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IQE slides as 2018 earnings miss forecasts despite previous downgrade

Published: 11:51 20 Mar 2019 GMT

Semiconductor
IQE has been rocked over the last year by the sudden death of its CFO as well as a “sudden disruption” to semiconductor supply chains

IQE PLC (LON:IQE) shares were on the slide in early deals on Wednesday after the semiconductor maker missed its adjusted earnings (EBITDA) forecasts for the year despite downgrading them in January.

The firm reported an adjusted EBITDA for the 12 months to 31 December of £26.4mln, 28.9% lower than the prior year while revenues grew 1.1% to £156.3mln.

READ: IQE predicts £9.5mln drop in earnings for 2018 following supply chain disruption

The EBITDA figure was lower than a previous estimate in a January trading update, when IQE said it would be at least £27.5mln.

IQE has been rocked over the last year by the death of its chief financial officer, Philip Rasmussen, who was killed by a drink driver in April, as well as a “sudden disruption” to supply chains, which reduced demand for vertical-cavity surface-emitting laser (VCSEL) wafers, semiconductors used in products such as laser printers and face ID scanners.

However, in its outlook, the company said its outlook for 2019 and beyond was “strong”, although it highlighted short term headwinds in the form of its VCSEL inventory levels following the disruption and a “general market softness” across the semiconductor industry, specifically in the mobile market.

These would affect the company’s revenues and profitability in the first half of the current year, but the group said this would be temporary and that there were “strong signs that significant growth can be achieved” in the second half and into its 2020 fiscal year.

House broker more upbeat

In a note to clients, analysts at IQE’s house broker Peel Hunt were more upbeat, saying the company had “delivered well” against its lowered guidance.

The broker also maintained its ‘buy’ rating and 137p price target on the stock, saying the near-term risks were “now in the numbers” and nothing had changed “structurally or competitively for the medium-term”.

“It is worth noting that the shares across the broader value chain has performed well despite relatively muted outlooks of recent, a pattern that is typical ahead of a turn-around,” they added.

The market, however, was less impressed as shares dropped 9.2% in lunchtime deals to 75.7p.

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