IQE PLC Iqe Plc : 2017 Pre-close Full Year Trading Update
20 December 2017 - 6:00PM
UK Regulatory
TIDMIQE
IQE plc
Trading on track to exceed full year expectations.
Cardiff, UK. 20 December 2017: IQE plc (AIM: IQE, "IQE" or the "Group"),
the leading global supplier of advanced wafer products and wafer
services to the semiconductor industry, announces its pre-close trading
update for the full year ending 31 December 2017.
The Group announces that it expects full year revenues to be ahead of
market expectations, and to be not less than GBP150m for the year
ending 31 December 2017. Wafer sales are on track to deliver strong
double-digit growth in 2017 and to continue to diversify. The three
primary markets are Photonics, InfraRed and Wireless.
The Photonics business has enjoyed strong double-digit growth over the
past few years largely driven by new product development and pilot
production for a wide range of applications. This growth continued to
accelerate sharply in the second half of 2017 as a VCSEL product
development programme moved to mass market production in June. As a
result, the Photonics division is on track to achieve approximately 100%
growth in 2017 over 2016. IQE believes that it has created a
sustainable lead in this market by virtue of its intellectual property,
its ability to scale this complex technology into mass market, and its
dual-site supply strategy. This is further underpinned over the next
few years by several, multi-year supply contracts.
The InfraRed business enjoys global leadership in the supply of advanced
antimonide wafer products. It has a history of delivering steady growth,
and is on track to deliver growth in 2017 of approximately 10%. This
business has historically focussed on advanced "see in the dark"
technologies in the defence sector, but it is now engaged with major OEM
and device companies in product development programmes targeting mass
market consumer applications.
Wireless sales are expected to be broadly flat year on year, with a
forex tailwind mitigated by a reduction of inventories downstream. IQE
successfully managed this inventory reduction to enable it to focus
capacity on the rapidly expanding photonics division. This was
achievable by virtue of its strong Supplier Managed Inventory ("SMI")
relationships with its customers. These inventory levels will normalise
in 2018 as we replenish normal SMI levels.
The Group also generates license income from Joint Ventures. As
anticipated, this will reduce from the prior year, which included
significant upfront amounts. License income is expected to be no more
than GBP2m for the full year.
The majority of the Group's revenues are denominated in foreign
currency. A forex tailwind of approximately 5% against the prior year
turned into an approximate 5% headwind in the second half. However,
this is largely presentational as the majority of the groups costs are
also in foreign currency.
The increase in wafer sales will continue to drive an expansion of wafer
margins in 2017. As a result, profit before tax for the Group is
expected to be ahead of current market expectations. In particular,
wafer sales are expected to be materially higher, partially mitigated by
lower license income. This margin expansion is after upfront investment
in overheads to establish the new foundry that will begin operations in
2018. Progress with the new foundry is on track, with the first five
new tools ordered being scheduled for installation in early 2018, and
generating revenues by mid-year. In addition, the Group has agreed terms
for a further ten production tools, and is in the process of agreeing
the specification for the first five of these additional tools.
Net funds are expected to be in the range of current market
expectations.
As reported in October, a prior year tax liability estimated to be
GBP4.2m was identified and settled in full. The Group's tax advisors
have now completed their review of the tax computations and the tax
return has been filed. Whilst there were no indications of any further
potential omissions, the Board commissioned an international independent
tax firm to complete a comprehensive review of the Group's tax
compliance in the UK, the US and Asia. This review is ongoing and has
not identified any further unrecorded liabilities. This review is
scheduled for completion during Q1 of 2018.
Additionally, the US Government's much publicised plan to reduce the
corporation tax rate from 35% to 21%, if passed would have a positive
long term financial benefit for the IQE group, which has operations in
the US. However, if enacted, this change will give rise to an upfront
non-cash deferred tax charge relating to a reduction in the associated
deferred tax asset. The quantum of the potential reduction has not yet
been evaluated.
The Group is scheduled to report its full year results for 2017 on 20
March 2018, and will provide forward looking guidance at that time.
Dr Drew Nelson, Chief Executive of IQE, said:
"I'm very pleased to confirm that IQE is on track to achieve record
financial results in 2017. The adoption of VCSELs in the mass market
has been a key revenue driver in the year. IQE has built a strong and
sustainable lead in this complex materials technology. We see VCSEL
being a long term growth driver for the Group across a diverse range of
applications including sensing, LIDAR, optical communications,
industrial heating, machine vision and heat assisted magnetic recording.
"VCSEL is just one of many advanced materials technologies that IQE has
developed which will drive continuing growth in the near and mid term.
IQE has created strong differentiation in the industry through its broad
portfolio of materials technologies and it ability to scale and supply
reliably in the mass market. Combined with our recent fund raising to
pump prime our expansion, IQE's outlook is for strong, diverse and
sustainable growth"
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this announcement,
this inside information is now considered to be in the public domain.
CONTACTS
IQE plc +44 (0) 29 2083 9400
Drew Nelson
Phil Rasmussen
Chris Meadows
Canaccord Genuity + 44 (0) 20 7523 8000
Simon Bridges
Henry Fitzgerald O'Connor
Richard Andrews
Peel Hunt +44 (0) 20 7418 8900
Edward Knight
Nick Prowting
Note to Editors
IQE is the leading global supplier of advanced semiconductor wafers with
products that cover a diverse range of applications, supported by an
innovative outsourced foundry services portfolio that allows the Group
to provide a 'one stop shop' for the wafer needs of the world's leading
semiconductor manufacturers.
IQE uses advanced crystal growth technology (epitaxy) to manufacture and
supply bespoke semiconductor wafers ('epiwafers') to the major chip
manufacturing companies, who then use these wafers to make the chips
which form the key components of virtually all high technology systems.
IQE is unique in being able to supply wafers using all of the leading
crystal growth technology platforms.
IQE's products are found in many leading-edge consumer, communication,
computing and industrial applications, including a complete range of
wafer products for the wireless industry, such as mobile handsets and
wireless infrastructure, Wi-Fi, base stations, GPS, and satellite
communications and optical communications.
The Group also manufactures advanced optoelectronic and photonic
components such as semiconductor lasers, vertical cavity surface
emitting lasers (VCSELs) and optical sensors for a wide range of
applications including optical storage, thermal imaging, leading-edge
medical products, pico-projection, finger navigation ultra-high
brightness LEDs, and high efficiency concentrated photovoltaic (CPV)
solar cells.
The manufacturers of these chips are increasingly seeking to outsource
wafer production to specialist foundries such as IQE in order to reduce
overall wafer costs and accelerate time to market.
IQE also provides bespoke R&D services to deliver customised materials
for specific applications and offers specialist technical staff to
manufacture to specification either at its own facilities or on the
customer's own sites. The Group is also able to leverage its global
purchasing volumes to reduce the cost of raw materials. In this way,
IQE's outsourced services, provide compelling benefits in terms of
flexibility and predictability of cost, thereby significantly reducing
operating risk.
IQE operates a number of manufacturing and R&D facilities across Europe,
Asia and the USA. The Group also delivers its products and services
through regional sales offices located in major economic centers
worldwide.
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: IQE plc via Globenewswire
http://www.iqep.com
(END) Dow Jones Newswires
December 20, 2017 02:00 ET (07:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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