IQE reports solid results and positive outlook

24 March 2015

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 2014.

Financial highlights

• Revenue of £112m in line with expectations, reflecting H2 revenues of £60m up 15% from H1

• Adjusted* operating profit up 21% from £14.6m to £17.6m (reported operating profit £7.2m)

• Adjusted* operating profit margin up 420bp from 11.5% to 15.7% (reported margin 6.4%) • Cash inflow from operations (before exceptional items) up 21% from £16.2m to £19.6m (reported £14.9m)

• Adjusted* fully diluted EPS up 21% to 2.42p (reported FD EPS 0.24p)

• Net debt down by £3.2m (9%) from £34.4m to £31.3m

• Deferred consideration down £15.0m (42%) to £20.6m
* Adjustment to operating profit and EPS reflect non-cash charges and exceptional items as detailed in note 4

Operational highlights

• Utilisation of global manufacturing facilities continues to improve – further capacity also being unlocked through higher equipment productivity

• Wireless outlook robust, driven by adoption of 4G LTE for mobile devices and the continuing growth in mobile data    
o Customer and supplier capacity expansion programmes reflect continued confidence within the industry    
o Compound Semiconductor solutions continue to dominate power amplifier (PA) production

• Photonics revenues grew 23% organically year on year in constant currency    
o Rapid adoption of VCSEL technology by Tier 1 customers helps drive 30% increase in lasers and sensors    
o Solid data infrastructure demand, and consumer product design-ins continue to grow     o Infrared division winning significant orders, revenues up 13% year on year

• Advanced Solar has commenced pilot production for field deployment, which we expect to ramp into full production through 2015/16

• Gallium Nitride making strong technical progress in both RF for LTE base station deployment and in power for energy efficient switching    
o Significant supply agreement with MACOM Solutions

Dr Drew Nelson, IQE Chief Executive, said: “The Group’s performance for 2014 was encouraging. Demand from our customers across multiple product areas strengthened through the year. We enjoyed a significant pickup during the second half which enabled us to deliver improved second half revenues. As a result of reduced overheads and improving utilisation of our manufacturing facilities, we achieved better margins and delivered increased full year earnings and cash flows. I am also delighted with the progress we have made in reducing net debt.
“We are making good progress against our strategic objectives. Our wireless business continues to provide a solid platform, whilst our other markets are delivering encouraging revenue growth and are helping us to diversify our revenues.
“Trading in the first three months of the current year has been in line with our expectations. The outlook remains positive, which underpins the Board’s confidence that we remain on track to achieve our expectations for the full year.”


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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.