IQE plc (LON:IQE) has forecast a drop in adjusted earnings (EBITDA) of around £9.5mln for 2018 after the semiconductor manufacturer saw the year marred by supply chain disruption.
In a trading update, the AIM 100 firm said adjusted EBITDA was expected to be at least £27.5mln, down from £37mln the year before, while revenues were forecast at no less than £156mln from £154.5mln previously.
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The firm also said it expected to incur £3.35mln in costs from closing its facility in New Jersey as part of a consolidation of its US manufacturing capacity, with the savings expected to be around £3mln per annum following the closure.
The company also expected to incur an additional exceptional charge of £4.5mln relating to an onerous lease accounting provision for the period through to the end of the second quarter of 2022 for the unused and unlet space in its Singapore facility.
Net cash for the year was forecast at £20.8mln, down from £45.6mln at the end of 2017.
Despite the drop in revenues and the disruption, IQE maintained its 2019 guidance, with the full-year results for 2018 due on 20th March.
Dr Drew Nelson, chief executive of IQE, said the “substantial” inventory correction in the first half and the supply chain disruption in November had “materially impacted” the group’s 2018 profitability, however, the CEO added that 2018 had seen “none of the benefits” of investment programs which were nearing completion.
"By the end of [the first half of] 2019 we will have completed a significant two-year investment program across our global operations” Nelson said, adding that the new investments would deliver “strong performance” across IQE’s wireless, photonics and infra-red business units and generate “margin expansion, increasing free cash flow and profitability in 2019 and beyond”.
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The November knock to IQE’s supply chain occurred when it was notified by a “major chip company” in the vertical-cavity surface-emitting laser (VCSEL) market that one of its largest customers for 3D sensing laser diodes would be materially reducing shipments for the current quarter.
At the time, IQE said as a result of the reduction it expected revenues of around £160mln for the year.
In a note to clients, analysts at broker Peel Hunt said the updated revenue forecasts had come in 2.6% below their own expectations, while the adjusted EBITDA figure was down 13% on its estimate.
The broker added that while it was important that 2019 guidance was maintained, the “lower starting point” from 2018 meant its 2019 adjusted operating profit forecast was cut by 8%.
Shares were up 0.7% at 75p.