Continued strong growth drives revenues up 21% and underlying operating profit up sevenfold

24 March 2009

Continued strong growth drives revenues up 21% and underlying operating profitability up sevenfold

IQE plc (AIM: IQE, the “Group”), the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, has announced its Preliminary Results for the year ended 31 December 2008.
FINANCIAL HIGHLIGHTS

  • Revenues up 21% to £60.5m (2007: £50.1m) despite difficult economic conditions
  • Continued margin improvement with gross profit* up 43% to £11.8m (2007: £8.2m)
  • EBITDA* more than doubled to £8.4m (2007: £3.9m)
  • Underlying operating profit* up almost sevenfold to £4.0m (2007: £0.6m) reflecting strong operational gearing
  • Strong conversion of EBITDA into cash generated from operations*, up more than fourfold to £8.5m (2007: £2.0m).
  • Positive free cashflow** of £0.7m (2007: outflow £7.1m)
  • Net asset value increased from £23.0m to £30.2m during 2008
  • Exceptional charges of £3.9m (2007: £0.4m) incurred for planned relocation of manufacturing facility in Singapore (£2.5m) and Group streamlining to reduce costs and improve efficiencies. This includes non-cash items of £2.8m.
  • Retained profit* of £2.5m (2007: loss £0.4m). After the impact of the exceptional items, total retained loss of £1.4m (2007: loss £0.9m).
  • EPS* at 0.59 pence per share (2007: 0.10 pence loss per share). After the impact of the exceptional items a loss per share of 0.32 pence per share (2007 : 0.20 pence loss per share).

* before exceptional items ** free cash flow represents net cash flow before financing activities, interest and exceptional items
BUSINESS HIGHLIGHTS

  • Focus on high-growth markets delivers double-digit revenue growth for the fourth consecutive year and positions IQE strongly for the future.
  • Growth principally driven by high speed wireless communications, 3G mobile devices, and optical products for fibre optic communications, consumer and office sectors. Significant progress on new products for clean solar power generation, high-efficiency LED lighting, and advanced products for the electronics sector.
  • Rapidly developing a leadership position in the emerging solar power market, including cutting edge proprietary intellectual property. The foundations have been laid which position the Group to exploit fully the growth potential of this exciting market.
  • Continued strong growth in pre-exceptional operating profitability demonstrating powerful, highly operationally geared business model.
  • Proactive management to reduce the cost base by rationalising and consolidating operations to shape the business well for the current economic climate. The benefits of the improved efficiencies and reduced costs are already visible in 2009.
  • Completion of investment programme will enable full impact of operational gearing in cash generation in 2009.

TRADING OUTLOOK

  • Signs that inventory reductions are coming to an end after slow Q1. Customer feedback coupled with recent industry news-flow indicate that demand should start to pick up in Q2 2009, accelerating through the second half of 2009.
  • Investment in infrastructure and new product innovation has strongly positioned IQE to benefit from the upturn in the semiconductor markets.
  • Robust long term market growth for Gallium Arsenide (GaAs) based products forecast, driven by high speed wireless communications (including smartphone devices for 3G and beyond), solar cells for renewable, clean energy generation, highly efficient LEDs for solid state lighting, and compound semiconductor integration with silicon for future generations of integrated circuits.

Dr Drew Nelson, IQE Chief Executive, commenting on the results said:
“Despite the global economic downturn that caused a strong reduction in demand in the fourth quarter of 2008, IQE achieved record revenues and underlying operating profit, producing its fourth consecutive year of substantial double digit growth.
“The Group, which is the clear global market leader in advanced semiconductor wafer outsourcing, celebrated its twentieth anniversary during the year and achieved a number of important milestones. These included the relocation of its Singapore facility on time and within budget, and the development of an exciting range of new products, including those focussed on the burgeoning markets for renewable power generation and ultra high efficiency LED lighting sources.
“IQE’s continued growth during 2008 was driven by the increasing demand for GaAs based components for high speed, feature rich mobile devices that demand the high levels of performance and functionality that our products deliver. Whilst all sectors are currently suffering as a result of the global recession, it is “smartphone” products which are widely expected to be amongst the first to resume high growth once confidence returns to world markets.
“Our programme of reducing costs and investing in infrastructure and new product innovation has strongly positioned IQE to benefit from the upturn in the semiconductor markets.
“Operational cash generation was strong in 2008 and having completed our infrastructure investment programme, we expect free cash generation to improve significantly in 2009.
“Whilst it is anticipated that revenues during the first half of the year will be adversely affected by the global recession, we are seeing evidence that growth will resume in H2 2009 and that our exciting and innovative range of new products to address the global emphasis on energy efficiency is expected to contribute strongly to Group revenues in the latter half of 2009.”


Contacts:
IQE plc +44 29 2083 9400 Drew Nelson Phil Rasmussen Chris Meadows
College Hill +44 20 7457 2020 Adrian Duffield Carl Franklin
Noble & Company Limited + 44 20 7763 2200 John Llewellyn-Lloyd Sam Reynolds

Note to Editors
IQE is the leading global supplier of advanced semiconductor wafers with products that cover a diverse range of applications, supported by an innovative outsourced foundry services portfolio that allows the Group to provide a 'one stop shop' for the wafer needs of the world's leading semiconductor manufacturers.
IQE uses advanced crystal growth technology (epitaxy) to manufacture and supply bespoke semiconductor wafers ('epi-wafers') to the major chip manufacturing companies, who then use these wafers to make the chips which form the key components of virtually all high technology systems. IQE is unique in being able to supply wafers using all of the leading crystal growth technology platforms.
IQE's products are found in many leading-edge consumer, communication, computing and industrial applications, including a complete range of wafer products for the wireless industry, such as mobile handsets and wireless infrastructure, Wi-Fi, WiMAX, base stations, GPS, and satellite communications; optical communications, optical storage (CD, DVD), laser optical mouse, laser printers & photocopiers, thermal imagers, leading-edge medical products, barcode, ultra high brightness LEDs, a variety of advanced silicon based systems and high efficiency concentrator photovoltaic (CPV) solar cells.
The manufacturers of these chips are increasingly seeking to outsource wafer production to specialist foundries such as IQE in order to reduce overall wafer costs and accelerate time to market.
IQE also provides bespoke R&D services to deliver customised materials for specific applications and offers specialist technical staff to manufacture to specification either at its own facilities or on the customer's own sites. The Group is also able to leverage its global purchasing volumes to reduce the cost of raw materials. In this way IQE's outsourced services, provide compelling benefits in terms of flexibility and predictability of cost, thereby significantly reducing operating risk.
IQE operates six manufacturing facilities located in Cardiff (two) and Milton Keynes in the UK; in Bethlehem, Pennsylvania and Somerset, New Jersey in the USA; and Singapore. The Group also has 11 sales offices located in major economic centres worldwide.

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