Soaring demand for mobile data and high-speed wireless connectivity has been a blessing for IQE (IQE). Currency shifts and customers' inventory reductions depressed sales for the leading supplier of semiconductor 'wafers' last year. But cost savings and strong demand for its newer offerings drove adjusted operating profit up 21 per cent to £17.6m.
Operating profits slumped by almost half at IQE's key wireless division. But that was offset by strong growth at its photonics business, which swung from a £2.5m operating loss to a £3.3m profit. Management pointed to brisk adoption of its specialist laser technology, VCSEL, in markets as diverse as cosmetics, lighting and data communications.
The group also made gains in its fledgling power and solar businesses. It inked a deal with US semiconductor giant M/A-COM for its 200mm gallium nitride on silicon wafers, and began pilot production of its solar products in January.
IQE's transfer of production between sites has helped realise over £3.5m in cost savings. But its joint venture with a customer and a university to launch a development centre in Singapore meant it incurred nearly £18m in cash costs, asset impairment charges and provisions for onerous leases.
Broker Peel Hunt expects pre-tax profit of £16.9m, giving EPS of 2.6p, rising to £20.4m and 3p in 2016 (from £15m and 2.4p in 2014).
| IQE (IQE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 22p | MARKET VALUE: | £147m | |
| TOUCH: | 22-23p | 12-MONTH HIGH: | 25p | LOW: 12p |
| DIVIDEND YIELD: | nil | PE RATIO: | 89 | |
| NET ASSET VALUE: | 18p* | NET DEBT: | 26% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 73 | 6.3 | 1.6 | nil |
| 2011 | 75 | 6.9 | 1.6 | nil |
| 2012 | 88 | 6.1 | 1.2 | nil |
| 2013 | 127 | 5.2 | 0.9 | nil |
| 2014 | 112 | 5.2 | 0.3 | nil |
| % change | -12 | +1 | -73 | - |
*Includes intangible assets of £82.1m, or 12p a share | ||||
