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17 September 2015

IQE's non-wireless business rises year-on-year from 21% to 24% of revenue

For first-half 2015, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has reported unaudited results in line with expectations and its July trading update.

Revenue was £53.2m, down 11% on £60m in second-half 2014 but up 2% on first-half 2014's £52m. Driven by revenue growth and high operational gearing, adjusted operating profit rose by 5% from first-half 2014's £6.4m to £6.7m, leading to a a 5% rise in adjusted fully diluted earnings per share (EPS) from 0.86p to 0.90p. Cash generated from operations has risen by 13% from £4m in first-half 2014 to £4.5m in first-half 2015. Net debt has hence been cut further, from £35.5m a year ago and £31.3m at the end of 2014 to £31.1m at the end of June 2015.

"This was a solid start to the year, in which we delivered continued improvement in our financial results and further reduced our borrowings," notes IQE's chief executive Dr Drew Nelson.

IQE's revenues continue to diversify, with non-wireless revenue rising from 21% of sales in first-half 2014 to 24% of sales.

In particular, photonics sales grew rapidly (up 28% year-on-year from £5.8m to £7.4m). "Growth in the photonics business follows on from strong engagement by IQE in its customers' product development programs over the past few years," says Nelson. "The increasing number and quality of customer product development programs is a positive lead indicator which is providing a high level of confidence over the growth outlook for photonics," he adds.

"Other non-wireless businesses continue to make good progress," Nelson continues. Infrared revenue grew from $4.3m in first-half 2014 to £4.6m. Regarding advanced solar wafers (CPV), during first-half 2015 IQE began pilot production with its triple-junction technology and achieved initial sales into field deployments.

Regarding GaN technologies, continued progress in new product development should lead to initial sales into the RF and power markets in the next 12-18 months. 

Wireless revenue business was stable, although revenue of £40.5m is down on first-half 2014's £41.3m, impacted in part by some temporary production disruption at one customer site (unrelated to epiwafers) which pushed second-quarter demand into Q3. 

"Whilst we remain vigilant to the macroeconomic risks, our customer forecasts continue to reflect a normal second-half weighting of demand," says Nelson. "IQE's board remains confident in achieving its full-year expectations," he concludes.

On 9 July IQE entered into a new joint venture with Cardiff University to create the Compound Semiconductor Centre Ltd (CSC), which aims to accelerate the development and commercialization of compound semiconductor technologies in Europe, and to provide an anchor for the development of a compound semiconductor cluster. To establish the CSC, IQE contributed equipment worth £12m (matched by a £12m cash contribution from Cardiff University). IQE will also license certain intellectual property (IP) to the CSC. The CSC has been established from 1 August, which will create a non-cash exceptional gain of about £4.7m in IQE's full-year financial statements due to the difference between the book value and market value of the equipment contributed by IQE. The firm also receives and recognizes revenue of £2m relating to the IP license.

Also on 15 September, IQE announced that it has signed an agreement with Translucent Inc, a subsidiary of Australia's Silex Systems Ltd, for the exclusive licence of its Rare Earth Oxide (cREO) semiconductor technology, and taken an option to subsequently acquire the technology. IQE will pay Silex Systems $1.5m within six months in consideration of the licence and option agreement, which will include transferring manufacturing and characterization equipment from Translucent to IQE as well as the exclusive services of two key engineers for 12 months in order to transfer the cREO technology to IQE. The agreement also includes an exclusive option to acquire the cREO technology and IP portfolio for $5m within 6 months of exercise of the option, plus a long-term royalty agreement of 3% of epi products sold using the cREO technology transferred, or 6% of cREO templates sold using the cREO technology transferred.

See related items:

IQE inks exclusive licence and option agreement to acquire Translucent's cREO technology

IQE's first-half 2015 revenue grows year-on-year

IQE and Cardiff University establish JV to develop and commercialize compound semiconductor technologies in Europe

IQE second-half 2014 revenue up 15% on first-half

IQE increases underlying profit in first-half 2014 despite 17% year-on-year drop in revenue

IQE's first-half revenue down 17% year-on-year to £52m, but profitability up

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