12 June 2020
IQE plc (AIM: IQE) the leading supplier of advanced wafer products and material solutions to the semiconductor industry, provides a trading update for the half year ending 30 June 2020.
Q1 revenues were slightly ahead of internal expectations and trading in Q2 to date has been strong in both the Wireless and Photonics Business Units. Despite the significant risk of disruption posed by the Coronavirus pandemic, IQE’s production has not been affected to date. All of the Group’s global sites have continued to operate with appropriate measures and controls in place.
IQE expects total revenues for the first half to be at least £85m, representing a record first half and an increase of over 27% compared with the first half revenues of 2019. IQE also expects to return to profitability, with a low single digit adjusted operating profit for H1 2020.
IQE expects to be cash generative in H1 2020 due to current trading performance, a reduction in capital expenditure following the completion of the infrastructure phase of the Group’s expansion in Massachusetts USA, Hsinchu Taiwan, and the Newport Mega Foundry in South Wales, coupled with cost control measures and working capital management. Net debt has therefore reduced since year end FY19, liquidity remains strong and headroom on IQE’s credit facilities has increased.
Due to the economic impact of the pandemic, the smartphone handset market is expected to decline year-on-year in 2020 and the Group anticipates the possibility of some level of inventory adjustment in the second half. However, IQE has opportunities in both 3D Sensing and Wireless Power Amplifiers for 5G handsets, where the amount of compound semiconductor content per handset is increasing.
There is growing evidence that 5G Infrastructure roll outs will gather pace due to economic stimulus packages put in place by governments around the globe and demand for IQE’s products for the US Military market is expected to continue to grow.
Given the unprecedented levels of uncertainty in the external environment, the Group is unable to provide guidance for the full year. It is possible that current levels of demand will continue but equally possible that revenues could fall in the second half as the full public health and economic effects of the Coronavirus pandemic become clearer.
Dr Drew Nelson, Chief Executive Officer of IQE, said:
“The global pandemic has created enormous challenges for people, businesses and governments across the world. I am proud that in such challenging times, we have so far achieved our aim of keeping our people safe, whilst maintaining full operations at all of our global sites. This is testament to the flexibility, dedication and professionalism of the global IQE team.
Demand so far in 2020 has rebounded from the levels we experienced last year. With strength in several product areas, I am delighted that we should be in a position to report record first half revenues. Considerable risk remains for the second half of the year but I am confident IQE has the resilience to navigate this dynamic and challenging environment.”
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This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/ 2014. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of IQE by Tim Pullen, Chief Financial Officer of IQE.
IQE is the leading global supplier of advanced compound semiconductor wafers and materials solutions that enable a diverse range of applications across:
- handset devices
- global telecoms infrastructure
- connected devices
- 3D Sensing
As a scaled global epitaxy wafer manufacturer, IQE is uniquely positioned in this market which has high barriers to entry. IQE supplies the whole market and is agnostic to the winners and losers at chip and OEM level. By leveraging the Group’s intellectual property portfolio including know-how and patents, it produces epitaxy wafers of superior quality, yield and unit economics.
IQE is headquartered in Cardiff UK, with c. 650 employees across nine manufacturing locations in the UK, US, Taiwan and Singapore, and is listed on the AIM Stock Exchange in London.