20 January 2011

IQE reports record revenue and higher-than-expected profit for 2010

In a trading update for full-year 2010, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that second-half revenue and profit continued to show strong growth as a result of higher demand across its increasingly diverse portfolio of semiconductor wafer products. Revenue is expected to be at least £38.7m (up 17% on first-half 2010’s £33m), giving full-year revenue of a record £71.7m (up more than 36% on 2009’s £52.7m).

IQE’s high operational gearing is expected to translate into an increase in full-year earnings before interest, tax, depreciation and amortization (EBITDA) of more than 56% to a record £12.6m, ahead of consensus market forecasts of £11.9m and more than double 2009’s £6.1m.

IQE says that its strong performance throughout the year reflects the increasing reliance on advanced semiconductor materials across a broad spectrum of consumer, industrial and communications applications. The dramatic growth in portable devices from smartphones to tablets has been the major driver for increased demand in gallium arsenide (GaAs) wafers, specifically for wireless applications. Industry analysts expect the trend towards greater functionality and portability to continue.

Also, demand for compound semiconductor materials is likely to accelerate following announcements earlier this month at the Consumer Electronics Show (CES 2011) that manufacturers and carriers are stepping up the rollout of 4G devices supported by networks capable of download speeds of up to ten times faster than 3G.

IQE’s business growth has been further supported by increasing demand across the group’s diverse range of markets, from advanced semiconductor materials for optoelectronic communications to high-efficiency solar cells and LEDs. Optoelectronic products will hence account for a growing proportion of the group’s full-year revenue.

An oversubscribed £21m fundraising round was completed in fourth-quarter 2010. The funding was used to strengthen the balance sheet and to allow for expansion of manufacturing capacity. Also during the last quarter, IQE acquired Galaxy Compound Semiconductors Inc of Spokane, WA, the sole US provider of infrared imaging materials to high-value military and other markets. Now fully integrated within the group, Galaxy is performing ahead of initial expectations and is contributing well to the business, says IQE.

As a result of the fundraising, the end-of-year balance sheet is expected to show a significant increase in net funds, providing the resources for IQE to selectively invest in additional production capacity to satisfy projected growing demand over the coming months and years.

“Our core business of wireless-related products for all forms of mobile device has continued to show exceptionally strong growth, whilst new and emerging products for consumer, industrial and defence applications are generating demand across all our key markets,” says chief executive Dr Drew Nelson.

“We continue to make excellent progress in the development and commercialization of key intellectual property that we expect will contribute to IQE’s revenues during 2011 and help to increase the group’s competitive advantage and leading positions in a number of high-growth markets,” he adds.

IQE expects to report its preliminary results on 29 March.

See related items:

IQE revenue grows 54% year-on-year to record £33m in first-half 2010

IQE expects first-half 2010 revenue up 50% year-on-year

IQE rebounds by 46% to record £31.2m revenue in second-half 2009

IQE expects second-half 2009 revenue 45% up on first half

See: IQE Company Profile

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Visit: www.iqep.com