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(IQE) IQE plc Share Chat

Discussion in 'General Share Chat (IQE)' started by Mongoose82, Jul 20, 2016.

  1. Groucho

    Groucho Member

    Investors Chronicle 05/07/19
    Richard Faraway likes this.
  2. Groucho

    Groucho Member

  3. Groucho

    Groucho Member

    • Revenue of £66.7m (H1 2018: £73.4m) is 9% down year on year, impacted by a weak smartphone handset market and reductions in demand in the context of a technology market slowdown, international trade tensions and fall in demand from a major InP laser customer.
    • Adjusted operating loss of £1.9m (H1 2018: profit £7.6m) reflects negative operating leverage from a cost base scaled for volume which includes an increase in depreciation and amortisation of £2.4m resulting from the investment in capacity.
    • Negative EPS of 1.29p due to the operating loss plus a one-off non-cash deferred US tax charge resulting from a shift in the balance of future projected manufacturing between the US and UK / Asia.
    • Cash generated from operations of £4.0m (H1 2018: £7.6m) reduced due to lower trading volumes. Additional asset financing facility agreed post half year-end.
    Dr Drew Nelson, Chief Executive Officer of IQE, said:
    “I am pleased that IQE has delivered results which are in line with the trading update from June this year and to reiterate our full-year guidance, despite a number of challenging market conditions facing our industry in the first half of 2019.

    “We remain confident in IQE’s ability to adapt to global supply chain shifts and have made significant strategic and operational progress with our global expansion projects. This includes completing the infrastructure phase at our Mega Foundry in Newport, South Wales as well as the capacity expansion in Taiwan and Massachusetts, US.

    These investments in the Group’s global manufacturing footprint, coupled with IQE’s unique breadth of compound semiconductor materials experience and IP portfolio, position the Group well for future growth and margin expansion as volumes increase, driven by the growth opportunities in 5G and connected devices.”

    • Major Investment Programme substantially completed:
      • Infrastructure phase at Mega Foundry in Newport, South Wales now finished with ten tools installed and optionality to add up to 90 more
      • Capacity in Taiwan has been increased by 40%, enabling growth in revenues with Asian supply chains
      • Investment in GaN capacity in Massachusetts to capitalise on forthcoming 5G infrastructure deployments
    • Newport Mega-Foundry Commencement of Production:
      • First mass production order from IQE’s leading VCSEL customer
      • Extensive product qualifications ongoing with twelve other chip customers across broad supply chains
      • Commencement of production, post half year-end, with a second customer, serving Android supply chains.
      • Signature of a contract extension, post half year end, with one of its largest VCSEL customers, running through to the end of 2021. In addition, two other existing contracts have also been extended with several other new contracts anticipated.
    • 5G Product Development:
      • Continued strong results in the development of Filters and Switches for 5G, based on IQE’s patented cREO technology, with customer engagement for commercialisation proceeding well
      • Introduction of a Full Service Distributed Feedback (DFB) Laser for high-speed datacoms using Nano-Imprint Lithography
    • New management structure implemented to support growth ambitions and scalability of operations:
      • Dr Drew Nelson, Chief Executive Officer (CEO)
      • Tim Pullen, Chief Financial Officer (CFO)
      • Dr Rodney Pelzel as Executive VP, Global Innovation (CTO)
      • Keith Anderson as Executive VP, Global Operations (COO)
      • Dr Wayne Johnson as Executive VP, Global Business Development, Wireless and Emerging Products
      • Dr Mark Furlong as Executive VP, Global Business Development, Photonics and InfraRed
    • Development of the IQE Board
      • Appointment of Phil Smith CBE, as Chairman
      • Appointment of Carol Chesney, FCA, as Non-Executive Director and Chair of the Audit Committee
    • Post half year end increase to available credit facilities
      • £30m asset financing facility in place, increasing total available facilities to ~£57m (£12m drawn down at 30th June 2019)


    Outlook and guidance remain in line with the trading update from June 21st, 2019.

    Three key factors affect IQE’s revenue outlook for 2019

    1. Continued uncertainty related to the geo-political landscape, the effects on global technology markets and, in particular,the confidence for supply chains to rebuild inventory;
    2. The market for smartphone handsets in the second half of 2019;
    3. The speed of formation of new Asian supply chains, the associated product qualifications and volumes of initial orders.
    Balancing these factors, full year revenue guidance of £140m to £160m is reiterated.

    Segmental revenue guidance is reiterated on a like-for-like basis, but restated to reflect a change in allocation methodology based on (i) the newly implemented business unit structure upon the formation of the Executive Management Board and (ii) certain revenues pertaining to a specific site which has shared production, being reclassified between segments due to an allocation methodology change (USD constant currency):
    Second half revenues are expected to represent between 52% and 58% of full year revenues. As such, given the additional contribution against a largely fixed cost base, a return to adjusted operating profitability is expected in H2. This will be strengthened by cost management actions that support the strategic direction of the Group.

    EBITDA margins will remain low in FY19 as the utilisation of facilities remains low versus capacity and a high number of product qualifications continue. Full year adjusted operating profit margin guidance, whereby IQE expects to remain profitable in 2019 but with adjusted operating profit margin significantly below the original FY19 guidance of over 10%, is reiterated.

    With the infrastructure phase of the capital investment programme substantially complete in H1, full year capex guidance of £30m to £40m is reiterated. The range relates to the timing of the decision to invest in further tools at either Newport or Taiwan, which is discretionary depending on prevailing market conditions. The Group has sufficient installed capacity to underpin significant revenue growth.
  4. Groucho

    Groucho Member

    IQE plc

    (“IQE”, the “Company” or the “Group”)

    Trading Update

    Cardiff, UK 18 November 2019: IQE plc (AIM: IQE) the leading supplier of advanced wafer products and material solutions to the semiconductor industry, announces the following trading update for the full year ended 31 December 2019.

    IQE now expects to deliver revenue of between £136m and £142m, compared to the previous guidance range of £140m to £160m, including a forex tailwind of circa £3m.

    A mid-single digit adjusted operating loss is now expected resulting from revenues being slightly below the previous guidance range, additional one-off commissioning costs at the new foundry in Newport, general diseconomies of scale associated with operating at low volume in some sites and the inclusion of losses for the Singapore CSDC entity as announced in October.

    In Photonics, consistently strong 3D sensing volumes with the Company’s largest Vertical Cavity Surface Emitting Laser (VCSEL) customer have been achieved in H2 2019, underlining IQE’s lead position for epi-wafers in this supply chain. The Company continues to make good progress on a significant number of Android-related supply chains including two recently announced production qualifications. The market for Indium Phosphide lasers for datacom / telecom has remained weak but with signs of growth for 2020, particularly in Asian markets.

    In Wireless, there have been continued low volumes of orders and reductions in inventory by our major RF chip customers in the US, offset to a limited extent by a promising increase in production for Asian supply chains. IQE has qualified 3 tools, with 2 further tools in the process of qualifying, with a major Taiwanese foundry. The Company continues to make good progress on new product development in the areas of RF Filters and Switches for 5G.

    Since June, the Company has taken steps to reduce costs and capital expenditure as the infrastructure phase of capacity expansion has been completed. Capex will be towards the bottom end of the previous guidance of £30-40m and the net debt position at year end is expected to be between £15m to £20m, against increased debt facilities of £57m announced in June.

    The outlook for 2020 includes a seasonally weak Q1 and continued supply chain transitions in the wireless market. Beyond Q1 2020, IQE is cautiously optimistic about a return to growth, driven by expected content gains in an expanding market for 3D sensing, demand for GaN to meet accelerating 5G infrastructure deployments and expanding Asian market opportunities for both Photonics and Wireless products as supply chains continue to localise. Taking all of the above into account, the Company expects total revenue will return to moderate growth in 2020.

    Dr Drew Nelson, Chief Executive Officer of IQE, said:

    “IQE has experienced very challenging market conditions in 2019. Shortfalls in revenue relate predominantly to two major customers, with whom IQE is confident it has not lost share and who remain very well positioned for returns to growth in 2020. Indeed, the Company remains well positioned to capitalise on an expanding future compound semiconductor market opportunity driven by the macro trends of 5G and connected devices. In order to fully realise this opportunity, the recently announced Executive Management Board is already making good progress in driving the Company’s approach to increasing profitability, with specific responsibilities assigned for programs on operational execution, new technology introduction, revenue expansion through customer proximity and diversification, and strong cost management.”

    IQE will be holding a conference call for Analysts and Institutional Investors at 08:00 London time today.

  5. Groucho

    Groucho Member


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