A weak smartphone handset market and the US-China trade war were chiefly responsible for pushing IQE (IQE) into a pre-tax loss for its first half. A reduction in demand from a significant laser customer also hit the semiconductor technology specialist’s earnings, but it nevertheless reiterated guidance for full-year profitability.
IQE issued a profit warning in June, with revenue expectations given at £65m-£68m. Although it has met expectations, it will need to demonstrate that the £19m put towards plant developments during the period (H118: £6.29m) and the related £12m in borrowing proceeds will eventually translate into top-line growth and improved cash flows.
Much of the capital spend was directed towards the completion of the group’s investment in its Newport mega-foundry and capacity expansion in Taiwan and Massachusetts, as it bids to diversify its production base. The industries that IQE serves are in transition, so the group's decision to increase capacity and expand its 5G capabilities looks savvy given the evolution of global supply chains.
House broker Peel Hunt forecasts full-year pre-tax profits of £5.8m and break-even earnings for 2019, rising to £20.2m and EPS of 1.5p in 2020.
| IQE (IQE) | ||||
| ORD PRICE: | 50p | MARKET VALUE: | £396m | |
| TOUCH: | 49.7-50p | 12-MONTH HIGH: | 100p | LOW: 43p |
| DIVIDEND YIELD: | nil | PE RATIO: | NA | |
| NET ASSET VALUE: | 37p* | NET DEBT: | 0.3%** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 73.4 | 6.6 | 0.53 | nil |
| 2019 | 66.7 | -3.7 | -1.38 | nil |
| % change | -9 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £123m, or 16p a share **Excludes lease liabilities of £49m | ||||
