In an unaudited trading update for 2014, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that it expects full-year revenue to be about £112m (down 11.7% on £126.8m in 2013, but in line with expectations). In particular, second-half revenue was about £60m (up 15% on £52m in first-half 2014).
EBITDA (earnings before interest, taxes, depreciation and amortization) is projected to be up by 8% year-on-year to about £27m, including second-half EBITDA of about £16m (up on £11.1m in first-half 2014). Adjusted fully diluted earnings per share (EPS) is expected to be up 20%, from 2p in 2013 to about 2.4p.
Net debt at end-2014 is about £31m, down from £34.4m at end-2013 and £35.5m at the end of first-half 2014. This is after about £5m of cash restructuring costs (now complete) and after £8m of contingent deferred consideration (payments of which will end in 2016). IQE expects to make further progress on reducing net debt through 2015.
Business unit highlights
Overall progress for individual businesses has been good, says IQE.
The Wireless business (IQE’s largest division, with an estimated global market share of more than 50%) enjoyed double-digit sequential growth in second-half 2014 over first-half 2014, driven by the proliferation of increasingly complex wireless communication devices and systems such as LTE/4G, dual-band WiFi, and GPS location devices (which require increasingly complex compound semiconductor solutions).
Furthermore, just after the end of 2014, IQE secured a major contract renewal with a key tier-1 customer (estimated to be worth over $50m) that should also lead to some expansion in IQE’s market share. “The outlook for this business unit remains robust, driven by increasing adoption of 4G and LTE globally,” says IQE.
For the Photonics business, revenue grew by over 20% year-on year. “We further strengthened our relationships with major tier-1 photonic companies with additional long-term supply agreements, and made excellent progress on our range of VCSEL [vertical-cavity surface-emitting laser] products, both technically and commercially, with several important world firsts in energy efficiency and speed records for data-center applications, and initial design wins across several other application areas,” the firm adds.
The Infrared business won some significant orders in 2014, including one in October for $1.1m and more recently in January 2015 for $3.25m. The technology is also beginning to see some initial adoption for potential uses in consumer related markets, adds the firm.
IQE says that its solar concentrated photovoltaic (CPV) technology has also made good progress, but the market has taken much longer to develop than initially expected. However, the firm has now moved from a development phase into pilot production, with initial orders received in fourth-quarter 2014, and wafers now being shipped into the field. IQE is now pressing ahead with plans to increase production during 2015/16.
Finally, IQE says that it has made progress in its gallium nitride (GaN) technology platforms, particularly for base-station and power-switching applications (announcing a major supply relationship with M/A-COM Technology Solutions Inc of Lowell, MA, USA).
Outlook
IQE says that its board is confident that it is set to achieve market expectations for 2015. The Wireless business is enjoying an improved outlook, the Photonics business is continuing to show strong double-digit growth, and new technologies - including the development of GaN – are progressing well, it notes.
IQE will report final 2014 results in March.
