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IQE's profits dented by investment in its flagship foundry in Newport

Published: 08:43 29 Aug 2018 BST

Silicon wafer
Currency headwind, accelerated customer qualification programmes and Newport Foundry pre-production costs hit profits

IQE PLC (LON:IQE), which provides silicon wafers to the semiconductor industry, saw its underlying profit before tax take a step back in the first half of 2018.

Adjusted profit before tax declined 28.6% to £7.6mln from £9.7mln the year before, on revenue that rose 4.0% to £73.4mln from £70.6mln, despite strong currency headwinds.

READ: IQE’s NanoImprint Lithography reaches production qualification milestone for DFB lasers​

On a constant currency basis, sales growth was achieved in all three of IQE’s primary markets with the Wireless division up 11%, Photonics up 30% and InfraRed up 11% compared with the first half of last year.

Net cash at the end of June totalled £40.6mln, compared to net debt a year earlier of £41.9mln.

This year has seen the company expand its qualification for the vertical cavity surface emitting laser (VCSEL) market – a VCSEL is a semiconductor-based laser diode that emits a highly efficient optical beam vertically from its top surface.

IQE is now successfully engaged with more than 20 companies in this arena.

“Coupled with the installation, staffing and run up of the initial high volume production tools in our flagship Newport Epi-Foundry, these activities represent major steps forward in securing and further strengthening IQE’s leading position in the global supply of VCSEL wafers for multiple consumer and industrial 3D sensing applications. Although the costs of these investments have impacted first half profitability, we are confident they will be pivotal in delivering strong increases in revenue, margin expansion and profitability as 3D sensing is widely adopted in global mobile platforms and other large volume applications,” said Dr Drew Nelson, the chief executive officer of IQE.

“As we transition our business model from being the global leading supplier of advanced semiconductor wafers to a global leader in advanced material solutions, we already see significant engagements for our other core technologies, including GaN on Silicon, cREO and QPC. We look forward to the rest of 2018 and in particular the further multi-customer ramp which is expected in 2019, with considerable anticipation,” he added.

The shares, which are the fourth most shorted in London (short-selling is where a trader borrows shares and sells them in the hope of buying them back cheaper later), fell 5.6% to 98.15p following the release of the interim results.

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