Pre-tax profit tripled to £6.3m over 2009 and basic earnings per share (EPS) was up 247% to 1.63p.

IQE, a global supplier of advanced wafer products and wafer services to the semiconductor industry, has published final results for the year ended 31 December 2010.

Revenues went up 38% to £72.7m, thanks partly to additional capital expenditure of £5.0m (compared to £1.7m in 2009). Gross margins were up from 21.9% (in 2009) to 22.8%. Pre-tax profit tripled to £6.3m, (2009: £2.1m). Basic EPS was up 247% to 1.63p (2009: 0.47p).

The firm was awarded tax credit of £1.2m due to R&D tax refunds (£0.5m) and recovery of tax losses (£0.7m). With a strengthened balance sheet, the firm raised gross proceeds to £20.8m and declared net cash of £7.0m, as compared to a net debt of £14.9m in 2009.

 

 



 

IQE says strong revenue growth in primary markets reflects buoyant end markets and increasing market share. Rapid revenue growth was seen in a range of emerging optoelectronic products such as LEDs, which are moving towards volume production.

The firm further strengthened its IP portfolio, by being granted a nanocolumn patent in Japan for high purity GaN substrates from its subsidiary, NanoGan. It also acquired Galaxy Compound Semiconductors in September 2010, which IQE says has integrated well and performed very strongly.

Drew Nelson, IQE Chief Executive, said:

“2010 has been an outstanding year for the Group, with record revenues and profits achieved; a clear delivery on our strategic and operational goals.

“Our core business of high speed connectivity, including wireless-related products for all forms of mobile device communications has continued to show very strong growth, whilst new and emerging products for consumer, energy efficiency, industrial and defence applications are generating increased demand across all our key markets.”

“We continue to make excellent progress in the development and commercialisation of key IP that we expect will contribute to revenues during 2011 and help to increase our competitive advantage and leading positions in a number of high-growth markets.”

“In terms of the four technology ‘megatrends’ of this decade - high-speed communications, energy efficiency, security and lifestyle – we are helping drive these with our key enabling technologies. The Board remains confident that IQE is well positioned to continue its strong growth in 2011 and beyond.”

The wireless communications market enjoyed very rapid growth in 2010; global shipments of smartphones grew by more than 70% and with smartphones still only representing 22% of all handsets sold.

Furthermore, the launch of tablet devices, the rollout of 4G and LTE, and the adoption of high speed wireless technology around the world will drive rapid growth in wireless devices and the data communications they support.

Wireless sales grew by more than 32% and IQE was recognised by TriQuint and Avago as their “Supplier of the Year”.

The emerging optoelectronics business grew at an even faster rate than wireless, albeit from a lower base, achieving organic year on year growth of more than 46%. This growth was enhanced by the acquisition of Galaxy to deliver an overall increase of more than 56%.

With a number of emerging high-volume and mass-market applications, IQE believes its optoelectronics business has the potential to eclipse wireless growth on a sustained basis, and to eventually evolve into a business with the current scale and profitability of the wireless operation.

Within optoelectronics, markets with the highest growth potential include finger navigation devices, optical interconnects (such as Intel’sLightpeak/”Thunderbolt”), pico-projectors, cosmetic lasers and gesture recognition gaming devices.

Also, the market for compound semiconductor based CPV solar devices that are already more than 40% efficient compared with conventional silicon systems (which are typically less than 15% efficient), is expected to thrive. IQE says that industry experts predict that CPV could be capable of generating electricity at least as cheaply as fossil fuels.

Solid state lighting technology using LEDs is another major market for the firm.

Sales of IQE’s VCSELs (advanced lasers that are critical for finger navigation and optical interconnects) grew by approximately 120%, whilst sales of CPV material grew by more than 80%.

Selling, general and administrative expenses were £9.4m (2009: £8.5m), reflecting an investment in people, oneoff costs relating to the Galaxy acquisition, general inflationary pressures and the impact of one-off cost savings in 2009 achieved during the destocking.

A placing of 65 million new shares announced on 30 September 2010 raised gross proceeds of £20.8m, which was used to repay borrowings, finance capital expenditure and fund the acquisition of Galaxy. The Group incurred transactional expenses of £0.1m relating to the acquisition of Galaxy.

Markets

IQE’s three primary markets are wireless, optoelectronics and electronics.

 



 

Current trading and outlook

IQE says the current year has started well, in line with the Board’ expectations. In respect of the recent natural disaster which struck Japan, there has been no direct impact to date on the Group’s businesses and at this stage IQE does not expect any change to its performance.

The Board remains fully confident in the future of the business, the growth of its markets and the ability of IQE to execute and deliver a strategy to increase revenue, profitability and cash generation in the coming months and years.