FILTRONIC expects to make a loss this financial year after predicting a lower-than-expected demand for one of the antennas it produces.

It is also writing down £500,000 of development costs for the Massive Mimo (mMimo) antennas.

The Yeadon-based company gave a trading update which included a drop in sales in the first half of the financial year.

The news saw the firm's share price fall by more than half from 18p a share to 8p.

The designer and manufacturer of antennas, filters and mmWave products for the wireless telecoms and critical communications markets, reported sales were £10.4 million, down from £12.8m.

It said: "Whilst sales were lower than the prior year we have traded ahead of our internal sales projections in the half. However, despite good early take up, we regret to report that demand for the recently introduced Massive MIMO (“mMIMO”) antennas is now expected to be substantially lower than we had forecast in the second half of FY2019 and, as a result, the Company expects to be loss-making for the current financial year.

"Our predominant OEM customer, with whom we had closely collaborated in the development of this product range, has now significantly lowered its forecast demand below that which it had previously provided, having itself been advised that its lead client is now looking to deploy different frequencies to those it had originally indicated.

"As a consequence of this lower demand and the uncertainty it brings, the Board has decided to impair fully the net book value of the capitalised development costs of £0.5m relating to the development of mMIMO in its half year results.

"The company has made considerable efforts to diversify its customer base in recent years and despite this obvious set back to our mMIMO antennas business, we are pleased to advise that we were recently approved as a supplier of a niche antenna product to a Tier 1 Mobile Network Operator in South Africa.

"However, given the importance of mMIMO to our future plans in the antenna business, the Board has commenced a review of its options for this component of the Group.

"Notwithstanding the antenna business setback, we are pleased with the continuing progress made in developing our critical communications market opportunities and advise that this part of the business is trading in line with expectations. The production ramp of our long-term contracts to the defence and aerospace market is now complete with a steady rate of throughput in line with the customer’s requirements.

"Our success in these ramps has enabled us to secure further contract wins with this lead customer and to penetrate other major players within the defence and aerospace sector. The public safety market continues to see robust market demand as government and quasi-government agencies continue to expand their secure private networks."

Net cash at November 30 was £2.3m compared to £3.1m in 2018. The board is of the opinion that it has sufficient cash reserves to allow it to operate at this lower level of revenue whilst it explores and executes an alternative strategy for the antenna business.