The semiconductor market tends towards feast and famine and the de-stocking process that hit silicone wafer and wireless equipment specialist IQE (IQE) spilled over from last year into the first quarter of 2012. So the company's high operational gearing has gone into reverse, which meant a 10 per cent decline in turnover resulted in operating profits plunging from £3m to only £191,000. However, with the de-stocking effect at an end, and with ordering patterns returning to normal, the robust demand for smartphones means IQE is on course to meet brokers' full-year estimates.
The company's management was busy during the half integrating the Solar Junction and RFMD acquisitions. The latter will bolster IQE's position in the smartphone and solar energy market by giving its manufacturing operation much greater scale, and chief executive Drew Nelson forecasts it will boost revenues by 20-25 per cent. That new scale will become even more important when the next generation of 4G smartphones is rolled out over the next two years; the proportion of smartphones is expected to increase this year to 35 per cent of all phones shipped, up from 26 per cent last year. The expansion programme was the main reason for a near doubling in net debt to £7.5m, but the programme will conclude in the second half and annual capital expenditure will return to normal levels of around £4m.
Broker Peel Hunt forecasts full-year pre-tax profits of £9.3m and EPS of 1.6p, rising to £16.1m and 2.7p, respectively, in 2013 (from £8.2m and 1.7p in 2011).
IQE (IQE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 26.25p | MARKET VALUE: | £153m | |
| TOUCH: | 26-26.25p | 12-MONTH HIGH: | 35.5p | LOW: 17.25p |
| DIVIDEND YIELD: | nil | PE RATIO: | 25 | |
| NET ASSET VALUE: | 14.5p* | NET DEBT: | 9% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 38.3 | 2.81 | 0.60 | nil |
| 2012 | 34.3 | -0.09 | 0.02 | nil |
| % change | -10 | - | -97 | - |
*Includes intangible assets of £55.5m, or 9.5p a share | ||||
