IQE 2019 results in line with guidance
Company reports revenue of £140.0m and an adjusted operating loss of £4.7m
IQE plc, a maker of advanced wafer products, has announced its full year results for the year ended 31 December 2019, which are in line with the unaudited summary financials released in the trading update of 24 March 2020.
Revenue of £140.0m (FY 2018: £156.3m) and an adjusted operating loss of £4.7m (FY 2018: profit of £16.0m) were in line with the November 2019 Trading Update guidance and are as reported in the Trading Update on 24 March 2020.
Reported operating loss after tax of £35m (FY 2018: £1.2m profit) as a result of the adjusted operating loss, recognition of a share of joint venture losses of £5m and exceptional items including non-cash balance sheet write-downs of assets of £9.5m cash costs associated with a confidential legal dispute £4.3m and non-cash deferred tax asset write-downs of £10m.
Capital expenditure of £31.9m (FY 2018: £30.4m), as the group completed the infrastructure phase of the capacity expansion programme.
Adjusted operating cashflow of £16.5m (FY 2018: £17.0m) and net debt (excluding lease liabilities) of £16.0m as at 31st December 2019 near the lower end of £15-20m range highlighted in November 2019 Trading Update guidance and as reported in the March 24th Trading Update.
Drew Nelson, CEO of IQE, said: “I’m pleased today to report our full year financial results for 2019, having previously postponed the release based on advice from the FCA and FRC due to the uncertainty in the external market during these challenging times.
“The global coronavirus pandemic is having a significant impact on all of our lives. I am confident IQE continues to take the right steps to protect our staff and also to maintain production at all of our global sites. I’m proud that as a supplier within the critical communications sector, IQE’s technology has a role to play in helping the world stay connected during this difficult time.
“Looking at this year, I am pleased to report that Q1 2020 trading was slightly higher than our internal expectations and the outlook for Q2 remains positive at this time. IQE remains well positioned to withstand the near-term uncertainty, and we are confident our technology will be a critical part of the world’s technologically driven future.”
Operational highlights include the mega foundry in Newport, South Wales entering production for 3D sensing products; wireless capacity in Taiwan being increased to address changes in global supply chain dynamics; and additional GaN capacity in Massachusetts to capitalise on forthcoming 5G infrastructure deployments.
Next generation product developments include: 10G and 25G Full Service Distributed Feedback (DFB) Lasers and 10G and 25G ; Avalanche Photodiodes (APDs) for high-speed datacoms and 5G fronthaul and backhaul; and filters (based on IQE’s patented cREO technology) and switches for 5G; and lasers and sensors for environmental and health monitoring.
IQE says its photonics roadmap progress includes strong results for Long Wavelength VCSELs for future smartphone and LIDAR deployments
To support navigation of challenging market conditions, IQE has increased its credit facilities with £30m asset financing facility put in place, increasing total available facilities to ~£57m (£25m drawn down at 31st December 2019). It has also put a formal agreement in place to relax debt covenants in December 2020 and June 2021, as a precaution, to ensure continued access to debt facilities in severe downside scenarios
Current trading and 2020 outlook
The full effects of the Coronavirus pandemic on global economic output in 2020 are still uncertain. The effect of an anticipated downturn on IQE’s markets is also uncertain and the increased risk to near-term performance is not currently quantifiable.
Given the unprecedented levels of uncertainty, IQE says it is unable to provide explicit guidance at this point in time. However, in line with the Trading Update on 24 March trading so far in 2020 has been in line with previous expectations, and the outlook for Q2 2020 remains positive.
IQE says it will continue to monitor developments around the pandemic, economic activity and specific market intelligence very closely and will update the market as the situation evolves.
Investment in Research and Development will continue and it anticipates spending of up to £10m on capitalised intangibles in 2020. Investment in Property Plant & Equipment will significantly reduce in 2020, to under £10m, following the completion of the infrastructure phase.