149p +3.75p

Scotsman says HOLD

FILTRONIC is engaged in the design and manufacture of microwave products and component semi-conductors for wireless telecommunications systems and military applications.

The company's compound semi-conductors products are used in mobile telephone handsets, wireless infrastructure and defence electronic applications.

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Filtronic's shares have been in progressive decline for three-and-a-half years and this despite its exposure to two rapidly growing sectors, telecoms and defence.

The company has an alarming pensions deficit but this problem is now being actively addressed.

When the group's results were announced a few weeks ago, it said it expected to return to profitability this year and is looking for a purchaser of its compound semi-conductors operation.

This division, which makes wafers for mobile phone switches, suffered a blow when its predominant customer decided it would source in-house.

On the other hand, Filtronics' UK defence business, which makes components for radar equipment, and its point-to-point business, involved in microwave components, has made good progress.

Not surprisingly, the market is taking little on trust and, as a result, Filtronic is one of the few stocks not to have participated in the 2003-2006 bull market.

There are still some unanswered questions but, if the divisional sale can be completed and the pension deficit filled, Filtronic could be in the vanguard of the next advance when the contemporary financial hubris runs its course.

• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

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