those risks.

As Chair 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.

Next year the Committee will focus on concluding the
tender process to appoint a new external auditor and
continue to monitor the Group’s risk management
systems.

John Behrendt
Chairman, Audit and Risk Committee
31 July 2023

Filtronic plc Annual Report and Accounts 2023

Activities of the Audit and Risk Committee during the year

During the year, the Audit and Risk Committee discharged its responsibilities by:

Area of review

Activities undertaken

Financial
reporting

External auditors

Risk management
and internal
controls

• 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 corporate governance and accounting standards and their impact.
• Review of the going concern basis for preparation of the financial statements including

consideration of the Group’s latest business plan and three-year outlook, cash flow forecast and
corresponding sensitivities on downside scenarios.

• 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,

independence and rep letter.

• Review of the external auditors’ compliance with ethical and professional guidance on Senior

Statutory Auditor rotation.

• Assessment of the effectiveness of the audit process.
• Recommendation regarding reappointment of the external auditors.
• Committee-only meeting with the Senior Statutory Auditor.
• Recommendation to undertake a tender process for the FY2024 external audit.

• Review of the Group’s risk management register.
• Specific focus on risks in the semiconductor supply chain, cost of living and wage inflation, cyber
security as well as the risk relating to the strategic objective of broadening the customer base.

• Review of the Group’s internal control system and assessment of the effectiveness of those

controls in minimising the impact of key risks.

• Review of the need for an internal audit function and determine what aspects of the Group’s

operations should be subject to outsourced internal audit scrutiny.

• Ensured cyber security was regularly reviewed.
• Reviewed the results of the internal audit undertaken.

Governance

• Review of the Committee’s terms of reference.
• Recommended training of Market Abuse Regulation (“MAR”) to all employees who have access

price sensitive information.

Governance reportwww.filtronic.com Stock Code: FTC48

Audit and Risk Committee report continued

Key accounting matters

Significant issue

The following key areas of risk and judgement have been identified and considered by the Audit and Risk Committee in
relation to the business activities and financial statements of the Group and Parent Company:

Significant issue

Committee action taken

Carrying value
of goodwill and
other intangible
assets

The Committee considered the judgements made in relation to the valuation methodology
adopted by management and the model inputs used. These are set out in note 16 to the financial
statements.
The Committee agreed with the judgements made by management and concluded that no
impairment of goodwill should be made in the financial statements of the Group.

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 product and
looked 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
was appropriate and consistent.

Carrying value
of the investment
in subsidiaries
(Parent Company)

The Committee considered the judgements made in relation to the valuation methodology
adopted by management and the model inputs used. These are set out in note 15 to the financial
statements.
The Committee agreed with the judgements made by management and concluded that the
impairment of the carrying value of the investment in the subsidiary in the financial statements of
the Parent Company was necessary.

Risk management and internal controls
Risk and risk management is delegated to the Audit and
Risk Committee although the overall responsibility for the
Group’s system of risk management and internal controls
remains with the Board.

The Group has well established risk management and
internal control processes that have been developed
since Filtronic was formed in 1977. The Audit and
Risk Committee confirms that the effectiveness of the
system of internal control, covering all material controls
including financial, operational, commercial and
compliance controls and risk management systems,
have been reviewed during the year. Further details of
risk management can be found in the Risk management
section of this Annual Report on page 21.

Auditor independence
Both the Audit and Risk Committee and PwC have
procedures in place to avoid the auditors’ objectivity and
independence being compromised.

The Committee performs its own assessment of auditor
independence satisfying itself on an annual basis that
suitable policies and procedures are in place to safeguard
the auditors’ independence and objectivity. This includes
having regard to length of service, provision of non-audit
services and the existence of any conflicts of interest.
On the latter point, the Company has a policy of not
employing anybody from the audit firm within five years
of their departure. The auditor also has open access to

the Chair of the Audit and Risk Committee and open lines
of discussion with the Committee to ensure there is no
influence by management.

As part of their 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 five years and therefore
the Senior Statutory Auditor is operating in accordance
with professional guidelines of serving no longer than five
years to maintain independence. However, given this is his
fifth year as Auditor on the engagement, it will also be his
last year.

External auditor
The Committee considers that PwC has carried out its
duties as the auditor in a diligent and professional manner.

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.

Filtronic plc Annual Report and Accounts 202349

Having completed its review, the Audit and Risk
Committee is satisfied that PwC remained effective and
independent in carrying out its responsibilities up to the
date of signing this report.

appointment of the successful audit firm will be proposed
to shareholders for approval at the forthcoming AGM, as
well as authorising the directors to determine the auditor’s
remuneration.

Fair, balanced and understandable
The Company’s management and the auditor confirmed
to the Audit and Risk 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
and Risk Committee, the Board has concluded that the
2023 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.

Whistleblowing
The Group has in place a Whistleblowing policy, which
sets out the formal process by which an employee, or other
stakeholder, may, in confidence, raise concerns about
possible malpractice in financial reporting, conduct or
other matters to an identifiable whistleblowing officer.

There were no incidents or concerns raised for
consideration during the year.

Anti-bribery
The Group has in place an Anti-Bribery policy, which
sets its zero-tolerance position. The policy provides the
principles for employees and other stakeholders that acts
as guidance on how to recognise and deal with issues that
may be considered as giving rise to bribery.

During the period there were no incidents reported that
required consideration.

External audit tender
At the date of approval of these financial statements
the Committee has agreed to initiate a process and
established a timetable to undertake an external audit
tender for the next financial year to 31 May 2024. The
decision to appoint a new auditor is expected to be made
by the Board in August 2023.

Once that process is completed, a resolution for the

Governance reportwww.filtronic.com Stock Code: FTC
50

Directors’ remuneration report

Membership
The members of the Remuneration Committee and the
number of meetings attended are:

Pete Magowan (Chairman)
Jonathan Neale
John Behrendt

Meetings
attended

3/3
3/3
3/3

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.

For terms of reference go to www.filtronic.com/investors/
aim-rule-26/

Dear Shareholder

On behalf of the Board, I am pleased to present the
Filtronic Directors’ remuneration report for the year
ended 31 May 2023. 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.

It is hard to recall a time when pay decisions were as
important as they are today whether this relates to the
determination of director salaries or protecting our
employees from inflationary pressures. The Committee
is very sympathetic to the increased cost of living our
employees are under, with inflation exceeding levels
seen for some time, but recognises the pay decisions we
take needs to reflect the current and future needs of the
business.

In determining pay awards consideration was given to
financial sustainability, enabling the business to produce
the returns it needs for further investment whilst ensuring
Filtronic remains an attractive proposition to retain and
attract the talent needed to deliver our business strategy.
Therefore, we undertook a benchmarking exercise
against similar businesses in terms of size and nature to
understand the competitive market. This resulted in salary
increases being awarded to the Executive Directors and
key management at a rate of 5%.

The ’Our People’ section of this Annual Report and
Accounts offers some greater insight into some of the
additional benefits our employees enjoy as well as some
of the access they get to third-party services for support
with their health and wellbeing.

The Committee reviewed the outcomes for the FY2023
annual incentive plan, recognising that shortages of
available electronic components were a key factor in
the Group not achieving the revenue target for the year.
However, the Committee determined that given the target
was not achieved, there should be no bonus payment
made to participants in the scheme.

The Committee also considered the performance-
related bonus plan to be implemented in FY2024, to
ensure it aligned with the interests of shareholders. As the
Company executes on its growth plans it was concluded

Filtronic plc Annual Report and Accounts 2023

that the revenue-based metric for the incentive scheme,
implemented in the prior year, formed the best metric to
assess performance against the scheme. The incentive
for FY2024 will be awarded for achieving stretching
targets against the FY2024 strategic business plan. The
Committee is confident this will drive the right behaviours
in the organisation to deliver long-term shareholder value
and ultimately increased revenue will lead to improved
levels of profit.

To support the long-range strategic plans and further
align the interests of the Executive Directors and key
management with shareholders, the Committee has been
assessing the success of the incumbent Employee Share
Option Plan (“ESOP”) scheme and is undertaking a review

to ensure it delivers a scheme that drives growth and
ultimately share price appreciation.

The main activities of the Committee in FY2023 are set out
in the table below. I hope you find this report gives a clear
account of the Committee’s approach and remuneration
outcomes for the year. We are committed to maintaining
an open dialogue with shareholders with regards to
remuneration and would welcome any comments or
concerns, relating to this report, that shareholders may
have.

Pete Magowan
Chairman, Remuneration Committee
31 July 2023

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

Share incentive
plans

• Set the remuneration for the Executive Directors and senior management as part of the annual

pay review.

• Assessed and approved the FY2023 bonus outcomes.
• Reviewed and approved the FY2024 performance-related bonus plan and assessed the

performance criteria remaining as a revenue based metric.

• Determined the performance targets for the 2024 annual bonus in line with Filtronic’s strategic

plans.

• Approved the grant of share options under the ESOP for the Executive Directors and key

management.

• Approved the grant of share options under the Save as you Earn Plan (“SAYE”) for the Executive

Directors and key management.

• Reviewed employee share scheme headroom availability.
• Reviewed the effectiveness of the current share option scheme and its alignment to the interests of

shareholders.

Governance

• Considered and approved the Annual Report and Accounts on remuneration.
• Reviewed and approved the Committee’s terms of reference.
• Reviewed compliance with the QCA code.

Governance reportwww.filtronic.com Stock Code: FTC52

Directors’ remuneration report continued

Details of the service contracts currently in place for directors are as follows:

Name

Executive service agreement appointment date

Key current terms

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 £214,436
Annual bonus
Health insurance
Long-term incentives

Base salary £144,233
Annual bonus
Health insurance
Long-term incentives
Pension

Name

Role

Non-Executive terms of appointment date

Fee

Notice
period

6 months

Notice
period

Jonathan Neale Chairman and Nominations Appointed to the Board on 15 November 2021 £60,000 6 months

Committee Chairman

Pete Magowan Remuneration Committee

Appointed to the Board on 19 November 2018 £40,000 3 months

Chairman

John Behrendt Audit and Risk Committee

Appointed to the Board on 1 January 2021

£40,000 3 months

Chairman

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

FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 FY2023 FY2022 FY2023 FY2022

Executive Directors
Richard Gibbs
Michael Tyerman

Non-Executive Directors
Jonathan Neale1
Pete Magowan
John Behrendt
Reg Gott2
Total

204
137

189
126

60
40
40
-
481

33
40
40
25
453

-
-

-
-
-
-
-

75
50

-
-
-
-
125

11
-

-
-
-
-
11

17
5

-
-
-
-
22

24
11

-
-
-
-
35

9
3

-
-
-
-
12

239
148

290
184

60
40
40
-
527

33
40
40
25
612

1Jonathan Neale was appointed to the Board on 15 November 2021.
2Reg Gott retired on 28 October 2021.

Filtronic plc Annual Report and Accounts 2023

Notes to the single figure table of remuneration for directors - audited
Taxable benefits
The Executive Directors are provided with private health insurance and life assurance. Richard Gibbs also receives a
monthly payment in lieu of a contribution to the Company pension scheme.

Incentive outcomes - FY2023
There was no bonus awarded relating to performance in FY2023.

Long-term incentives
The Executive Directors have long-term incentives as part of the Company’s share option plan. More details relating to
this can be found on page 54 in the ‘Management share option plan - audited’ section of the Directors’ remuneration
report.

Annual performance-related bonus plan - FY2024
An annual performance-related bonus plan has been introduced for the year ending 31 May 2024 which will reward the
Executive Directors and key management cash bonuses for delivering stretching revenue targets aligned to the FY2024
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
FY2023 FY2022
£000
11
11

Michael Tyerman
Total

11
11

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 2023, in the Company’s ordinary shares, which excludes
interests under the share option schemes, are set out below:

FY2023

FY2022

Richard Gibbs
Michael Tyerman
Jonathan Neale
Pete Magowan
John Behrendt

600,000
339,478
199,870
750,000
200,000
2,089,348

0.3%
0.2%
0.1%
0.3%
0.1%
1.0%

425,000
339,478
199,870
750,000
60,000
1,774,348

0.2%
0.2%
0.1%
0.3%
0.0%
0.8%

The above shareholdings include holdings of directors’ connected parties.

Governance reportwww.filtronic.com Stock Code: FTC

Directors’ remuneration report continued

Management share options scheme - audited
The Executive Directors who were serving at 31 May 2023 held the following options over the ordinary shares of the
Company:

Richard Gibbs
Richard Gibbs
Richard Gibbs

Michael Tyerman
Michael Tyerman
Michael Tyerman

Plan

ESOP
ESOP
SAYE

Exercise period

Option price

FY2023

FY2022

25/09/2023—24/09/2030
24/06/2024—23/06/2031
06/05/2024—05/11/2024

01/03/2019—28/02/2026
24/06/2024—23/06/2031
06/05/2024—05/11/2024

8.00p
11.12p
6.67p

5.37p
11.12p
6.67p

750,000
245,448
35,622

300,000
479,988
58,290
1,869,348

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. The ESOPs granted in
June 2021 to Richard Gibbs, Michael Tyerman and key management were granted for the delivery of stretched targets of
revenue with the options vesting at various incremental increases of agreed targets.

There are no performance conditions attached to the ESOP options granted to Richard Gibbs, vesting in 2023, other than
remaining in employment with Filtronic until the exercise period.

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.

Richard Gibbs and Michael Tyerman both opted to take part in the Company’s SAYE scheme which was offered to all
employees in May 2021.

The closing middle market price on 31 May 2023 was 13p, and on 31 May 2022 it was 10p. The range of middle market
share prices during the year ended 31 May 2023 was 16p-9p.

There were no changes in directors’ interests between 31 May 2023 and 1 August 2023. The Company’s register of
directors’ interests, which is open to inspection at the Registered Office, contains full details of directors’ shareholdings.

Filtronic plc Annual Report and Accounts 2023

Directors’ report

The directors present their report together with the
audited consolidated financial statements for the year
ended 31 May 2023.

Directors’ conflicts of interest
There are no declarations to be made under Article 182 of
the Companies Act 2006.

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.

Financial results and dividend
The results for the year are set out in the income statement
on page 63. The position at the end of the year is shown in
the balance sheet on page 65.

The revenue, trading results and cash flows are explained
in the Financial review on page 17.

The directors are not recommending payment of a
dividend (2022: £nil).

After a review of forecasts including projections of
profitability and cash flows for the year to 31 May 2024
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.

Directors and their interests
The directors of the Company during the year, and up to
the date of signing this report, were as follows:

Executive Directors
Richard Gibbs
Michael Tyerman

Non-Executive Directors
Jonathan Neale
Pete Magowan
John Behrendt

Details of directors’ remuneration and interests in
the share capital of the Company are set out in the
remuneration report on page 50.

Richard Gibbs, retires by rotation, and being eligible,
offers himself for re-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.

Research and development expenditure
Research and development costs in the year are set out in
the Financial Review on page 17.

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 36
sets out the particular risks to which the Group is exposed,
and how these are managed.

Significant events and future developments

There have been no significant events since the reporting
date. The Group’s future developments are disclosed in the
Strategic Report on pages 3 to 34.

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 2022.

Substantial shareholdings
Up to 31 May 2023, 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 2023 (as disclosed by
shareholders via TR1) is set out in the table below. As at
31 May 2023, the Company had issued share capital of
215,121,085 ordinary shares of 0.1p each.

Top Investors
Investor
Rank
Mark and Diana Dixon
1
David and Monique Newlands
2
3
Canaccord Genuity Group Inc.
River and Mercantile Asset Management LLP
4
Harwood Capital
5
6
Michael and Alice Bennett

31 May 2023
41,250,000
25,895,109
25,866,264
11,333,451
10,000,000
7,054,761

%
19.2
12.0
12.0
4.9
4.7
3.3

Governance reportwww.filtronic.com Stock Code: FTCreasonable 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.

By order of the Board

Michael Tyerman
Chief Financial Officer
31 July 2023

Directors’ report continued

Corporate governance
The Corporate governance statement can be found on
pages 36 to 39 of this annual report and accounts.

Political and charitable contributions
No contributions were made for political purposes (2022:
£nil).

The Group made charitable donations of £1,250 in the
year (2022: £100).

Annual General Meeting
The Annual General Meeting of the Company will be held
on 26 October 2023 at 11am at
Plexus Building,
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 Accounts 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 UK-adopted
international accounting standards.

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 UK-adopted international

accounting standards 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.

The directors are 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 also responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s and company’s transactions and disclose with

Filtronic plc Annual Report and Accounts 202357

Independent auditors’ report
to the members of Filtronic plc
Report on the audit of the financial statements

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 2023 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 UK-adopted international accounting standards as applied in

accordance with the provisions 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 2023; the consolidated income
statement, the 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
• Two full scope audit components have been identified. The audit of these two components provided 100% coverage

over the Group’s revenue.

• All full scope audits were performed by the Group engagement team.

• Testing was also performed over certain material balances in two further components.

• Analytical review procedures were performed by the Group engagement team over all out of scope components.

Key audit matters
• Carrying value of investments (parent)

• Carrying value of goodwill and non-current assets (Group)

Materiality
• Overall Group materiality: £162,680 (2022: £170,000) based on 1% of revenue.

• Overall Company materiality: £59,847 (2022: £108,000) based on 1% of total assets.

• Performance materiality: £122,010 (2022: £127,000) (Group) and £44,885 (2022: £81,000) (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: FTC58

Independent auditors’ report
to the members of Filtronic plc continued

The key audit matters below are consistent with last year.

Key audit matter

How our audit addressed the key audit matter

Carrying value of investment (parent)

Refer to page 48 (Key accounting matters) and note 15 to
the financial statements.

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 carrying value of the investment was £4,179,000,
against which an impairment charge of £3,833,000 has
been recognised in the financial year.

The investment relates to the filter related business linked
to Filtronic Wireless Ltd and Filtronic Wireless Inc.

Carrying value of goodwill and non-current assets
(Group)

Refer to page 48 (Key accounting matters) and note 16 to
the financial statements.

The goodwill balance is £974,000. 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.

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, being the higher of value in use (VIU)
and fair value less cost to sell (FVLCTS).

We obtained management’s impairment assessment,
which included a VIU model based on discounted
cash flows and a FVLCTS model based on a multiple
of forecast earnings. We tested the inputs to the
models by assessing forecast cash flows against recent
performance of the filters business and comparing to
approved budgets. We also tested the integrity of the
models and their 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, including
the multiple used in management’s FVLCTS model.
We determined that the VIU model derived a higher
recoverable amount.

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 challenged management on
the key assumptions in the model, including the revenue
growth. We agreed the revenue projections to underlying
contracts and purchase orders where available and
challenged and sensitised growth where this was not
supported by available evidence.

We reviewed the disclosures in the Annual Report and
Accounts for compliance with IFRS, particularly in relation
to sensitivity analysis given an impairment has been
recognised.

Based on the procedures we performed we were able
to obtain sufficient and appropriate audit evidence in
respect of the carrying value of the investments balance.

We considered the carrying value of goodwill and non-
current assets by reference to management’s value in use
model, 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
short and long-term growth rates. We also tested the
integrity of the model and its mathematical accuracy.

Filtronic plc Annual Report and Accounts 2023
Carrying value of goodwill and non-current assets
(Group) (continued)

We determined that the calculations were most sensitive
to growth assumptions and calculated the degree to
which these assumptions would need to move before
any impairment was required. We assessed the short-
term growth rate assumptions against purchase orders
and contracts, along with 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.

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 were two 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 entity within the UK, Filtronic Broadband Limited,
and in addition the trading entity in the US, Filtronic Wireless Inc.

All audit work supporting the Group audit opinion was performed by the PwC UK engagement team, with the exception
of the verification of physical inventory which was performed by a PwC team member in the US under direct supervision
and review of the Group audit team.

Testing was also performed over certain material balances within the Filtronic plc and Filtronic Wireless Limited
components.

The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk
on the Group’s and Company’s financial statements, and we remained alert when performing our audit procedures for
any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk
on the Group’s and Company’s financial statements.

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

Financial statements - Group

Financial statements - Company

£162,680 (2022: £170,000).

£59,847 (2022: £108,000).

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.

Governance reportwww.filtronic.com Stock Code: FTC
60

Independent auditors’ report
to the members of Filtronic plc continued

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 £59,847 and £154,546. 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% (2021: 75%) of overall
materiality, amounting to £122,010 (2022: £127,000) for the Group financial statements and £44,885 (2022: £81,000)
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 £8,100 (Group audit) (2022: £8,526) and £3,000 (Company audit) (2022: £5,400) 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:

• Assessing management’s base case and severe but plausible downside cash flow forecasts, including challenging

management on the key assumptions underpinning the models, which included sales forecasts, margin performance
and working capital assumptions;

• Considering the mitigating actions included in the severe but plausible downside scenario to consider whether they
reflected actions within management’s control, as well as any costs associated with implementing these mitigating
actions;

• Reviewing historic trading results and ‘looking back’ to compare them with management’s original budget for the

relevant period, to consider management’s historical forecasting accuracy;

• Testing the mathematical accuracy and integrity of management’s model;

• Performing additional sensitivity analysis of management’s severe but plausible case; and

• Considering the disclosures provided in the financial statements with respect to going concern for consistency with the

models that were subject to audit.

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
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.

Filtronic plc Annual Report and Accounts 202361

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 2023 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 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 and UK and US tax legislation.
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;

• Review of Board meeting minutes to identify any instances of reported fraud or non-compliance with laws and

regulations;

• Discussions with management to confirm no on-going disagreements or disputes with tax authorities and no issues

identified through the testing of the tax computations;

• 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.

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

Governance reportwww.filtronic.com Stock Code: FTC62

Independent auditors’ report
to the members of Filtronic plc continued

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
31 July 2023

Filtronic plc Annual Report and Accounts 2023Consolidated income statement
for the year ended 31 May 2023

Revenue

Adjusted earnings before interest, taxation, depreciation, amortisation and

exceptional items

Amortisation of intangible assets

Depreciation of property, plant and equipment and right of use assets

Adjusted operating profit

Exceptional items

Operating profit

Finance costs

Finance income

Profit before taxation

Taxation

Profit for the year

Basic earnings per share

Diluted earnings per share

Group

Note

2023
£000

2022
£000

16,268

17,052

1,270

2,807

17, 18

(253)

(780)

237

(231)

400

464

0.22p

0.21p

(278)

(945)

1,584

391

1,975

(194)

111

1,892

(424)

1,468

0.68p

The profit for the year is attributable to the equity shareholders of the Parent Company, Filtronic plc.

The notes on pages 70 to 97 form part of these financial statements.

Financialswww.filtronic.com Stock Code: FTC

Consolidated statement of
comprehensive income
for the year ended 31 May 2023

Profit for the year

Other comprehensive income

Items that are or may be subsequently reclassified to profit and loss:

Currency translation movement arising on consolidation

Total comprehensive income for the year

Note

Group

2023
£000

2022
£000

464

1,468

(1)

463

179

1,647

The total comprehensive income 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 70 to 97 form part of these financial statements.

Filtronic plc Annual Report and Accounts 2023Consolidated balance sheet
as at 31 May 2023

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

Lease liabilities

Non-current liabilities

Deferred income

Lease liabilities

Total liabilities

Net assets

Equity

Share capital

Share premium

Translation reserve

Retained earnings

Total equity

Group

Note

2023
£000

2022
£000

1,774

2,889

1,446

1,254

7,363

2,778

5,335

2,610

10,723

18,086

1,495

2,293

701

868

5,357

2,598

4,479

4,006

11,083

16,440

3,673

2,993

364

164

617

282

172

540

4,818

3,987

1,698

1,727

6,545

130

1,280

1,410

5,397

11,541

11,043

10,796

11,077

(470)

10,796

11,060

(471)

(9,862)

(10,342)

11,541

11,043

The total equity is attributable to the equity shareholders of the Parent Company, Filtronic plc.

Company number 2891064.

The notes on pages 70 to 97 form part of these financial statements. The financial statements on pages 70 to 97 were
approved by the Board of Directors on 31 July 2023 and signed on its behalf by

Michael Tyerman
Chief Financial Officer
31 July 2023

Financialswww.filtronic.com Stock Code: FTC66

Consolidated statement of
changes in equity
for the year ended 31 May 2023

Balance at 1 June 2021

Profit for the year

New shares issued

Currency translation movement arising on consolidation

Share-based payments

Balance at 31 May 2022

Profit for the year

New shares issued

Currency translation movement arising on consolidation

Share-based payments

Balance at 31 May 2023

Share
capital
£000

Share
premium
£000

Translation
reserve
£000

Retained
earnings
£000

10,795

11,039

(650)

(11,826)

179

1,468

Total
equity
£000

9,358

1,468

179

10,796

11,060

(471)

(10,342)

11,043

464

10,796

11,077

(470)

(9,862)

11,541

Company statement of
changes in equity
for the year ended 31 May 2023

Balance at 1 June 2021

Loss for the year

New shares issued

Share-based payments

Balance at 31 May 2022

Loss for the year

New shares issued

Share-based payments

Balance at 31 May 2023

The notes on pages 70 to 97 form part of these financial statements.

Share
capital
£000

Share
premium
£000

10,795

11,039

Retained
earnings
£000

(11,167)

(3,434)

Total
equity
£000

10,667

(3,434)

10,796

11,060

(14,585)

7,271

(4,500)

10,796

11,077

(19,069)

2,804

Filtronic plc Annual Report and Accounts 2023Consolidated cash flow statement
for the year ended 31 May 2023

Cash flows from operating activities

Profit for the year

Taxation

Finance income

Finance costs

Operating profit

Share-based payments

Depreciation of property, plant and equipment and right of use assets

Amortisation 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 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

Interest received

Net cash used in investing activities

Cash flows from financing activities

Interest paid

Repayment of bank loans

Exercise of employee share options

Repayment of principal element 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 70 to 97 form part of these financial statements.

Group

2023
£000

2022
£000

464

(400)

(58)

231

237

780

253

(157)

(833)

665

(109)

950

(481)

(51)

(946)

(53)

1,468

424

(111)

194

1,975

945

278

(273)

(1,100)

550

(115)

(10)

2,285

(57)

(61)

(132)

(1,522)

(250)

(231)

(626)

(840)

(1,412)

4,006

2,610

(194)

(131)

(653)

(8)

(964)

1,071

2,906

4,006

Financialswww.filtronic.com Stock Code: FTC68

Company balance sheet
as at 31 May 2023

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

Retained earnings

Total equity

Company

2023
£000

346

422

4,947

615

5,562

5,984

3,180

2,804

2022
£000

4,179

4,251

6,321

259

6,580

10,831

3,560

7,271

10,796

11,077

10,796

11,060

(19,069)

(14,585)

2,804

7,271

Note

The Company made a loss in the year of £4,500,000 (2022: £3,434,000).

Company number 2891064.

The notes on pages 70 to 97 form part of these financial statements. The financial statements on pages 70 to 97 were
approved by the Board of Directors on 31 July 2023 and signed on its behalf by

Michael Tyerman
Chief Financial Officer
31 July 2023

Filtronic plc Annual Report and Accounts 2023Company cash flow statement
for the year ended 31 May 2023

Cash flows from operating activities

Loss for the year

Finance costs

Operating loss

Amortisation of intangible assets

Impairment of investments in subsidiaries

Share-based payments

Movement in trade and other receivables

Movement in trade and other payables

Net cash generated from 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 70 to 97 form part of these financial statements.

Company

2023
£000

2022
£000

(4,500)

(3,434)

(4,500)

(3,433)

3,833

1,375

(381)

362

(23)

356

259

615

2,372

1,082

122

(28)

(14)

(1)

101

158

259

Financialswww.filtronic.com Stock Code: FTC70

Notes to the financial statements
for the year ended 31 May 2023

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 Company and consolidated financial statements for the year ended 31 May 2023 have been prepared in
accordance with UK-adopted international accounting standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards.

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.

Going concern
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 2023, the Group had cash at bank of £2.6m 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 36.

As referred in the Strategic report, the Board recognises the uncertain economic and political 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, to stress-test the business, where programme curtailment and/or delays may
adversely affect forward-looking demand to levels lower than those initially modelled in the base case scenario
including reduced demand from a major customer.

A severe but plausible scenario was also modelled that took the downside scenario and removed a significant
contract win that the Group expected to convert from the outlook period.

The scenarios modelled including the severe but plausible model, demonstrate the Group has adequate cash for the
next twelve months.

Therefore, the directors continue to adopt the going concern basis to prepare the financial statement

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 financial year, 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.

Filtronic plc Annual Report and Accounts 202371

Accounting policies (continued)
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.

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 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.

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.

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.

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.

Financialswww.filtronic.com Stock Code: FTC72

Notes to the financial statements continued
for the year ended 31 May 2023

Accounting policies (continued)
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. The
estimated useful lives for the current and comparative periods are:

• Capitalised development costs

1 to 6 years

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. In assessing the fair value less cost to sell (“FVLCTS”), an estimated market multiple is determined and
applied to the forecast EBITDA of the cash generating unit (“CGU”).

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 “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.

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.

Filtronic plc Annual Report and Accounts 202373

Accounting policies (continued)
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.

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.

Financialswww.filtronic.com Stock Code: FTC74

Notes to the financial statements continued
for the year ended 31 May 2023

Accounting policies (continued)
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
less estimated costs of completion and sale. Inventory, including work in progress, costs comprise direct materials
only. Cost is stated in the consolidated balance sheet at standard cost, revalued to actual cost, based on a first in-
first out basis.

Provision is made for obsolete, slow moving or defective materials where appropriate. This is reviewed monthly.

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.

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.

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.

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.

Share capital
Ordinary shares issued are classified as share capital in equity.

Dividends
Interim dividends are recognised in equity in the financial year they are paid. Final dividends are recognised in
equity in the financial year they are approved by shareholders.

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 financial year.

Defined contribution pension schemes
Defined contribution pension schemes are operated for employees. Contributions are recognised as an expense in
the income statement as incurred.

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 202375

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.

The following amendments are effective for the financial year beginning 1 June 2023:

Application date (accounting
periods commencing)

Ref

IAS 1

Title

Summary

Presentation of Financial
Statements

Amendments: classification of liabilities
as current or non-current

Amendments: requirement to disclose
‘material’ accounting policies instead
of ‘significant’ accounting policies

Amendments: clarification of the impact
of post balance sheet date conditions on
the classification of liabilities as non-current

IAS 8

Accounting policies,
changes in accounting
estimates and errors

Amendments: definition of accounting
estimates and clarification of the treatment
of changes in accounting estimates

IAS 12

Income taxes

IAS 16

Leases

Amendments: clarification of how deferred
tax is accounted for on certain transactions

Amendments: clarification of the measurement
of sale and leaseback transactions that
qualify as sales transactions under IFRS 15

1 January 2023

1 January 2024

1 January 2023

1 January 2024

IFRS 17

Insurance contracts

Replaces IFRS 4 ‘Insurance contracts’

1 January 2023

Financialswww.filtronic.com Stock Code: FTC

Notes to the financial statements continued
for the year ended 31 May 2023

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, which are described in note 1, and reported amounts of assets and liabilities,
income and expenses. The directors are required to make accounting estimates and judgements which 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.

Key sources of estimation uncertainty
The key estimates concerning the future, that have a significant effect on the financial statements are considered
below:

Investments in subsidiaries - impairment
Investments in subsidiaries are tested for impairment by reference to their recoverable amount relative to their
carrying value. In accordance with IAS 36, recoverable amount is determined as the higher of value in use (“VIU”),
determined based on the expected cash generated by the CGU to which the investment relates and fair value less
costs to sell (“FVLCTS”). Both models are subject to uncertainties surrounding the EBITDA and cash flow forecasts
being used.

The sensitivity analysis in respect of the recoverable amount of investments in subsidiaries is presented in note 15.

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.

Capitalised development costs - impairment
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 14%.

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 Filtronic Broadband Limited in the UK and Filtronic Wireless Inc.
in the USA 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 £81,000.

Filtronic plc Annual Report and Accounts 202377

2 Accounting estimates and judgements (continued)

Warranty provision
The Group makes estimates in calculating the warranty provision for existing commitments arising from past events.
In estimating the provision, the Group makes judgements as to the quantum and likelihood of the liability arising.
Certain provisions require more judgement than others. In particular, the warranty provision has to take account
of future outcomes arising from past deliveries of products and services. In estimating these provisions, the Group
makes use of management experience, precedents and any specific contract and customer information.

Critical judgements in applying the Group’s accounting policies
The critical accounting judgements in applying the Group’s accounting policies are considered below and are the
judgements that have the most significant effect on the amounts recognised in the financial statements.

Development costs
Development costs are capitalised in accordance with the accounting policy in note 1 if it meets the criteria as per
IAS 38. Initial capitalisation of costs is based on management’s judgement whether the criteria of IAS 38 is satisfied,
when the technological and economical feasibility is confirmed, usually when a product development project has
reached a defined milestone and there is commercial interest in the product. As part of this judgement process,
management establish future demand relating to the product, evaluate the development plans to complete the
product and establish where the development is positioned on the Group’s technology roadmap. The directors
apply judgement in the review of costs capitalised to determine whether any impairment should be recognised. The
directors also apply judgement in its review of impairment of its development costs and assesses this on a regular
basis to ensure that any costs still capitalised continue to be commercially viable.

Financialswww.filtronic.com Stock Code: FTC78

Notes to the financial statements continued
for the year ended 31 May 2023

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 four customers representing individually over 10% of revenue each and in aggregate 85% of
revenue. This is split as follows:

• Customer A - 34% (2022: 23%)
• Customer B - 22% (2022: 36%)
• Customer C - 17% (2022: 22%)
• Customer D - 12% (2022: 0%)

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

Revenue by destination

United Kingdom

Europe

Americas

Rest of the world

Split of non-current assets by location

United Kingdom

Americas

2023
£000

4,762

2,600

5,711

3,195

2022
£000

7,489

3,421

5,313

829

16,268

17,052

2023
£000

2022
£000

6,925

5,109

438

248

7,363

5,357

Non-current assets relate to property, plant and equipment, right of use assets, goodwill and other intangible assets
and deferred tax.

Filtronic plc Annual Report and Accounts 20234

Operating profit

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

Staff costs

Amortisation

Depreciation

Depreciation, amortisation and impairment

Other operating income

Non-salary related exceptional items

Other expenses

Total operating costs

Operating profit

2023
£000

2022
£000

15,362

16,580

906

472

16,268

17,052

5,992

5,884

623

336

5,645

5,532

577

291

6,859

6,416

253

780

1,033

(187)

2,334

10,039

237

278

945

1,223

(329)

(391)

2,513

9,432

1,975

Development costs of £481,000 were capitalised in the year (2022: £nil).

Other operating income relates to grants received for plant and machinery and R&D innovation whilst R&D tax
credits claimed under the RDEC scheme are also recognised in operating profit.

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 exceptional items as follows:

Antenna warranty

Historic claim

2023
£000

2022
£000

(339)

(52)

(391)

The antenna warranty item related to the Group’s legacy Telecoms Antenna Operation previously costed through
discontinued operations. The warranty period has now lapsed, and the provision was released unused.

A provision relating to an historic claim was released unused and credited to the income statement as it related to
the Telecoms Antenna Operation, sold in January 2020.

Financialswww.filtronic.com Stock Code: FTC

Notes to the financial statements continued
for the year ended 31 May 2023

Operating items

Operating profit is stated after charging/(crediting):

Depreciation

Research and development costs in the income statement excluding amortisation

Amortisation of development costs

Amortisation of other intangible assets

Foreign exchange gain

2023
£000

2022
£000

780

1,776

222

945

1,937

259

(107)

(141)

Auditors’ remuneration
The Company’s auditor is PricewaterhouseCoopers LLP. The auditors’ 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

Employees
The average number of employees comprised:

Manufacturing

Research and development

Sales

Administration

2023
£000

2022
£000

130

110

2023
Number

2022
Number

125

124

Filtronic plc Annual Report and Accounts 2023
81

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 50 to 54. The compensation of the directors was:

Salary or fees

Bonus

Benefits

Long term incentives

Total remuneration excluding pension contributions

Pension contributions

2023
£000

481

527

538

2022
£000

453

125

612

623

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.

Related party transactions

Identity of related parties
The Company 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 £1,018,000 (2022: £931,000) and a royalty charge of 1% of filters product sales to Filtronic Wireless
Limited of £30,000 (2022: £38,000). 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 21 and 22
through the movement in the Company’s intercompany receivables and payables.

The amount outstanding from subsidiary undertakings to the Company at 31 May 2023 totalled £4.9m (2022:
£6.3m). Amounts owed to subsidiary undertakings by the Company at 31 May 2023 totalled £2.8m (2022: £2.8m).

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.

Finance costs

Interest expense for lease arrangements

Minimum service costs and interest charges on invoice discounting facilities

2023
£000

139

231

2022
£000

127

194

Financialswww.filtronic.com Stock Code: FTC82

Notes to the financial statements continued
for the year ended 31 May 2023

Finance income

Revaluation of foreign currency denominated intercompany balance

Interest receipt on treasury deposits

Taxation

Recognised in the income statement

Current tax credit

Overseas taxation in the financial year

Adjustment in respect of prior year — R&D tax credit

Total current tax credit

Deferred tax (credit) /charge

Change of tax rate

Origination and reversal of temporary differences

Total deferred tax (credit)/charge

Income tax (credit)/charge

The reconciliation of the effective tax rate is as follows:

Profit before taxation

Profit before taxation multiplied by the average standard rate of corporation tax

in the UK (20%) (2022:19%)

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

(Recognition)/derecognition of deferred tax asset

Rate change of deferred tax

Taxation

2023
£000

(32)

(14)

(386)

(400)

2023
£000

(89)

(32)

(386)

(400)

2022
£000

111

2022
£000

(24)

(109)

557

448

424

2022
£000

1,892

359

155

194

(270)

(24)

104

(109)

424

The main rate of UK corporation tax was 19% for the first 10 months of the year, although the corporation tax rate
increased to 25% on 1 April 2023 for companies with profits above £250,000. Consequently, the average rate of
corporation tax for the year was 20%. 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.

Filtronic plc Annual Report and Accounts 202314

Earnings per share

Profit for the year

Basic weighted average number of shares

Dilution effect of share options

Diluted weighted average number of shares

Basic earnings per share

Diluted earnings per share

Investments in subsidiaries

Cost

At 1 June 2021, 31 May 2022 and 31 May 2023

Impairment

At 1 June 2021

Impairment in the year

At 31 May 2022

Impairment in the year

At 31 May 2023

Carrying amount at 31 May 2022

Carrying amount at 31 May 2023

Total
Group

2023
£000

2022
£000

464

1,468

‘000

215,121

214,726

1,358

868

216,479

215,594

0.22p

0.21p

0.68p

Company
investments in
subsidiaries
£000

21,110

(14,559)

(2,372)

(16,931)

(3,833)

(20,764)

4,179

346

The investments in subsidiaries are assessed annually to determine if there is any indication that any of the
investments might be impaired. The assessment of the carrying amount is derived from the higher of the value in use
and the fair value less costs to sell. Value in use is determined by discounting the future cash flows generated from the
continuing use of the cash generating unit (“CGU”) to which the investment relates whilst the fair value less costs to sell
is the amount that a market participant would pay for the asset or CGU, less the costs of sale.

The carrying amount was calculated using the value in use model which returned a higher carrying value based on
the following key assumptions:

• Budgets incorporating post-tax cash flows have been prepared to 31 May 2024 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 2028. A long-term growth factor of 2.2% was applied to the perpetuity cash flows; and

• The CGU has a pre-tax discount rate of 14% (2022:12%) which was applied in determining the recoverable
amount of the unit, 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. At 31 May 2023 it was identified that the investment in the CGU responsible for RF
conditioning products would need to be impaired by £3.8m based on discounting the future cashflows following a
review of budgets. The recoverable amount of £0.3m was determined based on a value-in-use calculation which
requires the use of key assumptions. A key input of the model is the discount rate used. Therefore a +/- 1% difference
in the discount rate would impact impairment by £170,000 on +1% and £210,000 on -1%.

Financialswww.filtronic.com Stock Code: FTC84

Notes to the financial statements continued
for the year ended 31 May 2023

Investments in subsidiaries (continued)

The Company’s subsidiaries are related parties.

The subsidiaries at 31 May 2023, 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

1p ordinary shares

100%

Filtronic Holdings UK Limited1
Isotek (Holdings) Limited1

£1 ordinary shares

1p ordinary shares

100%

Owned by Isotek (Holdings) Limited:
Filtronic Wireless Limited1

1p ordinary shares

100%

Filtronic Wireless Inc.2

USA

US$1 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

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 Plexus 1, NETPark, Thomas Wright Way, Sedgefield, County Durham TS21 3FD, United Kingdom
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

Filtronic plc Annual Report and Accounts 202385

Goodwill and other intangible assets

Group

Goodwill
£000

Other intangibles
(core technology)
£000

Software
costs
£000

Development
costs
£000

Company

Software
costs
£000

Total
£000

Cost

At 1 June 2021

Additions

At 31 May 2022

Additions

At 31 May 2023

Amortisation

At 1 June 2021

Provided in the year

At 31 May 2022

Provided in the year

At 31 May 2023

974

Carrying amount at 31 May 2022

Carrying amount at 31 May 2023

974

10,884

323

380

431

243

262

293

118

138

1,015

13,196

1,015

13,253

481

532

1,496

13,785

353

259

612

222

834

403

662

11,480

278

11,758

253

12,011

1,495

1,774

127

155

178

102

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 pre-tax cash flows have been prepared to 31 May 2024 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 2028. A long-term growth factor of nil was applied to the perpetuity cash flows; and

• The Group’s pre-tax discount rate of 14% (2022:12%) was applied in determining the recoverable amount of the

unit, being the estimated weighted average cost of capital for the CGUs.

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: FTC86

Notes to the financial statements continued
for the year ended 31 May 2023

Right of use assets

Cost

1 June 2021

Additions

Exchange differences

At 31 May 2022

Additions

Disposals

Exchange differences

At 31 May 2023

Depreciation

At 1 June 2021

Provided in the year

Exchange differences

At 31 May 2022

Provided in the year

Disposals

Exchange differences

At 31 May 2023

Carrying amount at 31 May 2022

Carrying amount at 31 May 2023

Group

Company

Property
leases
£000

Plant and
equipment
£000

Total
£000

1,626

1,422

3,048

1,726

599

(595)

512

1,938

579

578

3,664

1,178

(595)

1,737

2,518

4,255

495

331

853

288

(595)

558

873

1,179

285

232

518

290

808

1,420

1,710

780

563

1,371

578

(595)

1,366

2,293

2,889

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, Yeadon and Manchester in the UK, Salisbury, Maryland
in the USA and a virtual office space in Suzhou, China. Leases remaining are up to six years.

In addition to the depreciation charges shown in the table above, the consolidated income statement includes the
following amounts relating to leases:

Interest expense (included in finance cost)

Expense relating to viable lease payments not included in lease

liabilities (included in operating costs)

2023
£000

139

2022
£000

127

Filtronic plc Annual Report and Accounts 2023
87

Group

Company

Fixtures
and fittings
£000

Plant and
equipment
£000

Computer
hardware
£000

Plant and
equipment
£000

Total
£000

292

296

133

(153)

276

150

182

(153)

114
209

3,766

(441)

3,418

810

(91)

4,144

2,946

337

(441)

2,877

158

(91)

2,950

541

1,194

170

178

(17)

164

118

132

(17)

121

46
43

4,228

(441)

3,892

946

(261)

4,584

3,214

382

(441)

3,191

202

(261)

3,138

701
1,446

Group

2023
£000

2022
£000

868

559

(47)

(128)

1,254

1,218

(585)

(309)

342

109

868

Property, plant and equipment

Cost

At 1 June 2021

Additions

Disposals

Exchange differences

At 1 June 2022

Additions

Disposals

Exchange differences

At 31 May 2023

Depreciation

At 1 June 2021

Depreciation

Disposals

Exchange differences

At 31 May 2022

Depreciation

Disposals

Exchange differences

At 31 May 2023

Carrying amount at 31 May 2022

Carrying amount at 31 May 2023

Deferred tax

Deferred tax assets

Opening balance

Origination /(reversal) of tax losses

Utilisation of tax losses

(Reversal)/origination of capital allowances

Exchange differences

Change of tax rate

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
88

Notes to the financial statements continued
for the year ended 31 May 2023

Deferred tax (continued)

Deferred tax assets which have been recognised:

Depreciation in advance of capital allowances

Tax losses carried forward

Group

2023
£000

287

967

1,254

2022
£000

415

453

868

Company

2023
£000

2022
£000

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. These deferred tax assets are presented below:

Deferred tax assets which have not been recognised:

Depreciation in advance of capital allowances

Tax losses carried forward

Share options deferment

Inventories

Raw materials

Work in progress

Finished goods

Inventory provision

Inventories (net of provision)

Group

Company

2023
£000

2022
£000

2,473

1,397

2023
£000

510

2022
£000

510

15,805

15,775

14,043

13,917

18,358

17,252

14,633

14,507

Group

Company

2023
£000

2022
£000

3,528

3,548

628

426

531

264

4,582

4,343

(1,804)

(1,745)

2,778

2,598

2023
£000

2022
£000

Raw materials, consumables and changes in finished goods and work in progress recognised in cost of sales in the
year amounted to £5,539,000 (2022: £5,083,000).

The amount charged to the income statement in the year in respect of write-downs of inventories is £60,000
(2022: £196,000). The amount credited to the income statement in the year in respect of reversals of write-downs of
inventories is £nil (2022: £nil).

Trade and other receivables

Trade receivables

Group receivables

Other receivables and prepayments

Group

Company

2023
£000

2022
£000

4,351

3,512

2023
£000

2022
£000

984

967

4,896

6,266

5,335

4,479

4,947

6,321

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.

Filtronic plc Annual Report and Accounts 202322

Trade and other payables

Trade payables

Group payables

Other payables and accruals

Group

Company

2023
£000

2022
£000

2,891

1,825

2023
£000

2022
£000

782

3,673

2,784

1,168

2,993

341

698

3,180

3,560

Amounts owed to Group undertakings are unsecured, interest-free and payable on demand.

Provisions

Warranty provision

Opening balance

Used during the year

Released unused during the year

Charge for the year

Exchange differences

Group

2023
£000

135

(58)

(60)

300

317

2022
£000

342

(24)

(347)

163

135

Company

2023
£000

2022
£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. Factors that could impact the warranty provision include the success
of the Group’s productivity and quality initiatives as well as parts and labour costs. The provision is expected to be
utilised in the next two financial years.

Dilapidation provision

Opening balance

Used during the year

Released unused during the year

Charge for the year

Exchange differences

Group

2023
£000

147

(29)

(71)

2022
£000

147

Company

2023
£000

2022
£000

The Group leases physical facilities at its three sites in the UK and one in the 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. Settlement will be
made on exit from each property. There are currently no plans to leave any of the Group’s properties.

Total provision

Warranty provision

Dilapidation provision

Group

2023
£000

317

364

2022
£000

135

147

282

Company

2023
£000

2022
£000

Financialswww.filtronic.com Stock Code: FTC90

Notes to the financial statements continued
for the year ended 31 May 2023

Deferred income

Contract liabilities

Capital grant

Total current deferred income

Contract liabilities

Capital grant

Total non-current deferred income

Total deferred income

Group

2023
£000

2022
£000

Company

2023
£000

2022
£000

140

164

193

134

172

111

130

302

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 of £40,000 was awarded in the year towards the purchase of a new die attach machine to support
new product introductions. The grant is being amortised over a period of four years with a remaining life of 0.5
years.

Filtronic plc Annual Report and Accounts 202325

Lease liabilities

Opening lease liability

New leases entered into during the year

Payments made during the year

Finance costs

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

Group

2023
£000

1,820

1,126

(765)

139

(5)

2022
£000

2,020

445

(653)

2,315

1,820

2023
£000

617

1,579

119

1,698

2,315

2022
£000

540

1,017

263

1,280

1,820

Interest bearing loans and borrowings

The following are the cash flows relating to the Group’s financial liabilities other than trade and other payables, for
which there is no material difference between their carrying value and contractual cash flows:

Lease liabilities at 31 May 2023

Carrying
value
£000
2,315

Contractual
cash flows
£000
2,725

Less than
1 year
£000
777

Lease liabilities at 31 May 2022

1,820

2,176

642

1-2
years
£000
665

446

2-5
years
£000
1,166

795

Over 5
years
£000
117

293

Share capital

At 1 June 2021

Exercise of share options

At 31 May 2022

Exercise of share options

At 31 May 2023

Group and Company

Deferred shares
of 10p each
Number ‘000
106,877

Ordinary shares
of 0.1p each
Number ‘000
214,415

106,877

383

214,798

323

215,121

£000
10,795

10,796

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.

The deferred shares have no rights to vote or receive dividends.

Financialswww.filtronic.com Stock Code: FTC92

Notes to the financial statements continued
for the year ended 31 May 2023

Share premium

At 1 June 2021

Exercise of share options

At 31 May 2022

Exercise of share options

At 31 May 2023

Translation reserve

At 1 June 2021

Currency translation movement arising on consolidation

At 31 May 2022

Currency translation movement arising on consolidation

At 31 May 2023

Group and
Company
£000
11,039

11,060

11,077

Group
£000
(650)

179

(471)

(470)

The translation reserve comprises foreign currency differences arising from the translation of the financial
statements of foreign operations.

Dividends
The directors are not proposing to pay a dividend for the year ended 31 May 2023 (2022: £nil).

Retained earnings

At 1 June 2021

Profit/(loss) for the year

Share-based payments

At 31 May 2022

Profit/(loss) for the year

Share-based payments

At 31 May 2023

Group
£000
(11,826)

1,468

Company
£000
(11,167)

(3,434)

(10,342)

(14,585)

464

(4,500)

(9,862)

(19,069)

Filtronic plc Annual Report and Accounts 2023
93

Share options
Sharesave plans

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 7

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

Weighted average
exercise price 2023

Number of
options 2023

Weighted average
exercise price 2022

Number of
options 2022

6.67p

1,898,193

(157,598)

(22,668)

1,717,927

6.67p

2,059,029

(160,836)

1,898,193

Management incentive plans
The options granted in the year have 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 2023:

Ordinary shares of 0.1p
2022
2023

950,000 1,250,000

300,000

200,000

750,000

2,361,760 2,543,574

181,814

4,743,574 5,243,574

Date granted

01/03/2016

11/04/2016

28/03/2018

11/02/2020

24/09/2020

24/06/2021

12/10/2022

Earliest date
exercisable

01/03/2017

11/04/2017

28/03/2019

11/02/2021

24/09/2023

24/06/2024

12/10/2032

Latest date
exercisable

28/02/2026

10/04/2026

27/03/2028

11/02/2030

24/09/2030

24/06/2031

12/10/2032

Exercise price

5.4p

8.5p

9.0p

9.3p

8.0p

11.1p

11.4p

The weighted average price of the outstanding options under this scheme at 31 May 2023 was 9p (2022: 9p).

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

Number of share
options 2023

Number of share
options 2022

5,243,574

181,814

(381,814)

(300,000)

4,743,574

1,450,000

3,083,334

3,270,828

(727,255)

(383,333)

5,243,574

1,750,000

Financialswww.filtronic.com Stock Code: FTC
94

Notes to the financial statements continued
for the year ended 31 May 2023

Share-based payments

Share options expense

Group and
Company

2023
£000

2022
£000

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

2023

2022

181,814

5,329,857

11.37p

50%

9.40p

50%

3.0 years

2.5%

4.0p

0.8%

2.5p

Expected volatility is the estimate of the volatility of the share price over the expected life of the share options.

Pension costs

Defined contribution schemes

Capital expenditure commitments

Group

Company

2023
£000

336

2022
£000

291

2023
£000

2022
£000

Group

2023
£000

2022
£000

Company

2023
£000

2022
£000

Capital expenditure contracted for at the balance sheet date
but not provided in the financial statements

234

Analysis of net cash

Cash and cash equivalents

Bank loans

Lease liabilities - plant and machinery

Net cash when including all debt except property leases

Lease liabilities - property leases

1 June
2022
£000

Cash
flow
£000

Other
changes
£000

31 May
2023
£000

4,006

(1,412)

(863)

3,143

(957)

2,186

419

(993)

346

(576)

(560)

(684)

2,610

(1,020)

1,590

(1,295)

295

(647)

(1,244)

Filtronic plc Annual Report and Accounts 202335

Analysis of net cash (continued)

Reconciliation of cash flow to movement in net cash

Movement in cash and cash equivalents

Movement in bank loans

Movement in lease liabilities - plant and machinery

Movement in lease liabilities - property lease

Exchange differences

Movement in net cash

Opening net cash

Closing net cash

2023
£000

(1,412)

(157)

(338)

(1,891)

2,186

295

2022
£000

1,071

131

(28)

228

1,431

755

2,186

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 2023 (2022: £nil).

IFRS 16 requires the recognition of property leases on the balance sheet which is classified as a debt item.

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.

Trade and other payables are all payable in less than one year. Trade payables are generally payable within 90
days.

All financial assets and liabilities are held at amortised cost other than derivative financial instruments which are held
at fair value.

Liquidity risk
The Group has cash at bank of £2.6m whilst the Company has cash at bank of £0.6m.

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
2023, although this can be reviewed at their 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 2024 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 Bank and Wells Fargo Bank.

Financialswww.filtronic.com Stock Code: FTC96

Notes to the financial statements continued
for the year ended 31 May 2023

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. Payment terms for trade receivables range
from prepayment terms to 90 days net. 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

No trade receivables have been provided for in either FY2023 or FY2022.

The Company has no trade receivables.

Group

2023
£000

1,571

1,105

970

705

2022
£000

1,226

830

742

714

4,351

3,512

Group

2023
£000

2022
£000

4,347

3,487

4,351

3,512

Interest rate risk
Cash is generally held on short-term bank deposits which earn interest at variable money market deposit rates. At
31 May 2023, there was £nil held on short-term deposit. The remaining cash in the Group is held in very low interest
rate bank 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)

Filtronic plc Annual Report and Accounts 202397

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 was a forward contract in place at 31 May 2023, the fair value of the foreign currency contract was a liability
of £34,000 (2022 : £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

2023

RMB
£000

Group

USD
£000

549

3,084

(615)

3,018

EUR
£000

(6)

(2)

2022

RMB
£000

USD
£000

859

2,194

(740)

2,313

EUR
£000

337

(321)

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 2023, then the
Group operating profit would have been £78,000 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: FTC98