19 January 2010


IQE expects second-half 2009 revenue 45% up on first half

In a trading update for 2009, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that, following the industry-wide destocking that adversely impacted the first-half 2009, it experienced a strong second-half recovery. The firm therefore expects to report full-year 2009 results in line with market expectations, despite the adverse currency impact of sterling strengthening against the US dollar in second-half 2009.

Second-half revenue is expected to be 45% higher than first-half revenue (which was £21.4m). With the benefit of high operational gearing and stringent cost controls, IQE also expects earnings before interest, tax, depreciation and amortization (EBITDA) to rise more than threefold from £1.9m in first-half 2009, boosting full-year EBITDA to about £8m (down only slightly on 2008’s £8.4m).

Continued tight control of working capital and capex also delivered substantial free cash generation in second-half 2009. Net debt is therefore expected to be significantly better than market expectations at about £15m — a reduction of about £4m since June (compared to first-half 2009’s net debt of £18.9m).

IQE says that its strong second-half performance reflects increasing demand for gallium arsenide wafers in the wireless communications market, as well as a diverse range of high-growth optoelectronics markets.

The growth in wireless is being driven by a structural shift as GaAs-rich smartphones enjoy a rapid increase in popularity, and emerging economies such as the BRIC (Brazil, Russia, India and China) nations roll out 3G networks to satisfy increasing demand for high-speed mobile internet and data services.

The growth in optoelectronics is being driven by a diverse range of factors, says IQE. Demand for solar cells and solid-state lighting is growing in response to regulatory and environmental pressures. In contrast, consumer and industrial demand is driving growth in a number of applications including ‘hands free’ gaming, laser projection, high-speed data communications (broadband), and advanced optical storage.

“We have demonstrated a high degree of resilience through a challenging year,” says chief executive Dr Drew Nelson. “Proactive management protected the business through the downturn, without jeopardizing our ability to respond when sales volumes recovered strongly in the second half,” he adds. “Despite the economic turmoil, IQE has continued to strengthen its market position by attracting new talent and gaining new product qualifications to increase market share.”

“We are making good progress in developing and commercializing key intellectual property that will provide a competitive advantage and secure leading positions in a number of emerging high-growth markets, including solar power, laser projection systems and solid-state lighting,” continues Nelson. “The board remains confident that IQE is well positioned to achieve continued growth in sales, profits and cash flow in 2010.”

IQE expects to report preliminary results for second-half 2009 on 24 March.

See related items:

IQE completes NanoGaN acquisition

IQE sees sharp order pick up in May-June as destocking ends

IQE reports 20% growth in 2008, despite Q4 inventory reductions

See: IQE Company Profile

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