24 September 2013

IQE confirms first-half revenue up 84% year-on-year to £63m

After giving a trading update for first-half 2013 in late July, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has confirmed record revenue of £63m (up 84% from £34.3m for first-half 2012).

EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and exceptional items) is £10.5m (up from £4m in first-half 2012). Cash inflow from operations more than doubled from £2.8m to £6.3m. IQE says that such strong conversion of operating profit into cash and the completion at the end of 2012 of its two-year capital expenditure (CapEx) expansion program marks a return to free cash generation. After investment in CapEx and product development of £4.5m (down from £10.6m in first-half 2012), IQE generated free cash inflow of £1.8m (compared with outflow £7.8m in first-half 2012).

Sales growth was driven primarily by the wireless division (more than doubling from £25.4m in first-half 2013 to £53.7m in first-half 2013, or about 85% of total revenue). This was boosted by strong performance from strategic acquisitions made over the past 18 months, including the MBE epiwafer manufacturing unit of RF Micro Devices Inc of Greensboro, NC, USA as well as the Kopin Wireless MOCVD-based heterojunction bipolar transistor (HBT) epiwafer manufacturing business of Kopin Corp of Taunton, MA, USA. In particular, revenue from Kopin Wireless (acquired on 15 January) was £15.6m in first-half 2013 (if the transaction had completed at the beginning of first-half 2013, this would be £16.6m).

Revenue from the Photonics segment has risen from £8.3m in first-half 2013 to £8.9m in first-half 2013, while revenue from the Electronics segment fell from £0.6m to £0.42m.

“These record financial results are a clear testimony to the transformation we've achieved over the last 18 months,” says chief executive Dr Drew Nelson. “Our two strategic wireless acquisitions have been successfully integrated and are performing very strongly. These deals represented the final building blocks in our wireless strategy, and we are now firmly focussed on delivery,” he adds.

“Although the recent weakness in the global smartphone market, ahead of new product launches, has injected a greater degree of uncertainty in the short term, the overall wireless story remains as exciting as ever,” Nelson continues. “The demand for greater connectivity, the increasing complexity of wireless communications and the explosion in data traffic continue to drive increasing demand for compound semiconductors. We are uniquely positioned to exploit this long-term growth trend as the clear leader in providing a broad range of high-performance wireless products,” he reckons.

“We have built a strong IP portfolio and are primed to exploit the adoption of compound semiconductors in a number of mass market applications,” says Nelson. “These include advanced solar (concentrated photovoltaics, or CPV), power semiconductors, LED lighting, as well as a range of consumer and industrial applications utilizing advanced lasers (vertical-cavity surface-emitting lasers, or VCSELs).”

IQE highlights the following business highlights achieved in first-half 2013:

• significant milestones achieved in solar CPV (now primed for rapid mass market adoption);

• photonics transitioning to volume production, including data centre and communication applications (VCSEL);

• significant progress with gallium nitride (GaN) technology for power semiconductors and LEDs (nearing new product launches);

• internal business units created (IQE Wireless and IQE Infrared) to address evolving market needs; and

• program to realise significant recurring synergies (of at least £7m per annum, from second-half 2014) is on track.

“Advanced solar (CPV) is a disruptive technology which is gaining traction in the energy market. Advances in cell and system efficiency are accelerating the adoption of CPV, which is widely expected to be a $200-500m market for compound semiconductor materials in the next 3-5 years,” says Nelson. “Having successfully hit all major technical and operational milestones [set out at the time of IQE’s investment in III-V multi-junction PV cell maker Solar Junction Corp of San Jose, CA, USA in February 2012], and recently posted new world record efficiencies from our production platform, we are now qualified for high-volume manufacturing to commence over the coming months,” he adds.

“Our significant progress in strengthening and broadening the wireless business, whilst building a solid platform of technologies which are poised for strong growth in our other target markets, mean we remain confident of achieving market earnings expectations for the full year,” notes Nelson. “The operational leverage of our business model should create significant earnings growth as our revenues increase.”

See related items:

IQE’s first-half revenue up 80% year-on-year to nearly £63m

IQE launches dedicated wireless products division

IQE launches dedicated infrared products division

IQE to acquire Kopin’s III-V assets for $75m; share placing to raise £16.5m

IQE’s revenue grows 45% year-on-year in second-half 2012

IQE’s first-half 2012 profit slashed due to Q1 inventory correction

CPV cell maker Solar Junction partners with system maker Amonix

IQE completes CPV technology process transfer milestones with Solar Junction

Solar Junction sets CPV cell efficiency record of 44%

IQE raises £10.5m and invests in CPV cell developer Solar Junction

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