Continued growth in underlying earnings despite customer inventory de-stocking. Good progress with restructuring

16 September 2014

Cardiff, UK. 16 September 2014: 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 half year results for the six months to 30 June 2014.

FINANCIAL HIGHLIGHTS

  • EBITDA up 6% to £11.1m (H1 2013: £10.5m)
  • Revenues down 17% to £52.0m (H1 2013: £63.0m) reflecting inventory de-stocking and strength of sterling
  • Wireless demand recovered during Q2 from customer inventory de-stocking
  • Photonics H1 2014 revenues up 22% on H1 2013 in constant currency to £10.1m
  • Adjusted PBT up 11% to £5.6m (H1 2013: £5.1m)
  • Reported LBT of £2.3m after £4.8m non-cash exceptionals and £3.1m cash cost of restructuring.
    • Adjusted basic EPS increases 10% from 0.82p to 0.90p (reported basic EPS of -0.92p)
    • Net debt £35.5m (December 2013: £34.4m)

Note: EBITDA and the adjusted profit measures exclude non-cash charges for share based payments, non-cash acquisition related charges and exceptional  items as detailed in note 5. 

BUSINESS HIGHLIGHTS

  • Clear leadership position in wireless supply chain as industry consolidation continues
  • Strong and sustainable photonics growth reflects significant contract wins
  • Benefits of restructuring programme beginning to come through in H1 2014
  • Restructuring largely complete, with further benefits to be seen in H2 2014 and thereafter
  • Signed MOU on collaboration to create specialist R&D centre of excellence in Singapore.
  • Significant technical and commercial milestones in GaN technology

Dr Drew Nelson, IQE Chief Executive, said:

“The Group has again demonstrated the resilience of its business model through the delivery of continued growth in profitability despite the lower than expected revenues resulting from adverse effects of a significant inventory correction in the wireless industry and the translational effect of a strengthening of the sterling exchange rate against the US Dollar.

“IQE is unquestionably the global leader in the manufacture and supply of the industry’s broadest portfolio of advanced semiconductor wafer products for the wireless sector. Wireless will continue to be a long term growth driver for our business as increasing connectivity continues to drive increasing demand for compound semiconductor devices.

“In addition our technology leadership and credibility in photonics are translating into contract wins which have delivered a 22% year on year growth in photonics revenues in constant currency.  This is being driven by a range of end market applications including optical communications for backhaul, fibre-to-the-home, and data centres, gesture recognition and sensing, and industrials applications.  This growth will be further supported with the transition from the development phase into commercial production for high efficiency solar power (CPV), anticipated for the second half of 2014.

“Having established a world-leading position in the wireless communications market, IQE is beginning to replicate this across our other markets including photonics, infrared, power, solar and CMOS++, the last of which is focussing on advanced technologies combining the simplicity of CMOS with the power of compound semiconductors.”

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Contacts:

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

Broker Profile +44 (0) 20 7448 3244
Simon Courtenay
Tamsin Shephard

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.