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IQE

14 September 2016

IQE's revenue grows 18% year-on-year in first-half 2016

For first-half 2016, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has reported revenue of £63m, up 18% on £53.2m in first-half 2015 (above the "at least 15% growth" given in a trading update in late July), reflecting increasing revenues in all markets.

Wireless sales were £43.2m, up 7% on £40.5m in first-half 2015. However, Wireless has fallen from 76% of total revenue in first-half 2015 to 69% in first-half 2016 as, continuing the firm's diversification, non-wireless sales have risen from 24% of revenue in first-half 2015 to 31% in first-half 2016.

In particular, Photonics sales continued to see strong double-digit growth to £10.7m, up 45% on £7.4m in first-half 2015 (rising from 14% to 17% of total revenue in first-half 2016). Infrared sales were £4.7m (7.5% of revenue), up slightly on £4.6m in first-half 2015. CMOS++ sales were £0.87m, up from £0.82m in first-half 2015.

License income from joint ventures (a new revenue stream since 2015) amounted to £3.5m, as both joint ventures continued to perform in-line with expectations.

"IQE's continued strong financial performance reflects the significant progress made in diversifying revenues over the past few years, and its growing portfolio of intellectual property," says chief executive Dr Drew Nelson. "A healthy performance in Wireless and IR has been supplemented by accelerated growth in photonics," he adds. "The photonics market is being driven by a diverse range of applications, and is at an early stage in the growth cycle. We expect our photonics business to continue to grow strongly for the foreseeable future."

Aided by the favourable product mix, adjusted gross margin rose from 24% in first-half 2015 to 28%. Hence, despite adjusted sales, general & administrative (SG&A) expenses rising from £6.2m to £7.3m (as IQE invested in anticipation of continuing growth), the adjusted operating profit rose from £6.7m to £10.8m. This resulted in a 62% increase in adjusted fully diluted earnings per share (EPS) from 0.90p to 1.46p.

Net cash generated from operations more than tripled from £3.5m to £11m, due to the improvement in profitability and strong working capital management.

During first-half 2016, net debt rose by £10.4m to £33.6m, largely reflecting that in January IQE settled the final balance deferred consideration from the Kopin acquisition (£10.7m). Conversely, the deferred consideration balance reduced from £17.9m to £1.8m, and will be eliminated in full by the end of September.

"IQE has developed a broad portfolio of intellectual property for advance semiconductor materials," says Nelson. "In addition to the £3.5m of license income generated in the first half, this IP portfolio is increasingly enabling IQE to differentiate itself, and create a platform for continuing growth across its current and emerging markets," he adds. "IQE has a pipeline of new products and customer qualifications which underpin its growth ambitions, with programs expected to ramp through 2017 and 2018. This includes new photonic applications, wireless base stations, advanced solar, and power switching applications."

IQE says that in second-half 2016 trading has commenced well and, with the benefit of a strong pipeline and increasing revenue diversification, the board remains confident that the firm is on track to deliver full-year earnings in line with expectations.

See related items:

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

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

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

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Visit: www.iqep.com

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