21 July 2016

IQE's first-half growth of 15% year-on-year driven by diversification

In a trading statement for first-half 2016, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that it expects to deliver a significant increase in revenues and profits compared with first-half 2015 and continues to reduce its balance sheet leverage (deferred consideration plus net debt).

Sales are expected to be at least 15% higher than first-half 2015, with the business seeing increasing diversification of revenue.

"The group's continued diversification of revenues is improving its resilience to end-market fluctuations, and our Photonics business continues to deliver strong double-digit growth driven by a range of emerging end-markets which are primed for significant and sustainable growth," says chief executive Dr Drew Nelson. In particular, it is widely accepted that the photonics market will continue its rapid growth over the coming years as vertical-cavity surface-emitting lasers (VCSEL) and indium phosphide (InP) lasers are increasingly adopted for a wide range of end-market applications including consumer products, fiber-optic communications, data centres and industrial processes.

License income from joint ventures is expected to be about £3.5m for first-half 2016, with both joint ventures making good progress. "Our Wireless and InfraRed businesses were stable, delivering slight increases in revenues [year-on-year]," says Nelson.

The depreciation of Sterling against the US dollar due to Brexit occurred shortly before the end of the half year, and as a result the financial impact on first-half 2016 was limited (translated at average exchange rates). However, the balance sheet impact was more significant, with a presentational increase in both assets and liabilities (converted at spot rate). Despite this, IQE has continued to reduce its leverage in both Sterling and US dollar terms due to its strong cash generation. Deferred consideration for previous acquisitions will be completely eliminated by September. IQE says that, other than the impact of currency fluctuations, it does not see any material impact of the decision to exit the EU on its business or prospects.

"The growth in IQE's sales and profits reflect the increasing diversification of its revenues, the growing breadth of its end markets, and the strength of its IP portfolio," says Nelson. "As a result, the group's strong cash generation continues to de-leverage its balance sheet, with the deferred consideration from previous acquisitions on track to be completely eliminated by the end of September," he adds.

IQE says that during first-half 2016 it made good progress on new product development and qualifications, strengthening its IP position, and re-enforcing a positive outlook. The board hence remains confident that the firm is on track to achieve full-year expectations.

IQE will report its full results for first-half 2016 on 13 September.

See related items:

IQE's Photonics sales growth of 28% outweighs further Wireless sales drop of 11%

IQE's Infrared business wins $3.7m order for InP materials

IQE's wireless business unit renews major contract with tier-1 customer

IQE on track to achieve full-year revenue growth

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

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

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

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