Trading Update pre Annual General Meeting

30 May 2006
 

Continued strong growth


IQE plc (the Group), the leading global supplier of customised wafer products and outsource wafer services to the semiconductor industry, is pleased to provide a pre Annual General Meeting Trading Update.

Commenting on the Group's performance, Dr Drew Nelson, President and CEO said :

"Trading has been very strong since the start of the year, with sales in the first quarter up 19% on Q4/2005 and up 53% on Q1/2005.

All parts of the custom epitaxy business have continued to show strong growth in 2006. The wireless sector is particularly strong, driven by the continuing demand for mobile handsets and infrastructure projects such as wireless LAN and Wi Fi. The mobile handset market is predicted to grow by an additional 15% in 2006 and the Group will benefit greatly from this growth through increased demand for its gallium arsenide materials. In addition, the greater sophistication of handsets with much more functionality and multiple radio frequency components in each unit will only add to this demand.

The Group's major outsourcing contracts are all performing ahead of expectations and the accelerated qualifications carried out in H2/2005 have now moved into full production. New qualifications continue well, including several in the Far East.

The opto electronics marketplace is also showing considerable strength, and the Group's Vertical Cavity Surface Emitting laser products are finding rapidly growing markets in short distance communications, laser printing and copying, and laser mouse applications. The markets for IQE Silicon and Wafer Technology are also showing good strength.

The growth which we are experiencing has increased our working capital requirements. In anticipation of this, we secured a working capital facility of £5m from our bankers towards the end of 2005 in the form of a £3m loan and a £2m overdraft facility. The loan was fully drawn down in December. The overdraft facility has not been utilized. The Board is confident that its existing cash resources and the overdraft facility will together provide sufficient funds to support our organic growth expectations.

Although there has been a substantial weakening of the US dollar in recent weeks of around 7% compared with Q4/2005 which has inevitably had an impact on our sales revenue, that impact is somewhat less than it would have been in the past because of the natural hedge provided by the higher percentage of the cost base now being denominated in US dollars. Notwithstanding this, we continue to control our costs very rigorously and implement new cost saving measures wherever practicable

We are now moving into a situation in the market where outsourcing is featuring more prominently in many companies' strategic considerations because the semiconductor industry is now becoming capacity limited in several areas. We see this as an advantage to the Group as our breadth of product range, large scale production capacity and economies of scale are key considerations in attracting new business. We therefore look forward to continued strong growth as the Group’s capacity utilisation continues to increase and the industry continues to expand".

 

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