Filtronic shares plunge as chief pays price for losses

Filtronic, the Yorkshire-based maker of telecommunications equipment, accepted the resignation of its chief executive, John Roulston, yesterday as the company reported worse-than-expected first-half results, causing its shares to tumble from 244.5p to 170p.

For the six months to 30 November, the company reported a pre-tax loss of £5.6m, down from a pre-tax profit of £3.5m the previous year.

David Rhodes, the founder and non-executive chairman, who will take over as chief executive, saw the value of his stake in the company fall by almost £1.5m after yesterday's drop in the share price.

Rhys Williams, a non-executive director, said: "John has many merits but the pace at which strategy was being implemented was at variants with the quick decision-making that this business requires.

"The haemorrhaging of key people was something that the company could not cope with and we therefore decided to act quickly. It was a tough decision but the board felt that we could not go into our results with someone in charge in whom we had lost confidence."

Sources close to Filtronic said Mr Roulston, who joined from the defence electronics giant BAE Systems, suggested poor management relations with certain senior employees had contributed to his resignation. He will receive a pay-off of nine months' salary - about £187,500.

Alan Needle, the head of Filtronic's wireless infrastructure unit, which generates 80 per cent of the company's revenues, retired last month, and sources said his departure sparked at least another six senior resignations. Since the board's acceptance of Mr Roulston's resignation, Mr Williams said all members of staff who had resigned had been reinstated.

Exceptional items, such as the closure of Filtronic's defence sales office in California, led to losses at other divisions. Compound semiconductors, central services and defence electronics reported operating losses, although analysts were more concerned at the flat returns in wireless infrastructure.

Losses continued at Filtronic's Newton Aycliffe plant, in Tony Blair's constituency of Sedgefield, Co Durham, albeit at a lower rate than before.

Tony Brown, at JP Morgan Cazenove, kept his "outperform" stance on the shares but said: "Second-half sales and profitability in wireless infrastructure will be reduced sharply due to delays to large contracts in the US, pricing pressure and continued costs of developing power-amplifier products. With several senior management changes in the past year, Filtronic is vulnerable to an approach."