TELECOMS equipment group Filtronic last night ruled out recruiting more staff at its Newton Aycliffe plant in County Durham as it posted an increase in profits.

The company said although the plant was not working at full capacity, it would rather manufacture fewer, high-value products than more, low-value ones.

Chairman Professor David Rhodes said: "Newton Aycliffe is starting to do well, but we are coming from a loss-making situation.

"It was never going to be working at full capacity. There is a potential for more expansion, but I can't see it."

The company said it was taking on 50 extra staff last year, taking the total number to 400, but Prof Rhodes said further expansion following that was unlikely.

However, the product mix and use of the capacity has been improved at the Newton Aycliffe site - described by Prof Rhodes as the catalyst feeding other parts of the business.

Filtronic took over the former Fujitsu site at Newton Aycliffe five years ago.

Only last week the company, which manufactures semiconductors for the communications industry at Newton Aycliffe, announced it had won a contract with mobile phone component supplier RF Micro Devices (RFMD).

As well as Newton Aycliffe and its head office in Shipley, the group has manufacturing sites in East Kilbride and Stewarton, in Scotland, Wolverhampton and Milton Keynes. It also has bases in the US, Finland, China and Australia.

RFMD is the world's largest manufacturer of radio frequency modules used in mobile phone and supplies most of the main handset producers. Filtronic said yesterday that pre-tax profits for the six months to November 30 rose from £2.7m in 2003 to £3.3m last year.

It said it had benefited from property disposals in the US and Australia, which earned £2.4m.

Profits at the handset division fell more than 50 per cent compared to the year earlier.

Prof Rhodes said: "In handset products, revenue is expected to remain seasonal.

"Demand from our key customer's new models is not expected to start until next financial year.

"Management focus will remain on achieving efficiency, although operating margins may be under pressure."

Profits were up at Filtronic's wireless infrastructure business as the company improved its position as market leader.

The increase in profits was helped by the company moving much of its production to China, where labour costs are lower and more than 50 per cent of its manufacturing is now carried out.

Electronic defence products have been identified by the company as a growth area and it hopes to increase sales in the US.