IQE plc: Full Year 2016 Results

21 March 2017

Record revenues, profits and cash generation reflect the strength of IQE’s IP portfolio, which is delivering continued growth across a diverse range of applications and markets

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 2016.

 

£’ Million (except EPS)

2016

2015

Change

Revenue

132.7

114.0

16.4%

Adjusted* Operating Profit

22.1

18.9

16.6%

Adjusted* Profit Before Tax

20.6

17.6

17.4%

Adjusted* Fully Diluted EPS

3.0p

2.6p

15.4%

Cash generated from operations

22.5

20.9

7.1%

Capital investment (tangible plus intangible)

19.1

10.0

90.6%

Leverage (net debt + deferred consideration)

39.5

40.4

-2.0%

 

Financial highlights

  • Strong financial performance with continued double digit growth in revenues and  profits
    • Revenues up 16% to £132.7m (PY £114.0m), reflects multiple growth drivers and currency benefits in H2
    • Adjusted* operating profit up 17% to £22.1m
    • Adjusted* fully diluted EPS up 15% to 3.0p
  • Strong conversion of adjusted* operating profit into operating cash of 102% (PY: 111%)
  • Capital investment increased to £19.1m to address near term growth opportunities (PY £10.0m)
  • Deferred consideration from previous acquisitions settled in full (PY £17.1m outstanding)
  • Total leverage reduced by 2% to £39.5m (19% reduction in constant currency)

 

        *   Adjustments reflect non-cash charges and exceptional items as detailed in note 4

 

Operational highlights

 

  • Diverse range of growth drivers and end markets enables 19% growth in wafer sales,  reflecting organic growth in all markets, supplemented by a currency tailwind in H2
    • Photonics revenues up 43% to £22.8m
    • Wireless revenues up 15% to £91.3m
    • InfraRed revenues up 19% to £10.6m
    • US dollar strengthened 11% against sterling in H2 following Brexit vote in June
  • License income of £6.7m higher than expected, but lower than prior year (£8.0m) which included  a significant element of upfront income.
    • Direct engagement with multiple Tier 1 OEMs reflect IQE’s strong IP position and the increasing importance of epitaxial IP as a key enabling technology within electronic systems;
    • Major milestones achieved in 2016, enabled by IQE’s growing portfolio of leading edge IP, provide a positive lead indicator of significant growth opportunities ahead :
      • Key milestones delivered on several major photonics programmes during H2 2016, providing significant growth opportunities for 2017 and beyond;
      • Excellent progress with new cREO technology delivers some early wins, including delivering a step change in  GaN on Silicon technology (the elimination of “parasitic channel”), and engagement in development programmes for advanced RF filter applications;
      • A key customer is engaged in end market qualification using IQE’s GaN on Silicon material,  signifying that this technology is close to commercialisation; and
      • Significant contract wins in InfraRed, and progress in a number of development programmes underpin the continued growth of this business, and progress towards new high volume applications.
    • Positive market dynamics, including increasing M&A and sector investment, reflect the increasing focus on compound semiconductors as a critical enabling technology to major growth themes, including high speed communication, the “internet of things”, big data, advanced medical technology, energy efficiency,  and autonomous vehicles.
    • Good progress by IQE’s Joint Ventures in the UK and Singapore mark key milestones in their development as centres of excellence in driving innovation and commercialisation of advanced CS technologies.   The UK Joint Venture was a catalyst to securing c.£300m of funding towards the continued development of a UK CS Cluster, and the Singapore JV has been selected as a partner in a major programme for CS on silicon technology.

 

Dr Drew Nelson, IQE Chief Executive, said:

“IQE delivered a strong set of results in 2016, with revenues up 16%, PBT up 17%, and EPS up 15%.     The continuing growth in revenues, profits and cash generation is being enabled by the Group’s portfolio of cutting edge intellectual property, and is being delivered through a diverse range of growth engines.

“Revenues were up in all key markets: wireless, photonics and InfraRed.  Photonics continues to be the star of the show with 43% year on year growth in sales, and a CAGR of more than 35% over the past three years.  This is being driven by VCSEL and InP technologies which enable a broad range of applications from fibre optic communication, to advanced sensors, and industrial processes.   The depth and breadth of  photonics development programmes and customer qualifications provide a solid platform for continued strong growth over the coming years. 

“InfraRed sales were up 19% with a number of notable contract wins during 2016.   This division has gone from strength to strength, with good technological and commercial progress.   Our largest division, Wireless, also  performed well, with revenues up 15%.   Good progress within the wireless division in 2016, including continued innovation, new product development and new qualifications, has strengthened IQE’s strong leadership position in this space and provides a good platform for further growth.


“Our focus on building a strong IP portfolio reflects our vision of global leadership across a range of markets as advanced semiconductor materials become an increasingly important enabler of a wide range of electronics applications. This strategy underpins our strong financial performance, and the exciting outlook we see for our business.”

 

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