Full year 2013 results: Robust wireless business and diversification strategy drives strong rises in revenues, profit and earnings
26 March 2014
Robust wireless business and diversification strategy drives strong rises in revenues, profit and earnings
IQE plc (AIM: IQE, “IQE” or the “Group”), the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, announces its final results for the year ended 31 December 2013.
• Revenues up 44% to achieve new Group record of £126.8m (2012: £88.0m)
o Includes £30.9m revenues from Kopin Wireless, acquired in January 2013
o Adverse H2 currency impact as sterling appreciated 3% against US dollar
o H2 wireless sales up 3% over H1 in constant currency
o H2 photonic sales up 12% over H1 (in constant currency)
• Adjusted* PBT up 51% to £13.0m from £8.6m (Reported PBT £5.2m)
• Adjusted* fully diluted EPS up 43% to 2.00p from 1.40p (Reported fully diluted EPS 0.89p)
• Cash inflow from operations before exceptional items* up 346% from £4.7m to £16.2m (Reported cash inflow from operations £12.8m)
• Cash conversion before exceptional items** of 111% up from 51%
• Net debt of £34.4m (opening net debt £15.5m) increased primarily due to £25m of debt to part fund the Kopin acquisition
* Adjustments to profits, cashflows and EPS reflect non-cash charges and exceptional items as detailed in note 3
** Conversion of adjusted operating profit into cash inflow from operations before exceptional items.
• Integration of Kopin Wireless, reflected in strong operational performance and major customer service awards
• Reorganisation of business into market streams reflects confidence of strong growth in emerging markets and revenue diversification
• Improved operational efficiency through benefit of synergies including sharing best practice, economies of scale
• On track to secure elimination of duplicate overheads with consolidation of operations without any loss of capacity or technology, saving over £7m on an annualised basis
• CPV commercialisation strategy strengthened by acquisition of Solar Junction Corp. (SJC) stake by strategic investor
o Robust supply chain being established and qualification progressing well
• Excellent progress on diversification strategy with new product developments and qualifications, including :
o Major contract announced with Philips for VCSEL applications
o New 150mm VCSEL product launched for high volume applications
o Achievement of VCSEL speed performance and energy efficiency world records announced
o Development of Silicon Photonics technology announced
o World’s first 150mm InSb product launched for infrared applications
o Award winning 150mm GaN HEMT epi wafers on SiC launched for high power RF applications
• Increasing engagement in Government sponsored technology programmes in USA, Europe and Asia
Dr Drew Nelson, IQE Chief Executive, said: “IQE’s core wireless division has again delivered a robust performance, with continued growth despite a significant downstream inventory correction in the major chip companies due to softness in the high end smartphone market. As a direct result of our customer risk mitigation strategy, which we have executed over the last 18 months and completed with the acquisition of Kopin Wireless, we are much less sensitive to market share shifts between the major chip supply companies.
“Concerns in the UK over the last year that silicon CMOS would significantly damage the Compound Semiconductor industry have proved unfounded and are not reflected in our financial performance nor in our customers’ expectation of future long term demand drivers.
“Wireless remains an attractive market for us over the coming years with demand continuing to be driven by the proliferation of wireless applications and the need for sophisticated GaAs chips to deal with the explosive growth in data traffic. Beyond this, the next waves of innovation which will drive handset replacement cycles are likely to include lasers and sensors using compound semiconductor technology, for gaming, 3D image capture, gesture recognition, and sensing for a variety of applications including healthcare monitoring devices.
“Our business diversification strategy also gained strong traction, and we achieved a number of significant technical and commercial milestones during 2013 which reflect the strong progress made in our other key markets including photonic sensors and lasers, advanced solar (CPV), power semiconductors, infrared, LED and advanced electronics.
“Our integration remains firmly on track, and we expect to realise significant reductions in our financial overheads, whilst benefiting greatly from the operational and technical synergies we are delivering.
“IQE is at the forefront of the enabling technologies that are at the very heart of many of the twenty-first century trends and products. We are confident that the Group is well positioned for continued growth in earnings and cash flow in 2014 and beyond.”
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IQE plc +44 (0) 29 2083 9400 Drew Nelson Phil Rasmussen Chris Meadows
Canaccord Genuity + 44 (0) 20 7523 8000 Simon Bridges Cameron Duncan
Peel Hunt + 44 (0) 20 7418 8900 Richard Kauffer Daniel Harris
Insinctif +44 (0) 20 7457 2020 Adrian Duffield Kay Larsen
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 ('epiwafers') 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; and optical communications.
The Group also manufactures advanced optoelectronic and photonic components such as semiconductor lasers, vertical cavity surface emitting lasers (VCSELs) and optical sensors for a wide range of applications including optical storage, thermal imaging, leading-edge medical products, pico-projection, finger navigation ultra-high brightness LEDs, and high efficiency concentrated 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 a number of manufacturing and R&D facilities across Europe, Asia and the USA. The Group also delivers its products and services through regional sales offices located in major economic centres worldwide.