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IQE encounters heavy disruption

The semiconductor consultancy is embroiled in a legal dispute over a patent
March 20, 2019

Semiconductor group IQE (IQE) suffered a dismal end to 2018, as “sudden disruption” to its semiconductor laser diodes (VCSEL) supply chain in the final two months contributed to “greatly reduced” demand for VCSEL wafers and an 8.1 per cent decline it its photonics (light science) revenues. This followed “a very substantial VCSEL inventory correction” in the first half.  

IC TIP: Sell at 79.5p

In the short term, management expects headwinds linked to the unwinding of inventory levels in the VCSEL supply chain, compounded by general market softness in the semiconductor industry. Elsewhere, IQE, which is presumed to provide technology used in Apple products, paid £1.3m in legal costs as part of an ongoing patent dispute defence that is due for an arbitration hearing in September 2019.

Analysts at house broker Peel Hunt forecast adjusted pre-tax profits and EPS of £30.8m and 3.6p, respectively, for 2019, against £14.4m and 1.9p last year.

IQE (IQE)    
ORD PRICE:79.5pMARKET VALUE:£618m
TOUCH:79.5-79.7p12-MONTH HIGH:144pLOW: 55p
DIVIDEND YIELD:NILPE RATIO:612
NET ASSET VALUE:39p*NET CASH:£20.8m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141125.20.3nil
201511419.43.0nil
201613318.42.7nil
2017**15515.12.1nil
20181566.70.1nil
% change+1-56-94-
Ex-div:na   
Payment:na   
*Includes intangible assets of £122m, or 15.7p a share**Restated for IFRS 15 accounting rules