IQE provided the following trading update ahead of the financial close for H1 2019. It expects to deliver revenue of £65m to £68m for H1 2019 (consensus £68m). H1 2019 was affected by a weak smartphone handset market, particularly in the Wireless Business Unit.
The group experienced a reduction in Indium Phosphide laser revenue for the datacom market due to a customer specific issue outside its control. This has been partially offset by new qualifications and revenue streams coming into production at the Taiwan facility.
The group has also received a reduction in forecasts from a number of chip customers in the Wireless and Photonics sector, affecting anticipated revenue for H2 2019. Due to this, and with the expectation that uncertain market conditions will continue in the near term, the group now expects to deliver revenue of £140m to £160m for FY2019 at prevailing exchange rates (consensus: £175m).
Given the reduction in expected revenue, the group expects to remain profitable in 2019, but its adjusted operating profit margin is significantly below previous guidance of over 10%. As global supply chains adjust, the company expects significant market drivers such as 5G, connected devices and LIDAR to regain momentum.
Dr Drew Nelson, IQE’s Chief Executive, said: “IQE remains well placed to adapt to mid – long-term share shifts at both the component (chip) and the OEM level. We anticipate significant new customer qualifications during the second half of 2019 as a result.”