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Wireless market drives record results for IQE

The wireless communications market accounts for a whopping 85 percent of the group's sales

IQE plc., a global supplier of advanced wafer products and wafer services to the semiconductor industry, has announced its half year results for the six months to 30th June 2013.

Half yearly results

Revenues were up 84% to £63.0 million as compared to the first half of 2012 (H1 2012), where revenues were £34.3 million. The figure for this year was boosted by past strategic acquisitions. This year IQE acquired Kopin Wireless.

EBITDA for H1 2013 was up 162% to £10.5 million as compared to the same period last year when it was £4.0 million.

Adjusted Profit Before Tax (PBT) increased tenfold from £0.5 million to £5.1 million (reported PBT was £2.5 million). Adjusted basic Earnings Per Share (EPS) increased from 0.13p to 0.82p (reported basic EPS was 0.39p). EBITDA and adjusted profit measures exclude non-cash charges for share based payments, non-cash acquisition related charges and exceptional items as detailed in the press release.

Net debt increased from £15.5 million in December 2012 to £37.7 million at the end of June 2013.

Drew Nelson, IQE Chief Executive made a statement commenting on the results. He said:

"These record financial results are a clear testimony to the transformation we've achieved over the last 18 months. Our two strategic wireless acquisitions have been successfully integrated and are performing very strongly. These deals represented the final building blocks in our wireless strategy, and we are now firmly focussed on delivery."

"Although the recent weakness in the global smartphone market, ahead of new product launches, has injected a greater degree of uncertainty in the short term, the overall wireless story remains as exciting as ever. The demand for greater connectivity, the increasing complexity of wireless communications and the explosion in data traffic continue to drive increasing demand for compound semiconductors. We are uniquely positioned to exploit this long term growth trend as the clear leader in providing a broad range of high performance wireless products."

"The advanced properties of compound semiconductors go far beyond just wireless communication. We have built a strong IP portfolio and are primed to exploit the adoption of compound semiconductors in a number of mass market applications. These include advanced solar (CPV), Power Semiconductors, LED lighting as well as a range of consumer and industrial applications utilising advanced lasers (VCSELs)."

"Advanced solar (CPV) is a disruptive technology which is gaining traction in the energy market. Advances in cell and system efficiency are accelerating the adoption of CPV, which is widely expected to be a $200-500 million market for compound semiconductor materials in the next three to five years.Having successfully hit all major technical and operational milestones, and recently posted new world record efficiencies from our production platform, we are now qualified for high volume manufacturing to commence over the coming months."

"Our significant progress in strengthening and broadening the wireless business, whilst building a solid platform of technologies which are poised for strong growth in our other target markets, mean we remain confident of achieving market earnings expectations for the full year. The operational leverage of our business model should create significant earnings growth as our revenues increase."

Currently, approximately 85% of the Group's sales are into the wireless communications market. This market has enjoyed strong and sustainable growth driven by the proliferation of wireless communication devices, and the requirement for more compound semiconductor chips per device as wireless communication becomes increasingly complex. The Group expects these factors to continue to drive growth in demand for compound semiconductors for many years to come.

IQE has completed and successfully integrated two major competitors during the last 18 months, establishing a compelling platform in the wireless supply chain. The Group anticipates long term growth in wireless communication without suffering the volatility of swings in market share between chip companies.

The acquisition of Kopin Wireless, which was completed in January 2013, has integrated very well into the Group and has performed strongly. IQE is firmly focussed on delivery, and fully realising the many synergies which arise from these combinations.

The Group has also made major progress in its other markets, which will both accelerate organic growth and diversify its revenue streams as these opportunities transition from development and pilot production into high volume.

Advanced solar (CPV) is a highly disruptive renewable energy technology which is gaining traction.  Advances in cell and system efficiency are accelerating the adoption of CPV, which is widely expected to be a $200 million to $500 million market for compound semiconductor materials in the next three to five years. 

Having successfully hit all major technical and operational milestones set out at the time of its investment in Solar Junction Corporation, IQE is now qualified for high volume manufacturing and poised for the ramp as customers qualifications in the end market complete over the coming months.

IQE's photonics business has a diverse range of end applications, from data communications and advanced fibre optics to consumer and industrial applications. This business is being propelled by IQE's technology in VCSELs and is in the process of shifting from development and pilot revenues into high volume. The groundwork has been set for significant progress in this business in 2014 and 2015.

IQE has also made very strong progress with GaN materials, and is nearing new product launches. These materials will offer the Group's customers major cost-performance advantages in the high volume, high growth power switching and LED markets.

The Group's strategy is to use its technology leadership and scale to deliver the performance, cost points and security of supply required for mass market adoption of compound semiconductor materials.

IQE's key end markets are Wireless, Photonics (incorporating advanced solar, high resolution infrared, and opto-electronics), Electronics (advanced technologies) and the emerging opportunities of power switching and LED lighting. As can be seen in the chart below, wireless got a big boost this year.

These are high growth markets, which are being driven by a number of common themes.These are high-speed connectivity, the exponential growth of personal consumer devices for enhanced lifestyle,sustainable clean energy generation and the efficient use of energy;and safety and security.

Each of these growth trends involves a wave of technology upgrades driven by economic,environmental consumeror regulatory pressures,and each is being enabled by compound semiconductor technology. 

IQE is in the process of establishing internal business units to focus on these specific end markets. The firm's market facing teams are focussed on their respective markets to ensure that we remain aligned with our customers changing needs, and anticipate market trends.

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