29 March 2011

IQE’s final 2010 revenue up 38%, tripling profit

After giving a trading update at the end of January for second-half 2010 revenue of “at least £38.7m”, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has reported final unaudited revenue of a record £39.6m, up 20% on first-half 2010’s £33m.

This takes full-year 2010 revenue to £72.7m, up 38% on 2009’s £52.7m, driven by increased volumes in all primary markets (reflecting buoyant markets and increasing market share).

In particular, although the IQE Silicon electronics business (which provides epitaxy services on silicon) comprised less than 5% of total revenue, wireless sales grew by more than 32% (comprising 75% of total revenue).

The emerging optoelectronics business grew more than 46% organically, albeit from a lower base (comprising 20% of total revenue). However, opto growth was boosted to more than 56% by the acquisition at the end of September of antimony-based substrate maker Galaxy Compound Semiconductors Inc of Spokane, WA (the sole US provider of infrared imaging materials to high-value military and other markets), which has “integrated well and performed very strongly”. Complementing IQE’s Wafer Technology subsidiary in Milton Keynes, UK, the Galaxy acquisition positions IQE as the market leader for gallium antimonide and indium antimonide substrates for use in infrared sensing, it is reckoned.

IQE says that its optoelectronics sales are already beginning to reflect the benefit of pre-production revenues generated from consumer applications and concentrated photovoltaics (CPV). In particular, sales of VCSELs (critical for finger navigation and optical interconnects) grew by about 120%, while sales of CPV material grew by more than 80%.

“Our core business of high-speed connectivity, including wireless-related products for all forms of mobile device communications, has continued to show very strong growth, whilst new and emerging products for consumer, energy efficiency, industrial and defence applications are generating increased demand across all our key markets,” comments president & CEO Dr Drew Nelson. “2010 has been an outstanding year for the Group, with record revenues and profits achieved, delivering on key strategic, operational and financial objectives well ahead of the board’s expectations,” he adds.

Reflecting “continued strong management of costs and further operating efficiencies”, full-year gross margin has risen from 21.9% in 2009 (which included the benefit of one-off cost savings during a period of destocking) to 22.8%.

Aided by extremely high operational gearing, pre-tax profit tripled from £2.1m to £6.3m, while retained profit more than tripled, from £2.1m to £7.5m.

A placing of 65 million new shares announced at the end of September raised gross proceeds of £20.8m, which was used to repay borrowings, finance capital expenditure and fund the Galaxy acquisition. Capital expenditure rose from £1.7m in 2009 to £5m, as capacity has been added in order to meet expected continued growth in demand. In particular, IQE invested £3.4m in development expenditure (up from £2.3m in 2009), relating to the qualification of new wireless and optoelectronic products and the development of new solar and gallium nitride materials. Also, IQE disposed of a property in Singapore for £1.5m, realizing a profit of £0.4m. Overall, compared with net debt of £14.9m at the end of 2009, IQE had net cash of £7m at the end of 2010.

“We continue to make excellent progress in the development and commercialization of key IP that we expect will contribute to revenues during 2011 and help to increase our competitive advantage and leading positions in a number of high-growth markets,” notes Nelson. In particular, last August IQE was granted two Japanese patents on nanocolumn technology for high-purity gallium nitride (GaN) substrates (for the production of blue and green lasers and LEDs), developed by NanoGaN Ltd of Bath, UK (acquired in October 2009).

“In terms of the four technology ‘megatrends’ of this decade [high-speed connectivity; sustainable clean energy generation and the efficient use of energy; the explosion of personal consumer devices for enhanced lifestyle, and the increased sophistication and performance of security-related systems] we are helping drive these with our key enabling technologies,” says Nelson. In particular, with a number of emerging high-volume and mass-market applications, IQE believes its optoelectronics business has the potential to eclipse wireless growth on a sustained basis, and to eventually evolve into a business with the current scale and profitability of the wireless operation. “The board remains confident that IQE is well positioned to continue its strong growth in 2011 and beyond.”

See related items:

IQE reports record revenue and higher-than-expected profit for 2010

IQE revenue grows 54% year-on-year to record £33m in first-half 2010

IQE expects first-half 2010 revenue up 50% year-on-year

IQE rebounds by 46% to record £31.2m revenue in second-half 2009

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

See: IQE Company Profile

Tags: IQE

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