IQE is the leading supplier of epitaxial compound semiconductor wafers globally. The principal applications include radio frequency semiconductors, devices for optical networks, vertical cavity lasers, infrared semiconductors and power electronics.
Total FY18 revenues grew by 1% year-on-year to £156.3m. Wireless revenues benefitted from inventory channels being replenished and customers making last-time buys ahead of the closure of the New Jersey facility. However, photonics revenues were affected by inventory overhang in H118, followed by supply chain disruption caused by OEM product sales softness in Q418. Adjusted profit before tax was depressed by several factors, almost halving to £14.0m. These include currency headwind, production inefficiencies arising from lower VCSEL volumes, the cost of multiple low-margin VCSEL qualification programmes, the cost of staffing the new Newport facility prior to commencing production and a higher proportion of wireless products. Net cash fell by £24.8m to £20.8m at the year-end, reflecting continued investment (£12.0m) in multiple innovative technologies and £30.4m in property, plant and equipment, primarily for the new Newport foundry.
Noting softness in the global handset market, management expects the FY19 recovery to be second-half weighted. This is supported by ramp ups on new VCSEL programmes. Volume production on some of these, including shipments to companies in the Android supply chain, has already started.