Year end Trading Update - Strong second half delivers significant increase in profits and cash generation

19 January 2010

IQE plc (AIM: IQE, “IQE” or the “Group”) the leading global supplier of advanced semiconductor wafer products and services to the semiconductor industry, provides a trading update for the year ended 31 December 2009.
The Group experienced a strong second half recovery following the industry-wide destocking that adversely impacted the first six months of 2009. As a result, IQE expects to report full year 2009 results in line with market expectations, despite the adverse currency impact of sterling strengthening against the US Dollar in the second half.
Second half revenues are expected to be 45% higher than first half. With the benefit of high operational gearing and stringent cost controls, IQE expects to report more than a threefold increase in second half EBITDA from £1.9m in the first half, to deliver a full year EBITDA of approximately £8m.
Continued tight control of working capital and capex delivered substantial free cash generation in the second half of 2009. As a result, net debt is expected to be significantly better than market expectations at approximately £15m – a reduction of approximately £4m since June 2009.
IQE’s strong second half performance reflects increasing demand for Gallium Arsenide (‘GaAs’) wafers in the wireless communications market, as well as a diverse range of high growth opto electronics markets.
The growth in wireless is being driven by a structural shift as GaAs-rich smartphones enjoy a rapid increase in popularity, and emerging economies such as the BRIC nations roll out 3G networks to satisfy increasing demand for high-speed mobile internet and data services.
The growth in optoelectronics is being driven by a diverse range of factors. Demand for solar cells and solid state lighting is growing in response to regulatory and environmental pressures. In contrast, consumer and industrial demand is driving growth in a number of applications including ‘hands free’ gaming, laser projection, high speed data communications (broadband), and advanced optical storage.
Dr Drew Nelson, IQE’s Chief Executive, said:
“We have demonstrated a high degree of resilience through a challenging year. Proactive management protected the business through the downturn, without jeopardising our ability to respond when sales volumes recovered strongly in the second half.
“Despite the economic turmoil, IQE has continued to strengthen its market position by attracting new talent and gaining new product qualifications to increase market share.
“We are making good progress in developing and commercialising key intellectual property that will provide a competitive advantage and secure leading positions in a number of emerging high-growth markets including solar power, laser projection systems and solid state lighting.
“The Board remains confident that IQE is well positioned to achieve continued growth in sales, profits and cash flow in 2010.”

IQE expects to report its preliminary results on 24 March 2010.

Contacts:

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


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, high efficiency LEDs and a variety of advanced silicon based systems.
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.