Trading update

21 January 2014

Cardiff, UK. 21 January 2014: IQE plc (AIM: IQE; “IQE”, “the Group”), the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, provides a trading update for the year ended 31 December 2013.
Trading in H2 2013 is expected to show sequential growth, despite weak guidance for Q4 2013 and Q1 2014 from a number of IQE’s wireless customers, and a significantly strengthening sterling/dollar exchange rate.
As a result, revenue for full year 2013 is expected to be at least £126.0m (2012: £88.0m), representing a new record and an increase of over 43% compared with the prior year. Strong sales growth and improved operational efficiencies are expected to deliver a record EBITDA of at least £24.5m (2012: £16.4m). Adjusted fully diluted EPS is therefore expected to be approximately 2p (2012: 1.51p), an increase of over 32% compared with 2012.
The Group’s high conversion of operating profit into cash is expected to reduce net debt to below £35.0m at year end (June 2013: £37.7m), even after the payment of approximately £14.0m during 2013 in deferred consideration relating to prior acquisitions. The amount of deferred consideration payable in 2014 is expected to reduce from this level.
Towards the end of 2013, in addition to successfully renewing its existing contractual relationships with key wireless customers, IQE also extended its contractual share of future business. As anticipated, the group continues to diversify its business across non-wireless applications.
In particular, the Group demonstrated:

  • strong progress in photonics (VCSELs) through a major contractual agreement with Philips, announced in October 2013;
  • continuing qualifications and technical progress on CPV, where a powerful supply chain has been established and is being fully qualified;
  • continued growth in infrared products; and
  • excellent progress on power and LED materials employing gallium nitride (GaN) on Silicon (Si) technology.

In addition, since year-end IQE’s powerful position in GaN on Si has been further endorsed by its inclusion in a significant US energy initiative announced on 15 January 2014 by US President Obama.
The Board remains confident that the Group can continue to deliver increased free cash flow over the coming year and beyond, as the business continues to diversify, and cost synergies from recent acquisitions are realised.

Dr Drew Nelson, CEO and President of IQE plc, said:
“I am very pleased to announce that we expect to report a record level of revenue and earnings for 2013 as a result of IQE’s increasingly strong position within the Compound Semiconductor Industry, and our rapidly strengthening product portfolio. As a result of strong cash flows we have also successfully reduced net debt and the deferred consideration owing on prior acquisitions.
“We look forward to further increasing cash flows and earnings during the current year and beyond as we maintain our strong position in wireless and continue to leverage opportunities to exploit our products in other high-growth markets.”