21 January 2014

IQE expects revenue growth of 43% for 2013 to record £126m

In a trading update, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that revenue for second-half 2013 is expected to show sequential growth, despite weak guidance for fourth-quarter 2013 and first-quarter 2014 from a number of IQE’s wireless customers, and a significantly strengthening sterling/dollar exchange rate.

As a result, revenue for full-year 2013 is expected to be a new annual record of at least £126m, up 43% on 2012’s £88m. Strong sales growth and improved operational efficiencies are expected to deliver record EBITDA (earnings before interest, taxes, depreciation and amortization) of at least £24.5m, compared with £16.4m in 2012. Adjusted fully diluted earnings per share (EPS) is therefore expected to be about 2p, up 32% on 2012’s 1.51p.

IQE’s high conversion of operating profit into cash is expected to reduce net debt to below £35m at the end of 2013 (from £37.7m at end-June), even after the payment of about £14m during 2013 in deferred consideration relating to prior acquisitions. The amount of deferred consideration payable in 2014 is expected to reduce from this level.

Towards the end of 2013, in addition to renewing its existing contractual relationships with key wireless customers, IQE says that it also extended its contractual share of future business. As anticipated, the firm continues to diversify its business across non-wireless applications.

In particular, IQE demonstrated:

• strong progress in photonics (vertical-cavity surface-emitting lasers, or VCSELs) through a major contractual agreement with Philips (announced in October);

• continuing qualifications and technical progress on concentrated photovoltaics (CPV), where a powerful supply chain has been established and is being fully qualified;

• continued growth in infrared products; and

• excellent progress on power and LED materials employing gallium nitride (GaN) on silicon (Si) technology.

In addition, since year-end IQE’s position in GaN-on-Si has been endorsed by its inclusion in a US energy initiative (the Next Generation Power Electronics Innovation Institute) announced on 15 January by US President Obama.

The board remains confident that IQE can continue to deliver increased free cash flow over the coming year and beyond, as the business continues to diversify and cost synergies from recent acquisitions are realised.

“We expect to report a record level of revenue and earnings for 2013 as a result of IQE's increasingly strong position within the compound semiconductor industry, and our rapidly strengthening product portfolio,” says CEO & president Dr Drew Nelson “As a result of strong cash flows, we have also successfully reduced net debt and the deferred consideration owing on prior acquisitions,” he adds.

See related items:

IQE to be key partner in Next Generation Power Electronics Innovation Institute

US DOE selects NCSU to lead $140m Next Generation Power Electronics Innovation Institute

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 completes CPV technology process transfer milestones with Solar Junction

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